Live, from Oxford....

I am blogging this week from the Skoll World Forum for Social Entrepreneurship at Oxford University. There are a series of good blogs about the Forum on Social Edge, including mine. See you there.

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And the winner is.....?

Well, I am not allowed to tell you who the winners of the IYVS Project Challenge are (see blog entry below). They will be announced shortly, so stay tuned.

But I can tell you that about $25,000 was raised from more than 200 donors for these student-led projects in three weeks.

And this is only the beginning - IYVS tells us that they plan to replicate this on campuses around the country - and then around the world!

UPDATE:

Here are the winners - check them out:

	Creating a Sustainable Water Initiative in Jazmin We will build a water treatment system with the community of Jazmín and work with its members to create and implement a water education campaign to ensure project sustainability and replicability. Learn more
Location: Costa Rica | Theme: Health | Need: $35,000
	Project FOCUS: Art for AIDS Orphans in Uganda Empower youth with a voice to share their stories. This project connects AIDS orphans in Uganda with local and US artists through collaborative art projects and creative storytelling. Learn more
Location: Uganda | Theme: Education | Need: $28,000
	HOPE HIV/AIDS: Fighting AIDS in Zimbabwe This project expands resources in Zimbabwean communities, where AIDS is a serious threat. The effort empowers people to fight the epidemic though focusing primarily on community-based action. Learn more
Location: Zimbabwe | Theme: Health | Need: $30,000
	A community-run clinic in Sikoro for 28000 people This project will be providing some funding, accountability, institutional support, technical support and consulting to a community committee that is in charge of creating a clinic for basic care. Learn more
Location: Mali | Theme: Health | Need: $14,472

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Power to the (Young) People!

"Let's see if anyone shows up."

A couple of years ago Simon Johnson invited Mari Kuraishi and me to come talk to his class at the MIT Sloan School of Management. We awoke in Boston the morning of the class to find several feet of snow on the ground, and to hear on the radio that MIT was officially closed for the day. "Come on over anyway, and let's see if anyone shows up," said Simon.

When over eighty students showed -including some not enrolled in the class - I knew that the world had changed. Even a decade before, few business school students were interested in social change. Now, whenever Mari or I speak at any of the leading business schools, the room is almost always packed.

Students really care about the state of the world. And unlike previous generations, which relied heavily on protesting the current state of affairs, the current generation is taking action to actually change things.

An excellent example is the International Youth Volunteer Summit (IYVS), which was formed in 2006 by two undergraduate students at Northwestern University. Their idea was to hold dialogues with young changemakers and allocate resources to the students with the most innovative ideas to change the world.

Let's get this straight, because it is very significant: Students are working directly with communities in developing countries to create initiatives designed to address challenges and create wealth.

Not World Bank, USAID, or other experts. Students.

This year, they partnered with GlobalGiving to raise money for their projects and to enhance the likelihood those projects would be sustained over time. They have done an exceptional job, raising over $16,000 in less than three weeks for projects ranging from an initiative that connects AIDS orphans in Uganda to US artists to designing and building sustainable new water systems in Costa Rican communities to training of 300 micro-entrepreneurs in Guatemala.

This is only the tip of the iceberg. The new generation will not be satisfied with complaining. They will continue to take action. And as they gain experience, confidence, and more resources, they will be a major social force acting outside of top-down, official channels. That gives us reason to be optimistic.

PS: By the way, that same Simon Johnson has recently been nominated to be Chief Economist of the IMF. As I said, Times are changing...

"You Can't Beat That For Accountability"

Yesterday, Slate.com ranked GlobalGiving among the top micro-lending sites on the web. The writer, Jude Stewart, praised our "meaty" project information.

And after going through our whole find--> fund--> follow process she concluded, "You can't beat that kind of accountability."

I am always happy when our amazing team's hard work gets recognized. Authenticity, transparency, and accountability are what people want, and we are delivering.

GlobalGiving]

The Origin of Wealth

I was a decent economics student in grad school, but I had a dirty secret. That secret was this: At the end of an exam, I often left the room thinking "What a bunch of baloney that is."

Traditional economics is based on several principles. People are in theory perfectly rational, have access to all the information they need to know, and always instantly act to maximize their own welfare.

The good news is that if you make those (and other assumptions), you are able to model economics with some elegant mathematics.

The bad news that people don't really act like that, and my classmates and I knew that. But most of us never dared suggest that the Emperor had no clothes. Instead, we just buckled down, learned our math, and tried to do well on the exams.

I am happy to report that the field of economics is - slowly - changing to take into account the real world. Daniel Kahneman won the Nobel Prize in Economics in 2002 for his pioneering work in "behavioral economics," which builds on how people actually act rather than assuming they are perfectly "rational."

Over the past decade, another branch dubbed "complexity economics" has also begun to emerge, and I want to thank Steve Pearlstein at the Washington Post for pointing me toward an excellent summary: Eric Beinhocker's The Origin of Wealth. The subtitle is Evolution, Complexity, and the Radical Remaking of Economics. It argues that economies are actually complex, emergent systems. Economies grow (i.e., wealth is created) by an evolutionary process whereby goods and services that create value are replicated, and goods and services that create less or no value die out over time.

Traditional economics is all about equilibrium - how demand and supply come into balance and how existing wealth is allocated. The traditional approach has never successfully described how growth occurs. But the new field of "complexity economics" has a coherent description of how growth comes about. By its account, there are three key ingredients to growth: (1) PTs- physical technologies (e.g., steam engines or the internet), (2) STs- social technologies (e.g., limited liability corporations or social networking sites), and (3) a mechanism for allowing differentiation, selection, and replication of successful innovations.

Much traditional thinking emphasizes the importance of new physical or social technologies as a driver of growth. But complexity economics argues that growth is tough without a mechanism for differentiation, selection, and replication. Without such a mechanism, it is hard if not impossible to stimulate and reinforce continuous innovation.

One word for such a mechanism is "evolution." Another word is "marketplace." Centrally planned (non-market) economies did not have such a mechanism, and the results have been plain to see: low levels of innovation, and failure of even the rare innovation to be made widely available across the economy. By contrast, market economies (accompanied by important social technologies such as the rule of law and certain regulatory functions) have generated stunning wealth in the last 200 years.

Why is this relevant to GlobalGiving? Well, to date, most efforts at international aid have been centrally planned by specialized agencies like the ones I used to work for. As a result, innovation has been slow. And not much wealth has been created out of the approximately $2 trillion spent on official aid over the past 50 years.

We and others are working to create instead a real marketplace - where new physical and social technologies can differentiate themselves, be selected by funders, and be replicated widely. It is early days still, but we are making good progress by doubling in size each year. And one thing I learned back in those grad school classes is just how fast something can grow from small to big when it doubles each year.

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A fork in the road for Google.org?

When I worked in Russia for the World Bank, I got to know a lot of government officials who had been rising stars under the old Soviet system. One day in 1995 I was having drinks with a guy who used to work at Gosplan, the Soviet central planning bureau whose job it was to determine all the goods and services that would be produced in the country each year - and where they would be distributed and consumed.

I asked him, "Konstantin, I am really baffled by this central planning system you had. Tell me - how did it work?"

"Badly!!" he exclaimed in reply. "Very badly. It was a terrible system that was horribly inefficient. In retrospect, it was crazy to think that we should be making all those decisions. In fact, we had to keep hiring smarter and smarter people --and working longer and longer hours--just to keep the system from sinking under its own weight, which of course it eventually did...."

I laughed and had another vodka. But about three years later after I was asked to co-lead the Corporate Strategy Group at the World Bank, Konstantin's words began to haunt me. I realized that the World Bank was structured like a central planning agency. The idea at the Bank was literally to "hire smarter and smarter" experts and make us work "harder and harder." And we were responsible for allocating approximately half of all the official aid resources to developing countries.

And yet, no matter how many experts we hired or how hard we worked, we "experts" suffered from three big problems: 1) lack of adequate information about local conditions and what people in developing countries really need; 2) lack of "bandwidth" to process all possible solutions to problems and challenges - there are only 24 hours in a day!; and 3) lack of feedback - it was very hard to understand the impact of our policy advice and project investments, so it was hard to adapt and improve.

At that time, I began to think about how market economies differ from central planning and why they are more successful. The core answer is because they distribute information, decision making, and resources among millions of decentralized people and companies. And the emergent nature of markets mean that successful innovations encouraged and replicated.

In the US and other market economies, there is no "World Bank" making decisions about what needs to be produced or where it needs to be distributed. Instead, there is Adam Smith's invisible hand at work: "[The merchant] intends only his own gain, and he is...led by an invisible hand to promote an end which was no part his intention." The invisible hand has its shortcomings, and Adam Smith himself talked about the importance of government in regulating certain aspects of the economy and even producing some goods. But no other system discovered to date comes close to the invisible hand in driving innnovation, creating wealth and addressing people's needs.

So what does this all have to do at Google? Google describes its mission as "organizing the world's information." But I would describe what they do as "revealing the underlying organization of the world's information." If you search for "dog" on Google, for example, there is not a central planner at Google deciding which search results you "should" see. Instead, Google's algorithms (roughly speaking) display the dog-related sites that have the most relevant links from other highly ranked sites. Google thus "reveals" the content and connections of all the users of the web itself.

The remarkable thing is that as soon as Google launched several years ago, people quickly learned that Google search results were superior - often far superior - to results from other sites that used a centrally planned approach where editors determined what search results should be displayed.

The power of aggregating these user activities and links by Google is remarkably similar to Adam Smith's invisible hand.

So it is strange to hear some of the reports coming out of Google.org - Google's social good arm - implying that they are going to take a much more traditional approach to their philanthropy and social investments. Although their plans appear to be far from decided, it looks like they may choose a sector and a small set of countries to "work on." Presumably, a relatively small set of (very smart) people will analyze the situation, talk to people, design a program, etc. And then the program would be "carried out." The problem, as the Soviet Union demonstrated (and as Bill Easterly masterfully analyzed in his book "The Elusive Quest for Growth"), is that this approach does not work.

Although we at GlobalGiving are often referred to as "an eBay for philanthropy," in a sense we are "organizing the world's information about global philanthropy." Our eventual goal is to have all bona fide philanthropy projects around the world listed and "organized" on our site according to algorithms we are refining over time. Google has both the platform and reach to accelerate this dramatically. Will they seize the moment?

[GlobalGiving]

The Wisdom of the (Virtual) Miners

A few years back, Toronto-based gold mining company Goldcorp (GG) was in trouble. Besieged by strikes, lingering debts, and an exceedingly high cost of production, the company had terminated mining operations....Chief Executive Officer Rob McEwen needed a miracle. Frustrated that his in-house geologists couldn't reliably estimate the value and location of the gold on his property, McEwen did something unheard of in his industry: He published his geological data on the Web for all to see and challenged the world to do the prospecting. The "Goldcorp Challenge" made a total of $575,000 in prize money available to participants who submitted the best methods and estimates...

Within weeks, submissions from around the world were flooding into Goldcorp headquarters. There were entries from graduate students, management consultants, mathematicians, military officers, and a virtual army of geologists....

The contestants identified 110 targets on the Red Lake property, more than 80% of which yielded substantial quantities of gold. In fact, since the challenge was initiated, an astounding 8 million ounces of gold have been found—worth well over $3 billion. Not a bad return on a half million dollar investment.

This is from an article in BusinessWeek by Don Tapscott and Anthony Williams. (Thanks to Alex Tabarrok on Marginal Revolution for the excerpt.) Tapscott and Williams go on to observe the following:

If the masses can peer-produce an operating system, an encyclopedia, the media, a mutual fund, and even physical things like a motorcycle, one should carefully consider what might come next. You could argue that we're becoming an economy unto ourselves—a vast global network of specialized producers that swap and exchange services for entertainment, sustenance, and learning.

This was the insight I gained from doing the Development Marketplace at the World Bank six years ago. The innovation in terms of ideas generated was MUCH higher than the typical internal Bank process - and the cost was much lower. I realized that no matter how smart the Bank's experts are, they have limited information, expertise, and bandwidth. That experience led to the creation of GlobalGiving.

Like a typical company, the World Bank and many other development agencies and foundations are built on a hirearchical model:

Conventional wisdom says companies innovate, differentiate, and compete by doing certain things right. They hire and retain the "best people" to generate new ideas, make new discoveries, compete, and expand their business lines.

It is disheartening to see the slowness with which old (and even some of the larger and newer) organizations are coming to grips with the key lesson:

The lesson for business leaders is that the old monolithic multinational that creates value in a closed hierarchical fashion is dead. Winning companies today have open and porous boundaries and compete by reaching outside their walls to harness external knowledge, resources, and capabilities. Rather than do everything internally, these companies set a context for innovation and then invite their customers, partners, and other third parties to co-create their products and services.

[GlobalGiving]

It's something more primitive

Why do people do good? A new scientific study suggests that it's not just for an emotional reward: people may actually act selflessly because they're acutely tuned into the needs and actions of others. For decades, psychologists and neuroscientists have puzzled over the tendency of humans to engage in altruistic acts -- defined as acts "that intentionally benefit another organism, incur no direct personal benefit, and sometimes bear a personal cost." The bottom line, says Duke University professor Scott Huettel, is that altruism may rely on a basic understanding that others have motivations and actions that may be similar to our own. "It's not exactly empathy," he says, but something more primitive.

This blog you are reading is titled "Why I do GlobalGiving." It is a series of ruminations on this question - some direct, and some more tangential. In case you haven't noticed, I don't fully understand all my motivations. There are a thousand other things I could be doing in life -- many more remunerative, and many less stressful.

Thanks to my friends at Charity Focus for pointing me to this study. I find it illuminating and helpful as I ruminate some more....



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Jacob Harold on Social Capital Markets

Some of the most innovative foundations in the US have been key to the success of GlobalGiving. And while many people think foundations provide only financial support, our conversations, interactions, and collaborations with most of our funders have been equally important. The Hewlett Foundation is no exception.

Last year, Jacob Harold joined the Hewlett Foundation, and with the support of its leadership has begun encouraging the emergence of the broader "social capital market" - something I talked about in an earlier post.

In a recent newsletter, the Hewlett Foundation has an interview with Jacob. I am quoting liberally from it here, since I think he captures some of the key ideas - and talks about how the Foundation is putting its money where its mouth is by funding collaboration between key actors in the market. I predict you will see much more of this in the coming 2-3 years:

We’re interested in what we call the social capital market. Just as there are capital markets to finance new businesses there’s a capital market in the nonprofit world, too. A market is just a place to share information and exchange things for mutual benefit. Most of what we’re trying to do is to build institutions or support existing ones to support that market and make it easier to make good choices about philanthropy.

One way they do this is by helping donors find nonprofits that are effective and doing things they’re interested in. Keep in mind there are more than 1 million nonprofits in the U.S. alone, so identifying the best of them can be a challenge.

Several organizations we support are working on that: for example, Guidestar, with a huge database of financial information about nonprofits nationally, and DonorEdge, which started at the Greater Kansas City Community Foundation and provides programmatic information on nonprofits around the country.

...I want to put all the pieces together, to help the social capital marketplace become better integrated. I envision a situation where donors have everything they need to make the best decisions about how and where to give. So we always try to facilitate partnerships to move that forward.

It’s starting to happen. We recently funded two organizations in an interesting collaboration. Network for Good, an online marketplace for nonprofits, provided the financial functions so that someone looking at a nonprofit on GuideStar could make an online donation directly to that organization. Here’s an example of two organizations offering different services coming together to make each other more effective.

This is exciting work. The stakes involved are huge. The success of the nonprofit sector is so closely tied to the success of the society as a whole.

Read the entire interview here.

[GlobalGiving]

Ordinary Oprahs

We don't have to be rich and famous to be great. We all have parts to do and can do something to make a change in someone else's life. I hope others will be encouraged and inspired to find their task in life to help another.

That was one of the reactions to an interview I did with NPR yesterday on a segment called Ordinary Oprahs. This was part of a new series that Michel Martin is piloting called Rough Cuts, which is designed to showcase "new voices" with leading edge ideas.

Michel highlighted two social entrepreneurs based here in Washington DC, Lidia Schaeffer and Wendy Johnson. Both are helping educate children in Africa. Lidia is building a school in her home province in Ethiopia. Wendy takes groups of her friends to countries throughout Africa to support a number of projects.

Michel then interviewed me to show that there is now a marketplace - GlobalGiving - that can connect "ordinary Oprahs" like Lidia and Wendy to people around the world who would like to join them and support their efforts financially.

Finally, Michel interviewed Gene Sperling, who discussed the research showing the incredible returns to girls' education.

The figure that stuck in my mind as I prepared for this interview was: $50. This is the approximate amount that it takes to educate a child for a year through projects on GlobalGiving.

$50??? At that rate, there are literally tens and probably hundreds of millions of potential "ordinary Oprahs" in the world.

It was a pleasure to be part of Michel's new show. You can listen to the interview here.

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Note: Photo courtesy of Lidia Schaeffer.