As many of you know, I am a pro-business kind of guy. Entrepreneurship... capital... new business models... sustainable product design- these are the topics I write about with respect to tackling the challenges of the BOP. My bleeps know I also believe there is a role for charity (see my "Matrix" post).
Thursday, December 31, 2009
Monday, December 14, 2009
What if? This is one of my favorite two word questions.* An artist's question. A builder's question.
Saturday, November 28, 2009
As someone involved in companies that are based on the idea of attacking global problems of pollution and health, I am deeply interested in the issue of whether it is "right" to have the poor pay for products. And I have spent much time trying to find innovative business models that create societal value and allocate it between customers, communities, investors and employees in a way that makes impactful solutions scaleable and sustainable.
In addition to my teaching, I have been quite involved in two companies that are based on the principle that the best way to achieve social good is through market based approaches. Envirofit, which designs, manufactures and sells cook stoves to poor people in India is a non-profit company, dedicated to developing environmentally friendly products so that poor people can lead healthier and more productive lives. Inviragen is a for-profit biotech company developing vaccinces for developing world infectious diseases in markets that traditional pharmaceutical company R&D has ignored. Is this the "right" approach to tackling these global challenges?
Some people have objected that it isn't "right" to have the poor pay for products and services on ethical grounds. They argue that for those who are wealthy to charge someone who is poor violates an ethical norm. That humans should provide charity for religous or altruistic reasons.
More recently, people have started to argue that having the poor pay isn't "right" because it violates rules of economic incentives. That, as Rachel Glennerster of MIT's Jameel Poverty Action Lab (J-PAL)* states in this month's Fast Company: "Charging small amounts is the exact wrong thing to do" to tackle issues facing the poor.
The data are several years old, as is the debate (I first blogged on it in March 2008). But with J-PAL now being featured in Fast Company, and one of its members, Esther Duflo recently being awarded a MacArthur "genius" grant, I am concerned about the ramifications of these catchy sound bites.
J-PAL studies are useful for what they show, but my concern is that their findings are now being applied with too broad a brush. Glennerster's comment is such an example. Perhaps she added caveats to her statement that didn't make it past the Fast Company editor's desk. Both examples are in the field of public health, an area where the societal and community effects are compelling for broad measures. But standing alone, the statement is dangerously overbroad.
As one J-PAL researcher put it in the Fast Company article, "it's more satisfying to answer small questions well than big questions badly." Yet statements such as Glennerster's seem to indicate a willingness to answer the bigger questions with limited data. While most of J-PAL's studies seem to be on government funded aid programs (see Duflo's suggested "Best Buys" to achieve UN Millennium Development Goals), their broader policy prescriptions don't seem to have boundaries. To apply this "pricing model" to the many social enterprises working today in Base of Pyramid markets would be foolish. Not only is it OK to have the poor pay for goods and services, it may often be necessary in order to have these goods and services exist.
To me, Glennerster's comment speaks to only one side of the equation, that of demand. Yes, people will use more mosquito nets if they are free, or get more infants vaccinated if they receive lentils. But that assumes that someone is willing to supply the nets for free, or buy the lentils to accompany the vaccines. In a small trial, this charity work can be done. The sponsor can buy a few kilos of lentils along with the vaccines. But at the massive scale required to really solve some of these problems, I am skeptical. Even the Gates Foundation with its billions cannot buy all the nets, vaccines, cook stoves, treadle pumps and school fees required to lift the world from poverty. With or without lentils. To use the fashionable term these days- charity doesn't "scale." What does scale is markets (and economists know this, don't they?). That is what has made the 4 C's ubiquitous in our world: Coke, condoms, cigarettes and cell phones. While I don't view markets as a panacea for every global challenge, I do think they are indispensable in development.
As my regular readers know, my argument is more nuanced. In some areas, where the problems are of a crisis nature, and governments are weak, charity is the most workable business model. Where problems are more chronic, such as vaccinations or education, but governments are weak and therefore unable or unwilling to provide such public goods, then enterprising, market based approaches offer a more sustainable business model. And these are typically driven by customers paying for their goods and services. Sometimes, the business model is purely commercial. Sometimes, as with Envirofit or International Development Entrprises, it is a hybrid, where donations are used to subsidize product or market development. Other enterprises which have the poor pay include Vision Spring, Grameen Bank, and Kickstart. Even A-Z Textiles, a mosquito net manufacturer. When J-PAL argues that incentives work for the poor, they also need to remember that incentives work for producers. Yet they are curiously silent on who will make the free or subsidized goods and services to support the policies they propose.
To be sure, the actions of A-Z, Vision Spring, or even Grameen Bank are still small. I don't claim that there is any one path to reducing poverty and improving public health, education and the environment. Charity and "free" products will be required in some instances, but so will having the poor pay.
While I am pleased that J-PAL is bringing new approaches and insights to the field of international development, I encourage them to remember that the field has humbled many with big new ideas. Most tools are useful only in specific situations, even economic tools (like randomized trials). To dispel myths is important work, but broad statements of general application begin to build new myths that may be just as mistaken.
The title to this post is purposely provocative. My answer would be "much of the time, but not always." Not a very good sound bite for a reporter. But it sounds "right" to me.
*NOTE: I have recommended J-PAL's work to BOPreneurs. And I found one of their recent studies on the impacts of microfinance to be useful for some of my work in that field.
Update 11-30: NextBillion's Francisco Noguera posted on the Fast Company article and this post. Thank you to those who have commented on this post and for providing more examples. Also, William Easterly recently blogged on another aspect of randomized controlled trials, noting they will "only EVER be available for a small sample of aid projects."
Thursday, November 26, 2009
The following guest post is from Zubaida Bai, a graduate student in Colorado State's Global Social & Sustainable Enterprise program and TEDIndia fellow. She is hard at work launching her social enterprise, AYZH (link below) and is definitely a BOPreneur-in-training. I have no doubt that with her vision and passion, she will have a lifetime of impact. Here are her reflections on her time at TEDIndia.
It has now been a week after TEDIndia and I am still trying to absorb the impact of my experience. I met entrepreneurs who were distinctive horizontally as well as vertically on the business spectrum; a Chef, a race car designer, a monkey explorer, a humorous website designer, a blogger, a health worker, an artist, a film maker, a chief ethical officer… the list is endless. As I stood admiring this exceptional group of individuals, I was unaware that among this cream of the crop, were two individuals whose work would touch me the most; Sunitha Krishnan, a woman who has dedicated her life to saving young girls from the terror of Human Trafficking in India and Babar Ali, a 16 year old headmaster running a school without walls for over 2000 children in Bangladesh.
The first impression on arriving at the Infosys Campus was of awe as we passed walked through a myriad of architecture from around the world. As I sat in my room late that night going through the day’s events, I realized the artificial atmosphere such landscapes created and how easy it was to get carried away. That night, I made a decision of not letting this atmosphere sway me but learn from it and enhance my experience as I interact with such a large gathering of amazing individuals over the next 3 days.
Within the first hour of the next morning as I went about meeting new people, I knew I had made the right decision of leaving my assumptions and inhibitions behind. Each interaction demonstrated a unique effort at making the world a better place precious for life. As the day progressed, on one side I was humbled beyond words with each contact I made on the other side I saw these individuals were so very similar to me, driven by their desire, energy and passion to make a difference to a burning need in the world.
The TED experience reinforced my belief, that what matters is not how big or small your contribution is to the problems around the world. The key is to identify these problems and make an effort to solve these problems. With AYZH – Technology Solutions for Women, I have begun to tread the path of empowering women through affordable health and livelihood products. I am supported my expectional individuals and entities in India and USA in this initiative and together I am sure we CAN and WILL make our contribution.
I have to admit that I once felt "how silly is it to spend $2500 for a conference and watch a talk in person which you can watch online for free?" But I realized this is what makes a life changing TEDific experience. If and when I can afford, I would most certainly make the investment of time and money to go to many more TED conferences.
I have been talking about all good things. Yes, there are dark sides too but the bright ones cover it up and I bet I won’t even remember the negatives. I am in a sense missing the endless days, starting at 7 am with exchanges about ‘this is what I do’ and ending with informal late night interactions about ‘this is who I am’.
Finally, it was also great to hear from C. K. Prahalad talk about “learning disabilities” of organizations and from Thulasiraj Ravilla about Lions Aravind Institute of Community Ophthalmology after having learnt about them at GSSE. It was also exciting to see the GSSE theme echoing throughout the conference of making social businesses sustainable and viable.
Bonus Pack: My two "must watch" picks for TED Talks: Hans Rosling and Sunitha Krishnan.
Tuesday, November 24, 2009
Limited time offer for aspiring BOPreneurs:
Whereas previous versions of IDDS focused on creating prototypes, IDDS 2010 will focus on turning prototypes into products and project teams into ventures with business plans. Dissemination and marketing will be significant aspects of this summit. We will also focus on what happens after IDDS and how teams will continue working on ventures after the summit. In short, participants will have the opportunity to explore the many challenges of entrepreneurship and technology dissemination for developing markets with a diverse group of people from around the globe. By the time IDDS ends, you can expect to have developed a richer understanding of ways to disseminate your innovation at scale, a plan to move your venture forward, and a broader network of people who can assist you with both.
Sunday, November 22, 2009
My bleeps know I am not long on patience, particularly when it comes to metrics. Not so long ago, I ranted a bit about how incredibly bored I am with this topic. Since then, I have been to two conferences, where, unfortunately, it reared its head. The most recent of these, this past Friday, was entitled "Change that Counts" and had a definite metrics and measurement tilt.
Saturday, October 24, 2009
There are a lot of conferences. And more and more are in the fields of social entrepreneurship, clean technology and green business. Just this weekend, one could attend Poptech in Maine, Social Venture Network in La Jolla or the Energy Justice Program in Boulder. Is this a good thing? What is all this conferring doing to make the world a better place? Here are a few issues that concern me.
Sunday, October 11, 2009
In 2003, two guys (with whom I used to work) started a company. No big deal. Happens all the time.
At first, the company looked at using some new vaccine delivery technology. Both guys had other jobs. But they wanted to build a company together. They had a start on the WHO, but not really the WHAT yet.
But they were fortunate. One of them lived in a town where the Centers for Disease Control has laboratories. And where the land grant university has a number of scientists working on infectious diseases in the developing world. And a few non-profits that were working on products and services to improve public health in the developing world. And it probably didn't hurt that there were a few good local breweries to support "beer storming" ideas. An idea for a company began to evolve.
And these guys were knowledgeable. They knew about doing research. They knew about drug development. They had worked at top research universities and in the biotech and pharmaceutical industries. They had a lot of respect for what the drug companies did. But they also wondered about what the drug companies didn't do. One thing the drug companies didn't do was develop many drugs or vaccines for the billions of people in the developing world. Their business models didn't work for these markets. Their pipelines were focused on the diseases of the affluent- expensive medicines and treatments for chronic diseases. The developing world was a place for off-patent medicines or the occasional charitable venture, not a place to target R&D efforts.
So these guys thought about how they could build a company that created products for those billions of people. They studied the markets. They spoke with early leaders like One World Health. Could they do research on new vaccines? Instead of expensive treatments, could they develop affordable vaccines that would prevent disease. Could they develop products that would also work for the middle class in these countries? For travelers to these countries?
Well, from those ideas, they started building a company. Global from the start. To develop vaccines to fight infectious diseases. Top quality research, top quality manufacturing. Partnerships with clinics around the world. Picking diseases, such as dengue fever, which did not receive much attention from other companies, but had huge impacts on public health. A big idea, maybe. But still not a big deal.
At first, they got told they were well intentioned, but crazy. Why develop products for these less developed markets? Why develop vaccines, which don't have a continued revenue stream? Why move manufacturing outside Western countries? But they kept plugging away. And they began to win a few awards (Colorado's most promising biotech Business Plan in 2005). They raised some start up capital from friends (including me). They were awarded some grant funding from the NIH. With each step, they looked a bit less crazy. They added a few more smart, well-intentioned people to the team. A good idea, good people. But still not a big deal.
They knew that bringing a vaccine to market takes tens of millions of dollars. That was going to require venture capital, and venture capital requires competitive returns. In 2006, the company decided it was time to start raising money to start building the company. They pitched and pitched, making the case that these markets and diseases were attractive and that the company could profit from preventing these diseases. To put it diplomatically, they got a polite reception, but not an enthusiastic one. Professional investors asked some of the same tough questions about the markets and vaccine based business models.
Over time, the company stayed afloat, and the perceptions of this company, the attractiveness of its target markets and its business model, began to change. At several points, the situation looked dicey. But these guys, and their employees and partners, persevered. In 2008, they found a lead investor. Got a term sheet. But then the global financial crisis made it tough to fill out the group of investors. They survived and kept working. Which was a good thing, but not a big deal.
Finally, last week, more than three years after they started working on Series A and after over a hundred investor presentations, these guys, and their company Inviragen, closed the round. $15 million dollars. Enough to take the company through the early clinical trials of several vaccines. You can read more about the company at their website. And more about the Series A investment, and merger with Singapore based Singvax, in their press release.
So, why do I think this is a big deal? It's not because of the money (although that is certainly helpful). It is because of whose money it is. Sometimes you hear an entrepreneur say "all money's green; who cares who the investor is." Well, those entrepreneurs are wrong. It matters who your investors are. And Inviragen's investors are top notch biotech VC's. Experienced. Main stream. Connected to a network of people who know how to bring products to market. They found Inviragen to be a compelling investment.
This is one of the first of what I hope to be many deals where mainstream investors see the benefits of starting high tech ventures that serve global markets, including the poor. And I hope that it shows that the drive for attacking global public health challenges can be very profitable for investors. That the value they create can attract top private capital firms. In fact, I hope it shows that the financial returns required of this venture will drive the successful commercialization of several vaccines, saving thousands and thousands of lives. And yes, I think that is a BIG deal.
Congratulations to Dan Stinchcomb, Jorge Osario and the rest of the Inviragen team, and best of luck in continuing your worthy work.
Note: I am not an unbiased source. I have known Dan and Jorge for years, and was an early investor in their company. I also served as a director of the company until recently.
Tuesday, September 22, 2009
When I was a kid, the McDonald's signs kept me updated on how many billions had been served. The year I was born (1958), in it's 10th year of business, it hit 100 million. When I turned 5, McDonalds hit 1 billion. About the time I reached 6 feet, it reached 10 billion burgers. By 1984, when I graduated from law school, McD's reached 50 billion. A few years later it stopped counting.
What does this have to do with BOPreneurs? Well, this simple metric illustrates a great example of scaling up an international business. Jim Collin's writes about the flywheel effect of gradual, increasing momentum in a business. For McDonalds, part of this came from potent branding and marketing to a newly mobile population. But the other part came from a solid franchise model. This let them experience logarithmic growth without exploding, and allowed them to leverage other people's human and financial capital.
Yesterday, Jason Fairbourne of BYU's Economic Self Reliance Center, visited CSU to talk about his work in applying franchise principles to BOP markets. Fairbourne persuasively made the case that this is a promising approach for both large companies and growing ventures. Borrowing from his research on companies such as VisionSpring and Fan Milk, as well as his own work with a new start up in Ghana, Fairbourne proposes a straightforward framework for "micro-franchising."
1. Find a Successful BOP Business. He didn't say this was easy, and it takes getting out into the field. You won't find these at conferences or in a library. On the other hand, since many of the businesses in BOP are hawkers, you might be successful by looking at "businesses that aren't hawkers." Or not exactly hawkers. It takes a little observation to see that Fan Milk is not just hawkers selling yogurt or ice cream in Ghana, but a sophisticated, profitable organization with low turnover of its bicycle based franchisees. If you are a BOPreneur, microfranchising is not your strategy, but it is a tactic you can use once you have proven your business model.
2. Systematize it. What is the venture's business model? What are leverage points that come with growth? Look at issues of branding, supply chain logistics, territory, contracts and operations manual. The idea is to remove the "creative burden" required for a new entrepreneurial venture, and move to a system which a manger can operate. By doing this, the franchisor reduces risks and enhances income generation for the franchisee. Note that Fairbourne isn't advocating for the demise of entrepreneurship in the BOP. But he is suggesting that those BOPreneurs wishing to "scale up" would be better off to rely on training microenterprise managers, rather than hoping to find an army of micro-entrepreneurs (which he has found to be in short supply).
3. Replicate it. Once the supply chain has been figured out, the manuals written, the managers trained and the business proven regionally, it is easier to replicate the concept into other territories and markets. This is where McDonalds excelled. Not all McDonalds were the same, but they were very similiar around the world. Local modifications may be neccessary as a venture enters new markets, but they should be kept to a minimum to enhance rapid growth. CSU students quizzed Fairbourne on how to decide where to start, and he suggested they pick regions with more stable governments and growing economies.
Fairbourne emphasised two big advantages he sees for this approach. First, it reduces the risk of failure for the business operator. Done properly, incentives for success and penalties for failure are better shared under Fairbourne's approach. Secondly, it connects informal operators to formal supply chains. In doing so, it has macroeconomic effects as these businesses become formalized and grow (not surprisingly, Fairbourne has discussed his approach with Hernando DeSoto's ILD as a way to promote development).
If you are interested in finding out more about micro-franchising, take a look at Fairbourne's book, the Microfranchise Toolkit, and David Stoker's blog. And certainly attend the conference he is hosting in early November (as a special BOP bonus, I'll be there too).
I was impressed with Fairbourne's talk, and the potential microfranchising offers for certain types of consumer focused businesses in the BOP. There is a lot of cheap talk on scaling up BOP ventures, but precious few examples of BOPreneurs that can claim "millions served" (IDE, Aravind, Grameen). The world could use a few "billions served" social enterprises, and if history is a guide, franchising might be a good way to get there.
Tuesday, September 08, 2009
SoCap09 had many sessions, blogs and tweets on metrics and ratings. And the "social entrepreneurship" field seems to have a fascination with definitions. Dare I say it is a morbid one? (I do.)
Today, Ashoka x-posted Adrienne Villani's blog on the question: "can you be a social entrepreneur if you aren't the head honcho?" Why do we care so much who gets to wear this coveted badge? Does it actually make a difference where it counts- solving the issues of poverty, environment and health in the BOP? I'm skeptical.
So, why do I think this fascination with definitions and metrics is "morbid"? Because this field is full of people who like to watch, comment and tweet. Social entrepreneurship, and for that matter, plain old entrepreneurship (irony intended) are not spectator sports. This well meaning crew (I am giving them the benefit of the doubt) of spectators is, at best, a distraction. More likely, it is a negative effect, in that it is making entrepreneurs spend time on spreadsheets, conference calls, conferences and reports, instead of getting stuff done. And if the spectators spent their conference fees on ventures, I'd bet the world would be better off. Take the money to attend the next "unconference," and start a fund which actually has to make decisions and investments. Not just discuss stuff.
Will ratings and metrics help? Well, reports from both Skoll Foundation and the Center for Effective Philanthropy help illustrate the quandry. Because these entrepreneurs build value that cannot be measured with financial tools alone, investors/donors have resorted to a plethora of self-set goals. Perhaps workable for measuring effectiveness of an individual venture, but hard to compare across a portfolio. Unlike those VC's (which most of our spectators seem to envy) who supposedly have terrific, easy to use metrics (e.g., 10x or 30+% IRR). So our spectators get all a-"twitter" on how the field needs transformational radical new metrics. Then they fall all over each other with competing methods. So the new venture looking for funding now has to run spreadsheets using IRIS, GIIRS, SROI, and WTF.* That is sure to add value, right?
Can standardized, improved metrics help bring new capital to the field and fertilze more and better ventures? That is the underlying assumption. But as I have written before,** I suspect this capital shortage in this field is only the market being relentless. It isn't a financial capital shortage if the market is not providing funding to those ventures that don't deserve it (and I have had my fair share of these). It may be a human capital shortage. Does financial capital drive more human capital into a new field, or does experience point to the converse being true? My opinion is that finance follows after the innovators; the trail needs to be pretty packed before those carrying money bags come along. And the early innovators aren't motivated by money, or swish conferences. They are motivated to fix what sucks.
Two years ago I challenged this sector to "give me a specific example of a good team with a good idea that didn't get funding." Maybe I don't get around enough, but no one has given me that example. Sure not every venture gets what it tries to raise, but the good ones are still going. Yes, the market is a nasty and brutish place, compared to the loving embrace of a feel-good conference. Progress can seem slow to the spectators, but on the field, the entrepreneurs are working hard, learning and doing. Often without standardized metrics and rigorous evaluation techniques. But making progress on addressing what sucks. Doing something about it.
Don't get me wrong. I think there are definitely some unserved needs for financing these new ventures. New instruments and new incentives could be very useful. But enough on definitions and metrics. Time for less talk and more action- if you have a theory on metrics, go raise a fund (e.g, Acumen) and make some real investments. A few decent sized seed and A rounds have happened.*** A few more are in the works. All good stuff. But I think that there is too much academic/consulting/foundation DNA in the room. Not listening enough to the entrepreneurs and experienced investors. Having investable deals will drive investment in worthy ventures, not better definitions or metrics.
*OK, I admit it, I made the last one up.
** See here and here, if you are so inclined.
*** d.light and Vidagas come to mind.
Tuesday, July 28, 2009
A few random quotes and descriptions from the last few days in Kumasi.
Bob Nanes (IDE Ghana): "You don't sell people a product, you sell them a dream. You may be making a chlorine water purifier, but you are selling them the vision of healthy children."
At the KNUST university books store, there was a pile of World Bank books on African development for sale for 200 cedis. That is about $142. I guess they want to sell a lot of them. The store also had one copy of Good to Great, for 25 cedis. That title seemed to be harder to keep in stock. Hmmm.
Bob Nanes: "Don't reinvent channels. There are hundreds of companies marketing to the BOP: soap, cigarettes, beer, buckets and batteries. NGOs always want to start a new channel, and it is usually a big mistake. Better to piggyback on what is there."
A student asked Bob what IDE's most successful product was. I figured he would say the treadle pump. But he said the "off season tomato green house" had the biggest return for family weatlh creation. Bob also mentionned that IDE had trained thousands of agricultural machinery technicians to service the treadle pump, and these technicians were often effective marketers for IDE products.
Amy Smith: "In design, there are no solutions, only trade offs."
Ben Linder: "If you don't want people to hold your prototype like a gun, make sure it doesn't look like a gun." [discussing prototyping progression for a demining clipper in Angola]
Amy: "how do you incorporate failure into the success of your design? how will your design fail? how will it fail first? what is the best failure mode? the worst?" [she described redesigning a plow so that when it hit a big rock, instead of bending the blade, a bolt broke. bolts are easier and cheaper to replace than blades.]
Last image: I got to attend my third IDDS International Potluck Dinner last night. Bigger and better than ever in Ghana. Participants grouped by country and then tried to show why their food is the world's best. And we all got a taste. The party lasted long into the pleasant evening. (Sule and I brought Enviro-banku... the world's first banku cooked on an Envirofit cook stove).
Saturday, July 25, 2009
I watched two teams who are working on chlorine purification approaches. It surprises me that chlorine is inexpensive and effective, yet not widely used to purify water. Why is this? Are more complicated technologies needed? The first team is looking to make a low cost chlorine manufacturing device. Using salt water and electricity to produce chlorine. The team was trying to figure out a way to do this without using expensive high power batteries. The second team was planning to use commercially available chlorine, but was working on a reliable way to dose water in smaller communities. They were also looking at business models- water committees, cooperatives or entrepreneurs- to distribute the device.
The other two reviews I watched were working on small scale energy. The first was looking for an alternative to batteries for LED lights. They had examined hand cranks, bicycles and salt water batteries (I had not heard of these before). They were also intrigued by a light we had seen in the villages that used an old music CD as a reflector and provided decent room lighting with 1w LED bulbs. The second team was working on a way of keeping produce from spoiling between the fields and the market. The cost of transport is not just the time and vehicle, but also the loss of up to 30% of a shipment before it is sold. This team has been looking at several alternatives to "pot in pot evaporation" which works well in dryer climates but not humid climates (West Africa). Their current design uses insulation, a small fan and inexpensive webbing materials.
The teams got good feedback from reviewers, a mix of development folks, business people, Suame artisans and engineers. Today is a rare "day off" and tomorrow will be back to work with prototyping and some "Build It" sessions (participants showing others how to make stuff).
Thursday, July 23, 2009
This past weekend, the 12 project teams left on their second trip to rural villages to continue their design projects. The projects generally clump into 3 areas: agriculture (better threshing for groundnuts, or removing debris from rice), energy (storage, food storage, small scale energy generation) and water/sanitation (kid friendly latrine, small scale chlorine production). Interviewing potential customers, meeting with village chiefs, weighing babies. Dawn until dark, these were long, hot, hard days, but much was learned by all, and relationships bloomed.
I was impressed by how these participants really are working on co-design: what is the problem? what do you do now?, would this work? why or why not? what would be a good way to do this in your village/on your farm? can you think about ways you could pay for this? It is a team effort with the villagers. My impression was that, at least in the villages I visited, this was not the way they were used to interacting with visitors. Villagers were excited (but also surprised) to see the teams return, and are working on things to get ready for the next visit at the end of next week.
This week has been a combination of class work on thinking about entrepreneurial business models to disseminate the products, as well as preparing for design reviews tomorrow. The tools are out, and the participants are making prototypes and concept drawings. The halls at the hostel are humming and hammering!
Wednesday, July 15, 2009
Thanks all, for your comments on the World Bank post. A few comments from me:
First, if we really did what Carl proposes, this would be the largest Venture Capital fund in the world. By a huge margin (I think the largest is about $2 billion). Not sure that's a good thing. The nature of large funds is to invest in larger, later stage companies. Last year, VC's invested about $30 billion (a few billion more than WB's annual budget). Would a doubling in the size of VC be a good thing? Do VC's need a stimulus package?
Second, World Bank funds come largely from public sources, as I understand it. Very different from VC sources (private investors, pension funds), which are looking solely for financial returns. Would these WB sources be effective investors/limited partners? I am skeptical.
Third, VC's are picky. They are supposed to be (the same could be said for WB). Is there adequate deal flow for VCs, in terms of investable deals? VC's concentrate investments in certain industries (info technologies, biotechnology) with large capital needs and potential scale to sell off (an "exit strategy"). This would likely need to be modified for BOP. And VC's fund about 1 in 20,000 startups in USA. Not sure why this percentage would go up if BOP.
Fourth, there are some interesting proposals out there of combining private dollars and more socially oriented funding sources (foundations). This is intriguing in that it allows higher returns for the financial investors, and better leverage on social/environmental returns for the foundations. But not many examples, so far. For instance, Gates Foundation has not been doing a lot of Program Related Investments. If Gates isn't finding deals, will World Bank?
I think, however, that Carl is proposing more a change in attitude and approach to how WB money is invested. Wholesale elimination of the bank is unlikely, but experimenting with new approaches in their investments, and the economies of the developing world, seem worthy objectives. If they were a VC fund, it seems likely to me that they would have a hard time raising money based on their track record. Moving some of their portfolio to a new fund for companies that serve BOP customers, properly managed and incentivized, is worthy of consideration.
Monday, July 13, 2009
This is a guest post from Carl Hammerdorfer, the director of Colorado State University's Global Social and Sustainable Enterprise Program. Carl is an entrepreneur, returned Peace Corps Volunteer (Mali), and has worked in international development for years. In this post from somewhere in Africa, Carl proposes that poor countries (and BOPreneurs) would be better served by shutting down the World Bank, paying their experts severance, and investing the remaining multi-billion dollar budget as venture capital. Can he be serious? You decide (and comment if you'd like).
"Is it just me, or is the world actually discussing global poverty and development solutions with renewed passion and genuine rethinking? Work in the development racket for too long can make even the most starry-eyed optimist feel a bit jaded. After all, how long can you hang your hat on the success of South Korea and Poland? Sure, Ghana and Botswana are starting to seem like good stories, but what about Egypt, Burkina Faso, Honduras, Bolivia and a hundred other countries spinning their wheels in poverty’s swamp? When do we start seeing some real, long-term results? When do perennially poor states stand on their own feet?
So it has been good to see Dambisa Moyo brashly call the whole development rodeo into question. It’s been terrific to see Bill Easterly and Jeffry Sachs duke it out in the NYT, Huffington Post and all over the TV and the web. The kind of debate they’ve been having almost never, ever makes the mainstream media. That pabulum factory is too worried about Brad and Angelina’s adoptions or Oprah’s academy, both nice things to be sure, but hardly more than a gnat on an elephant’s … oh, never mind.
For those of you who haven’t been paying attention, Moyo – dubbed the anti-Bono - has said that the development industry has ruined Africa and should get out…er, except for humanitarian aid… and maybe a few scientific institutes. Jeffrey Sachs holds that it’s Western greed and selfishness that has underfunded development, thereby causing untold misery, death and destruction. “We must give more money!” he screams. “Much, much more money!” Bill Easterly stands with Moyo, deriding the World Bank, USAID and other development actors, and arguing that in enterprise lie the answers. He ridicules Sachs, while Sachs basically accuses him of murderous proposals that will damage the lives of millions. And then there’s Bono, Bob Geldoff, most of Hollywood and almost every wannabe activist between the age of 15 and 21. They all want to have another rock concert for Africa and buy more T-shirts to save the planet and all of the poor people on it.
Well, It is time for some wise person to reconcile these seemingly irreconcilable positions so that we can all get back to our I-Phones, Tivos and Priuses. I, regrettably, am not that person. Rather, I’d like to throw some more fuel on this fire and get some other people involved in this global barroom brawl. Smart people. People with big brains and big pocketbooks. People who hate to chip or mar their manicures. World Bank people!
I think it is time to shut down the World Bank. Yes, you heard me right. Shut them down.
It’s not a new or original idea, I’ll admit. Right wing nuts and crazy leftists have both taken aim at the Bank over the years, so this might actually be a chance to get two nuts in the sack together. Er, never mind. But if the extreme right and left agree on this, then let’s take a flyer and cut off the money, turn off the lights, and send all of those really smart people who want to save the developing world back to the developing world. After all, if these guys, most of whom have multiple PhD’s, are the premier experts on development, let’s send them to developing countries where they can practice their craft. And I don’t mean 14 days in the Ulan Bator Hyatt or the Dhakar Sheraton. No, I mean to live, to educate people, to reform governments, to build economies, to create civil society institutions and all of that stuff that they so ardently want to get done. How in the world are they ever going to do that from Washington DC?
Have you ever been in the World Bank? Man, it is an awesome building. All glass and steel and leather and beautiful art and ergonomic chairs. And that cafeteria? Are you kidding me? Last time I was there I had the choice of Asian fusion, pheasant under glass, sushi, sol meunier or veal piccatta. Food I can’t even pronounce, and all at rock bottom prices! Heck if they’re serving that kind of fine cuisine and not bilking taxpayers to support it, then they should be in the restaurant business, not wasting their time in the “not ending poverty business”. Shoot, the light bill alone at the World Bank could probably get both Cape Verde and Honduras out of poverty in a couple of years.
So, shut down the World Bank, I say. And, I have an idea for putting all of that money to use that would actually help poor countries. A friend of mine helpfully suggested that we not shut them down, but that we “transform” them. Ha, ha ha ha ha! Is he crazy!? Nobody’s ever going to transform the World Bank. Heck, the inertia of this institution is approximately that of the Himalyan mountain range, the pyramids and offensive line of the Pittsburgh Steelers combined… and then squared! And man, are those guys ever cagey. Do you think anyone can transform an organization that has 8500 of the smartest people on the planet, people who were able to get out of villages with no electricity, running water or flush toilets in places like Angola and Burma and Venezuela and manage to permanently entrench themselves into some of the highest paying, tax-free jobs on the planet… you think they’re gonna be transformed by anyone? Not on your life. They must be eliminated.
I think we can pay them to go away, and still have money left to implement my aforementioned plan. We could give them half of their salary for 10 years and ask them to go back to work in the real world. Heck, if you are from Niger or Chad, with that kind of money, you are going to be the man/the woman. Since the cost of living there is about 1/10th of what it is in DC, you’d be able to live off of that money and use the balance of it to manage your own personal development strategy. You could do micro-lending, women’s empowerment, maybe even build a small hyrdo-electric dam. And what could be better for the developing world than to send all of their smartest people back to them to build that country?
With the balance of the $25 billion that 185 countries put into the WB every year, here’s what I propose: Let’s use it to subsidize and incentivize the venture capital industry to invest real money in developing countries. If anyone knows how to invest money wisely, it’s the venture capital guys (excluding, of course the guys who invested in Segway). If you ask entrepreneurs in Africa or Latin America what the biggest problem is, they’ll tell you “it’s capital, stupid”. There’s a bunch of money to be made building businesses that make stuff to sell to local people and into regional markets, but rarely can the guy with the idea and the drive get the money to do it. It’s hard enough to do that here, but at least you can mortgage your house or charge up your credit cards or go to Vegas, find a roulette wheel and bet your life savings on red or black. But in Ethiopia if you have a fool-proof plan to pelletize coffee husk for fuel for people’s wood-stoves, finding an investor is like finding cockroach at the Ritz-Carlton. It ain’t gonna happen.
The reason venture capitalists are as rare as hen’s teeth in very poor countries is the perceived risk of doing business there. As one of them told me recently, “Sure, I’ll go to Africa… just as soon as I feel like I won’t earn a ‘negative return’ on my money.” Okay, fair enough. You see it as too risky. Well here’s what we’re going to do for you. We are going to take the money that’s no longer funding Italian loafers and marzipan biscotti at the World Bank and use it to buy out some of that risk. Maybe we’ll cover most of your startup in Kenya so that you can get a person on the ground looking at investments at minimal cost. Maybe we’ll provide training on how to avoid the sharks and scam artists. Or, maybe we guarantee some percentage of your investment capital, leveraging up all of that taxpayer money, all to be put to productive use.
Yes we’d need controls. No investments in illicit arms smuggling, opium production or massage parlors. But there are a few brave folks who’ve got most of those rules of the game down (go to SEAF and see what they’re doing with VC in over a dozen developing countries). Granted, it takes a while to figure out the ropes in Kenya, but it does in pharmaceuticals and biofuels too. VCs would be smart enough to hire good people and develop a methodology to evaluate investees if the incentives are there for them to make healthy returns. They’d make some mistakes, just like they do here, but they’d probably pick some big winners too, maybe even some that produced enough profit to make up for the WB money that might otherwise have gone to that beautiful office and staff in downtown San Salvador.
Let’s face it- what a poor country needs is no different from what a poor state or county in the US needs. Economic development, entrepreneurship, new companies, products… real jobs for God’s sake! Not unproductive jobs working for a foreign NGO, but jobs where people make stuff….and sell it. Michigan and California are depressed- and what do they want? Companies that give people jobs. Why should Guyana and Mali be any different from Georgia and Montana? And if there’s one thing that entrepreneurs and new companies need, it’s capital. You could have a bunch of WB guys making decisions about where to put the money, but I don’t think anyone believes that that’s what those guys are good at. So let’s let the professionals handle it… the venture capitalists.
Wednesday, June 24, 2009
- Nice to see IDDS get a shout out in this month's Fast Company calendar. This will start on July 8 in Kumasi, Ghana. Two Colorado State students, Sule Amadu (Cohort 1 and recent grad) and Habib Anwar (our new Cohort 3), will be helping out, and Bryan Willson and I will be there for part of the program. Full time faculty will include Amy Smith (MIT), Ben Linder (Olin), and Ariel Philips who will be hosted by KNUST's John Quansah and Crossman Hormenoo. The program ends in time for the participants to be part of the Maker Faire Africa in Accra from 14-16 August.
- For another GSSE team blog, check out: Organic Oasis and their aquaponics venture in Peru.
-To see a lot of electrons being being burned on the aid vs entrepreneurship debate, take a look at Easterly's blog and Maggate Wade's post on Huffington. My take- we need African Cheetahs, but they need to figure out where the real game is. (Hint: maybe not attacking MV tours!) I know there is an argument that there is no such thing as bad publicity, but I think that beating up on Jeffrey Sachs is not a particularly useful undertaking at this point. I had been pleased that Easterly's blog was beginning to have more of a focus on identifying true Searchers, but I don't think he can help himself from rising to MV bait. I guess his self-identified role is critic. But I hope he continues to promote Cheetahs/Searchers, study them and let others know what is working, rather than the harping on what isn't working for the Planners. What doesn't work can be instructive, but not as instructive as what works. When one learns to paint, one studies the masters. Inquiring minds want to know: Who are Easterly's masters? I hope that is his next book.
- Panda Bikes, started by GSSE grads John McKinney, Mark Schlink and Jacob Costillo got a nice segment on Denver's Channel 7 tonight! The first organic bamboo bike for under $1000. On sale soon! Here is the video link.
Wednesday, June 17, 2009
When you are designing a venture, spend some time on the network. Think about the "5 Deals" in a venture: customer, founders, funders, employees, and supply chain. Your venture will need to make a deal with each of these groups to build out the network.
Once you have sketched out your proposed network (use a dirty napkin for karma points), think about which of these deals are private, and which are public.
Private in two ways.
First, is this a deal with a public organization (charity, social enterprise, government agency) or private organization (a company)? If private, the consideration (the legal term for value) will need to have some financial components. Not all financial, but primarily. If public, then the mix will likely involve some non-financial items.
Second, is this deal private between the parties? Can you talk about it? Typically, a venture does not disclose terms of supply arrangements, founder and employee options, or terms of financing. Be sure you understand what you can talk about, and what you can't. And understand that if you have public organizations in your network, they may have a different culture, and rules, about disclosure.
Now back to the napkin. For many BOPreneurs, there will be a mix of public and private organizations in the network (yet another "hybrid"). As with any entrepreneur, your job is to create and share value. Not just for your organization, but for this network. Too often, founders will focus on creating value for a specific group ("our" investors, "our" users) but not for the entire network. Does the network create and share value effectively and efficiently? Is each group providing and receiving value? Can you find that elusive synergy that characterizes strong networks?
An example from Envirofit. Our cook stoves are manufactured in China by a private company. Envirofit (a non-proift) ships these to India and sells them through a network of dealers and retail outlets (mostly private, but some NGOs). Our customers purchase the stoves, and receive a warranty from Envirofit. Envirofit employees have incentives to sell stoves (but the details are private), as do the dealers and retail outlets (profits!). We provide value to our donor-investors by reducing pollution and improving public health. Paying attention to the private parts of the network is important. Private firms are willing to work with social enterprises, but they also want to be paid. And these deals with private firms can be a source of competitive advantage for your venture (price, reliability, etc.).
The trick, of course, is to provide value all the way through the supply chain. Customers like the stove and find the price attractive. Dealers sell at a price which provides an attractive profit. Envirofit gets enough margin to pay employees and suppliers. Manufacturers make an attractive profit by selling the stove to Envirofit.
These 5 deals are key to building your venture. Now they are on your napkin, be sure that you can make the numbers real, and that you understand what value each organization provides and receives by participating.
Monday, June 15, 2009
Great to see blog postings coming from our GSSE teams in the field.
Running Water International is working in the Njoro region Kenya this summer on biosand filters (BSF) for clean water in homes and schools. They have already started taking orders!
And they now have a waiter inspired mantra: "It is very possible, for you very possible.” Indeed.
Saturday, June 06, 2009
One common discussion around universities is about the value of teaching disciplines that society tends to view as an art or a talent. In my area, I often hear it expressed as "can you really teach entrepreneurship?" Implicit in the question is that entrepreneurs are born, not made. I have also heard that people question whether one can be taught: leadership, teamwork, art, etc.*
This is a topic that has been discussed in this blog since its humble beginnings.
But what is my answer to the question? I usually respond "I don't teach students to be entrepreneurs. I teach them about being entrepreneurs." There is a difference. Not all students want to become enterpreneurs (a source of continuing puzzlement to me). But they want to find out more about the role of entrepreneurs in business and society. Or maybe entrepreneurship courses are popular for the same reason "Social Deviance" is popular in psychology and sociology departments- morbid fascination?
What seems to work best for my classes is providing a framework, discussion, and a chance to practice. A mix of encouragement, support and questions. For those that lean entrepreneurial, my classes provide examples and a chance to test out a new venture. And, I hope, a dash of inspiration. If they decide to pursue a new venture, class is just the start. Then my role becomes advising, assisting, watching.
Really, though, the answer to the question is more complicated. What is important is what students learn, not what I teach (I still cling to the idea that there is a correlation). Some students learn to be entrepreneurs in my classes. Some learn about entrepreneurs in my classes. In many cases, it is not the particular content of hours of reading, cases and discussion. But rather at some point, a student realizes "I can do this." They give themselves permission. They realize there isn't a litmus test or an entrance exam for becoming an entrepreneur.
* I am not getting into levels of genius here. For instance, I think it is possible to teach basketball, but not possible to teach just anyone to be Kobe or Jordan. It is possible to teach painting, but not possible to teach just anyone to be Cezanne or Homer. And there are many impressive people who are self-taught. But being a self-taught entrepreneur is different than being a born entrepreneur, isn't it?
Wednesday, May 20, 2009
Puzzled by my current reading. Just finished Ishamael Beah's "A Long Way Gone: Memoirs of a Boy Soldier." Concurrently working through Jessica Livingston's "Founders at Work" and Niall Ferguson's "The Ascent of Money: A Financial History of the World."
So what is the connection between child soldiers in Sierra Leone; founders such as Steve Wozniak, Paul Graham and Craig Newmark; and Medicis and silver mines of Peru? I have no idea.
All are excellent, but my current selections seem a bit like selecting shuffle on an iPod (is this an option on Kindle?). Guess it will be a test to see if I can see any intersections. Maybe I will see a pattern or get an insight. Maybe not.
I think "shuffling" is one way to foster to intersectional creativity and innovation. The random events in a day are a shuffle... are you paying attention to the hands you are being dealt? What are you doing to get a variety of ideas from different cultures and disciplines? Are you keeping track of them?
Saturday, May 16, 2009
One of my great joys is helping students who are working through the challenges of building a business. Here are my one line descriptions of the 20 businesses which I have had the privilege of seeing in my role as an entrepreneurship instructor this spring at Colorado State University and Bainbridge Graduate Institute. What these students are doing is difficult and inspirational. Some are real ventures, some class projects, and some dreams deferred until personal situations allow them to proceed. I learn from each team, and am proud of them all.
Colorado State University MBA
1. Adventure Academy of Northern Colorado: an after school Outward Bound program.
2. Beacon Financial: financial services for immigrants from China and India.
3. Colorado Equine Rehabilitation Center: helping horses heal after surgery at CSU Vet Hospital.
4. Green Ride Colorado- a more convenient and eco-friendly airport shuttle service.
5. Harmony Wellness Systems- reducing employer health costs through wellness programs.
6. KromaTid- cancer diagnosis through a proprietary method of identifying genetic inversions.
CSU Global Social & Sustainable Enterprise MSBA
7. AYZH- designing and producing products to empower women at the base of the pyramid.
8. Cradle of Tea- launching a healthy and delicious new beverage from Ethiopia.
9. Ecuador ICT- telemedicine and tele-eduction for rural Ecuador.
10. Latin Health Services- helping make South American homes safe from insects and chemicals.
11. Organic Oasis- providing vegetables and fish in an affordable, closed loop aquaponics system.
12. Rocky Mountain Hops- providing local hops for Rocky Mountain craft brewers.
13. Running Water- household water filtration products for rural Kenya.
BGI MBA Program
14. Char for Change- cook stoves and biochar provide cleaner kitchens and income in Peru.
15. Growfood.org- matching organic farmers and volunteers for labor and learning.
16. Healing the Hero- therapeutic wilderness trips for our returning veterans.
17. Restoration Abbey- using information technology to restore the lives of former slaves.
18. Second Helping- enterprise approach to meals for those in need on the Olympic Peninsula.
19. Tangerine Solar Cooperative- solar energy, with a twist, in Hawaii.
20. Terrabytes- reducing the ecofootprint of clients' information technology systems.
Thursday, May 07, 2009
The other day during the CSU Clean Energy Supercluster Expo, someone said to me: "I can't believe Envirofit is a non-profit. They don't look or act like one." I took this as a compliment for Envirofit, and a criticism of more traditional non-profits in the energy field.
Envirofit is a non-profit, 501(c)3 corporation. But we intentionally try not to act like one. We make and sell products. We define success as making and selling a lot of these products. We have a complex supply chain with large multinationals. We have built a distribution network in India for our stoves, and in the Philippines for our retrofit kits. We offer a warranty on our products, something poor customers aren't use to getting. We care about marketing, and we care about our brand. While we are not yet profitable overall, we do make a profit on each unit we sell. We hope to sell enough volume soon to become a profitable company, and we are on track to have millions of dollars in revenue.
We aren't doing these things to make money for our shareholders (we don't have any). We are doing them because we believe this is the best way for our company to have a significant impact on the environment and poverty, and to do so in a sustainable and scalable way. When we started the company, we couldn't promise attractive returns to investors, but we could offer attractive impact. Since our goal was to clean up the environment, and alleviate poverty in developing regions, we could qualify as a non-profit organization.
My point? Envirofit is a non-profit organization. But it runs as a company. If you decide to start a non-profit, be sure you realize that this is but one decision on your organization's design. It certainly defines some things you can and can't do. (At times, it has been a bit of a bother for us.) But it doesn't have to define your relationship with customers, the types of employees you attract, and the way you conduct business.
Other non-profit BOPreneurs with an enterprising attitude? Kiva, One World Health, Accion and One Acre Fund all come to mind.
In short, don't let your legal form drive your business attitude. Don't let "non-profit" become a mindset.
Tuesday, May 05, 2009
Monday, May 04, 2009
Bryan Willson and I headed to the Denver Green Festival yesterday to talk about Innovations for Energy, Environment and Health, which basically means we got to tell stories about Envirofit cook stoves and Solix Biofuels. There were some great speakers and entertainment. And the conference organizers took many steps to make this truly a "green" festival.
What I wasn't ready for was what I saw when I went upstairs in the convention center. It was a huge trade show, with the floor filled with booths with the latest in "green goods" for home, body and mind. Gotta love the American consumer. And with trade shows comes schwag (no, not bad weed, but the promotional items used to encourage you to remember a product).
One sign asked: "are you eco-chic?" When I signed in at the speaker booth, I was asked if I wanted some organic, fair trade eye cream. (to be fair, at least they didn't provide the "goodie" bag that one gets at many conferences).
Sorry, but for me, at least one step toward true eco-chic is to just say NO to schwag.
Sunday, April 26, 2009
Andrew Youn, founder of One Acre Fund and a true BOPreneur, recently sent me a message asking for help in recruiting additional funding. So, bleeps, this is your chance to help an amazing group do their work for $20/month (enough to help a family of 6 work their way out of poverty).
Andrew has built a great organization, doing worthy work. He has done it quietly, in a difficult place and time. One brick at at time. Please join me in helping out One Acre Fund as a member of the Investment Council.
"Thanks to your support as an Investment Council member, One Acre Fund continues to make major advances in addressing chronic hunger. More than 4,000 families, including more than 16,000 children, are literally growing themselves out of chronic hunger. Our farmers' hard work coupled with One Acre Fund's innovative market bundle, which includes quality farming inputs, farmer education and access to output markets, is proving to be a powerful tool in the fight against hunger.
Now we need to ask for your help. If every member of our Investment Council identifies just one friend, family member, co-worker or organization that shares the desire to create an innovative and permanent solution to chronic hunger, One Acre Fund can help an additional 500 families permanently grow themselves out of hunger. The Investment Council is One Acre Fund's single largest source of financial support. Please help us build a long-term foundation for a pioneering solution to world hunger."
Saturday, April 25, 2009
Bjorn Lomborg strikes again in today's NY Times:
"In Kyoto in 1997, leaders promised even stricter reductions by 2010, yet emissions have kept increasing unabated. Still, the leaders plan to meet in Copenhagen this December to agree to even more of the same — drastic reductions in emissions that no one will live up to. Another decade will be wasted...We might have assumed that investment in [energy technology] research would have increased when the Kyoto Protocol made fossil fuel use more expensive, but it has not. "
Lomborg suggests that instead of emissions limits, nations instead agree to invest .05% of GDP into research for making wind and solar energy technologies more competitive. He argues this would be more efficient and effective.
"Economic estimates that assign value to the long-term benefits that would come from reducing warming — things like fewer deaths from heat and less flooding — show that every dollar invested in quickly making low-carbon energy cheaper can do $16 worth of good. If the Kyoto agreement were fully obeyed through 2099, it would cut temperatures by only 0.3 degrees Fahrenheit. Each dollar would do only about 30 cents worth of good."
While he doesn't get into it in this article, Lomborg has also written persuasively that other public health investments are more compelling than carbon reductions. HIV treatment, malaria, cleaner drinking water, nutrition and education all have higher returns. Society must prioritize how we invest in a healthier planet (even more so after having lost a lot of ground due to the financial crisis).
"The fact is, carbon remains the only way for developing countries to work their way out of poverty. Coal burning provides half of the world’s electricity, and fully 80 percent of it in China and India, where laborers now enjoy a quality of life that their parents could barely imagine. " This statement is true, and troubling. The issue is whether we increase the chances (and speed) for leapfrog energy technologies with more R&D funding or with Kyoto.
Lomborg's view that investing in cleaner energy technologies may result in better decisions than regulating emissions deserves careful consideration by policy makers.
Thursday, April 16, 2009
P.S. There are no known pictures of Sule when he isn't smiling.
Saturday, April 11, 2009
President Obama is seeking to increase aid to developing countries:
"I intend to work with Congress to provide $448 million in immediate assistance to vulnerable populations from Africa to Latin America and to double support for food safety to over $1 billion so that we are giving people the tools they need to lift themselves out of poverty."
This is heating up the debate on whether and how to provide aid. Most Americans, our president among them, want to do something. It is hard to watch people suffer, and not try to help. But sometimes it makes the donor feel good, while not helping the person who is suffering.
Can aid help? Is it just putting a band aid on much larger problem? Is it doomed to failure?
Jeffrey Sachs suggests the answer is Homegrown Aid. People are poor and hungry, and international aid can help, if done properly, he argues. Of course, his proper way is to have recipient governments come up with plans. Aid can be effective if undertaken with "generosity, good science and rigorous management."
George Ayittey was interviewed the same day, and decried "Dead Aid." How's this for provocative:
"Americans were justifiably outraged when AIG, which received billions in U.S.taxpayer money in bailouts, paid out hefty bonuses to its executives. So where is the outrage when African leaders, who receive U.S. taxpayers’ money in foreign aid, build palaces for themselves while their people wallow in abject poverty?"
Not enough? How about: "The African countries that received the most aid -- Somalia, Liberia and Zaire -- slid into virtual anarchy." He goes on to urge that aid be focused on building institutions that support liberty and freedom, not projects.
I recognize the need for aid, and have argued that it, as well as enterprise, plays a role in development. But the waste and ineffectiveness angers me. I think that development funds (as opposed to emergency aid) should flow to the approaches, and countries, with better records. I also believe that, just as in developed countries, aid is needed to subsidize health and education. If we left it just to markets, we would still have endemic small pox and polio in these countries.
There is also the issue of the capacity to receive these flows. Recently, ANDE was launched, providing a new resource network of $750 million for investing in developing world enterprises. Backed by some pretty smart funders in this field. They believe they can deploy these funds and make a return. But if there were 10 ANDE type funds, or 100, would they be able to find projects that would be able to provide a return on investment? Or would they start a "bubble" in social enterprises with too much money chasing too few investable deals?
The size of the Obama plan and ANDE are similar. It will be interesting to see whether either of them can help us understand new ways to help the patient.