President Obama: How to Spend that Nobel Prize

Dear President Obama,  

We would like to congratulate you on your distinguished honor as the 2009 Nobel Peace Prize Laureate. We respect and admire your efforts to strengthen international diplomacy and cooperation between peoples around the world, particularly when it comes to your advocacy for achieving change from the bottom up.  

It is in this spirit that we write you to offer a recommendation for how to use your prize - one that will spark further grassroots investment in bringing peace, economic development and opportunity to individuals across the U.S. and around the world. We believe an impactful use of the $1.4 million reward would be to offer the funds as a financial incentive for others, a matching donation that would engage Americans and individuals around the world in the spirit of generosity.  

By significantly multiplying the impact of your gift, you would have the opportunity to share with the world your true commitment to bringing about transformational change from the bottom up. And what better way to use this prize than to leverage it to raise multiple millions more towards the pursuit of peace?  

Just as your Presidential campaign inspired millions of Americans to donate small amounts to bring about the change they believed in, your Nobel Peace Prize matching campaign could inspire a groundswell of global generosity to support the amazing work being done by non-profit and non-governmental organizations all over the world. 

Especially in times of economic uncertainty, when organizations working to build stronger communities are struggling, this signal of support would be a powerful call-to-action for not only the American people, but for the entire international community.  

We founded GlobalGiving.org nearly eight years ago to connect individuals to the causes they care about most here in the U.S. and around the world. As former World Bank executives we saw the impact individuals empowered with the proper resources and a commitment to bringing about change can have in their communities and beyond.  

In the years since our founding, we have been consistently inspired and awed by the altruism, spirit and dedication our donors, project leaders and supporters have in their pursuit of making the world a better place. Once armed with the knowledge that for as little as $10 you can help educate a girl in Afghanistan, offer clean drinking water to a school in Kenya, provide solar energy to low-income families right here in the U.S., or support one of the thousands of other earth changing ideas just waiting to be funded - there is no end to the energy an individual can muster in pursuit of change.  

We urge you to consider taking the honor you have received and using it as a launching pad to further your advocacy for service, generosity and commitment to others by creating a matching campaign through GlobalGiving.org. This platform will allow individuals to support the causes they care about most, whether it's microloans to help a woman start a business in Ghana, a school uniform to help educate an orphan in India, or training for a child with Autism right here in Washington, D.C.  

Your offer of a matching gift will challenge the world to give back in this time of great need. We would welcome the opportunity to work with you and your Administration in the future to build peace and opportunity from the ground up.  

Sincerely,  

Dennis Whittle co-founder and CEO of GlobalGiving.org and Mari Kuraishi, co-founder and President of GlobalGiving.org

There is way more luck involved...

But something else is going on here, says Princeton University psychologist Daniel Kahneman, who won the Nobel prize in economics in 2002. "We believe that people with certain characteristics will produce certain consequences," he says. "But we're wrong, because there is way, way more luck involved in determining success than we're prone to think."

That is from a nice article in the WSJ by Jason Zweig, who describes how we tend to attribute success and failure to leaders rather than other factors.  Boards and stockholders often treat newly recruited CEOs as saviors:

"...a company will be much more inclined to replace the CEO after a run of bad losses—and to bring him in from a firm that has been on a hot streak. That leads to an illusion: "You change the CEO," Dr. Kahneman says, "then performance reverts to the mean, and you attribute the improvement to the new guy."The problem, as this article notes, is that the effect of bringing in an excellent new CEO on the performance of a business is not much better than the "flip of a coin."

The same illusion of causality holds true for many things we observe in life.  The role of luck and external factors on our lives and on the effect of programs and policies create a paradox for us that is similar to others I have discussed in this blog.  Namely, in order to stay motivated to do good (or to achieve any goal), we must tell ourselves that our efforts are connected to the outcome.  Realizing  the effect of luck on the outcome is a hard thing psychologically: why should we keep trying so hard every day?  Yet we do.

"We tried that and it didn't work?"

"We've already tried something like that and it does not work."

One of the most difficult challenges of innovation is knowing when to discard an idea or hypothesis because "it does not work." Sometimes, a change in the external environment, such as the launch of Apple's iPhone Apps Store, can cause a piece of software suddenly become valuable.  And sometimes, the addition of what is seemingly a small tweak to a product can transform a "ho-hum"product into something revolutionary.

I was reminded of this the other night when Mari and I were touring the Terra Cotta Warriors at National Geographic.  I noticed that the horses on display, dating from 350 BC, had saddles without stirrups.  They had bridles, bits, and reins, but no stirrups.

By this time, saddles had been around for about 4,000 years, with few design changes.  Around 200 BC,  someone tweaked the saddle by adding a wood "backbone" that helped distribute weight across the horses's back and reduce fatigue.  The saddle itself was a significant but not overwhelming advantage for its users.  Finally, after about another five hundred years someone in the Jin dynasty in China decided to hang stirrups off the saddle.

This minor "tweak" to a saddle was revolutionary.  Some credit this tweak as being "one of the basic tools used to create and spread modern civilization.  Some argue that it is as important as the wheel or printing press."

This left me wondering what could be the most revolutionary minor tweak to our existing features on GlobalGiving.

Sign me up as Chief Talent Officer

The modern economy puts an increasing premium on human talent over physical resources. Well-run companies, organizations, and universities are always on the lookout for talent. I know more than one CEO who argues that if you find someone good, hire them right away, and then figure out how to best deploy them. Talent is scarce, they say, so grab it while you can.

Why doesn't the same applies to countries? With some exceptions, countries make immigration difficult - including for extraordinarily qualified people. Even the US, which arguably makes use of talent better than any other economy, puts people through years of bureaucratic paper shuffling before issuing residency visas and citizenship.

What would happen if the US and other countries had Chief Talent Officers who scoured the world for the talent their countries needed - and then invited them to become residents? What if these new "recruits" were put through a dehumanizing bureaucratic grind, but instead welcomed by real people, who told them "We value your skills - thanks for moving here"?

What if countries started competing for talent by ensuring that the returns to talent were high via domestic policy reforms, infrastructure development, and open economies that promoted a lot of opportunity?

I would love to be the Chief Talent Officer for a country in a system like this.

Anatomy of a cash-squeeze bankruptcy

I recently had a heartbreaking conversation with a small business man who started producing a new type of fruit juice a few years ago. His family business was his "dream come true," he told me. He was thriving. This past month, he had to file for bankruptcy even though he was making money. Here is how it happened.

He was doing well, growing his business by getting distribution in large supermarket chains, and even turning a profit. And then came the financial crisis. This caused the supermarkets to delay payments to him - from the normal thirty day lag after delivery (called "net-30"). The supermarkets, though profitable, were having trouble raising working capital from their banks, which were in crisis. So to conserve their own cash, the supermarkets began going to net-60 and then to net-90 with their smaller suppliers like the juice maker. He told me one supermarket even had him on net-120, which meant that he would not get paid until four months after he delivered the juice to the supermarkets.

Since the juice maker was not getting his revenue on time, he was having trouble pulling together the cash to continue producing. Unlike the supermarkets, which have a lot of power, his own suppliers will not allow him to pay on a net-60 or net-90 basis. So the juice maker turned to his local bank, explaining that he was profitably selling juice to the supermarkets, and that he just needed to borrow money for ninety days to tide him over while waiting to get paid.

His local bank was feeling the effects of the broader banking crisis and refused to extend him more credit. He tried more banks, and the answer was the same.

Finally, he could survive no longer and had to fire all his workers and close production entirely. When I spoke to him, he was winding down operations.

"You know, I didn't mind helping bail out the banks when they were in trouble last year," he said to me. "But the least they could have done was help bail me out when out when I needed help."

Effective scientists are like wandering ants

Science is basically a bunch of little steps. Many little experiments that explore cause-effect space. If you find a new example of cause and effect, the payoff is unpredictably large. Scientists don’t like thinking of themselves as wandering ants. But that’s how they are most effective. This goes against human psychology because wandering (Nassim Taleb calls it “tinkering”) is low status and lonely. The payoff is too rare and too unclear. It isn’t supported by powerful institutions, such as research universities and medical schools. Imagine an ant who says “I know where food is!” This is a way to get many ants to follow him, to feel important, to have high status, to get support from his employer. That’s why he does it. But he doesn’t know. The effect on the rest of us, the potential beneficiaries of progress, is that instead of having a thousand ants wandering everywhere, we have a thousand ants following one ant who doesn’t know what he’s doing.

That is from the iconclastic Seth Roberts, formerly a professor of psychology at Berkeley who now teaches at in Beijing at Tsinghua University. His overarching theme is that for science to advance it requires people to come up with and test novel hypotheses rather than tinkering at the margins of the currently accepted wisdom. In short, orthodoxy is often unproductive for scientists, and sometimes dangerous. His blog is full of unexpected hypotheses about how the world works, and he often tests these hypotheses on himself, enlisting his own readers as co-experimenters.

"I found it hard to give away what I had earned"

Yesterday I blogged about Karen Armstrong's Charter for Compassion, an attempt to rally both the interfaith and secular communities around a unifying concept.  Today I want to talk about an extraordinary book that builds on the same concept and  links it to generosity in action.  The book is Being Generous, by Ted Malloch.

Malloch, who comes from the Christian faith, describes how generosity has manifested through various faiths and specific people.  What makes it especially powerful is his description of his own journey from self-described narcissism to compassion: "It never came easy.  I have always had a "meritocratic" outlook.  That is...you get what you earn, what you deserve....I found it hard - often very hard - to give what I had earned away."

Being Generous weaves personal narrative with a brief description of the injunction to generosity in Christianity, Judaism, Islam, Hinduism, Buddhism, Native American and Aboriginal spiritualism, Confucianism, and secularism.

He then weaves in stories about an exceptional mosaic of givers, both big and small, well-known and obscure.  The diversity of personalities, viewpoints, and displays of generosity is arresting, and makes it clear that religion is not the sole motivator of generosity.  The vignettes range from Henry Ford, Bill Gates, Oprah Winfrey, Jeff Skoll, and John Templeton to surprising stories about figures such as Johann Sebastian Bach and Felix Mendelssohn.  Malloch also highlights many lesser known and smaller donors, including six donors to projects on GlobalGiving (to which royalties from of the book are being donated).

In the end, Malloch, despite being a strong personality with strong views, is interested in commonalities, not differences.  This is something he shares with Karen Armstrong.  This is what makes this book and the Charter for Compassion, so appealing.

Spending time with people as diverse as Ted Malloch and Karen Armstrong has been one of the great pleasures of my life since leaving the World Bank some nine years ago. I used to have much less time for people with whose political and aesthetic views I disagreed.  But when those views are connected through the shared value of compassion and generosity, the apparent contradictions become a source of creativity rather than conflict - something the world is crying out for these days.

[GlobalGiving]

Do Unto Others...

Today I attended the launch of the Charter for Compassion at the National Press Club.  Sponsored by TED and the Fetzer Institute, the Charter is being spearheaded by Karen Armstrong, a former Catholic nun.  She left the Church, initially to teach English and then went on to write some very well received books on comparative religion, including my favorite The History of God.

Armstrong argues that all religions boil down to one thing:  Do unto others as you would have them do unto you.  All holy texts, according to a religious leader she quotes approvingly, are merely commentaries on that basic injunction or belief.  It is that tenet - Do unto others as you would have them do unto you - that is at the core of the Charter for Compassion.

As Chris Anderson, Curator of TED, said in his introduction today, "This is not about kumbaya; it is about making a real difference."  I hope he is right.  The challenge is to figure out how to make the charter sing not only to the choir, but to those who don't think about the world - or their lives - in such terms.  Fortunately, many of those present have had experience with just such challenges, including overcoming apartheid in South Africa and segregation in the US.

Here is a video of Armstrong describing her dream for the Charter. One GlobalGiving donor was so inspired by this that he bought $25,000 in GlobalGiving gift cards with the inscription: "Charter for Compassion: Live compassionately, act generously. Match your gift to the need."

Luck Begets Luck

If you have ever reflected on the role of chance in life, I recommend this provocative post by James Kwak over at Baseline Scenario.  I do think a longer discussion of variance around the mean - including the role of  effort - is warranted (to be fair to Kwak, he agrees that incentives matter). This excerpt should whet your appetite:

But there are still two implications of realizing that everything — even your initial endowments — is a matter of chance, not something you deserve.

The first is that you shouldn’t look down on other people (1) because their parents weren’t as rich as yours, or (2) because they aren’t as smart as you, or even (3) because they don’t work as hard as you. I think most people agree with (1); I think you should agree with (2) and (3), too.

...I have little patience for the idea that rich people deserve what they have because they worked for it. It’s just a question of how far back you are willing to acknowledge that chance enters the equation.

Another Unexpected Guarantee

In 2007, GlobalGiving put in place what is perhaps the first philanthropic guarantee. If any donor is not satisfied with her donation for any reason, we will refund her money in the form of a voucher that can be used on any other project on the site. This guarantee is highly unusual in this sector, where donors have often been kept at arm's length.  It reflects how strongly we feel about the donor experience on GlobalGiving.

Today, The Week magazine announced it is guaranteeing to its advertisers that readers will remember their ads more than they remember ads in other magazines.  I like the Week (especially the print version) because they are innovating the presentation and trying to make the magazine enjoyable and "sticky" even while the content is serious.

Innocuous Changes vs Grand Designs in Aid Reform.

After the success of the first Development Marketplace at the World Bank in early 2000, Mari and I began sketching out additional competitions to extend the idea of creating a real marketplace for development.

One concept was to give vouchers to government officials and allow them to "shop" among various Bank teams when the officials came to Washington each year for the annual meetings. The idea was to create a small window outside the usual heavy and bureaucratic planning process by which the Bank's billions of dollars of funding were allocated each year. This new window would enable Bank teams to more directly gauge demand for their products and also to experiment with innovative new ideas that would normally not survive the formal planning process. Over time, we might even allow teams from other aid agencies to compete in this process as well to ensure that Bank teams were exposed to even more new ideas and competitive pressure.

Another concept was to create a small window allowing government officials to pitch innovative ideas to the Bank each time they came to town for the annual meetings. We would set aside maybe $50 million to fund ideas that might not normally make it through the Bank's analysis, design, and approval processes. Separately, Bill Easterly proposed that the Bank pilot a program distributing vouchers directly to beneficiaries in select countries, allowing them to choose which projects they wanted.

In the end, we decided that the Bank and other official aid agencies were not yet ready for a marketplace.  We felt we could have the most impact by leaving the Bank to create GlobalGiving, a neutral marketplace for community-led development projects around the world.  Our goal was to show it could work, and then see if the idea could get adopted more broadly - including eventually by official aid agencies. We started modestly, and decided that actions speak louder than words, so we did not write or speak much about it in the early years (though we did write a chapter on this in the book Reinventing Foreign Aid).

Over the last nine years, we have been gradually implementing the elements of a real marketplace - including open access, transparency, and feedback loops. We have been gratified to see the emergence of many similar marketplaces for development aid and philanthropy.  Some have failed to get traction, but a core group has survived and grown. Marketplaces similar to GlobalGiving include DonorsChoose (for education in the US), and Kiva (for microcredit worldwide), and GiveIndia. Important marketplace services such as Guidestar and NetworkForGood are helping create the infrastructure backbone for the market. And there are promising new entrants such as GreatNonProfits and Keystone (and many more).

Much has been written in the press about these various platforms, but few pieces discuss in depth the theory behind them.  And, during this time, official agencies have been slow to innovate in this area.  In that context, I highly recommend a new paper Beyond Planning: Markets and Networks for Better Aid by Owen Barder, a fellow at CGD.  It is an excellent theoretical discussion of the issues and challenges facing official aid agencies, which are waning in influence.

Barden argues that improvements in the official aid system are likely to be the result of evolution rather than intelligent design.  "Reform should not focus on a grand new design...but on a set of technical and apparently innocuous reforms which, over time, create strong political pressures for evolutionary improvements in the aid system."

This is a fundamental insight (which incidentally also applies to how the agencies should help stimulate reform in developing countries).  There have been a huge number of "grand design" papers written over the years about how to reform the World Bank and IMF.  But few of them have had much impact.  Barder's approach is much more likely to bear fruit.

But it does raise the question of exactly which "technical and apparently innocuous" reforms to implement.  What could we do that is most catalytic?

My own guess is that the greatest impact would come from empowering beneficiaries to have a much more direct say in what they want and how well projects are being run.  Any aid agency, local government, or project manager would be hard pressed to avoid responding to the voice of the people they are supposed to be helping.

As Owen says, "A particular challenge for aid is that there is a broken "feedback loop" connecting the intended beneficiaries and decision makers.  Recently at GlobalGiving we have started piloting a mechanism whereby beneficiaries in the field can provide feedback on project implementation, and we have demonstrated a rough prototype of a system that would allow beneficiaries to vote ex-ante on the types of projects they most need.  I believe creating this feedback loop can fundamentally change the incentives in the aid system and create strong pressure for change.









[GlobalGiving]

The human drama of learning

I highly recommend David Roodman's recent reflections on the Kiva controversy he stirred up.  Particularly unusual are the insights he reports from actually visiting the Kiva offices and talking to some of the folks there.

Development is at root about innovation and change.  Innovation and change in turn have both a technology/policy dimension and a human/organizational dimension.  We often focus on the technology/policy issues without enough attention to the human side, which can play an equal if not greater role in the success of a new approach.   Our experience at GlobalGiving is that the ability of organizations to learn and respond is a key proxy for their effectiveness over time.

Roodman's description of how Kiva arrived where they did and what Kiva's management did about it after Roodman's initial post is an important story in itself.



[GlobalGiving]

Transparency on Trial?

[Reposted from the Huffington Post, 10/22/09]

A number of commenters have asked me to weigh in on the lively debate that emerged from David Roodman's Microfinance Open Book Blog about transparency--not only on Kiva, but really about all attempts to make philanthropy more direct, starting with the pioneering efforts of Save the Children in 1940.

I've hesitated about weighing in--mostly because we have shared war stories, best practices, and worst moments with our friends at Kiva. We know that they are classy folks who know how to work constructively with feedback. And no one has written more openly than Matt Flannery has about the ups and downs of starting a new organization. So I have wondered what we could add to the debate.

Upon reflection, though, I do want to add a couple of things. It's partly because, as I reflect on this nascent space of direct philanthropy enabled by technology--including GlobalGiving, DonorsChoose, GiveIndia, and others--I think we have a collective responsibility to keep pushing the envelope on transparency and authenticity of the experience.

Let's face it: since the space is so new, we don't always know what works. So we keep trying things, based on what we think will work. Sometimes we get it right, and often we find we can improve.

Overall, we provide an enormous amount of information and transparency to our users about the organizations and projects on the site. We try to put the salient information on project home pages and provide links to more detailed information. At the beginning, we provided far too much information on the home pages. Users told us they couldn't see the forest for the trees - they felt overwhelmed and were paralyzed into inaction. Over time, we have gotten better in achieving a balance, and users tell us that they like our presentation much better now. Most of them feel we are giving them what they want.

But we can always do better.

For example, though the overwhelming majority of projects on the site are run by the equivalent of US 501(c)3 non profits, a few are run by self-help groups and community coops, which are sort of a hybrid type legal form. We even work with a handful of socially oriented for-profit companies that represent a new wave of entrepreneurs trying to leverage business principles to promote the common good. According to IRS guidelines, all of these different organizations are eligible to receive donations as long as they are carrying out a charitable purpose that is not possible under normal market conditions. Regardless of their structure, all are subject to our rigorous due diligence process. When these organizations list projects on GlobalGiving, we monitor their expenditures to make sure they are not making a profit from the donations.

We've received feedback that we should make this information more prominent on the project pages to make it clear to potential donors. That is a fair point, and we have in fact been considering making these categorizations visible, including a "for-benefit" category for these organizations that aren't equivalent to US 501(c)3s. My guess is that we will find that some donors are specifically attracted to this type of organization.

One of the positive things about the web is that we can get feedback - and respond to it - much faster than we could imagine back in the 20th century. Case in point: we recently piloted getting beneficiary feedback (via text message) in Kenya. We ended up with an incredibly rich dialogue between beneficiaries and donors that ultimately led to the beneficiaries moving on to work with another organization, and the original organization closing up shop.

We're constantly looking for more ways to get that feedback more quickly, and from more people. We even put in place what may be the first-ever philanthropic guarantee - the GlobalGiving Guarantee. This give donors a powerful way to tell us if they are unhappy in any way, and signals to them that we are serious about listening. And it gives us a chance to address the issue not only for that donor, but for all donors.

I admire how Matt and Premal have responded to the debate over at Kiva. Their response sets an admirable standard for speed and transparency. (And in that context, if you have any ideas about how we could get more feedback from more people faster, please let us know...!)

Owen Barder on "Beyond Planning"

This paper "Beyond Planning: Markets and Networks for Better Aid" by Owen Barder at CGD looks worth reading. Here is the summary:

The political economy of aid agencies is driven by incomplete information and multiple competing objectives and confounded by principal-agent and collective-action problems. Policies to improve aid rely too much on a planning paradigm that tries to ignore, rather than change, the political economy of aid. A considered combination of market mechanisms, networked collaboration, and collective regulation would be more likely to lead to significant improvements. A "collaborative market" for aid might include unbundling funding from aid management to create more explicit markets; better information gathered from the intended beneficiaries of aid; decentralized decision-making; a sharp increase in transparency and accountability of donor agencies; the publication of more information about results; pricing externalities; and new regulatory arrangements to make markets work. The aid system is in a political equilibrium, determined by deep characteristics of the aid relationship and the political economy of aid institutions. Reformers should seek to change that equilibrium rather than try to move away from it. The priority should be on reforms that put pressure on the aid system to evolve in the right direction rather than on grand designs.

[GlobalGiving]

Darwin and Development

"Growth is innovation, and you can’t know in advance how to do the innovative thing, or else it wouldn’t be an innovation. Development is BOTTOM-UP outcome of lots of unpredictable individual successes and failures."

That is from Bill Easterly's most recent post at AidWatch. He goes on to say:

"The paradox of development economics is that Development does NOT require any one person (Expert, Leader, or Aid Official) to have a comprehensive understanding of how to achieve Development (sort of like how evolution managed to happen on its own before Darwin)."

This is a tough message for many aid workers and experts, but it is true. There is no evidence of intelligent design at work in economic growth, and we still don't understand exactly how it works. The best thing to do, as Bill notes, is to create a fertile environment for experimentation, and incentives for replication of the things that succeed.


[GlobalGiving]

Crowdsourcing vs OpenSourcing

Here is a nice article by Dan Woods in Forbes about the popular concept of crowdsourcing.

In some ways he is constructing and attacking a strawman ("crowds create innovation"). But the article does clarify that the real value comes from OpenSourcing -i.e., allowing pretty much anyone to attack a problem or come up with a solution. As Dan says, it is usually a few virtuosos- obsessed individuals-- from within the crowd that do most of the work.

The key is to ensure that you don't predetermine who is eligible to address a problem, or which types of expertise are the relevant ones. Creative solutions and breakthroughs often come from outside the orthodoxy, not within it.

Crowdsourcing does have a role when you need to get feedback on a concept from potential users to see if it is is marketable, or to take the temperature of a specific population around an issue. But that is different from coming up with the breakthrough ideas.

So what closed systems, organizations, and companies have to fear is not crowdsourcing. It's OpenSourcing.


[GlobalGiving]

The Success of Development

Countries in every region of the world, from the poorest to richest...have all seen improvements in average levels of health and education over the past century.

That is from a forthcoming book by Charles Kenny.  Based on Kenny's own summary, The Success of Development is a book that you will want to pre-order.  If the book delivers, it will help get us out of the rut we are currently in - namely the "there is no evidence that development aid works" rut.

According to Kenny, there is good news and bad news. The bad news is that the divergence in incomes between the rich and poor countries has grown sharply since 1960.  Worse, we really don't understand how to increase economic growth rates in any country. But there is also really good news.  First, contrary to Malthus and Paul Ehrlich's expectations, there is not widespread starvation in the poor countries.  Even better, there have been dramatic improvements in health, education, and even political rights in most poor countries. 

The key insight of this book is that income appears to be a poor proxy for quality of life.  Fortunately, as Kenny says, many of "the best things in life are cheap....The last century has seen a dramatic decline in the cost of living."  The technologies and practices that reduce infant mortality, improve overall health, and increase literacy are relatively cheap. 

So the challenge for the development field is to create and environment that stimulate innovation and the spread of ideas that drive changes that improve the basic quality of life in different countries.   Unlike economic growth, which we have not had much luck stimulating, we have had some success in helping generate and spread these types of ideas, so there is grounds, Kenny says, for "realistic optimism."

[GlobalGiving]

Pioneers of Contagion

Recently I did a post called Could Prosperity be Contagious? Judging from a recent event I went to in Jamaica, the answer is yes.

An initiative called Pioneers for Prosperity was holding its finals competition for the Caribbean. Its goal is to celebrate some of the most dynamic entrepreneurs in the developing world and to help them become role models for their peers and the next generation.

I found the enthusiasm, skill, and grit of these finalists to be highly contagious, and I came back to Washington all charged up about my own work. The Pioneers for Prosperity group has made excellent videos of each finalist that will be showed on TV in their home countries. This type of initiative is very important to change mindsets about what is possible, which is key to making progress in any country.

You can read more here.

[GlobalGiving]

Could prosperity be contagious?

“I wouldn’t call it a competition, I’d call it a collective,” Josh Potocki, the chef and owner of 158 Pickett St. Café in South Portland, said of the city’s food scene. “We are all trying to raise the level of food in Portland to insanely high.”

There has been much written about "social contagion" over the past few years. The latest NY Times Magazine has a long article describing the social dynamics of things such as smoking, drinking, and obesity.

I have been thinking a lot about whether the dynamics of contagion could be applied to economic development.

A powerful example of contagion that I have seen (or tasted, actually) is the restaurant scene in Portland, Maine. Even though Portland is a small city, it has evolved some of the best restaurants in the US. Mari and I recently ate at a restaurant called Bresca there, and the food was spectacular - on par with anything I have had in Washington, New York, San Francisco or London.

What is the key to this? No one knows exactly how it got started, but one or two really great chefs moved to town, and others followed. The dynamics are part competition and part collective. Each chef both emulates and tries to outdo the others, but each chef also knows that the success of the others bolsters the overall market. The NY Times article about Portland is here.

(Thanks to Eli and Scott Stefanski for the pointers to the restaurant and article!)

[GlobalGiving]

Making solar simple (and and affordable)

The challenge for SunRun is to take the incredibly complicated business of solar and make it really simple to the consumer.

That is from a nice post about residential solar power by Marc Gunther. I highly recommend Marc's blog if you are interested in the intersection of environment and business. No one writes better about this than he does, and there are some very encouraging developments in the sector. The pace of innovation gives me some hope.

[GlobalGiving]

Making complexity simple (and cheap, too)

It was refreshing to see this blog post by Ken McHugh, a software architect at Cognitive Edge. Ken describes upgrading the operating system on his computer. Based on past experience, he expected the worst.

Instead, he was delighted. Even though the new system was a significant upgrade, it was cheap, installed quickly, did not crash, and even took up less space on his hard disk. The title of his post, Why Did It Work?, which speaks volumes about our expectations, and also about the value of delighting ones' users.

Feature creep on things like cameras, remote controls, software, and web sites makes many products less rather than more useful to normal users. Trying to navigate all the dials, buttons, and menus is sometimes a nightmare, when all you want to do is take a picture or write a quick note. This is starting to produce a backlash, as described by Wired in a recent article titled The Good Enough Revolution: When Cheap and Simple is Just Fine.

Ken's experience shows that adding features and complexity can be made simple - and cheap, too - if the company behind it is focused on what users really care about.

[GlobalGiving]

When at First You Don't Succeed...

It takes an average of 58 new product ideas to deliver a single successful new product. That is the core message of Getting to Plan B, a new book by John Mullins and Randy Komisar.

Since Plan A almost never works, it is critical to quickly learn from failure and move on to a successful Plan B (or C or D or E…). This book provides an exceptionally helpful framework for how to do this. Its power lies in its analytical framework combined with vivid examples from companies - including both for-profit and non-profit.

The first order of business for the authors is to dethrone the business plan. Many entrepreneurs and inexperienced investors obsess over the initial business plan. But the quality of the initial business plan is far less important than the ability of the entrepreneurs to form and test hypotheses rapidly - discarding the leaps of faith that don't pan out and doubling down on those that do.

Contrary to popular perception, most successful businesses did not strike it rich from the beginning. A company like eBay, profitable from day one, is the exception that proves the rule (and Pierre Omidyar has said that he realizes how lucky he was). Even eBay has struggled to figure out how to make money from new business lines such as Skype. Google would not be the behemoth it is today - and might even be out of business -- if it had not discovered its own Plan B, paid Adwords. Amazon burned through hundreds of millions of dollars before it hit upon the right business model that made it profitable. Today, the jury is out on whether Twitter and even Facebook will find profitable Plan Bs that sustain their early growth.

What matters most is not the quality of the initial business plan, but instead the ability of the team to iterate successive business plans as a means to finding what works. Merely flailing about from Plan A to B to C increases the chance you will run out of cash before finding the right Plan. So the trick is to experiment quickly but intelligently, and with discipline.

The authors urge entrepreneurs to assemble several analogs (features of other companies they want to emulate) and antilogs (features they want to avoid). Based on these, entrepreneurs then form a hypothesis about a product or service - essentially a leap of faith that customers will buy it at a price and quantity that generate revenues in excess of cost.

The next step is to develop a dashboard to monitor whether the hypothesis is correct. Can you get the product to market with the amount of investment you have been able to attract? Are enough customers buying? Are they willing to pay the price needed? Is the cost of production such that the company can become profitable at the appropriate scale?

The answer to one or more of the above questions is likely to be "no" for Plan A. So the next step is to repeat the process - develop new analogs and antilogs and another hypothesis or leap of faith based on those. Try it, and monitor with a dashboard. Repeat again.

The key is to pick the simplest possible dashboard that includes only the key drivers to your success. To help the reader determine these, the book provides helpful examples using real companies relating to several dimensions - the revenue, gross margin, operating cost, working capital, and investment models.

Anyone who is thinking about starting a new business should read this book. Given the pace of change in the world, even established business leaders should read it, since the constant threat of new competition often requires even existing companies to develop new Plan Bs.

More provocatively, this book helps explain why some economies grow faster than others. An economy whose institutions and other structures facilitate rapid-cycle experimentation is going to produce more successful companies and products. By contrast, economies that discourage experimentation and punish failure are going to find fewer of those one in 56 new ideas that work.

One implication of this is the need for a fundamental change in the DNA of development aid agencies. The existing aid agencies are based primarily on the idea that if a problem is studied in enough depth, then a select group of experts will be able to design a solution. As a result, a huge amount of resources go into Plan A, which results in projects with a typical life span of three to five years. And to make it worse, agencies such as the World Bank aim for a project success rate of 85% - far above the 1:56 chance of the first idea being a successful project.

For official aid projects, thorough reviews are done after several years have passed. In theory, the lessons learned are incorporated into the next project, which launches a couple of years down the road Though small course corrections are possible, it is difficult to significantly modify a project once it is underway. As part of this mentality, failure is seen as very bad - as evidence that not enough analysis and planning were done or (worse) that the experts involved were incompetent. Agencies go to great lengths to sweep failures under the rug instead of quickly embracing the lessons of failure and acting on them.

Aid agencies instead must mirror the way that successful economies operate- they must encourage rapid-cycle experimentation. They must acknowledge that even the best experts rarely get it right the first time - or even the second or third time. As counter-intuitive as it sounds, the key is to fail quickly and then move on to test new hypotheses until they find one that works, just like leaders of the most successful private companies.

I do have one major complaint with this book. As a leader of one of the organizations featured in the book, I was fortunate enough to have the counsel of Randy Komisar along the way. But it would have saved me a lot of headaches if Komisar and Mullins had written this entire book some nine years ago. When I co-founded GlobalGiving, I spent a lot of time on our initial business plan, and I was highly confident our Plan A was going to work. When Plan A failed, I spent a lot of time licking my wounds and wondering what went wrong. This book would have helped me understand that early failure is par for the course, and it would have given me a framework for getting to Plan B much earlier.

Update: Here is another review from the Financial Times.

Learning as a proxy for effectiveness

When people ask us how we evaluate projects on GlobalGiving, they often hope we will give them some big set of definitive metrics. Instead, we explain the algorithms that we use to determine the rank of a project on a page. One of the key factors we use is whether the project leaders show evidence of being able to learn from their experience and from feedback loops.

Often, we get perplexed reactions to our response, and someone asked me recently, "Why don't you just say what works and what doesn't?" So I was very happy to see this recent post by SHEHERAZADE HIRJI:

Evaluation evolved to include the ability to generate learning and build capacity to improve, rather than just prove what was working and what was not.

If you are interested in evaluation, you should read this.

(Thanks to Sean Stannard-Stockton for the tip).


[GlobalGiving]

A "lust" for making meaning

Here is a nice video of one of the world's great venture capitalists, John Doerr, talking about the different motivations for entrepreneurship.  Drawing on Randy Komisar's The Monk and the Riddle, John contrasts the "mercenary" to the "missionary" approach to launching a new business or initiative.



Randy's book was one of the things that gave me the courage to leave the World Bank and co-found GlobalGiving, and Randy has been a steadying influence all these years.  I have benefited greatly from his optimism tempered with realism.  In his book, he notes: "Success, even on your own terms, entails sacrifice and periods of very hard work."  Amen to that.

(Thanks to Paul Kedrosky at Growthology for the tip.)

[GlobalGiving]

Innovation increases quality of life even when incomes lag

Global improvements in quality of life have been fostered by the spread of technology and ideas. Very cheap health technologies that can dramatically reduce mortality have spread rapidly across the world. The proportion of the world’s infants vaccinated against diphtheria, pertussis and tetanus –the DPT shot—climbed from one fifth to nearly four fifths between 1970 and 2006. And ideas that save lives –wash your hands, don’t defecate in the fields you eat from—are increasingly accepted.

That is from the summary of a forthcoming book by Charles Kenny. Charles argues that the standard of living in developing countries has increased much faster than growth in income because of innovation, which has driven down the cost of goods and services that contribute to quality of life.

There is plenty of bad news about development, including the sharp divergence in incomes across the world, yet there is also much progress:

The book argues that ideas and technologies are the driving forces behind progress. And it suggests what the success of development and the importance of innovation to that success mean for policies in and policies towards the developing world.

The other good news is that innovation can be much less expensive than massive aid projects. Yet official and other large aid agencies struggle to find ways to support innovation because catalyzing innovation requires a different mindset and different tools.

I strongly recommend reading Charles's summary (it is only one page) if you want to get a quick overview of what we know about development.

And thanks to Bill Easterly for the tip - see his blog post on it here.


[GlobalGiving]

Some good news about global giving

Here is a very upbeat assessment of global philanthropy from high net worth families from Barclay's.  In addition to concluding that giving by wealthy families is holding up well during the recession, it argues that a massive generational shift is about to occur that will drive major changes in the market.

The whole report is worth reading (it's short, with lots of good graphs), but here are my takeaways:

* The wealthy feel an increasing obligation to be socially engaged.

* The young (age 18-34) are almost twice as likely to feel responsible for sharing their wealth as their parents (age 55+)

* The young (aged 18-35) are twice or three times more likely that those 55+ to view global causes and climate change as important.  

* Donors increasingly want to see the results of their philanthropy before they die.

* Though overall giving is down a few percent, many of the most engaged wealthy are giving more, not less, during this economic downturn.  They say they are prioritizing charitable giving over holidays, eating out, and luxury goods.  Only expenditures on education take precedence.

[GlobalGiving]

Dream it and you can do it (sometimes).

There is a lot of schlock out there in book stores on the personal motivation and business shelves.  "If You Can Dream It, You Can Do It" is a typical title, with many books assuring you that if you just take the first step, the world will rise up to meet you.  These books do serve a function:  they motivate people to be more entrepreneurial and give them permission to follow their dreams.  And, of course, I would not have spent the last nine years of my life working on GlobalGiving if I were not optimistic about the ability of a small group of people to change the world.

But many of these books are recipes for major disappointment and backlash down the road, because they fail to set expectations.  In that context, here is a very nice talk by Alain de Botton at TED.  His key messages are: 1) Success and failure have a huge random component. 2) Idealizing meritocracy results in an attitude that the poor are losers and deserve it, and 3) Promoting the idea that "You can do anything if you put your mind to it inadvertently leads to a lot of low self-esteem among the many people who try hard but fail.

Here are my takeaways from this:  a) Work hard in life and try to follow your dreams, but realize that randomness in life often trumps all, so don't be too hard on yourself if you don't succeed; b) If you are fabulously successful, be modest, and realize that luck probably played a big role (in addition to your hard work, vision, and intelligence); and c) given the importance of randomness, avoid putting all your eggs in one basket - maximize your chances for success by doing lots of experiments and ventures over time.





[GlobalGiving]

What's wrong with experts?

What's wrong with experts?

Nothing, as long as they don't monopolize control over decisions, resources, and information. Experts - people with special skills, a lot of experience, and/or who have thought a lot about an issue - should be an important part of any decision-making or resource-allocation process.

Experts are especially critical in technical fields, where there is a clear link between their expertise and outcomes. For example, if you are going in for heart surgery, you want the best expert you can find. Ditto if you want to fly in a jet, build a high-rise building or dam. Even in these areas, however, you want competition among experts, because that competition drives innovation and efficiency over time. Competition also allows best practices in these fields to adapt to changing technologies and socio-economic circumstances.

But there are many areas where there is no clear right answer or no clear best practice. And it is precisely in these fields that we must be careful of a "tyranny of the experts." Economic and social development pose many challenges for which there are no clearly demonstrated productive solutions. The low returns to the $2 trillion spent on development aid to date are testimony to this.

The relatively small number of aid agencies controlling the bulk of official aid means that a small number of experts control decisions over the allocation of most of the resources. This raises multiple problems. Let me demonstrate by describing a time in my career most people don't know about.

In the late 1980s and early 1990s, I worked in the World Bank's Jakarta office, where a group of two or three of us were in charge of hundreds of millions of dollars of rubber, palm oil, and coconut projects. For a period, we had more knowledge than any of our Bank colleagues about the financing, planting, and processing of these tree crops in Indonesia. As a result, any decisions about the design or implementation of projects had to come through us. Looking back, there were several problems with this:

* We knew a lot, but we didn't know everything - in fact I realize now that we were wrong about some fundamental things.

* Bandwidth: Managing projects in the Bank bureaucracy was exceptionally challenging, so we had to work many, many hours per day just to keep our own ideas and projects moving; there were not enough hours in the day for us to listen to a lot of new or opposing ideas.

* We had little incentive to listen to different views about what should be done, because we had all the power.

* Our rewards came from pleasing our colleagues and boss, not from the on-the-ground success of our projects. We would therefore respond to our colleagues' concerns first, and those of beneficiaries second (and in any case, we had to spend much more time at headquarters than in the field.)

* In an expert-driven culture, we was expected to come up with the right answer, and then implement it - not to launch of bunch of experiments with different approaches to see what worked best.

The bottom line is that, for what we were doing, there was no single right answer. But our opinions, biases and time constraints prohibited us from considering, allowing, or evaluation a variety of approaches to see what worked best. I also realize now that what might have worked best in 1985, before I began working on these projects, was not the same thing that would work best in 1990. But our various constraints (and power) inhibited our ability to adapt our thinking to the ongoing technical, social and financial changes in the environment.

In retrospect, I still believe that our expertise was valuable. But we did not leverage that expertise in the right way. Instead of our centrally planned, top-down design and administration of these massive projects, we should have been convening a conversation among all the stakeholders, promoting a series of different approaches, and helping everyone learn from the different outcomes so they could iterate toward ever better results.

The secret is that few "experts" like the current system. They know deep down that it is inefficient and ineffective. When given the opportunity to play more of a convening and coaching role, most of my colleagues at the Bank loved it because they knew they were adding more value. The challenge for the future is for us to enable experts to play this role to a much greater degree in the future.


[GlobalGiving]

"Rationality" and Development?

His big picture is familiar to readers of Hayek: societies develop NOT through the conscious design of some experts..., but through the “ecological” survival of institutions, norms, rules, firms, and products in a society of freely choosing individuals.

That is from a nice review by Bill Easterly of Vernon Smith's new book Rationality in Economics.

You should read the whole review, if not the book, since Smith tries to show how seemingly irrational behavior by individuals (e.g., cooperation), may actually be rational after all.  In addition, such behavior may promote the emergence of social institutions and economic development.

(I was once on a panel with Smith, whose name I did not recognize, and who was very unassuming. I noticed that he was pretty smart, so I asked him what his research was on. I knew I had blown it when his response started, "Well the work I got the Nobel Prize for was....".  This reminded me of the time I met Chuck Leavell.)


[GlobalGiving]

Anyone - That's Who.

Mari and I have been talking about the GlobalGiving vision -- what we believe, the hypotheses we are operating on, and what we believe the future will look like as GlobalGiving succeeds. Much of this vision appears in various documents (funding requests, strategy documents, media reports, and blog posts). But we realize it's time to prepare a fresh vision statement that brings these elements together and adds new pieces we've not yet fleshed out.

Thinking about vision led me to recall a presentation, titled "5 Questions", that I made in 2002 at the Center for Global Development.

In that presentation, I said there were five questions to ask about the development aid business model, and that the answers to those questions would provide the superstructure for a modernized aid system. The five questions were:

1. Who should be able to propose ideas for projects or initiatives?

2. Who should be able to help select which get funded?

3. Who should be able to fund the selected projects?

4. Who should be able to to compete to implement them?

5. Who should be able to evaluate them?

The point of my presentation at CGD was that the current aid system concentrated the answer to all five questions in a very small number of aid agencies, experts, and consulting firms. This may have been appropriate when the current aid industry was created fifty years ago.

But the world has changed dramatically since then.

The starting answer to each of those questions should now be: "ANYONE!"

There will, of course, be reasons to restrict that answer to some degree for each question and each context. But the important thing is to start at the "anyone" end of the spectrum rather than at "the expert agencies and experts only" end of the spectrum. In other words, we start from the presumption that the answer to all five questions should be ''anyone," and we force ourselves to justify any decision to give special access or powers to experts.

The vision statement Mari and I write will be long and nuanced. But if I had to sum up a key part of the vision in one word, it would be "ANYONE."

------

(PS: What's wrong with experts, you might ask? Stay tuned for my next two blog posts...)

[GlobalGiving]

When aid agencies listen

The aid industry has spent over $2 trillion since World War II to help spur the development of poorer countries, with not enough to show for it.  Some people argue that the returns to the money spent are zero.  Others argue that at least some of the aid money has had a positive impact.  Most would agree, however, is that the productivity of aid spending has been very low.

As Mari Kuraishi and I argue in our chapter of Reinventing Foreign Aid, a key reason for this low productivity is the lack of market mechanisms in the aid sector.  Aid agencies face little competitive pressure  - they almost never go out of business, even if they do a terrible job!  By contrast, effective market mechanisms force out the poor performers, and enable effective newcomers to get traction and grow.  Surviving in a marketplace requires constant innovation and efficiency gains.

The good news is that Laura Freschi at AidWatch reports she is starting to see some of this competitive behavior with respect to the Millennium Challenge Corporation (MCC).  The MCC, which is only a few years old and may be concerned for its fate under the new administration, has been actively reaching out to stakeholders to get feedback and advice on how to innovate.  Hats off to the MCC for this.

[GlobalGiving]

The Evolution of Economics

One economist leading the effort to define that new paradigm is Andrew Lo, of the Massachusetts Institute of Technology, who sees merit in both the rational and behavioural views. He has tried to reconcile them in the “adaptive markets hypothesis”, which supposes that humans are neither fully rational nor psychologically unhinged. Instead, they work by making best guesses and by trial and error. If one investment strategy fails, they try another. If it works, they stick with it. Mr Lo borrows heavily from evolutionary science. He does not see markets as efficient in Mr Fama’s sense, but thinks they are fiercely competitive. Because the “ecology” changes over time, people make mistakes when adapting. Old strategies become obsolete and new ones are called for.

That is from an article in the Economist describing how the rational expectations school of economics has been discredited. Behavioral economics has been successful at exposing the fallacies of rational expectations, but it has not succeeded in creating a new framework. A new approach adopts elements of both schools, and places them in a dynamic evolutionary framework.


[GlobalGiving]

Giving Markets meet Official Aid in the UK

A more radical approach would be to create a fund to match donations through champions of mass philanthrocapitalism globalgiving or kiva. By getting people to put up their own money, rather than voting in the abstract about where a small chunk of government money should go, it would be a more meaningful exercise and would give people a far wider range of choices. It could help to stimulate giving in general.

That is from a very good post over at Philanthrocapitalism, a blog by Matthew Bishop and Michael Green. It is worth reading the whole thing.

[GlobalGiving]

The Power of Proximity

The physical proximity of talented, highly educated people has a powerful effect on innovation and economic growth. Places that bring together diverse talent accelerate the local rate of economic evolution. When large numbers of entrepreneurs, financiers, engineers, designers, and other smart, creative people are constantly bumping into one another inside and outside of work, business ideas are formed, sharpened, executed, and—if successful—expanded. The more smart people, and the denser the connections between them, the faster it all goes.

That is from a recent McKinsey study. It has much relevance for economic development in poorer countries as well as the US. There have been a number of attempts to create physical clusters of economic activity in the developing world, most of which have failed because we don't yet understand the conditions leading to cluster formation (or how to create these conditions from scratch). And while the physical dimension of clusters remains very important (I am always amazed at how much I can get done on a short visit to Silicon Valley), the Internet opens up new virtual clustering possibilities.

We are starting to see clustering behavior on GlobalGiving and are rolling out features to encourage more of this. Since no one knows exactly what works, there is a large element of trial and error, which puts a premium on our ability to experiment rapidly with new features, keeping those that work, and dropping those that don't.


(Thanks to Dana Messick for the pointer.)

[GlobalGiving]

Don't just do something, sit there!

The Boston Review has an excellent discussion forum of Paul Collier's new book that includes an essay by the author as well as comments by Bill Easterly, Nancy Birdsall, and others. The discussion provides a meta-discussion of international development itself.

Collier makes some observations about poor countries and then draws what seem to be ineluctable conclusions about what the richer countries should do (in this case, intervene militarily). Those who read his first book, The Bottom Billion, found his arguments very compelling. The problem was that his observations were flawed statistically, and the conclusions he drew were flawed logically, as Bill Easterly has pointed out on many occasions (including here).

There is a strong human tendency to want to do something when one sees a bad situation. It is very hard for us to just sit there and do nothing. In some sense, the history of the World Bank is a reflection of the (admirable) instinct we have to try to make bad situations better. The problem, as Easterly has pointed out, is that honorable intentions do not necesssarily make for effective interventions. In fact, some interventions can make things worse, via the law of unintended consequences. The larger the intervention, the more severe the possible negative consequences.

Nonetheless, it is unlikely that the human instinct for action will go away even in the face of ferocious debunking of effectiveness by Easterly and others. So we need places where that human instinct can be channeled in ways that may be modestly effective and are unlikely to have catastrophic consequences. Nancy Birdsall, the head of the Center for Global Development, provides one of the levelest heads around on this front, by acknowledging the role that Collier has played in raising the issues and suggesting some more modest interventions that are better supported by the evidence.

Which makes me wonder why Birdsall has not yet been appointed the aid czar for the US.


[GlobalGiving]

Where's the beef?

The World Bank's private sector arm, the IFC, recently backed out of a deal funding cattle ranching in Brazil after objections from the Bank's own evaluation group, which argued that the deal posed a "grave risk to the environment:"

Vinod Thomas, the IEG’s director-general, sums up the dilemma: “Climate change threatens to derail development, while business-as-usual development threatens to destabilise the climate.”

The job of the World Bank and other aid agencies is not to promote business as usual. It is to promote innovation - new ways to grow, and to do so in a way that helps rather than harms the environment. The Economist magazine and others dwell on the costs of fighting climate change, but they rely too much on a static mind-set. With the right signals and incentives, great creativity will be brought to bear, and the problems will be addresses at far lower cost than we think.

Many of the solutions (especially energy efficiency measures) will generate net benefits, even with existing technologies, according to McKinsey. The others will be harder to tackle, but they can be tackled. To do so, however, will require extreme ingenuity and persistence - meaning that the next depression may be a psychological one rather than an economic one.

[GlobalGiving]
[image credit: Jelle at Flickr under a Creative Commons license]

"The work is grueling, but at least the pay is bad!"

Dr Nesse believes that persistence is a reason for the exceptional level of clinical depression in America—the country that has the highest depression rate in the world.

That is from an interesting article on Economist.com. Some recent research indicates that mild depression may be nature's way of discouraging people from trying to achieve unattainable goals.  One of the researchers notes that that the dynamism of the US comes from lots of people pursuing unreasonable goals.  On the one hand, entrepreneurial spirit makes the US the engine of innovation in the world.  On the other hand, the costs in terms of mental health are significant.

All of this research is still at the speculative stage.  But this article does provide a useful caution against overly romanticizing entrepreneurship.  Someone asked me the other day what I thought the most useful thing was that they could do to promote social entpreneurship.  "Create a nice place for social entrepreneurs to get together, blow off steam, and decompress," I told him. 

Maybe we should do the same for the project leaders on GlobalGiving, many of whom are out there every day straining to achieve the impossible.  As one of them told me a while back, "The work is grueling, but at least the pay is bad!" 

[GlobalGiving]

Invest in girls to fight global warming

Key to innovation and problem solving is looking at things from a different angle. Last year I did a post about how modestly changing your diet can not only improve your health -- it can also reduce carbon emissions as much as buying a hybrid:

Trimming the amount of meat Americans eat would not only help the planet — a mere 20 percent reduction is the equivalent of switching from a Camry to a Prius — but would also be likely to reduce obesity, cancer and heart disease.

Few people look at problems from a different angle better than David Wheeler, a former colleague at the World Bank who is now at the Center for Global Development. David was among the first to note that fighting global warming will require major efforts in developing countries, who are now the major - and fastest growing - source of carbon emissions (more here.)

Now my colleague Bill Brower reports on a talk David gave recently. According to Bill:

David calculated that investing in methods to slow population growth (educating girls and family planning) in developing countries could lead to greenhouse gas savings on the order of switching all coal-fired power plants to wind power—at a far lower cost.

There is no paper yet on this; I will post it when available. In the meantime, if you want to "green" your giving, consider supporting a "Girl Effect" project.


[GlobalGiving]

Bullets, Ladders, and Circles

Earlier I did a post about Silver Bullets. Silver Bullets are ideas or interventions that we get infatuated with, and we start thinking, "If only we could do X...then it would work [or I would be happy!]" In my post, I fessed up to many of the international development Silver Bullets I have become infatuated with over time. I noted that, alas, real Silver Bullets are rare, and that economic growth and opportunity usually require a lot of different things that reinforce and promote each other.

This reminded me of a graphic that Legatum has put together called the Legatum Prosperity Ladder. It is a nice attempt to show how different financial instruments are important at different stages of a country's development. Grant funding is needed when countries are really poor, followed by microfinance at the next stage of development, then private equity, and finally public capital markets for the most developed economies. This Ladder is a nice antidote to those who think that any one form of financing is a Silver Bullet for economic development.

As I reflect on Legatum's ladder, I realize that it can also be applied to the different life stages of regular people -- even in rich countries. Many of us have ascended this ladder in our lives.

By all measures, I am among the best off people in the world. I was born in the most affluent country, grew up with positive role models, and went to some of the best schools. And I have worked at some of the best organizations and companies. But it could have been different. Here is my own story:

My success is due in no small part to hard work and determination--but also to an incredible amount of luck and assistance from others. My family ended up living below the poverty line for several years when I was in grade school and junior high. Luckily, there were grant-funded programs that enabled my siblings and me to be productive in school nonetheless. For instance, we ate free and reduced-price school lunches. My family was also eligible for food stamps (though we were usually too proud to accept them).

When her last child entered first grade, my mom, who was a single parent with five kids at home and few job skills, was trained and temporarily employed by a public jobs program. This program provided provide temporary income and then a stepping stone to regular employment for her. Some of us older siblings were able to get work as well - delivering papers, waitressing, etc. Our household income rose, so we were able to depend less and less on food subsidies and more on our own resources.

But we had few extra resources for education. I was able to get an extraordinary education, even though my various odd jobs could only pay for books and modest other fees. My public education was free, and then I received scholarships to a high-quality prep school, university, and graduate school. That schooling in turn enabled me to get an excellent job.

It was only when I was twenty-five that I began my full-time professional work life. Finally I was able to pay my way and take advantage of private financing markets through borrowing for a mortgage and equity ownership. After fifteen years working at my first job, I had, at age forty, accumulated enough experience and wealth to help launch my own organization.

Everyone starts out life grant funded (usually through a combination of family, public, and sometimes other private support). If things go right, we leverage this early stage "investment" in our productivity to get good jobs and/or start businesses and become largely self-sufficient. And then, as we age, many of us come to depend again on a form of grant funding through Social Security, Medicare, Medicaid, and other forms of assistance for the elderly.

All of this leads me to think that, in developed economies at least, the Prosperity Ladder is actually a Prosperity Circle.

[GlobalGiving]