We asked three Booth experts who volunteer to help feed the hungry.
- By May 01, 2016
“An extra 60,000 people have been fed a day because of this market.”
We also included negative pricing: a food bank can tell Feeding America, “I’ll take that hard-to-get-rid-of broccoli if you pay me 2,000 shares.” In this way, produce that would have spoiled in the old system now has value.
The system has worked for 10 years. The big food donors like Kraft and Walmart are happy because their gifts leave the warehouse in a timely manner, the small food banks have as much chance as the big food banks of acquiring the food their constituents want, and there’s less waste.
The process has increased supply by 100 million pounds of food a year. An extra 60,000 people have been fed a day because of this market.
It works because it’s an infinitely repeated game—there’s new supply every day. If a food bank doesn’t find something they want today, they know it won’t be long until something they prefer comes along, and so they are happy to wait and sit on their fake money. In general, this kind of market design works in situations where we don’t use real money to assign things. For example, there are good reasons you don’t want people to buy and sell human kidneys.
I have a greater ability to listen thanks to this project. It’s probably the most valuable thing I got out of the experience. We never would have been able to do this without listening to the food bank directors.
Madeline King, a Full-Time student who has volunteered in food kitchens since she was 10 years old, was a director of operations for a rapidly growing education nonprofit in Boston before she enrolled at Booth.
Madeline King learned about Feeding America’s allocation system through a talk Prendergast gave in early 2016. “I could not stop talking to all my friends about the talk, about how fascinating the topic was,” King said. “Going in, I thought I was going to learn more about supply-chain management or some new technology piece,” she said. “Afterward, my mind kept thinking, ‘Where else could we apply this?’ and I thought about school choice.”
“In a lottery system, parents rank the schools they want their child to attend. It might be interesting if you used the allocation model to give people a better system to express their preferences. Bid points would let them express how much more they want one school over another.”
“The school considers social impact an important area to apply findings.”
The food bank bidding system is similar to the iBid system that Booth students use to vie for the classes they want. “Like the food bank directors Professor Prendegast worked with, I had to get over my initial reaction,” King said. “This isn’t how I signed up for classes in undergrad. Why do I have to learn a new system?”
“After getting used to it, I see how useful it is. I spend my points to create a schedule that’s condensed into back-to-back days. That allows me to intern off campus one day a week at New Schools for Chicago (a charter school–supporting nonprofit whose CEO is Daniel Anello, ’07).”
King is impressed by how Booth professors worked with the food bank directors to create, test, and implement a market that has boosted food donations while satisfying directors’ needs. “It just shows how outward facing Booth is,” she said. “The school considers social impact an important area to apply findings.”
William A. Rudnick, ’97, is a Chicago-based partner at law firm DLA Piper, cofounder of the Global FoodBanking Network, and a former chairman of the board of Feeding America (then called America’s Second Harvest) and the Greater Chicago Food Depository.
Food banking is the collection of surplus and otherwise unmarketable food, and the organization of and redistribution of that food. It is a great example of leverage, the ability to use infrastructure and process to create exponentially larger value than you started with. We take food that would otherwise go to a landfill and get it to people who don’t have enough to eat. The delta in that process is enormous.
The popular conception of food banks is that they distribute food to hungry people. They don’t. Food banks are the wholesalers in the distribution. Food banking involves pallets, inventory management, delivery optimization—it’s a logistics problem. And that’s where business schools can help.
The externalities of this work are interesting. There are a lot of programs that feed the hungry, but that’s not their primary service. For example, domestic-violence shelters, drug counseling centers, senior centers, child-care centers—each has a primary mission separate from feeding people, but they do because it’s one way to get people through the front door. If you’re running a domestic-violence shelter and you don’t have to pay wholesale prices for food, that’s a huge savings in your operation budget, and you can serve so many more people because you’re getting your food from a food bank at a fraction of the cost.
“Food banking doesn’t just help feed the hungry. It solves an array of operational challenges.”
I started out in food banking in the late 1980s with the Greater Chicago Food Depository. After working with them for more than 10 years, serving on and chairing the board, I moved to the Feeding America board, where I worked on food banking locally and nationally with my colleague Bob Forney. As my time was coming to an end, Bob and I had a hunch food banking could work outside the United States. That seemed like the logical step. So we cofounded the Global FoodBanking Network.
We have done food banking around the world, and the challenges and opportunities vary greatly. In the United Kingdom, for example, landfill space is expensive. Anything to reduce waste out the back door is valuable to them. Food banking doesn’t just help feed the hungry. It solves an array of operational challenges.
Once a food bank is up and running, they are hard to stop because everyone involved is active, from the government to the food donors, the food banks and the food pantries, to other social organizations. Their interests are all aligned, and that’s really powerful.