Really, it gets to the heart of what motivates impact investors.  Do they invest in the (perceived best) solution to a problem, or the best mechanism to discover the solution?  In the first scenario, the investor assumes that she has (or may have) a viable answer and devotes her efforts to supporting that answer.  In the second, the investor gets behind a superior problem-solving approach and a working hypothesis, subject to further testing and experimentation.  (You can probably tell that I’ve been reading The Lean Startup by Eric Ries.)

Why does this matter?  Because if investors bankroll “the best possible solution”, the focus may be making that particular solution work. From an investment management perspective, this could reduce tolerance for pivots.  From a portfolio management perspective, diversifying with other, presumably less promising  investments looks a bit foolish. However, if investors support “the best working hypothesis” + “the best discovery mechanism”, there is room for several players in the same sector.  In fact, what you have is multiple experiments running simultaneously that provide lots and lots of problem-solving information.  If the goal is in fact solving the problem, this approach makes intuitive sense.

Perhaps the state (and utility) of collaboration across the impact investing industry is something else to consider.  ”One and done” may make sense in the context of a single institution, for a variety of reasons.  But it doesn’t across the investing spectrum.  The industry as a whole would be better off exploring multiple solutions at the same time.  However, this sort of approach would either require lots of luck or lots of coordination.  Both seem like wishful thinking at this point. In any case, if coordination is as absent among impact investors as it is among social entrepreneurs, it may be more, not less likely for similar projects to get funded.  Or not.  It does seem a bit nonsensical to think there is only one winner per category in the real world though.  Sigh… Perhaps I should refocus my energy on deciding what movie to rent from redbox.

Sigh…Just another entry under “Things that make you go Hmmm…..”

Skip Hammock and Dean Mosca, who work for Pharmachem, found out about the seeds at a conference in Baltimore in 2007 and began looking for places where they’re grown. They eventually agreed to purchase millions of pounds of the seeds from a cooperative of Bolivian farmers.

Now that, I like.  Shea, coffee, jatropha, and chia.  Let’s hope those farmers are profiting from the “super food” (Thanks, WSJ) craze.

Here’s the thing.  From what I understand, Neil learned the ins and outs of the eye wear industry during the five years he spent at VisionSpring.  Neil talks about  that with Mitch Baranowski in BBMG’s The Green Room.  (Watch from 4:05 to 4:21.)  That’s when he discovered that glasses are sold at a steep mark-up because a small group of companies control the value chain.  For example, Luxottica Group basically corners the frame market by licensing 20 retail brands, manufacturing the glasses, and selling them at a 10-20x mark-up.  They own optical outlets— Lenscrafters and Pearle Vision, eye wear only retailers—Ray-Ban and Oliver People, and even the second-largest vision insurance provider in the country.

Is this an isolated incident?  Or are there other social enterprises/nonprofits that have discovered supply chain inefficiencies that can be exploited by disruptive start-ups?  If it’s the latter, then it weakens the questionable assumption that innovation mostly flows from the private sector to the “public” sector.  (Granted, VisionSpring is a social enterprise with an inclusive business model; the lines are clearly blurred.)  Perhaps this might cast a new light on the prescribed role of nonprofits.  Community service provider?  Check.  Honest broker?  Double-check.  Bastion of (social) business model innovation?  Hmm….

The problem is that we, as human beings, hypothesize about what we would do in other people’s shoes all the time.  When it’s done well it’s called empathy.  When it’s not, it’s called hubris…at best.  Ta-Nahesi Coates at the Atlantic does a masterful job of describing the latter phenomenon in his response, A Muscular Empathy. Terrific read.  As Coates points out, there is a tendency to assume that we’d be and do better than the people to whom we’re trying to relate.  Why?  Well, in Mr. Marks’ case it seems as if he wrote from the perspective of a poor black kid while retaining his identity as a privileged white man.  I don’t know if this was intentional or not, but empathy doesn’t work that way.  You actually have to take off your loafers and put on the moccasins, which brings me to my point about development.

Many solutions to tough problems probably start with a hypothesis similar to the one Marks created.  Here’s one.  ”If I were a rural farmer in Mali, I would invest in hybrid seeds to improve my annual yield.”   These statements are easy to make because we can imagine what we’d want if we were rural farmers.  Except we’re not.  Of course, there are lots of tools in development to avoid this type of thinking, and they’re improving all the time.  For example, Abhijit Banerjee and Esther Duflo’s work on randomized control trials, which I’ve blogged about before, goes a long way toward testing these sorts of hypotheses.  Design thinking, and other approaches that emphasize “human-centeredness”, co-creation, and community ownership also contribute mightily to this effort.  However, it’s all too simple to think “If I Were…” without actually doing the hard work—trading your set of experiences, expectations, assumptions, hopes, desires and needs for someone else’s.  So instead of pontificating about the hypothetical, get out there and experience the reality, as many of Marks’ readers suggest that he do.  If nothing else, you’re much less likely to piss people off.

*This piece was inspired by a friend and fellow Cornell alum with whom I recently reconnected.  Inspiration finds you at unexpected times in unexpected places.

Well, apparently this approach doesn’t necessarily translate at the institutional level.  As Heather Esper of NextBillion points out, “narratives are not enough” when the goal is to ensure accountability and transparency.  She rightly emphasizes the need to collect data as a way to demonstrate impact.  Perhaps more importantly, she highlights the growing realization that a framework for openly discussing failure is necessary, particularly as a way to learn and improve.

I don’t know what stories Mr. Mortenson told himself about his work, and don’t aim to guess.  However, for better or worse, the stories he told others are well-documented.  What’s pretty clear is that if you’re a public figure, your personal and public stories have to match up.  I suspect that this is much harder than it sounds.  The nature of (social) entrepreneurship requires that the problem-solver literally bend reality Matrix-style to match his or her version of the truth, i.e. how things should be in a better version of the world.  In order to do this, said entrepreneur better be a skilled story-teller.  Firstly, she has to believe with all the restless fibers of her being that what she wants to achieve is possible.  Secondly, she has to convince a whole crowd of skeptical others.  The challenge is maintaining a healthy balance between vision and reality.  That’s where data, an active board, and members of the community come in.

Nonetheless, I imagine that one’s self-esteem as a social entrepreneur can become intertwined with the (perceived) success of the venture.  In some cases, there is a great deal of external validation to be had in the life of a “social sector celebrity”.  From prestigious awards and fellowships to elevated social media status, the stock of the heroic founder can rise quite dramatically.  Unfortunately, sometimes this happens on the strength of the story rather than the work itself.  Of course, it’s the personal tales that captivate us the most.  That’s certainly the case with Mortensen.  And why shouldn’t they?  The compelling ones have surely inspired a generation of change-makers.  However, as participants in the narrative we need to be committed enough to stick with the plot, and  see what happens in the end  Indeed, this is why Desiree Adaway’s post on “founder’s fatigue” is so timely.  In her very appropriate words:

I am done with the founder that becomes the star, the hero, the savior.  …The founder whose reputation, brand, charisma and personality are so bound with the organization that they are one. I am tired of organizations, companies and products with big stories but no substance.  All narrative with no data just leaves me wanting,  disillusioned and hurt.

 An organization is never about one person, one story, one voice. The work is richer and deeper than that.  We like to simplify it for mass consumption and in doing that we have created a system which encourages and rewards easy answers to complex situations.

All of that said, I’m with Nicholas Kristof in his call to “reserve judgment” for the time being.  The truth about Mortensen’s apparent misdeeds—exaggerating the tale of his Taliban kidnapping, mismanaging CAI funds, claiming credit for schools he didn’t build or are currently unused— is probably fairly nuanced.  It probably lies somewhere between the absent-minded, well-intentioned “disorganization” that Kristof and Mortenson himself cite, and the outright fraud that former supporter Jon Krakauer attributes to him.  (See this exclusive interview conducted  by Alex Heard of OutsideOnline for Mortenson’s take on his management struggles.)  Perhaps that’s not surprising given the nature of the “truth”; it’s usually much more complex and much less subjective that we’d prefer.  Perhaps that’s why this impact assessment stuff is so darn thorny.

In any case, it’s not my aim to accuse Mortensen of anything further, or to speculate about what caused this situation to explode.  His story simply made me think about the nature of this type of work, and what roles we play for ourselves and others.  At minimum, I think it’s important to ask yourself, as often as you can, whose story you’re telling (or selling) and why.

My primary take-away from all of this is that we spend a lot of time telling ourselves things that simply aren’t true.   We talk about our limitations, weaknesses, and tendencies as if they were presented to us on stone tablets.  More often than not, we use personal labels, e.g.  introvert, extrovert, poet, numbers-jockey, etc. to excuse ourselves from situations that will push and challenge us.

Why is this a problem?  Because I’m pretty sure that many of you who do this are still pretty successful.  The problem is that we rob ourselves of opportunities to do so much more, without meaning to.  As Sasha puts it, “[if we] slam doors before we’ve ever tried to walk through them…then we have no one to blame but ourselves when our path forward isn’t what we’d hoped it would be.”

For those of us who are committed to living impactful lives, this is an unacceptable conclusion, point-blank, period.

So the next time you’re tempted to tell a negative story about your ability, don’t.   You’re doing yourself and the people you serve (who, incidentally, kinda need you to be at your best),  a disservice.  Plus, as one of Tony’s commenters rightly pointed out,  “When the truth is unknowable, believe the flattering outcome. You will turn to more useful actions as a result.”

For whatever reason, small companies don’t attract the same level of ire and finger-pointing that the mega corporate leviathans do.  On some level, this makes sense.  No one pickets outside the neighborhood bookstore.  After all, the guy or gal is just trying to make a living.

Why does this matter?  To be honest, I’m not sure that it does.  Although I doubt anyone would contend with the assertion that small companies need to tow the before mentioned line, their harm/value profiles differ from their larger cousins.  Unless the small business has obviously nefarious intentions, most people assume that the damage they do is limited.  Perhaps more importantly, their benefit to society is unlikely to be question.  Additionally, the economics are different.  One might believe that small companies lack the financial resources to make upfront investments that could reduce costs or drive revenue in the future.  Unless of course, the business model is designed to create value this way.

Surely, I think there’s some value in being clear about who and what we’re talking about.  But beyond that, given the sheer number of SMEs out there, it might be worthwhile to expand the conversation beyond their oft-cited role in job creation.  Just a thought.

Note:  I know that there are many small businesses, social businesses, social enterprises, and other hybrids that take a shared value perspective.  It’s just that there’s not a lot being said about their roles and responsibilities as a whole.

As defined by Mark Kramer and John Kania in an article published in the Winter 2011 edition of the Stanford Social Innovation Review (SSIR), collective impact is “the commitment of a group of important actors from different sectors to a common agenda for solving a specific social problem.”
From what I can tell, the defining characteristics include the before-mentioned common agenda, and “a single set of goals, measured in the same way.”  Kramer and Kania describe the USP as “…a centralized infrastructure, a dedicated staff, and a structured process that leads to a common agenda, shared measurement, continuous communication, and mutually reinforcing activities among all participants.”  In the same breath, they acknowledge that “Collaboration is nothing new. The social sector is filled with examples of partnerships, networks, and other types of joint efforts.”

Frankly, I don’t understand how/why a run-of-the mill network or public private partnership couldn’t have all of the characteristics listed above, but perhaps this misses the point. For all I know, collective impact is a difficult phenomenon to understand until you’re in it, getting things done on the ground.  This perspective seems consistent with the war stories shared by a few participants at the Collective Impact conference hosted by FSG Social Impact Consultants and SSIR a couple of weeks ago.  (Fortunately for me, it was streamed live.)  Many of them thanked Mark Kramer for giving a name to the work that they’d been doing for years.

What’s interesting from my perspective, is the way that collective impact describes a mechanism to engage in systems-based problem-solving. As Kramer and Kania contend, social problems aren’t created by a single organization, so they can’t be solved by one.  There are other variables—people, institutions, behaviors, etc. in the mix as well.  It’s actually this distinction—between adaptive problems, which are complicated enough to require non-formulaic solutions and the attention of lots of different people and resources, and regular problems that are  straight-forward to solve—that makes the case for a multi-faceted problem solving approach.

Now, the reason this rings my bell is that I’ve never quite understood why social problems are often disaggregated and tackled by silo-ed experts.  I mean it’s not as if providing potable water to a rural village is unrelated to challenges with agriculture, sustainable livelihoods, health, and education.  It seems more sensible, albeit incredibly more difficult and complicated, to view these issues as interconnected elements of the same faulty system.
For that reason, talking about collective impact makes some sense to me.

Kramer and Kania seem to agree.  As they put it, “..large-scale social change comes from better cross-sector coordination rather than from the isolated intervention of individual organizations.”  However, they also assert that:

The power of collective action comes not from the sheer number of participants or the uniformity of their efforts, but from the coordination of their differentiated activities through a mutually reinforcing plan of action. Each stakeholder’s efforts must fit into an overarching plan if their combined efforts are to succeed.

Hmm…Makes me wonder how this jibes with Bill Easterly’s discussion of planning vs. seeking as problem-solving methods in development.  Does using a top-down approach to solve an adaptable problem really make sense?  Although Kramer and Kania contend that searching for single solutions presented by single organizations is the wrong way to address certain types of issues, it seems like using a bottom-up, market-based methodology (and I use this term very loosely), to find discrete solutions is a precursor to engaging in collective impact.  After all if you don’t have a number of organizations with unique perspectives and theories of change how do you pool resources?

In a way, that’s why Esther Duflo’s work with randomized control trials to discover solutions to “micro-level” problems  is so important.   (I blogged about this yesterday.)   She’s trying to figure out what works for discrete challenges, because making seemingly small improvements “at the margin” can make a significant difference in the lives of the poor.

But then again, I suppose if you held a shot-gun wedding between collective impact and discrete impact, what you could end up with is a pool of long-term, collective experimentation, i.e. a license to “search” for the answers in a way that leverages the respective strengths of the players and respects the complexity of the problem.  Pretty nifty, right?

I can’t say that I’m entirely convinced that collective impact describes a new paradigm for the social sector.  Again, that may not be the point.  However, to the extent that it names (or re-names) a pre-existing phenomenon, one must beware the dangers of “buzz word bingo”.  When new terminology is introduced, dilution of meaning and significance begins almost immediately.   It’s not enough to name-check collective impact like a mediocre rapper with dubious lyrical ability. (Example: We put two and two together and get five.  Collective impact.)  It’ll be important to be crystal clear about what it is, what it isn’t, and what it looks like and feels like when it’s being done.

Esther’s primary contention was that institutions are not as immutable as they seem.  In f act, significant policy changes can be made at the margin, even when the “politics” and the policy environment are poor.  This insight strikes me as incredibly important given the dichotomous nature of the debate around the power of government institutions to make change.   On one side,  it’s government vs. corporation.  On the other, and I contend that this perspective is more useful, the private sector, NGOs and government all have roles to play.  In any case, Duflo’s point of view gives us a reason to escape unilateral thinking with respect to government’s role in development.

What really blew me away though, was Duflo’s response to the query posed by Nancy Birdsall, Founding President of CGD, as a follow-up to Duflo’s formal remarks.  Nancy took the opportunity to couch Esther’s micro-level work in the context of a macro-level debate about the efficacy of aid.  The response made my lazy little neurons crackle with delight.  “Whether aid is good or bad is not the most important question,” Esther asserted.  “Given that aid is a small percentage of capital flows, the more important consideration is how we make policy work; make aid more effective; and spend it in a way that maximizes its ability to teach us something.”

For me this is hugely ironic, although appropriately so.  When I first started the struggle to find my vocational “true north”, one of the first questions I posed to myself centered on aid effectiveness.  Why?  Because quite selfishly, I didn’t want to devote my time and energy to pursuing useless interventions.  Eight years later I am happy to report that this was probably  the wrong way to frame the problem.  As a gentleman from USAID aptly expressed it, “VCs can be successful even if large numbers of interventions fail.” Had I been in the room, I would have asked the congregation for a resounding  “Amen!”  It is truly exciting to consider that the “right answer” may in fact be searching for it…the right answer that is.  Were this  underlying principle to be put in place, imagine the impact on the struggle against fear of failure, and arguably, accountability, in the development community?
If nothing else, this perspective helps de-emphasize the “conflation of opinion” that happens when aid is summarily declared good or evil.  Dambisa Moyo’s Dead Aid illustrates the tone of that discourse.

It got even better when Ngozi Okonjo-Iweala,  Managing Director of the World Bank and Nigeria’s first female Finance Minister,  supported Duflo’s perspective, indicating that “the aid debate is a bit passe”, because people are starting to focus on developing effective programs and policies in order to catalyze and/or scale change.  Two words: L-O-V-E it.

Equally as interesting is the notion, again espoused by the USAID representative, that aid-based financing can be used to align incentives (in addition to catalyzing and scaling change) at the margin.   Perhaps rather conveniently, this reminds me of the Acumen Fund’s use of philanthropic dollars as risk capital to fund business models that would not have seen the light of day.  I like the idea of aid money being leveraged in a similar way.

Happily, Duflo’s talk concluded with a comment that addressed a fundamental question in the debate about when and how to evaluate.  Essentially, she argued that it’s better to conduct a select number of high-quality evaluations when doing so will tell you something that you really want to know.  Otherwise, spend the rest of the money on smaller, process-based assessments. Now doesn’t that sound sensible?  Yup, I thought so too.

Thank you to Esther Duflo for inspiring me to write again, and encouraging all of us to think just a bit differently.

Also, be sure to check out the list of relevant posts at the bottom of the page.