Sunday, November 22, 2009

"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.

Thursday, November 19, 2009

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.

Tuesday, November 17, 2009

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."

Sunday, November 15, 2009

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.

Friday, November 13, 2009

"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 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.


Thursday, November 12, 2009

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.

Monday, November 09, 2009

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.

Friday, November 06, 2009

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.