Friday, November 30, 2007


Check out GlobalGoodness, the new blog that allows you to see what's going on behind the scenes here at GlobalGiving. It features posts from GlobalGiving staff and an occasional guest blogger. The goal is to provides a preview of upcoming features and to point out trends we think are important. We will also highlight other organizations we love.

Even in its infancy, GlobalGoodness is already showing evidence of the wisdom of crowds. You will find the posts there, in total, better than the posts from me alone on this blog :)

I will keep writing here at Pulling for the Underdog on a variety of topics that strike my fancy, but if you are looking for the inside scoop on GlobalGiving, then GlobalGoodness is the place to go.

Sunday, November 25, 2007

How marvelous collaboration can be

Much of the joy was social. Almost all of Amos' work was collaborative. He enjoyed working with colleagues and students, and he was supremely good at it. And his joy was infectious. The 12 or 13 years in which most of our work was joint were years of interpersonal and intellectual bliss. Everything was interesting, almost everything was funny, and there was the recurrent joy of seeing an idea take shape. So many times in those years we shared the magical experience of one of us saying something which the other would understand more deeply than the speaker had done. Contrary to the old laws of information theory, it was common for us to find that more information was received than had been sent. I have almost never had that experience with anyone else. If you have not had it, you don't know how marvelous collaboration can be ...
That is the concluding paragraph from Danny Kahneman's Nobel prize autobiography. Kahneman, a professor at Princeton's Woodrow Wilson School, was awarded the Nobel for economics in 2002. Much of the work he was recognized for was done with Amos Tversky, who died in 1996. Kahneman's piece is one of the most lovely autobiographical sketches I have ever read. It provides a highly engaging survey of breakthroughs in economics and psychology over the past forty years. So if you are a student in either field, that makes for mandatory reading. But more important, it is a generous and moving account of the nature of friendship, which makes it great reading for everyone.

Monday, November 19, 2007

"Social return" is not the point...

O swallows, swallows, poems are not
The point. Finding again the world,
That is the point, where loveliness
Adorns intelligible things
Because the mind’s eye lit the sun.
I am not a big poetry reader. But occasionally I run across something that really speaks to me personally. This poem, by Howard Nemerov, called The Blue Swallows, also speaks to me about the nature of philanthropy. There has been much discussion - and some good work - over the past few years about the "social return" on philanthopic funding. But with few exceptions, the abstract idea of social returns does not drive most philanthropy or international aid decisions. Philanthropy and aid funding are ultimately driven by intensely personal considerations - even at many (most?) large foundations and agencies.

In Nemerov's view, abstractions are something that we impose on reality to make sense of our experience. But if we are not careful, these abstractions obscure the underlying phenomena. In this poem, he goes on to say:
Some seven centuries ago.
It’s taken that long for the mind
To waken, yawn and stretch, to see
With opened eyes emptied of speech
The real world where the spelling mind
Imposes with its grammar book
Unreal relations on the blue
Hopefully it will not take seven centuries for us to "waken, yawn, stretch, and see" the underlying nature of philanthropy. In fact, I think we are in the midst of a fundamental transformation right now - something that Peter Drucker referred to as the emergence of an "economy of meaning."

Even if, like me, you don't read much poetry, I strongly urge you to read the full poem here.

Friday, November 16, 2007

Guaranteed - Period.

If I buy shoes from and they don't fit, I can send them back for a full refund — no questions asked. They even refund shipping costs! If I buy a coat from Nordstrom's and my wife doesn't like it, I can take it back to the store — no questions asked.

But what would happen if you asked your favorite nonprofit or charity group for a refund? Margaret Su, one of our colleagues here at GlobalGiving, asked this question earlier this year. "We claim that GlobalGiving is a 'whole new way to give.' We place a premium on showing donors exactly where their money goes -– and the impact it makes. Why shouldn't we provide a refund if a donor is not happy?"

I told Margaret, as gently as I could, that she was naive: "That is crazy, Margaret. Philanthropy doesn’t work that way. We can't do that." I had a thousand reasons to blow her off.

But her idea nagged at me, and I couldn't shake it. I brought it up at the management team and then at the board. The response was always the same: "That's crazy, we can't do it, it's impossible, etc. etc."

Over time, though, we started to think that the idea might be not only possible -– but critical. And not just to donors, but also to the organization. A guarantee could compel us to put front and center questions of how to amplify the impact of our work, hold ourselves accountable to our partners, and ensure donor trust. Each and every day.

Today we’re putting our money where our mouth is with the announcement of GlobalGGGGiving Guaranteed. Starting today, if a donor is not happy for any reason with his or her experience on GlobalGiving, he or she can get a refund. The refund comes in the form of a voucher the donor can use to give to any other project he or she wishes. (If the IRS allowed it, we would even refund donor's money in cash.) The guarantee will cover up to $10,000 per donor, per year, at the beginning, but we may increase this ceiling if it makes sense in the future.

We see GlobalGiving Guaranteed as a new way to demonstrate the confidence we have in our project leaders, who are good people making a big difference with a relatively small amount of funding. But the guarantee also brings direct market discipline to bear on us. We make promises about the speed at which donors' money will get to the field, and we promise donors that they will get regular updates from the field from project leaders. Starting now, the guarantee creates a feedback loop with teeth.

We also believe that donors deserve to be treated at least as well as consumers. After all, they are trying to help improve the world with their dollars. They have the right to know how their money is being used — and to redirect that money to a different purpose if they are not satisfied.

You may be thinking this is a real financial risk for a small organization to be taking — and you are correct. But we believe that ultimately the benefits far outweigh the risks. Study after study has shown that the positives outweigh the drawbacks for providers of guarantees.

Does the guarantee mean that all projects listed on GlobalGiving will succeed in terms of their objectives? Of course not. Most projects on GlobalGiving succeed in improving hundreds or even thousands of lives. But, like anything else in life and business, sometimes development initiatives fall short, for all kinds of reasons. We will, however, guarantee that from here on out, donors can play an active role in the conversation.

Months ago, I told Margaret that a donation guarantee was a crazy idea. That isn’t how philanthropy works, I said. But today, I believe that it is. What do you think?

Note: This post can also be found on the Philanthropy News Digest Blog

Monday, November 12, 2007

Targeting subsidies for micro-credit

I also think that there is a role for grants in generating the funds necessary to continue helping the poorest borrowers and savers take baby steps towards establishing themselves as legitimate financial services consumers.
That is Julia Brown over at the Women's Initiative, whose good post I recommend reading in full. She was responding to my earlier post arguing against subsidizing interest rates on microcredit in most cases.

Julia goes on to say:
Reaching the poorest of the poor, especially in rural areas, requires a great deal of overhead in terms of physically reaching the borrowers who may be widely scattered and maintaining the contact necessary to reduce default rates.
I agree with Julia on the high overhead cost of reaching the poor in rural areas. I also agree that in some cases subsidizing this overhead may be a more cost-effective way of helping the poor than many other aid programs.

However, experience has shown that the best thing is to subsidize this overhead directly. Subsidizing interest rates tends to distort incentives at the margin, politicizing the loan process and masking the true cost of doing business.

In any case, thanks to Julia for a nice post.

Thursday, November 08, 2007

Punching above our weight...

"Oh, we have eight Java coders working on our site..."

This is what the CEO of a small online organization told Mari recently at a conference. He does have a nice site. But I was floored to hear how many coders he had.

GlobalGiving has about fifteen staff, but we have only two Java coders.

And until about six months ago, we really only had one coder. Steve Rogers, our Engineering Director, pretty much single-handedly did all the serious coding on our site. (He had some backup from a great firm we use, and he was assisted by the renowned Neal Draves, who did the design and HTML for our co-brands. But he was pretty much the man.)

Everyone on our team used to complain about the pace at which we were introducing new features. Our users had lots of great ideas for what they would like to see, but it was impossible to implement all of them. Naturally, Steve was pretty crabby sometimes, since he was working like a maniac. I will admit it: sometimes I felt like wringing his neck for being so grouchy.

But when I think about the technical resources available to other online organizations and companies our size, I realize what an amazing job Steve has done.

About six months ago, Steve upped our coding game considerably by finding and hiring Kevin Conroy. While Steve began focusing more on the deep architecture of the site, he turned Kevin loose on the front end. Within a few months, we released an entirely new version of the site, and we have been steadily rolling out new features every couple of weeks.

Someone told me recently that "GlobalGiving punches well above its weight." In other words, our influence considerably exceeds our actual size.

Steve and Kevin are two of the rock stars here at GlobalGiving that make that possible.

"I am not a saint" : a feisty philanthropist has fallen

Noi Chudnoff died suddenly yesterday after a freakish accident. She was an extraordinary person. She came to the US from Thailand in the 1960s at age 17, and started off scrubbing floors in a nursing home. After attending college, getting married, and raising a son, she decided to take off her apron and start a business. This turned out to be the famous Go Mama Go store on 14th Street here in Washington, DC. She was a succesful business woman and a feisty philanthropist.

Noi funnelled most of her profits to the gay and lesbian communities, Concerned Black Men of America, a local HIV/AIDS clinic, and other groups that were disdvantaged or discriminated against.

No one pulled for the underdog around here more than Noi. She was an inspiration and will be missed.

Read about what some of her fans say about her here.

Read about her life here. Excerpt:

''She knows virtually everyone who comes into her store. She has no hesitancy about asking anyone to help,'' says Matt Foreman, executive director of the Task Force, for whom Chudnoff harbors particular admiration. While her profits have in large part translated to donations to Whitman-Walker Clinic, Concerned Black Men, the N Street Village women's shelter, and the National Youth Advocacy Coalition, among others, Chudnoff has pledged $100,000 to the Task Force. ''I've met with a lot of donors over the years,'' says Foreman, ''and it's an exceptional day when a donor offers to give money before you ask.''

Despite her philanthropy, Chudnoff is the first to insist -- repeatedly -- ''I am not a saint.'' Spend some time with her, and you'll likely agree. After all, she's not one to mince words. She can be demanding. Don't let her slight frame fool you -- she does not suffer fools

Thursday, November 01, 2007

Don't mess up micro-credit

GlobalGiving facilitates grants. As I said in the San Jose Mercury News yesterday:
"There is no silver bullet in development and poverty reduction. Some things can be funded through microcredit and others need grants." To be successful, Whittle said, people need such basics as health care, clean water, education and transportation.
These "basics" - the things that people need to be healthy, hold productive jobs, and live a dignified life - are the things that we provide through GlobalGiving.

Microcredit has been in the news a lot recently, however, and many people ask me about its relationship to grants. This morning, Tyler Cowen quotes Dean Karlan and Jonathan Zinman, from today's WSJ, "In Defense of Usury," p.A18:
Charge 80% per year on a loan in the U.S. and you're called a usurer. Charge 80% on a loan in Latin America or Africa and you can be a poverty-alleviation charity.
They are right about the appropriateness of charging market rates of interest for micro-credit in developing countries. But they are wrong to conflate that with charity or grants. In fact, subsidizing micro-credit via lower interest rates is usually a bad idea.

One of the most successful micro-credit schemes in the world has been KUPEDES in Indonesia. When I was working in Jakarta for the World Bank in the 1980s and early 90s, KUPEDES was charging about 33% nominal rates (20% real). Their surveys showed that their borrowers were much better off, and get this: KUPEDES was also the biggest money maker for the bank involved, BRI. It was a real win-win.

Few people have heard about KUPEDES. You know why? BRI's management hated the limelight. They intentionally did not brag about their success because there would have been pressure on them to lower their interest rates. BRI's management understood that, in order to be sustainable, the program had to be run on market principles.

I know this first hand: in the late 1980s I tried to lend BRI several hundred million dollars at subsidized rates, and the president told me no. I was shocked! Who would turn down cheap money? He said they would rather raise the money from deposits, since that was healthier. I asked him where they were going to get the deposits, and he pulled out a ledger showing me that their branches were mobilizing a lot of savings from the same communities they were lending money into.

That taught me a lesson about microcredit I have never forgotten.

There can be a healthy role for outside finance in micro-credit. Modern banks borrow through national and international bond markets all the time. There can even be a role for grants when micro-credit organizations are initially setting up operations, which can be very costly. Grants can also help bring excluded, vulnerable or traumatized populations into the micro-credit system. (We facilitate things like this in Bosnia through GlobalGiving.)

But overall, market-based financing works best for micro-credit. A World Bank report summed it up best:

First, it is possible to create a microlending program that serves the poor and is profitable and self-sustaining. But to succeed the bank units will need to lend at market rates, use their income to finance their operations, and devise appropriate savings instruments to attract depositors. Second, developing a savings instrument for the poor is at least as important as providing them with loans. In Indonesia, SIMPEDES, the village savings program, attracted thousands of depositors. And by mobilizing rural savings, it not only provided the banks with a stable source of funds, it also kept financial savings in rural areas, thus helping continue development in the countryside.