Proverbial Emails...

Got an email from a colleague today. After his e-signature, and contact info, was a quote (this seems to be a growing trend). Most of these are trite, but I liked this one, and I hadn't heard it before. Kind of presented my "What sucks? and How can we fix it?" questions in a more zen-like and inspirational way.

"Vision without action is a daydream. Action without vision is a nightmare."

Being curious, and in one of those procrastination modes (I am grading student work), I decided to Google it. Who said it? When? Why?

And I learned that it is a "Japanese Proverb". That's it. 159,000 hits, and they are all just quotes. Oh, and a few of those tacky motivational posters that are hung on cubicles at crappy companies. No explanation, no sense of when it started getting used. No context. Has it been in use for centuries? Was it the mantra following the Meiji Restoration, as Japan modernized in the 1870s? Were any Japanese generals muttering it as their pilots attacked Pearl Harbor? Did Akio Morita use it in the early days of Sony Corporation?

It is a paradox. In the Google-age, my curiosity can only be partially sated. I can quickly get the information about the quote, but not with context. Information without knowledge. Info-porn. Perhaps this is the nature of proverbs as well. But I hope all the good quotes don't lose their anchors in history as they spawn in the digital streams of the internet. If I ever end up with a good quote, I sure hope it doesn't end up in anonymous email sign offs and tacky posters.

If anyone knows more about this proverb, or can provide some context for its past use, please let me know.

Amy Smith, Frank Devlyn and Intersectional Living

The Medici Effect is a great book about how innovation happens at the intersection of cultures and disciplines. I used it in one of my courses this fall for a section on innovation, and it got good reviews from the students, too. Once you read it, you get more aware of intersectional innovators and situations (see blog link to right--->)

As a multi-tasker (my wife has another word for it, "distracted"), I find that one can use this intersectional stuff as a way to explain weird stuff you do. Like reading several books at the same time (well, I mean concurrently, a chapter in this one, then a few pages in another). Or reading while you listen to NPR. Or while said wife is telling you stuff (no, not really). Seriously, this is important stuff to think about as an entrepreneur, leader or designer. And it has implications for how teams communicate, organizations work, and communities grow.

Great intersectional opportunites this week in Fort Collins. Amy Smith had a great visit (another member of the Honorary BOPreneur Society) and gave a very interesting talk on Monday night. Then Frank Devlyn, past Rotary International president, spoke to our club on Tuesday night. Got quite a few intersectional ideas firing in my head, and many other heads too, from all the buzzing going on among students and friends. Will post a link to Amy's lecture when we get it edited.

Exciting News for Inviragen

In the past week, Inviragen has announced two signifiant funding events. First, funding of new research on avian flu from the National Institutes of Health. Then yesterday, they announced funding from the Pediatric Dengue Vaccine Initiative (PDVI). The PDVI grant will provide funds for manufacture of Inviragen’s dengue vaccine in preparation for testing in human clinical trials.

From press release: "Dengue fever is a mosquito-borne illness, prevalent in tropical and subtropical countries throughout the world. Approximately 3.5 billion people live in endemic countries and about 100 million people are infected with dengue every year according to recent estimates published by the PDVI. Infection by any one of four dengue viruses can lead to a debilitating fever or, in a subset of cases, can lead to life-threatening hemorrhagic fever.

'This financial support from PDVI will accelerate the development of our dengue vaccine,' said Dr. Dan Stinchcomb, CEO of Inviragen. 'We decided early on to partner with one of the leading vaccine manufacturers in India, Shantha Biotechnics, Ltd., for the manufacture of our vaccine for human clinical trials. The grant from PDVI validates our strategy and will partially support our vaccine manufacturing efforts at Shantha.'

Inviragen’s dengue vaccine was designed by collaborators at the Centers for Disease Control and Prevention in Ft. Collins, CO to protect against all four of the dengue viruses. The vaccine has been shown to be safe and effective in preclinical animal models. Inviragen intends to begin human clinical testing of its vaccine in the second half of 2008."

For more info, http://www.inviragen.com/. PDVI is funded by Gates Foundation and Rockefellar Foundation and their funding provides both needed capital and credibility. http://www.pdvi.org/ It is exciting to see Inviragen hitting its stride on building a biotech company focused on developing world diseases. I have worked with co-founders, Dan and Jorge, for many years and they are very talented and extremely dedicated to this venture. Dan has visited our entrepreneurship classes and we used the dengue vaccine as a "hypothetical venture" several years ago. Very cool to see it now moving toward clinical trials as a very real venture. Dan and Jorge, welcome to the Honorary BOPreneur Society.

Amy Smith is coming to CSU

"Can Low Tech have a High Impact?

While her inventions may be "low technology" there's nothing low-brow about Amy Smith's work to develop simple, affordable technologies for the world's poorest people. The CSU College of Business and the Department of Mechanical Engineering are pleased to present MIT Faculty Member and MacArthur "Genius Grant" winner Amy Smith in lecture as part of the Sustainable Enterprise Speaker Series.

Her remarks, entitled Design, Dialogue and Duct Tape - Tools for International Development, are inspired from real-world experience using technological innovation to address everyday problems in developing nations."

Date: Monday, November 26th
Place: Clark Building - Room A101
Time: 7:00 to 8:30 pm.
RSVP: www.biz.colostate.edu/ms/GSSE/RSVP

We hope to videotape and post on GSSE site for those who are not able to attend in person.

TechAwards 2007: Moveable Feats (sic)

Glad I went back to the TechAwards. I had an unexpected adventure and missed much of the Gala. But the Gala is the desert, not the main course. And what a menu for the main course- 25 entrepreneurs and their feats of technological innovation for the benefit of humanity. And since Envirofit was an laureate in 2005, I got to sample the menu items for free.

There were five sections to walk through in the showcase. Here is what was on the menu:

Environmental Laureates: EZVI-NASA, SudEco Industrie, Skyonic, Solar Sailor, Fundacion Terram

Economic Development Laureates: Voute Nubienne, blueEnergy, Environmental Camps for Conservation Awareness, Kiva and CellBazaar

Education Laureates: Canal Futura, Eluminate, Inst for Study of Knowledge Management in Education, NASA, TakingITGlobal

Equality Laureates: Counterpart International, Devendra Raj Mehta (Jaipur Foot), Grameen Shakti, Innocence Project, Tropical Forest Trust

Health Laureates: Diagnostics for the Real World, HELPS, PATH, P&G Pur, Vaxin

Descriptions of each of these can be found at link above. If you like what you read, it is easy to contribute through Global Giving or their websites.

So, what were my impressions?

1) Laureates are now talking about scaling. Perhaps in part because they were encouraged to do so in some of the training sessions. But this issue has come to the fore in social entrepreneurship. Funders are pushing it. This is very different from 2005. In 2005, few of the organizations had business models that scaled outside of their country or region. Talking and doing are, of course, different things. I am dubious that many of these models will scale or be replicated to other markets (up or down the pyramid). The Environmental Laureates provide an example. Those in the developed world (e.g., Solar Sailor, Skyonic) don't have plans to go to BOP; those from Senegal (SudEco) and Chile (Terram) don't plan to move beyond region. I have concerns that if funders push "scaling" too hard on these models, not much good will result. A few laureates that appear to have business models and management amenable to scaling? CellBazaar, Elluminate, Grameen Shakti, Project Innocence. Personally, I think it would be a good idea for funders and laureates alike to read Small Giants, as a reminder that Great is not always correlated with Big.

2) Intrapreneurs and Govpreneurs were in evidence. NASA had two projects as laureates. P&G was a laureate for their PUR sachets, Eluminate for their Fire & Ice project, and Vaxin for its bird flu vaccine. This is a reminder that innovation is not exclusively the domain of entrepreneurs. And it was interesting to talk to these laureates about how they obtained support within these organizations. None seemed to be interested in spinning out their ventures from the parent organization.

3) Guess someone at Google.org read my post from last year. Well, at least there were a few of them around. But if they gave out checks to everyone, they kept it on the DL.

4) Microfranchising is now in vogue. Interestingly, while there was a lot of buzz about it, no one seemed to credit BYU and its work at the Center for Economic Self Reliance. Even though they wrote the book on it. This is an area worth watching. People have talked about franchising to achieve scale in the past. Adding "micro" doesn't change the fact that you need a pretty high operating margin to make room for all the people in the chain. If I were going to look at this seriously, I'd also be looking at models like Great Harvest Bread Co., which has a one page franchise agreement. At Envirofit, for instance, it would be great to open up franchises, and we have discussed it. But that may mean higher prices for the retrofits. It may still be the best way to achieve broad distribution, since a great thing about franchising is reducing your asset footprint/expense per unit.

4) The Thursday conference at Santa Clara University was quite good. I hope that they will soon post some video. In particular, I thought Allen Hammond and Ted Moser made some interesting comments. Hammond had some good examples from WRI, including a pilot of using low cost WIFI as leapfrog for village communication system. He observed that pharmaceutical companies make wake up soon and find that much of the BOP has a distribution network for generics that big pharma doesn't own. Moser talked about ideas on how laureates might use microfranchising to replicate and scale their businesses. Opportunity International, who Moser represents, is discussing models with their most successful borrowers. As he and Hammond admitted, so far, there are no great examples, just early experiments. Perhaps one of these laureates will pull it off. My bet is that it is more likely that a new entrepreneur is going to start a social enterprise with explicit "must franchise" DNA baked in to the business model.

Lastly, a quick note of appreciation to Jeff Hamoui for giving me a pat on the back (literally) when I needed it. I owe you one.

The First Time

I got into San Jose today. Will be attending several events related to the TechAwards tomorrow and Thursday. The theme of this program is "Technology Benefitting Humanity." More specifically, "innovators using technology to make the world safer and healthier, more prosperous and just." The idea is to recognize, and help fund, promissing organizations who are developing technology that makes a difference.

It kind of makes me nostalgic for the "first time." When Envirofit was a laureate in 2005, it was the first recognition of what we were doing. Intel was sponsoring the prize, and though we didn't win, we met some great people, including Harish Hande of SELCO, who was so helpful with our stoves work last year in India. And David Green, who's work has inspired me,and who continues to work behind the scenes for large scale change. For a picture, click here. (That's our co-founder, Bryan Willson, front and center, and Harish over his right shoulder. David is hiding up in back, I think. I am the guy with the crooked tie.)

Attending the awards two years ago was a great learning experience. I was once told "you can learn something from everyone you meet." A good way to approach the world. But particularly awesome when you are with 24 leading social entrepreneurs and get to learn from them. Find out what they are doing. At the time, I thought (and still do) that the adjustable eyeglasses that Josh Silver did were the coolest innovation.

The other thing that struck me, however, was that, even with all their passion, most of the laureates were thinking about solving a particular problem in a particular region. They weren't thinking of how to scale and replicate. They were, consciously or unconsciously, limiting their ideas. While focusing on innovation, the awards were really more about invention (which lacks the wide scale dissemination that gives us innovation). This got me thinking, and I'm not done yet. To me, this is the biggest challenge of social entrepreneurship. While I don't have an answer yet, I think part of the answer is designing an organization to scale-up/replicate from the start. Build it in. Make replication part of the original DNA. Hire accordingly.

Tomorrow, there is a Showcase featuring the laureates and their work. I can't wait to meet them and hear them talk about what they are doing. And you can now watch online (that strikes me as kind of weird, it is, afterall, just bunch of people in costumes having dinner).

Nashville Net Impact, Part II

We skipped the key note on Saturday to meet with Jessica from Kiva. Fun to chat with an entrepreneur in the growth stage of a worthy venture. Despite her "fame" she is so down to earth and was happy to brainstorm with one of our GSSE student teams. Two thumbs up!

Next, Mitesh and I attended the IDEO session on sustainable new product development. We decided to split up (fortunately for him, I think). Anyway, after some introductory remarks about Design Thinking ("building") vs Critical Thinking ("breaking down"), Ted Howes and Steve Bishop got us to work. With instructions to brainstorm a more sustainable product, they handed out products. Our table got a box of Tampax.

In the first round, our ideas- less packaging, more tampons per box, recycled paper and fiber- were pretty conventional (well, there was the "roll your own" idea). The next step was interesting. We were given a series of photos from an unnamed person of what was important to them in their life. Ours was a hispanic woman, middle class, living in a city, likes crosswords and theatre. Now we had to design a sustainable Tampax for her. It generated a very different conversation among our table mates. We focused on packaging, materials and disposal. What would be important to "Margarita"? (note to GSSE students, I did not name her!)

Ted and Steve left us with the following thoughts about sustainability: 1) it's about behavior (the consumer), 2) it's about desireability, not sacrifice, 3) it's about finding a credible intersection between sustainability and brand (what we call authenticitiy at New Belgium), and 4) if it fails, it is a failure of product, not people. Two thumbs up.

Ted and I ended up at lunch in a broad ranging discussion with some students about OneWorld Health, retrofit technologies, biofuels, and the unintended consequences of well meaning "interventions"(anti-retroviral drugs in Botswana). We were late to lunch, and late to leave, so I missed much of the Lessons Learned from CSR panel featuring execs from Dow and Timberland. From what I could see, however, the students understood the challenges these companies faced in looking to fundamentally change their business approach, while staying in business.

The next event was the closing key note from Tensie Whelan, Executive Director of Rainforest Alliance. They too, seem to be in the midst of changing their approach, and working with large companies. Some interesting stories about sustainable forestry and Gibson guitars, and the savings Chiquita realized from more sustainable plantations. Two things grated on me though. First, they are only partway there- the change in approach is only partial. There still seems to be a "gotcha" mentality in her stories. A desire to take credit for actions others took. MBA's hardly need to be shown role models of this attribute.

Second, and I see this with a lot of non-profit leaders, there seems to still be a discomfort with the business community. Her tone wasn't quite patronizing, but it certainly seemed to me to be a level below where the audience could go. These NGO's still aren't engaging as equals in their sustainability mission- they are a bit "holier" and want you to know it. Jim Collins's advice comes to mind: focus on being "interested, not interesting." Tensie only gets sideways thumbs from this listener.

For those of you who were not able to attend, here is the event blogspace. One note of concern for the conference: Net Impact could make it better by recruiting more faculty and professionals to attend. It would be great for the students and faculty, to get the benefit of exposure to what is going on in other institutions and companies. Some of the real leaders in the field were conspicuously absent.

In closing, kudos to Net Impact and Owen School at Vanderbilt U. for a great conference. Definitely two thumbs up.

Naive and unoriginal (but optimistic)

Friday News from Net Impact in Nashville.

On the plane to Nashville, I read the Business Week article on "Little Green Lies," about Aspen's Auden Schendler and his "bitter" (would bittersweet be a better description?) greening journey. Then the Net Impact Conference (1700+ MBA's interested in more sustainable business) started off with Yvonne Chouinard. YC is one of my heroes, but he started it off on a fairly tough note. A double hit of pesssimism. It was getting tough to maintain my "unrepentent optimist" outlook. Don't worry, I got over it. Being around all these highly energized Net Impacters helped.

A few highpoints from YC's talk:

"there is a proper size for every endeavor"
"from my climbing, I learned that the goal is not the summit, but how you climbed the route"
"hire people you want to go to dinner with, then leave them alone"
"leading an examined life in business is a pain in the ass"

Next up was our panel on Technology and the Base of the Pyramid. Rob Katz of WRI was a great moderator, and Tim Prestero of Design that Matters and Cindy Cooper of Speak Shop were wonderful co-panelists.

I liked Cindy's use of IT to empower Guatamalan language tutors to gain access to a global market. Very clever, and a wonderful example of using technology to help the poor go to where the money is. Note most aid has been aimed at taking money to where the poor are. And they do a free trial!

Tim was a riot. He has a gift for simple, funny stories... and then as you think about them, you realize they have several dimensions. For example, his Peace Corps experience (after getting his engineering degree) of digging outhouses. Tough work. But also realizing the gap between classroom learning and useful work, when he was asked about load tolerances of the concrete they were using, and realized he didn't know whether they could support someone sitting on the crapper. My favorite, though, was his response to an executive who said he didn't have time to talk to Tim about an LED projector for teaching the poor to read. Tim's response: "I can understand why don't have time for me, but how can you not have time for the 1 billion people in the world who can't read?" Ouch.

It was also fun to share some our our Envirofit stories- the good, bad and ugly. And it lead to my commment that my skill was being naive and unoriginal. These are actually good skills for an entrepreneur (even this isn't original). Being naive allows you to get in over your head without knowing it. And once you are committed, you just keep muddling along and occasionally you get something right.

As for being unoriginal, in BOP, it is a good idea to invent as little new stuff as possible. It is hard enough to just get traction in these markets, so figure out how to make it as easy as possible. I am pretty sure you don't get points for degree of difficulty (unlike Olympic diving, or developed markets, where such difficulties may provide competitive advantage).

During the panel, I may have implied that I am also lazy, in that entrepreneurs have to find the path of least resistance. Being a successful entrepreneur involves looking for the easiest answer for hard problems. This isn't really lazy, just efficient. And sometimes it is hard work to find these easier answers. So I don't think it is really lazy at all. Otherwise I would have to title this post "Naive, Unoriginal and Lazy (but still optimistic)," and that might give the wrong impresssion.

Your Big BOPportunity?

I will be in Nashville for the NetImpact meeting Nov.1-4. Please come to our panel on Technology and the BOP if you are in town on Friday morning. There are 11 sessions on the business and international development track, so this is a great bopportunity to meet others in the field.

Low Pay: A New Venture's Competitive Advantage

Recently, a former student was talking with me about creating a new venture in the non-profit sector. Pretty soon, we were talking about how to attract "great people." The pay, or percieved low level of pay, loomed large. He was worried that he might not be able to attract anyone to work for him. I suggested that he focus more on the mission and business model, and that actually, "low pay" can be a competitive advantage for start-ups, at least in the early years.

Pay is the first thing most people look at when they consider a job. I don't want to work with those people, or hire them. They are motivationally impaired. Usually (but not always) these people are pretty easy to spot, and you can avoid wasting time on them. Who wants to staff up with people that are in an organization because it pays "well"? Low pay will keep them out of your start up.

By having "low pay" be part of an early venture's core values... i.e., everyone agrees to work for less, but has an upside "out there" for when the business model flips... you can build a very strong team dynamic. But two things matter here... everyone on the team needs to work for less (with greater sacrifice by founders and execs), and this will not last for years. But if you haven't created value in years, you deserve to lose your employees.

At our companies, we try to have generous benefits (at least for a start up) and keep them equal across the board. We do the best we can, consistent with staying in business and having an impact. Part of a business model is deciding how to divide up the value your enterprise captures. Definitely a balancing act. Obviously we would like to reduce prices, pay employees more, and scale up our impact. But you have to prioritize. For now, it is keep the burn rate low, and get the products to market. Pay has to lag performance. So far it has worked pretty well for us. At Envirofit, we get unsolicited job apps, people offering to work for free, etc. I recently saw that New Belgium gets up to 200 applications for entry level positions. You know, I have yet to meet a New Belgium employee that is working there for the money. They work there for the vibe, the people, the beer, the free bike. But not the money.

When you start a non-profit, you miss out on one "lever" by not having equity, but done right, you can lengthen another lever called "purpose." What is equity? It is a right to share in the financial success or failure of the company. What is purpose? It too involves sharing in the success of the company, but here the participation is not separated from the employment relationship. So leaders in non-profits need to be sure to "leverage" the purpose lever so that co-workers feel connected to success. Instead of having "owners" and employees, a non-profit's employees must "own" the mission and its success. It simply can't just be a job, or your organization will be a failure.

I encourage entrepreneurs to work on for-profit business models if possible. Not because of pay, but because of the ability to attract capital to successful, scaleable business models. But in either model, purpose should be the starting point. A strong purpose will attract people more than strong pay. Design your company to attract those that share the passion and motivation for change. Better yet, figure out new types of options/bonuses on the social/environmental returns of a business. Invent a new model. Create more value for the venture.

One last thought. Much of the stuff about pay is in the context of people wanting "more." As you think about who you want to work in your company, think hard about character. Do they have the discipline to save early in their careers? Do they understand how limiting consumption can be? How important it is to avoid overdoing on credit? These are keys to building personal wealth and creating value in an enterprise.

There is no secret to wealth. Most of the time it is hard work over a long period of time. But people get stuck. And then they can't take the cool job they want. And then they are less happy with their job and life. The discontent is like a cancer. They think getting paid more will cure it. Unlikely.

So design your venture around purpose and impact. Build a business model that can fairly reward people for success. But don't get stuck on having to pay a lot in the early days to attract the right people. Trust me, they won't be the right people.

Goods and Services

When economists discuss economic productivity, they often use the term "goods and services." Don't ask me why, but I began to wonder a bit about this term the other day. I mean, how much of what we buy is really "good"? Which services really "serve" their customer?

Webster's defines a "good" as "something that has economic utility or satisfies an economic want... personal property having intrinsic value." If, as an entrepreneur, you want to create products for a more sustainable economy, you need to look at "utility" as including economic, social and ecological value. By digging deep into the opportunity, sometimes you find that these factors can reinforce each other and more value is created. For example, Envirofit's use of carbon credits will help provide additional revenue for activity it was going to do anyway. Or Patagonia's use of recycled plastic for its clothing. Both of these are 1.0 approaches. My guess is that 2.0 approaches will go beyond reuse or conservation and actually be ecologically regenerative. The flows in sustainable agricultural and forestry approaches provide useful models.

If you are embarking on an entrepreneurial venture, focus on being sure your goods are really "good" and your services really "serve" mankind and the planet.

How to Save the World x 2.

Today, Guy Kawasaki interviews David Bornstein about social entrepreneurship. I wonder if this is the result of a dispute over Guy using the title of David's book for his website? Good stuff, in any event, even if Guy can't count how many questions he asked. I guess I am a little disappointed that it doesn't seem like Guy has read David's book and vice versa. David could have knocked question #4 out of the park with Guy's advice to "make meaning" and hire infected people from the "Art of the Start." It would be cool to see these guys collaborate on a book.

McDonalds or In-n-Out?
The Aravind case is a stand-by for courses in social entrepreneurship. It starts with Dr. V speaking about using McDonalds as the model he brought to cataract surgery. This is a great case to explore innovation and business models for social sector. Intersectional ideas, Blue Oceans, catalytic innovations. Good stuff and fun to teach. But a troubling aspect... thirty years after the founding of Aravind... the backlog of cataracts remains at about the same level that drove Dr. V to start it. Despite Aravind's amazing work, the problem persists. Aravind now does 270,000+ cataract surgeries a year.

This is a far cry from "Billions Served" and is unfortunately putting only a minor dent in the backlog of millions of blind people. Aravind has, no doubt, an effective model and I have the utmost respect for them. But it is still regional and attempts to replicate across countries and cultures have not yet seen big results. Project Impact has worked to apply a similar approach to other countries and conditions. But it still seems more like In-N-Out (a successful California burger chain) than McDonalds. How can the next generation of entrepreneurs work on truly replicating and implementing innovative models worldwide? I don't have an answer, but think the question needs more work. To date, social entrepreneurs have figured out how to sell the first, the hundreth, the thousandth, etc. But scaling to an impact of millions has, so far, largely eluded the sector.

Larry Reed, at Opportunity International, once told me an interesting story. Basically, every meeting with their board, they were showing bar graphs of the growth in microloans. Good progress, more borrowers, higher volume. Nice graphs. They were feeling great. Then one director asked "what is the total need for microloans worldwide?" As Larry tells the story "we were using the wrong measurement... it was not about growth, it was about serving the market." The bar graph of their total loans compared to the total market was not so impressive. To paraphrase Dr. Evil, "why serve billions, when you can serve... millions?"

For many of the problems social entrepreneurs are trying to solve, the market is literally, "billions served." What do you think are the best examples of enterprises with this potential? Be sure to help them out! As a customer, investor or evangelist.

GSSE Launch

One goal for an entrepreneur is "launch." That point where your team has worked and worked and you finally are ready to go. Sell your new product. Introduce your new idea. Until the point of launch, you have been working largely within your network... but launch means customers, press, public feedback. Exciting times, indeed, and a bit scary, too. Because no matter how much preparation you do... you don't really know what is going to happen.

The CSU Global Social and Sustainable Enterprise Program (GSSE) has launched. Our first cohort of 20+ students arrived on campus in mid-August for orientation. They have now finished the first few weeks of class, and it is going great. We knew we had a great collection of talented individuals, and are pleased to see how quickly they have formed a “tribe”.* This past weekend they had an intensive seminar on "Personal Leadership for Changemakers" with Sue Schell, and it was great to see their energy and enthusisam.

In an earlier post, I wrote of thinking of a venture as having stages. “Launch” is a stage. Now its on to other stages of the GSSE venture: courses, projects, field work, theses, graduation and worthy ventures for these students. They have already begun to build two of the most important elements of an education; the connections between class members and their identity as a group.

* I am not using this term in a precise anthropological way. Figurative tribe, not literal.

Why don't Artists use Teams?

When we think of creative people, we often think of artists. I was recently thinking about art and artists (Cezanne is a favorite, and Winslow Homer, too). And I was also thinking about teams and creativity. And I realized something weird/different about artists (compared to entrepreneurs).

The great artists are wonderfully creative, and have great execution skills as well (to be convinced, just look at Picaso's pencil drawings, or the many drafts Matisse did of his "spontaneous" paintings).

I love to see the work of the "Masters," those geniuses that integrate both creativity and execution so well. But they are so rare. How much more great art could be created if there were a different, or multiple, systems for creating it?

What about the "not so good" artists? Those who have great vision and creativity, but aren't so world class with line, color, or perspective. Or those who are great technical painters, skilled with the use of color, but don't have an inspired view of the world. Why do they toil away, often, without recognition. [Of course, unfortunately, some of these get more recognition than I think they deserve, but that's another matter.] Going to fairs and shows, being good, but not great artists. Why not team up? Why not collaborate... thinking more of creating art as a play or movie, instead of a life's work? Why can talented musicians have bands, but not artists?

As entrepreneurs, we are lucky. If we have a gap in our abilities, and the sense to realize it, we have the opportunity to find someone who can help out. Team efforts are acceptable and encouraged. Maybe that is why entrepreneurs aren't stereotyped as lonely and alienated... and artists are.

Hackers and Entrepreneurs

One of my former students, Dawn, under the duress of a graded assignment, referred to Envirofit as "a perfect hack." I wasn't sure whether this was a good or bad thing.

The popular view of hackers is that they are semi-alienated, clever people, toiling away to bring down a system. They wear black, rarely go outside, play fantasy games and, once in a while, end up on the cover of Newsweek or in court. Right? So a perfect hack would be a bad thing... and certainly not something of which I would wish to be a part, being a professor and all.

But "perfect" is such an intriguing and attractive word...(a bit like a flame to a moth)... and Dawn is such a pleasant person. What's more, she's Canadian! It just didn't seem possible that she was calling me a borderline sociopath.

So why is Envirofit a hack? For Dawn, it is both the way our retrofits are grafted on to the existing technology (a dirty old motorcycle engine) and the way our company is trying to effect systemic change.

Paul Graham seems to know quite a bit more about Hacking than I- probably because he writes software, lives in California, and went to Stanford (all clues indicating that he probably is, indeed, a hacker). He writes:

"To add to the confusion, the noun "hack" also has two senses. It can be either a compliment or an insult. It's called a hack when you do something in an ugly way. But when you do something so clever that you somehow beat the system, that's also called a hack. The word is used more often in the former than the latter sense, probably because ugly solutions are more common than brilliant ones.

Believe it or not, the two senses of 'hack' are also connected. Ugly and imaginative solutions have something in common: they both break the rules. And there is a gradual continuum between rule breaking that's merely ugly (using duct tape to attach something to your bike) and rule breaking that is brilliantly imaginative (discarding Euclidean space)."

Joseph Schumpeter said entrepreneurs play a role in the "creative destruction" necessary for economic and social advancement. Building on this, I often refer to entrepreneurs as "revolutionaries with a business model". But I think Dawn and Paul have provided me with a more positive view of hacking. Both hackers and revolutionaries seek to change a system, but hackers try to tweak the system to change itself. They rewire the system, then utilize the resources of the system to change itself. So maybe entrepreneurs are more like "hackers with a business model".

Anyway, Dawn, I'll take it as a compliment!

A New Summit?

As I have written before in this blog, I think many entrepreneurial endeavors start with asking two questions... "What Sucks?" and "How can we fix it?"

It sounds pretty simple, and yesterday I had a chance to propose it to some students at the International Development Design Summit at MIT. In fact, this summit can be used to examine this approach to design.

There are a number of meetings/conferences/summits on international/sustainable development. Lots of bright, energetic people talk about the problems of the developing world. Many of them fly in on airplanes, stay at nice hotels, and fly home. Everyone feels good- they talked about the issues, they had panels, they networked. They helped make a difference... maybe.

Well, someone might say "That sucks" because all that happened was talk. And they might then say, "what if we had a conference that had as a goal that the participants wouldn't just talk, but they would actually design a new product or service to fix a problem? Oh, and what if we actually invited lots of different types of people- engineers, designers, health workers, business people- from around the world. And had them live/eat/work/play together for a few weeks."

This is happening at MIT this month, through a summit organized by several folks at Caltech, Olin and MIT. And it is a cool experiment. Some interesting ideas are kicking around, and it remains to be seen what happens, but it is very cool that the conference is designed around a useful output besides "conferring." If this group is successful, we may need to rename these events (I hope).

UPDATE 9/11/07: Article on IDDS in NY Times.

Do you want your Sustainable to be local or global?

An interesting article in today's Grist. Seems like the UK organic certifcation board may decide that items that are flown in are not organic enough. The imbedded energy of jets and all. This presents a bit of a problem for the farmers in Kenya who have changed their practices to access the UK markets. As the Economist reported earlier this year, the whole local food thing needs more rigor. As the Kenyans point out, if one of their organic customers flies on a jet, this has a much larger footprint than their supply of organic food. In many cases, more fuel is used by the consumer driving to the store than is used to get the actual food they buy to that store. So, who's "right"? I don't know, but think it is an interesting debate, and would rather it not be solved by a certification board. Let the consumers decide. Personally, I'd buy Kenyan.

Pacing and Braking

It is Tour de France time. Any lessons from cycling that could be applied to entrepreneurship? While I am not as big a fan of cycling anymore, with its drug scandals, I was thinking about this question on my last solo mountain bike ride and I came up with two as I was climbing up Hewlett's Gulch (there's no time to think on the way down).

Pacing the venture. Entrepreneurship is exciting and fast paced, but unlike a cycling race, there is not usually a distinct finish line. Building a business takes time, usually more time than you plan, and you run the risk of burning out your team if you try to ride an endurance event at sprint pace. Like the Tour, try to think of the stages of your business. Figure out which riders are key in the different stages. Keep an eye on competitors and stay out of the crashes in the center of the pack. Figure out when you will need to refuel, where you can rest a bit, and where you will need to go all out (particularly if you are in a seasonal business).

Staying of the brakes. It is counter-intuitive, but all strong riders have figured out how to use gravity to their advantage and stay off the brakes. In mountain biking, there is a hard wired human impulse to squeeze the brakes as one is descending a steep, rocky slope or is heading into a dusty turn. While it feels "safer" it really isn't. It isn't that it slows you down, but that it takes you off your line. Braking pulls you to the outside of the turn, where the path is rougher and longer. Staying off the brakes increases your awareness and aggressiveness. When you lean into a turn around a bush or boulder, not quite sure what the trail ahead holds, you understand the need for being fully ready, anticipating what you think will be there, but flexible and ready to jump or swerve around a new obstacle. Good entrepreneurs have an ability to take a more aggressive line, and realize that its safer to take the turns at full speed, staying off the brakes. When you start feeling positive things happen in your business, take advantage of the gravity and let it accelerate you.

At Envirofit, we have been through several stages and some have been pretty difficult. Some times we have been lucky, and many times we have worked hard as a team to stay in the race. In particular, Tim and Nathan have worked really hard and spent a lot of time working on implementation issues in the Philippines, building our team, and slowly building our reputation. Now, things are coming together well for us, and new opportunities are coming our way. With our goal of significantly reducing chronic air pollution in the developing world, it is definitely a "race" we care about, and one that is worth winning.

Madonna and the Angels

Paul Graham has done it again with his "Hacker's Guide to Investors"

For the social entrepreneurs out there, here is a hint on decoding the essay and making it into the "Social Entrepreneurs Guide to New Donors." When you read "angels", think of the new generation of donors you are trying to attract to fund your organization. When you read "VC" think about more traditional foundations. When you read "Investor", think "Donor."

If a picture helps you process, think about what Burton Snowboards and JDK did to Madonna's Sex book (look at page 26). Just print out Mr. Graham's essay, cross out the incorrect term and replace it from the key above. What we call a "heuristic device."

There, in just a few pages, you have learned more about fundraising than you could have imagined. And, if you followed the "Sex" link, more about Madonna and her "snowboard" than you ever wanted to know.

Quiz: who is going to be a better source of funding for your social enterprise? The angel investor who you meet at the local Habitat build or Nature Conservancy meeting, or those new style Social VC funds that are starting to hang out at the Skoll and SVN conferences.

Hint: Madonna is not the correct answer. Pay attention.

Worth Repeating

While I often quote others in this blog, I am ususally discrete (might I even say "surgical"?) in my quotations. Not here. Wholesale lopping here from an email from Mathis Wackernagel at Global Footprint, a recent Skoll Award recipient:

"In nearly every newspaper, from California to Australia, you can find a reference to the 'Carbon Footprint.' It has become an enormously popular term as we rush to stem global warming, and to find alternative energy sources that won't harm the climate. This is great news.

The Carbon Footprint is 50% of humanity's overall Ecological Footprint, and global warming is one of the most visible symptoms we've seen to-date of the larger problem humanity is facing: ever-increasing, global ecological overshoot.

Ecological overshoot means that humanity is living beyond the planet's ability to sustain us. Today the focus is on carbon, but climate change is happening as we approach other critical limits as well, in fisheries, forests, cropland, and water. Unless we focus on ending overshoot as a whole-systems problem, some of our solutions to climate change could cause large, unintended impacts.

For example, in Brazil, sugarcane plantations used for ethanol production are being linked to air pollution, water pollution, and deforestation. And in Borneo and Sumatra, large areas of tropical forest are being cleared to make room for palm oil plantations, which is destroying the habitat of endangered species, in particular, the orangutan.

The Ecological Footprint was created to ensure that addressing a singular issue, like global warming, doesn't negatively impact entire ecosystems or shift pressures from one land type onto another. "

Different choices on energy and technology can still have vastly different ecological impacts. How will you reduce your personal footprint? Walking or riding a bike? Buying wind energy from another state? Installing solar panels? Buying carbon offsets from replanted trees in the Amazon? Using the EcoFootprint tools will help you make informed decisions.

As we work toward a clean energy future, carbon is an important consideration, but as Mathis points out, it is only half the environmental story. And "Ecological Footprint" is only one third of the Triple Bottom Line around which we need to be building sustainable enterprises.

Dream Job

Are you sitting at your desk thinking that you are spending time doing something that is interesting, but not so important? If you do it for three more years, under the best of circumstances, what would you accomplish?

Now, how would you like to help a very promising young company grow? In three years, you may have been part of eradicating poverty for thousands (or dream big, millions) of microentrepreneurs around the world. Sound good? How about living and working in San Francisco?

Well, Kiva needs a CFO. Check out Matt's blog/job posting... this is such an impressive company and it is great to see them building out their team.

Here is the info: http://www.socialedge.org/blogs/kiva-chronicles

My friend Nathaneal told me...

that my blogs are too long. Hmmm. That violates the first rule of stickiness (Simplicity). So here is a shorter blog, Nathaneal.

If the Millenials and Gen Y and LOHAS are supposed to be market segments that care about the sustainability of products they purchase, how do you explain their affinity for Apple products? Perla Ni's post has stirred up some controversy on the role of corporate philanthropy and which companies don't do much, and Apple is at the center of her target. Apple also has done less on the life cycle of its products, compared to competitors like Dell and H-P. Lots of room for improvement, and my guess is when they do something, it will be innovative. Makes me pause before I go buy an iPhone, though.

I gotta give props to Eric Nee, at Stanford Social Innovation Review, for stirring it up in this sector. Something badly needed. First the articles on "who gets to call themselves a social entrepreneur". (My take: Going to a conference on social entrepreneurship was enough to make me not want to call myself one.) And more recently, Aneel Karnani's article which is critical of microfinance as a development tool.

Lastly, a while ago, someone sent me a link to management changes at Google.org. It seems that they have now hired most of the key hires (and these are some good folks). And they've made a few more grants. So, maybe some forward motion, but still has an Oz-like quality to me. My previous posts on Google.org both supportive and somewhat critical.

There, Nathaneal. Now you can read my blog and get in a bike ride before work. And, it is Bike to Work week, this week. So get a friend to ride too.

Gapitalists and H.E.R.O.'s

There is a bit of a problem with capitalism.

Well, several problems actually. Nothing fatal, but we have some work to do. If you read my blog regularly, you know I think Hernando de Soto has identified some important flaws with how capitalism has been implemented in the developing world (Mystery of Capital). And Paul Hawken and the Lovinses have pointed out some of the problems flowing from a system that doesn't take into account natural capital (Natural Capitalism). Sen has pointed to the need to look at measuring freedoms in addition to economic factors when evaluating international development (Development as Freedom). Well, I am not in their leagues. And my problem isn't that big... but it is signficant.

This problem has to do with expected returns on investment. Those who work in the area of socially responsible investing or sustainable development or the BOP often talk about Social Return on Investment (SROI) where non-financial business performance metrics are measured and quantified. As an example, if you make a loan to business that employs high school drop outs, you (hopefully) get interest payments and a return of your principal. But you also may get measurable social benefits: less delinquent behavior, less kids going to prison, less drug use, etc. If the interest rate and risk on the loan are perceived to be equal, one assumes that most people will favor the socially responsible investment.

This has attracted capital to "social venture" sector. What used to be primarily donations is starting to shift to debt which allows the capital to be recycled. If you are supporting a venture that will eventually be financially independent, it would be nice to get your money back, so you can lend it to another venture. This is the appeal of Kiva. Loan $50 to a microentrepreneur in Tanzania. Get repaid. Lend to microentrepreneur in Cambodia. Almost as easy as shampoo instructions. Instead of Lather-Rinse-Repeat it is Loan-Repay-Repeat. At the other end of the spectrum, Accumen Fund, GoodCap and others are looking at larger loans to larger businesses working on improving on companies that produce financial returns and social returns.

So what is the problem? Well, as you know, it isn't that I think there is a capital shortage for the social sector. The issue is that there is a gap in our entrepreneurial finance model. Debt is unlikely to be a powerful way to fund social venture start ups. Yet private equity capital wants to earn 25%-35% return if invested in a risky venture (spread over a portfolio, so the actual winners need to return at an even higher rate to make up for the losers). Yes, there are losers, that have a negative return. While investors can identify some of these losers up front (and not invest) a fair number slip through, get funding and don't repay investors. After millions of transactions, the markets have worked out that this type of investment needs to return at that 25% rate to be attractive to capital.

And money put into a non-profit returns -100%. So, the gap is that our capitalist system presumes that a start up returning less than 25% on invested capital cannot (and should not) exist (for my academic and banker friends, don't quibble me with on numbers... I am discussing a concept here). It is a null set. Capital just won't go to these deals. At least not smart capital. Of course, this is not true experience. Companies return much lower than 25% all the time and few private investors get a 25% return over time. Not even Warren Buffet (but he has made over 20% over the years for Berkshire shareholders, which is spectacular). But this ROI rule has achieved mythic status in the investment community.

There have to be many good businesses that simply cannot really return 25%, but produce value to society. Rather than castigate these investors for being heartless, entrepreneurs need to find ways to help them build successful track records investing in this sector, and this is starting to happen. These entrepreneurs are venture gapitalists.

Hybrid financing schemes are emerging, where private capital is pooled with foundation capital. The Gates Foundation is working on this. Simply, if half the money in the pool isn't looking for a return (the foundation donation), then the opportunity only has to return 12.5% to meet the private investors 25% hurdle rate. David Green (of Aurolab fame) recently worked with Deutsche Bank on a similar approach to put together a fund for eye care in Africa. I expect to see more of this synergistic financial partnering between private capital and foundations.

Another approach is to use "other value" to attact capital. For instance, my earlier example of SROI. But we need to push that model- I think we are still in beta test phase on this. Instead of being a bit greener or more socially responsible, what if entrepreneurs build companies that will be truly regenerative? My acronym is H.E.R.O.'s: Human and Environmental Regenerative Organizations. As a system, natural systems have an amazing ability to regenerate. How about capitalist systems? What companies are actually cleaning up the place? Is it possible for companies to actually reduce their eco-footprint as they grow? To make a business of environmental repair? clean water? Providing credit, education or health benefits to chronically poor regions? These are the Blue Ocean opportunities of the next decade. Carbon sequestration, cellulosic ethanol, biomimetic solar systems... Entirely new markets will emerge and entire industries are going to be remade in coming decades (as they have been in recent decades).

This is just getting started, so it will be exciting to see what else begins to happen as "relentless capital" begins to flow and shift to find these areas of value. I foresee some interesting financial instruments emerging. Will we see loans repayable with carbon credits (something Envirofit has proposed to some funders)? Financial returns that vary with social/environmental performance (either positively or negatively)? Syndication of social benefits (remember that derivatives are just stripping out and repackaging separate benefits of financial instruments). So I'd urge BOPreneurs to talk with these new investors and LISTEN. Figure out what they are looking for. Figure out if you can find a solution for them.

A few of those who get there early are going to make a bunch of money and solve some of our environmental and social problems. And, I hope, change the business role models for success. And a lot of others are going to fail. Great system, right? This doesn't bother me, but it seems to bother some people in the social venture community. To paraphrase Mr. Churchill: "capitalism is the worst economic system, except all the others that have been tried." Capitalism isn't perfect and continues to evolve. It is this dynamic that allows us to dream of 25% returns or companies that "clean up" in multiple ways.

I think that the easiest way to find entrepreneurial opportunities is to ask "WHAT SUCKS". This "gap" sucks, and it is an imperfection in the capitalist system. But the next step is important. Who is going to fix it? So go ahead, write your newspaper or congressman (good luck) or... get started on building or funding organizations that change business for good.*


*"Changing Business for Good" is the motto of Bainbridge Graduate Institute. I think its a great, sticky motto. So I am shamelessly using it.

Envirofit Honored at World Clean Energy Awards

Media Release, Basel, 15 June 2007

"The very first World Clean Energy Awards were presented today, at the traditional “Faktor 4-Festival“ in Basel. The awards honour the world's best projects promoting the large-scale use of renewable energies. From some 70 nominees, a high-profile jury picked the nine winners of the first energy "Oscars", who travelled to Switzerland from as far away as Abu Dhabi, China, India, Kenya, Sweden and the USA to receive their awards....

Transport and mobility
Bryan Willson, Chief Technical Advisor, with the Philippine Two-Stroke Engine Retrofit Project. The Envirofit company has developed a retrofitting kit for twostroke engines, which are found everywhere in the Philippines. The kit improves fuel-efficiency and thus massively reduces greenhouse gas and toxic emissions....

The high-profile jury of the World Clean Energy Awards... is composed of the following eight individuals:
• Christopher Flavin, President, Worldwatch Institute (USA)
• Nicky Gavron, Deputy Mayor of London. On the jury she also represents the organisations ICLEI (Local Governments for Sustainability) and "C40 – Large Cities Climate Leadership Group" (UK)
• Ashok Khosla, CEO TARAhaat, New Delhi (India)
• James Leape, Director General, WWF International
• Amory B. Lovins, Chairman, Rocky Mountain Institute (RMI), Snowmass, Colorado (USA)
• André Schneider, Managing Director and Chief Operating Officer of the World Economic Forum (Switzerland)
• Klaus Töpfer, former Executive Director of the UN Environment Programme UNEP(Germany)
• Ernst U. von Weizsäcker, professor and author (USA /Germany)

Well-known institutions such as the Worldwatch Institute, Rocky Mountain Institute(RMI), the local government sustainability union ICLEI and South-South-North Cape Town, South Africa, were invited to propose winners. Together with other respected institutions, they nominated a total of 70 candidates from 20 countries."

For more info: http://www.cleanenergyawards.com/

The Next 4 Billion

The World Resources Institute recently published a report called "The Next 4 Billion: Market Size and Strategy at the Base of the Pyramid." Any BOPreneur worth their salt will want to download this report and study it carefully. Together with Banerjee & Duflo's "Economic Lives of the Poor" published last fall, there is now much better data on how the poor spend their money.

The commonly used "triangle" used to depict the wealth of the world's 6 billion people hides so many individual stories. Knowing that 3 billion people live on less than $3 per day is interesting, but it is not actionable information for entrepreneurs. The numbers are too huge, and the need too ambiguous. Prahalad's work on the "Fortune at the Bottom of the Pyramid" and other related works have been hamstrung by having to jump from this macro knowledge to micro anecdotes. Now, however, we have some intermediary data to help us understand differences in purchase patterns between countries, between rural and urban, and between types of goods and services.

Some of the MNCs and BINGOs had done some market research on specific countries or interventions (for instance, Shell's work on cookstoves, or P&G's work on water purification) but these were also problematic because the context of what the poor spend on other things was not available.

So take a few hours and BOP around these reports. The markets for health, energy, transportation and communications are huge and unserved (or at least quite underserved) and some are starting to change rapidly. All indicators of entrepreneurial BOPportunity.

And read the reports for another reason. Do it so you stop thinking of the poor as a mass of humanity with unlimited problems, and instead see them as potential customers with purchasing power, who want to improve their family's lives. If you can help them do this, you will bring value to their lives and yours. And that is what enterprise is all about.

Here are a few quotes to get you thinking:

"In either case, it is hard to escape the conclusion that the poor do see themselves as having a significant amount of choice, and choose not to exercise it in the direction of spending more on food─the typical poor household in Udaipur could spend up to 30 percent more on food than it actually does, just based on what it spends on alcohol, tobacco, and festivals." Banerjee and Duflo (p 6)

"Many in the BOP...pay higher prices for basic goods and services than do wealthier consumers...this high cost of being poor is widely shared." WRI (p 5)

"A consortium of 19 mobile operators, serving more than 600 million customers... announces a system that will transfer remittances entirely through their phones... predicts global remittances of more than $1 trillion by 2012." WRI (p 104)

Goodall to Great

In this blog, I have written about the role of activists and entrepreneurs as change makers. Jane Goodall and Jim Collins both spoke at CSU recently, and challenged the community on the need for change, and the best ways to pursue such change. Who knew chimps and hedgehogs could lead to so many interesting ideas?

Jane Goodall is an impressive activist role model. Now in her 70s, she is still going strong, traveling around the world, giving 300 speeches a year to spread her message of hope for the natural world. There seemed to be two dominant themes of her talk- the need for humans to be involved in the natural environment and the role of youth for bringing about change for this world. I was also impressed by her use of “enterprise models” and microcredit, as demonstrated in the TACARE initiative of blending sustainable livlihoods around her beloved chimps.

A few quotes:
i) “It is not much good to immunize kids if you don’t improve the environment in which they live.”
ii) “Many of the problems of Africa are tied to the unsustainable lifestyles of wealthy nations.”
iii) “I wonder how such an intelligent species can be destroying the only world it has.”

She continues to be excited about working with people with “bright eyes” that are ready to “jump in.” “There are thousands of problems, and I have never found one that didn’t have someone working on it.”

If Goodall spoke to the large challenges facing the world’s species, Jim Collins spoke more on how one could use a disciplined approach to achieving a great life of meaningful work. He started out asking our business school graduates “what would you ask me if we were having dinner?” He quickly gave them unexpected advice, suggesting that by focusing on picking the right job, they were missing the point. “It is almost certain you will get the wrong job, so spend your time picking the right mentors.”

Collins is now working on two research streams. First, “great” companies that lost it (“Great to Good”) and then companies that have been successful in “less forgiving environments” (analogizing to being high up on Mount Everest). In his view, the post WWII environment was remarkably stable, and that stability is declining.

He emphasized that one fundamental finding in all his research is that “greatness is not a function of luck or circumstance; it is a function of choice and discipline.” He then noted that there was a negative correlation between starting a company with a great idea and success, noting that HP’s story was not one of deciding what they would make, but with whom they would work and how they would do the work.

He also noted the difference between two types of people. Those whose lives are a series of transactions, and who lead "successful" lives. And those whose lives are a series of relationships, who lead "great" lives. Adding to his advice on picking mentors, he shared his story of choosing a personal board of directors (not all of whom knew they were on his board). And suggested that students pick them based on values, not the appearance of success. He also shared the use of his “hedgehog” concept as a way to make decisions on meaningful work at which an individual can excel. [Hedgehog= what are you passionate about? what can you be the best in the world at? how can you make money doing it?]

As an entrepreneur, I most enjoyed his advice to the graduates that “it is much riskier to get a job than it is to start a company.” Collins points out that getting a job is riskier, in that you are putting all your eggs in one basket (business), and putting someone else in charge of the basket. As he put it, there is a difference between risk and ambiguity. The entrepreneurial path is more ambiguous, in that it is less clear what will happen. But can be less risky, since you can have many clients and can adjust rapidly when you see opportunities or threats.

One of the key points of the book the Medici Effect was the innovative energy that comes from overlapping and intersecting fields and cultures. Those in the CSU community had a wonderful chance to hear two great thinkers in Goodall and Collins, and I hope it sparked some creative thinking about the role of entrepreneurship and activism in solving the closely related problems of poverty, health and environmental degradation

Linkage?

A recent poll suggests that many Americans still aren't sure about whether there is a link between human activity and climate change. As Joel Makower states in his blog today:

"a poll conducted by market research company Vizu Corp. and Green Home found that people are convinced the global warming phenomenon exists (70%) and is important (74%). However, the public remains unsure of the cause of global warming and is debating whether the culprit is human behavior (26%), natural climate cycles (26%), or some combination of the two (25%)."

A colleague wrote me over the weekend asking about what I thought established this link. Evidently, as the poll reveals, this person is not alone in asking this question! Here is part of my response:

"I think there is good evidence of a link between human activity and global warming, but I am less sure that that means there are compelling reasons to make it the TOP priority for global economic policy (or even environmental policy). Those are different questions and that seems to get glossed over these days.

Here are two summaries of the science from what I believe are objective groups.
First, the Pew Center: http://www.pewclimate.org/global-warming-basics/ and then the National Academies of Science, which issued a joint statement, stating in part: "It is likely that most of the warming in recent decades can be attributed to human activities."

Bjorn Lomborg, who has been a critic of much of the environmental movement's doom and gloom has stated that climate change is caused in part by human activity. He questions, however, if it is the most important challenge facing the earth and how accurate the predictions are for future disaster. This project, enlisting many Nobel prize winners, is called the Copenhagen Consensus. He recently testified to Congress in March, and you can download his testimony at the site: www.copenhagenconsensus.com Of course, he has been criticized. But I would say that reading Pew, NAS and Copenhagen would give you a pretty good view of the thinking on this linkage."

So, is climate change the world's biggest problem? I'd say I am closer to Lomborg than Gore on this question.

My first concern is that carbon emissions are not the only environmental problem facing us, and that there are many other sources of environmental pollution for which we have the technology to fix them. Fortunately, many of these solutions also reduce carbon. But I question whether our environmental policy should be carbon monogamous. For example, with Envirofit, our retrofit cleans up a number of nasty emissions: particulates, hydrocarbons, NOx and CO/CO2. CO/CO2 are probably the least harmful of 2-stroke emissions for the people living in these cities... but under Kyoto, we only get "paid" for carbon reductions. That is OK, and will help us clean up these other pollutants as well. But it isn't the carbon that is causing respiratory disease in Asia. So pursuing a more polygamous emissions strategy makes sense to me, and when we get to the strategies like carbon sequestration, I am less sure that they make sense (compared to other investments to reduce pollution or improve global health).

Another concern is that the climate change models don't seem to me to properly model the liklihood of technological solutions, and I am not sure they can. While I don't want to be a "naively optimistic" about this, if you look at the pace of technology change for the past 100 years, I see no reason it is going to decelerate. How could we have predicted what we have in 2007 back in 1907? This doesn't mean we shouldn't start acting on reducing carbon, but that the justification should not be all the "disaster" scenarios that are being postulated for a hundred years from now.

I'd like to see the US take some policy approaches to carbon emissions mitigation, because I think that we need to slow the pace of emissions growth. So, for example, carbon cap and trade, or perhaps a carbon tax. It just seems sensible to not keep dumping more into the atmosphere, since we aren't really sure what it is going to do. We do know that it persists for decades, so as a recent article said, the carbon from Model T's is still up in our atmosphere.

Much of the growth in emissions will be from China and India, and it seems that in order to put some pressure on them, the US needs to get on board. In addition, I think coming up with a carbon reduction policy will get the US to innovate in this area... which will drive more technologies that can reduce carbon emissions and be cleaner, more cost effective sources of energy.

So, yes, climate change is an important issue. Is it the TOP issue? I don't think so. Part of an economy is having scarce resources, and as a society, we need to figure out where to invest/allocate these limited resources. I see Climate Change as a top 10 challenge, but feel that not all of the "answers" being proposed are as cost effective as say, malaria nets, clean water, vaccines, etc. So, if I were King of the World, I would be spending resources in multiple areas, where I saw best chances for payback (in lives saved, nature preserved, etc.). Climate change is not in my top 3... but I am happy it is some people's top 1. That is the basis of policy debate... people with different ideas on what society needs to do.

Lastly, I think many in the environmental movement have an aversion to discussing "mitigation strategies" and that this is a mistake. They would rather send out missives about relocating millions of people from flooding, than talk about sea walls, etc. Beyond the simple stuff, like changing light bulbs and more efficient cars, they seem to think that the only answer is wind and solar and doing with less. I don't buy it. That's why I like Lovins, McDonough, etc. and the view that done right, and designed right, there are many solutions that will in the end be better solutions. They will reduce waste, reduce pollution, and likely reduce carbon emissions. But they are going to come from the innovators, not the environmentalists (though I think there are lots of people who are both!).

Investments

An investment involves purchasing an asset or obligation with the expectation of future return. The aggregate effect of these investments drives capital flows around our globe. If, as is usually the case, people are investing for financial returns, financial capital will be searching the globe for the best returns. There is a lot of investment capital in this world, and our investment patterns, just like our consumption patterns, can drive significant change.

What happens when people are interested in other types of returns? This has given rise to the field of "socially responsible investment" and there are several types. There are the "negative screens", where you avoid investing in companies that sell certain types of products (cigarettes) or have certain types of supply (extractive mining). Then there are "positive screens" where one attempts to find particularly exemplary companies, with the idea that they will achieve higher returns (perhaps because this is their competitive advantage... in that attracts more customers, sparks greater innovation, or avoids risks). Think Ben & Jerry's or Interface. This is a burgeoning field, one of the faster growing areas of investor interest. Calvert, Pax World, and Domini funds are growing.

For most economists, investing is what one does with savings. If one donates money to a charity, the economists don't treat that as an investment. And if the government takes money from you (any one else just pay taxes?), and uses it for public "good" that isn't treated as investment either. Nor should it be. But back up... what if the reason one provided money to the charity was to seek a non-financial return on an investment? While we may never convince the economists that this is an "investment," there is certainly growing evidence that this is how the people with the money view what is happening. This growing trend falls under various labels like "venture philanthropy" or "social venture capital" or "new philanthropy".

Intriguingly, the investor may look at this "social investment" quite a bit differently than a "charitable donation." Returns in general, while speculative on the front end, are measurable at the back end. So, the investor might want to know what the investment accomplished. They might even want to know that it accomplished a superior return over a similar investment. Hmmmm. Ever compared yields on a mutual fund? Now, what about your "social investments"? Did you get the return you wanted from that United Way gift last year?

The law treats charitiable donations as gifts. Back in law school, we had to learn the difference between a gift and a contract,and it basically hinged on intent and a lack of mutual consideration ("consideration" as with many legal terms, doesn't mean what most people mean when they use the word; here it means money/property/services). If you are an investor, you usually get some form of obligation from the recipient (a share, a note, a deed). With a charity, you used to just get a thank you note and a tax receipt. But this has been changing. These "investors" are bringing some of the discipline of financial capital to this area. They are holding organizations accountable: funding based on milestones, requiring better measurement of results, etc. I think smaller donors (like me) are also beginning to think this way about at least some of our charitable giving.

Am I consistent in how I treat my investments across the spectrum of retirement savings to charity? No. But I do tend to start with a small position, and continue to grow it over time in the more successful ventures. And, I sell if I sense that the venture has moved away from the strategy it had when I invested, or if there has been a significant negative development in their market. I use this approach regardless of the investment. I also look for signs of growing value, whether in cash flow or other impact. I like measurable impacts, not the squishy stuff.

Mutual Funds. One of my tasks this year is to begin to move these funds (largely retirement) from standard mutual funds into more responsible funds. Along these lines, I have recently started a position in the Wilderhill Clean Energy Portfolio (AMEX: PBW). I will dollar cost into this fund over time, as I sense the portfolio companies are "richly valued".

Publicly traded companies: Whole Foods, Novartis, Johnson & Johnson and Toyota. All companies that pass my "positive" screen of being innovative, and having products that improve the world, particularly when compared to their competitors. I also think they will increase in value over time at a faster rate than other companies (a key idea behind an investment).

Private companies: Brighter Pla.net (carbon offset credit cards), Inviragen (developing world vaccines), Gelazzi (gelato) and CaringFamily (use of communication networks to treat disease). I also own stock in a few companies that I have worked/consulted for in the past. These are my gambles. Investing in early stage companies is foolish, but it is also a way to back teams you think have potentially "game changing" ideas.

Philanthropy: Rotary International, Nature Conservancy, Doctors without Borders, Kiva, Opportunity International, One Acre Fund, Ashoka, One World Health, Envirofit International. All of these have a common theme: all of these use private enterprise approaches to achieve societal value. All also understand that they need to partner with other organziations and governments to get sustainable results.

Looking at it, I feel good about my investments. I know my goals for each, and what my expected return is. I would like to single out One Acre Fund for doing an incredible job this past year, both in terms of results, and reporting. Guess I need to increase my investment in this great start up venture.

Some Thoughts on "Capital" and "Investing" in the BOP

Last month, I was fortunate enough to attend the Skoll World Forum. Interestingly, many of the other attendees were bemoaning the lack of "capital" for early stage social ventures. It seems that just a little more money (or a lot, depending on the participant) would cure a host of the world's ills. And, frankly, many of the participants (including me) were there in part because we are looking for money. But the specific issue of getting money for your organization is different than the issue of "is there enough money" for this emerging sector.

I have spent part of my career in the biotech sector. It was a common complaint that there was not enough start up capital in this industry either. The complaints were numerous: venture capitalists were moving to later stage deals, pharmaceutical companies were waiting too long to enter partnerships, the governments needed to get involved, universities needed start up funds, etc. So I designed an experiment. When someone started in on this, I would ask them for a specific example of a good team with a good idea that didn't get funding, somehow. In close to 10 years, I never got an example. It is NOT a trick question.

Does this mean there aren't examples of companies that didn't get as much funding as they wanted, had to delay some programs, pay "below market" salaries, travel in coach, or stay in Motel 6? Of course not. The point is that good teams, energized by good ideas about which they are passionate, will figure out a way to keep going. They work for stock, stay in Motel 6 and bust their butts. So, please, tell me what good social venture with a good team hasn't gotten funded, somehow?

When I talk about funding BOP ventures, I emphasize that "capital is relentless". What does this mean? It means that capital seeks a return... and if it doesn't get it, it leaves. And this isn't true of just financial capital... it is also true of human capital, and natural capital (1). So, if your organization (or sector) isn't getting capital you are doing something wrong. If you are having a hard time raising money, or getting good people to work for you, your red warning flag is flapping. I hope you see it. This does not make you a bad person, or a failure (unless you don't figure it out and try to fix it). Remember, too, that no one is entitled to capital. Remember those old Smith Barney advertisements? You have to "earn it." As long as capital is limited, you are competing for it, and that is hard work.

What about the bigger picture? What is the funding challenge for social ventures (and I am focusing on the "new" models here, not the more traditional charities)? Why is capital going to come into this sector? Remember, the context of trying to alleviate poverty is one of trillions of dollars of aid, with a very poor return on the investment. Now we are mixing in "start up venture," another high risk/low return (overall) proposition. At least when I took math, a low probability times a low probability resulted in an even lower probability. That is going to make capital (of all forms) a bit leery. Hmmm. More hard work.

And what about the other side of the equation? Are Jeff Skoll/Bill Gates/Pierre Omidyar/Google.ogres (just kidding, Sergey, in case you are reading this) sitting around saying: "Jeez, I wish I had more money, because there are so many good teams with good ideas that I would like to fund because I know they can be successful?" I doubt it. My sense is that they are seeing lots of interesting ideas swirling around, but not the teams that offer superior execution. Jeff Skoll was posting on this in the early days of his SocialEdge site. Why are Google.org and Omidyar Network looking in the for-profit sector? Probably many reasons, but at least in part because they aren't happy with the deal flow/quality in the social sector. Why are Prahalad and Hart emphasizing the need for multinational companies to lead the charge on BOP markets? In large part because they believe that only MNCs can execute(2).

Please don't tell me the answer is that if the sector only paid more (3), more good teams would form and attract more financial capital. The history of entrepreneurship is that ventures start with people with dreams, that then attract capital. It is only during the bubbles that this sometimes flips, and it doesn't last. It certainly isn't a "sustainable" way of attracting capital to the sector.

My next post will be about "walking the talk". Where am I investing in this sector... both my financial and human capital?

Until then, do good, and be great at it.
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(1) I don't think this is necessarily the case with intellectual capital, because for practical purposes, there are no limits on imagination/creativity. That is not to say that governments, cultures and organizations don't try to limit them.
(2) They convenienly ignore, unfortunately, that there are few (no?) examples of large corporations leading large scale societal change. That role typically falls to entrepreneurs and activists.
(3) Check out Rod Schwartz's interesting observations on this from his March 30 posting.

Three Months: 3 books, 3 articles, 3 blogs...

I like to read, and it is part of my job to keep up with the field. So I always have a big stack of books and articles that I need to read, plus the daily flow of emails, blogs and essays.

Since we are 3 months into 2007, here are 3 books, 3 articles (well, I kinda cheated) and 3 blogs that I would urge you to consider reading:

First, the Books:

1) Medici Effect by Frans Johanson. Some very intriguing ideas about how innovation occurs, and better yet, where to look for innovations. I think it could have gone farther in terms of looking at how these intersections and collaborations are occuring in more virtual ways.

2) Made to Stick, by Dan and Chip Heath. So, once you have figured out where to look for innovations, and you find one, this book will be useful in how to popularize it. This is important. Think of all the great ideas that never go anywhere because they don't "stick". If you are an entrepreneur, you need to read this because: 1) it will help you get your ideas to stick... with the media, with customers, with investors, or 2) because your competitors will read it, and then you will really be in trouble if you don't. If you aren't sure you are going to read it because you think innovation is all about "substance," and this book is about "form"- get over yourself, and stop being one of those people who is always whining about their great ideas that no one is excited about.

3) Omivore's Dilemma, by Michael Pollan. OK, I am a little late on this one. All my kids (and my Mom) read it before me. They all raved about it. We started having discussions where I couldn't keep up, because I hadn't read it. So I read it. It is an excellent book; well written, interesting, thoughtful. If you get a bit dizzy when business people talk about supply chains or value chains... read this book. You will never look at a meal the same way again, and that is a good thing.

Next, here are the 3 articles of note:
1) "The Ten Cent Solution", Clive Crook, Atlantic March 2007. A fascinating account of private schools at the BOP.
2) "Why the World Isn't Flat" Foreign Policy March 2007 and "Managing Differences" Harvard Business Review 2007, both by Pankaj Ghemewat. A first rate thinker, keeping it real. Think about the Triple A model for social sector enterprises.
3) "More Profit with Less Carbon" Amory Lovins, Scientific American Sept 2005. Quite simply, Amory is a frickin' genius. I looked this article up again recently to find the graphic on the wastefulness of our electrical grid (supply chain) but reread it. If I were ruler of the world, I would require everyone to read this article before they are allowed to write, blog, or even talk about what needs to be done to address climate change.

And, finally, three blogs I have enjoyed:
1) "The Greenwasher in All of Us" by Joel Makeower. Ouch... the truth hurts. Once again, we prefer to remove the speck from a neighbor's (or company's) eye before removing the log from our own.
2) "Writing a More Concrete Dating Profile" by the brothers Heath on 3/28, after their "Polarize Me" column in Fast Company last month. OK, I am not looking for a date, but I am often looking for business partners. So... have you rewritten your LinkedIn/FaceBook/MySpace page yet?
3) "Why to Not Not Start a Start Up" by Paul Graham (March 2007). I am a big fan of Mr. Graham. He's done it again. Just one juicy quote to get you to click on the link: "You don't need to know anything about business to start a startup. The initial focus should be the product. All you need to know in this phase is how to build things people want. If you succeed, you'll have to think about how to make money from it. But this is so easy you can pick it up on the fly." I am hoping one of my students gives me this quote on a final paper or exam. Bonus points. Really. Even better would be telling me about the product they built and the people that are using/buying it!

Conference Report

Back from several conferences- the Nat'l Collegiate Inventors & Innovators Alliance (NCIIA) and Skoll World Forum (SWF). Here are some exciting things I saw or heard during my travels:

1) March Madness of the Mind- the NCIIA presentations of college student teams from around the country... some great ideas on medical diagnostics, water filters, wind turbines, cleaning up mercury emissions from gold mines... and of course I was very proud of Katie and Chaun representing CSU with the Bright Light stove. "Kids these days," indeed!

2) Dan Kammen, from UC Berkeley, gave NCIIA keynote talk on climate change and energy. A few spicy excerpts:

• "It is remarkable how much we know about climate change; but stunning how little we are investing in doing anything about it."
• After discussing the potential of other (dirtier) fossil fuels (tar sands, etc.)... "So we run out of atmosphere way faster than we run out of oil."
• Discussing the coming alternative energy revolution, and how to avoid what happened with... "the Green Revolution, which was an 'equity ungenerator' and helped wealthy farmers, but not the poor."

In addition, he had a nice chart showing that "not all fuels are created equal" and showing the differences in carbon emissions per gallon (for the entire production and combustion of the fuel). Gasoline was 20 lbs/gallon; fuel from coal was 50 lbs/gallon; and biodiesel was 12 lbs/gallon. The real shocker... some of the cellulosic ethanols (from agricultural waste) actually took a couple pounds of carbon out of the atmosphere in their production and consumption. As he pointed out, a battery powered hybrid, using wind/solar electrical power and this type of ethanol, could get 100 mpg and be basically carbon neutral!

3) Jim Taylor of Int'l Development Enterprises (IDE) in Myanmar gave a great seminar at NCIIA on designing for "extreme affordability" in BOP markets. The poor are very risk averse, as they are often one bad judgement (or accident) away from starving. IDE shoots to have its products priced to customer at $10-25. They do not use microfinance, but instead give their dealers longer payment terms, in effect, providing financing for their channel. Most products hit "payback" in a few months of growing new crops.

4) The SWF was at Oxford, a place dripping with tradition. You can't help feeling smarter walking around this place. A "temple of the mind" for sure. But it also feels a tad stodgy and musty, and the SWF got the institution's heart beating a bit faster. Oxford needs the SWF.

5) Bill Drayton's (Ashoka) remarks throughout the forum were intriguing. This guy is out on the frontiers, and has a vision for a very different world.

• "Agriculture allowed everyone to live on land... with small surpluses that allowed a small population of elites and bureaucrats. That is changing in rural areas, and we can no longer rely on elites to solve the world's problems. Everyone must be involved, everyone must become a changemaker."
• He was a bit defensive about the charges that social entrepreneurship is growing its own elite. But my observation from SWF is that this is something about which these folks will need to be very careful. It is quite clubby, and that contradicts Drayton's message (as does his traditional assertion that Ashoka fellows are one in 10 million). A little cognitive dissonance... Jeff Skoll and Bill Drayton and Dr. Yunus weren't exactly going to the same events as most of the attendees, or joining in the networking at the coffee breaks.
• "The lifecycle of entrepreneur goes on for life. Unless young people get these skills when young, you will have a small level of people qualified to be changemakers." Drayton gets it, and is leading the charge on how youth will drive this field. However, the crowd at SWF was decidedly middle aged. The Skoll folks did a great job of webcasting most of the sessions, but SWF would benefit from more participation from youth, including panels. They could use the March Madness concept to their benefit!
• "Changemakers will be the sustainable competitive advantage of this century… for companies, countries, regions, ethnic groups."

6) The opening ceremony had some real "names" including Yunus and the Queen of Jordan... I found the most interesting comments to be those from David Galenson (U Chicago) who spoke of his research into models of creativity. There is the "conceptual" creativity, which are the bursts of big ideas (think Leonardo, Picasso) and there is the lesser known, but perhaps more important "experimental" creativity, which is built on years of work. His work started with art, but he finds these patterns across fields. Experimental Creativity is particularly empowering to those later on in years. Cezanne, who was a banker for many years before becoming a painter, is a great example. Galenson pointed to Yunus as an example from social entrepreneurship field, in that he didn't start Grameen until later in his career (his 50's?). An even better example, I think, is Dr. V of Aravind Eye Center, who started the first clinic as a retirement project. WOW!

7) My personal favorite of the SWF was Dr. Larry Brilliant's session the last day. Despite my questioning of Google.org's strategy in an earlier post, he did an amazing job of showing the optimism that drives work in this field. Do yourself a favor and watch this session "Reflections from a Pioneer"! He started out with a list of some of the important challenges facing us... global warming, disease, poverty. Then he told the tale of the battle to eradicate smallpox... a challenge that is certainly up there in complexity and impact. A few nuggets:

• Smallpox: killed more than any disease in history…500 million in 20th century..2 million deaths in 2007. It killed kings and queens… wealth didn’t protect you. Lesson: “A gated community can’t save you. We are all in this together”
• In India, it took an army of 150,000 workers, searched every house for 2 years… 1 billion house calls. Rivers wouldn’t flow from the bodies of dead babies. There were 185,000 cases in 1974.
• "The fact that this disease no longer exists gives us hope. This disease brought teams together across countries to fight a common enemy… how can that not make you optimistic that we will be able to solve these other challenges that face us today?"

8) Cool organizations from SWF (more info at www.skoll.org)

Health (particularly distribution of stuff that works; vaccines, bed nets)

• Village Reach
• Riders for Health
• Healthstore Foundation
• OASIS (social insurance)

Environment

• CERES
• Global Footprint Network
• Marine Stewardship Council