Social Venture Capitalism

http://www.forbes.com/sites/ashoka/2014/03/31/how-philanthropists-and-investors-can-work-together-to-create-social-change/

Currently there is a strong likelihood that my PE will not be in microfinance as originally anticipated.  As worrisome as that is for the impending literature review I may have the chance to work in a place much more interesting.  This article describes the approach of many new social ventures.  The article provides the example of Aravind Eye Hospitals - a group of hospitals around India providing low cost yet profitable eye-care to the rural poor in India.   The Hospitals got their start when a philanthropy donated the seed money to the founder much in the same way a venture capital firm would provide seed funding for a start-up.  UnLtd. India -the organization I might be interning at- describes itself as a social venture incubator and occupies a role similar to a social venture capital firm.  One of the problems for Aravind was that he had to rely on funding from philanthropists because profit margins were too low for traditional venture capital firms.  If he did go to a venture capital firm he would have to focus on distribution models that centered around profit margins where as by getting a donation he could focus on a distribution model that focused on distribution. This is where UnLtd. India comes in.  They are a non-profit themselves donating the profits from an endowment that is held in trust for them.  This consistent source of funding allows the organization to give  seed funding to social ventures in the same way Aravind got his funding but at the same time providing many of the services and networks that venture capital firms often provide to their investees.  This model is so cool because it uses the tried and true structures of capitalism for social ventures.  It lets the ideas and the know-how emerge organically from the places it operates in then finds them and gives those ideas funding.   Usually in the development world the funding and ideas originate from the same space which has often left the combination wanting.  Either the ideas aren't perfectly situated to a developing country given that they were developed elsewhere or the idea is local but the funding is hard to come by. Basically its a model that has combined the strengths of Easterly's searchers with the funding from developed nations.

Implications if the rich are less compassionate

http://www.scientificamerican.com/article/how-wealth-reduces-compassion/

Our recent discussion in lecture featured Professor Talwalker's essay, "What Kind of Global Citizen is the Student Volunteer." One of the interesting studies she brings up is Piff et. al's work on prosociality. Lower class individuals demonstrate greater procial behavior and are more compassionate than upper class individuals. This plays directly against the common notion of charitable, lavish donors vs. poor families who are inherently selfish to maintain the little they have.

The above article elaborates more on Piff and Keltner's exact research. As you can see through the article, Piff and Keltner have run a multitude of experiments to show that the affluent form a disconnect with the poor and suffering since they themselves don't experience it on a daily basis. This inability to relate/connect affects their inclination to be charitable. What interests me is the implications of this study on the developmental aid industry and theory. Critics and theorists like Jeffrey Sachs call for nations to abide to their previous agreement to donating 1% of their total GDP. This, in Sachs' perspective, would transform the developing world, pushing them up the ladder of development. However, if this problem persists and nation still refuse to donate 1% of more of their GDP to charity, the individual donor contribution becomes much more vital. With this study in mind, and assuming it applies to most affluent people (since most have grown up in affluence all their lives), the concept that enough aid will flow to these nations is not practical. To extend this concept further, since politics and wealth have grown together in recent years so drastically, the reason why many developed nations are not donating their 1% share of their GDP to third world nations is because of this lack of compassion.

We can also extend this concept that the rich possess less compassion more thoroughly in the realm of politics. The individuals running for office these days are often people who live lavishly. More and more money has to be spent on campaigning, much of it out-of-pocket expenses. Politics correlate to wealth which correlate to power. In order to run for any political office these days, you must have a lot of money to first of all reach that level in which a party puts trust in you and while campaigning. Thus the rich are the only citizens with access to the power of the government, the institution that perhaps requires the most compassion out of all our nation's institutions since its job is to take care of its people to maintain a functional society. With people at the top with all this power lacking in compassion due to a disconnect with the poor he governs over, poverty inevitably results.  Food stamps get cut and welfare for the poor become less a priority.

Of course, there are exceptions to the scenarios I described above, and they are extremist. This indication that the rich has less compassion than low-income families is not the only factor that influences the success of the aid industry or politics. But it could be a root cause for these issues. The problem is if they are inherent tendencies humans have in hierarchical political/economic systems. if they are, then they are terribly difficult to fix.

Reflection On My Favourite Pair Toms

    "One for one" is the motto used by the retail company Toms to promote its shoes. It is the idea that a pair of shoes will be given to an impoverished child with every purchase, and part of the profit made from eyewear purchases will also be used to save or restore the eyesight of people in developing countries. This is one type of an emerging business model that includes charity as a method for profit and marketing. I am sure most GPP students are familiar with this idea. Currently, Toms gives shoes to more than 60 countries. The location chosen is driven by the needs of its Giving Partners. Toms works closely with them to add new communities and countries where shoes will have the greatest impact. I am not particularly against this effort and model that Toms initiates; as a matter of fact, Toms’ shoes are my favourite kinds for daily wear. The shoes are simple, comfortable and stylish, and I have already bought two pairs for myself. According to Toms’ notion of “one for one”, this means that I have directly given two pairs of shoes to those in need in another part of the world. Am I, and should I be, proud of myself because I have given a pair of shoes to a child to protect his/her feet from cuts, infections and diseases? That child can also go to school since shoes are often required for school attendance in many countries. Still, honestly, I am not gratified of this purchase simply because it does not holistically capture the need of a sacrifice of the privileged to help people who are marginalized. Though it is impossible to quantify, one can argue that people are buying the shoes for themselves more than the purpose of buying it for others. It is just another form of individualism where there is always something in it for "me". The idea behind “one for one” is basically manifesting the concept of “exchange value” over “use value,” but in doing so, the idea of “exchange value” is blurred because the result seems to be a win-win situation, and the concept of “use value” is highlighted in terms of the impact it will bring with every purchase.  I am really ambivalent towards this model of the win-win situation. It seems empowering and hopeful since both group are winners (the consumers get their pairs of shoes and know that they did something good with their purchases) and the children who receive the shoes are also winners (though one can argue there are just compensated losers masked as winners). However, this new emerging do-good emerging market is simply not enough and harmful as critiques may argue. It is also interesting to know that “TOMS” is derived from “Shoes for TOMorrow” and its signature design comes from Argentine traditional Alpargata (Espadrilles), which can trace its origin as peasant footwear. I find this reflection critical and needs to be discussed or at least acknowledged.

Here is a video from Toms' "One Day Without Shoes" campaign as part of its one for one movement:

In relation to Duraipah et. al “Degrees of Participation”, where does this movement situates itself? Anyone of you who participated willing to share your reflection on this campaign?

The Gates Foundation: Goliath of Poverty Alleviation

In late July of 2013, I frantically wrote and rewrote sections of an influence study I was conducting with two of my colleagues at Digital Green. Stress ran high-not only was the deadline for our paper in a couple of days, but a Bill and Melinda Gates Foundation report was due as well.

For those of you who are not familiar with the Gates Foundation, they are the largest transparently operated foundation in the world, focused on reducing poverty through four divisions: global development, global health, United States education policy, and policy and advocacy (http://www.gatesfoundation.org/What-We-Do).

Digital Green, my practice organization, is currently funded by a multimillion dollar grant from the Gates Foundation to run a massive randomized control trial (reaching 10,000 new villages and 1,000,000 new farmers) to obtain the causal impact of Digital Green on agricultural production and adoptions of proven, sustainable practices. Thus, they are held accountable by the Gates Foundation and must submit quarterly reports on progress.

I watched my colleagues rapidly put together a presentation for representatives of the foundation. There was a lot of talk about how the Gates Foundation only saw numbers, how this was taking time they did not have, to make the presentation aesthetically pleasing, to make sure they were kept happy, etc. I could not help but feel as if the Gates Foundation was akin to a rich relative that one did not necessarily like or agree with, but who commanded obedience, if only to stay on their will.

I don't have a problem with philanthropy, and I believe it's great that one of the world's wealthiest families has decided to give back. However, partnerships with Monsanto and Cargil, two of the world's largest agribusinesses whom are notorious for destroying livelihoods of small farmers everywhere, makes my faith waver. They have invested over 23 million dollars in Monsanto and make profits from the company (http://blogs.edweek.org/teachers/living-in-dialogue/2012/07/the_gates_foundations_leverage.html). Again, there is nothing wrong with a foundation investing in private stocks-in fact, if it leads foundations and NGOs to become sustainable, it would be great. But when the investments are made in companies that keep people in poverty in the first place, it seems a tad hypocritical.

Further criticisms revolve around the Gates Foundation's obsessive need for numbers and increases in performance. Understandably, they want accountability for the large amounts of capital they invest in programs. However, this can produce one dimensional measures of progress, limited by decontextualized results, leading to well meaning, but perhaps uninformed policy.

The question, then, is whether or not "meaning well" is enough. There is no doubt that the Gates Foundation has made a substantial impact on global poverty. They have mobilized influential and wealthy figures around the world, required metrics of accountability to mainstream development work, and invested billions of dollars in programs working to alleviate poverty. However, they are a single foundation, yielding a massive amount of power in international and domestic development, with a single perspective-they're not at all a participatory organization. They often implement western metrics to evaluate programs, and have partnerships with some of the very organizations that are causing millions of people to struggle. The good may outweigh the bad, but when you're this powerful, that isn't enough.

I don't believe the Gates Foundation is evil, but perhaps misguided. An internal restructuring would go a long way to improve the long term impact it has the potential to have on global poverty. Though undeniably difficult, it would be irresponsible not to try.