Silicon Valley

I have traveled to Palo Alto about 8 times per year over the past 6 years, and I have therefore watched the dot.com boom, bust, and now boom again. What an amazing time.

Mari, Donna, and I have just spent two very productive days in the area discussing GlobalGiving with funders, advisors, potential users, and business partners. It is amazing how much we can get done in 2 days here, since there are so many people inventing so many interesting things.

The money here is an important factor, but what is most powerful about Silicon Valley is the attitude: When you float a new idea out here, people generally try to think of a hundred ways it could succeed. This is a refreshing change from the atmosphere in many other places, including Washington, where people generally respond by telling you a hundred reasons why your idea can't succeed.

To be honest, I am pretty tired of flying so much. But the energy and openness out here (almost) make up for the cramped seats and delayed flights.


[GlobalGiving]

Presto, several months in....

A few months ago, I blogged about a new service called Presto, which allows you to email your mom or grandmother even if she does not have a computer. What happens is this: You send an email to her special email address, and the email - along with any attachments such as color pictures - simply prints out at her house. Presto!

I love this device because (a) it delights my mother (she can get quick email notes from her six kids scattered around the world, along with pictures of her grandkids) ; and (b) it elegantly solves a problem. Many older people are simply not comfortable with booting up a computer, logging onto email, figuring out how to launch attachments, and then figuring out how to print. In my mother's case, she can run her computer, but it is such a hassle that she rarely logs on.

The nice thing about Presto is that it only prints out emails from people on my mom's white list. So no spam. I can also think of many other enterprise-related uses for Presto - printing out orders and work tickets from customers and workflow colleagues automatically comes to mind.

So check this out. Even if you don't get one, you can admire it.

[GlobalGiving]

What information do markets need to work?

Did you know that about 6% of non-profits in the US attract four-fifths of the resources?

This might be fine if there were not so much at stake. There is a growing appreciation of the role that philanthropy can and must play in addressing the challenges we face - be it education at the local level or carbon emissions at the global level. And Americans are putting their money where their mouth is: last year they gave away almost $300 billion to philanthropic initiatives.

So it really matters where all this money goes. The problem is, as Paul Brest puts it in his most recent Hewlett Foundation President's Letter, most donors "simply lack the necessary data to support informed decision making." This means that the philanthropy marketplace does not function well, and resources don't get allocated to their highest-impact uses.

It also means that big organizations can get bigger based on their marketing and branding rather than on their results. And the little guys, regardless of how good they are, usually have trouble attracting the attention of donors. The sad fact is that seven out of the top ten largest NGOs in 1990 either maintained or grew their size relative to the rest of the sector during the following decade.

As Mari and I write in a forthcoming book chapter:

Well-functioning markets, on the other hand, demonstrate significant entry and exit from the market, as organizations with innovative ideas enter to compete, and companies that have lost their edge go out of business. To illustrate, from 1990 to 1999, only three of the top ten companies (ranked by market capitalization) at the beginning of the decade remained in the top ten list by the end of the decade. All of those three companies had lost market share. The other seven companies in the top ten in 1999 had not been on the list at the beginning of the decade.

In his letter, Paul Brest describes some of the organizations (including GlobalGiving and several other excellent ones) that are working to provide donors with the information they need to make better decisions. As Paul says, "diverse philanthropic investments do not have a single common measure [of return]." To that, I would add that diverse "donors" do not share the same measure of returns. As a result, no single set of data or information can or should inform - or motivate - all philanthropic decisions.

The question is how to provide a mosaic of data suitable for different philanthropic investments and donors. It is clear that there will be no single solution to this - it really will have to be different strokes for different folks. But there are common elements that should be applicable to many organizations and many donors, and Paul discusses some of these in his letter, which is highly recommended reading.

[GlobalGiving]

GlobalGiving Badges...

I like these new "badges" we have. Click on the one below. Or you can check them all out here.

The fox and the hedgehog

A little knowledge can be dangerous. But if you are trying to get an education in economics with minimum time commitment, you could do much worse than reading Tyler Cowen's blog Marginal Revolution and Robin Hanson's blog Overcoming Bias. If you have more time on your hands, you might consider enrolling in the exceptional economics department at George Mason University, where they teach.

Tyler and Robin have almost diametrically opposed perspectives on how one can make sense of the world. And yet, like many opposites, they have huge respect for each other.

Here is an excerpt from a recent post by Tyler:

Robin is very fond of powerful theories which invoke a very small number of basic elements and give those elements great force. He likes to focus on one very central mechanism in seeking an explanation or developing policy advice. Modern physics and Darwin hold too strong a sway in his underlying mental models. He is also very fond of hypotheses involving the idea of a great transformation sometime in the future, and these transformations are often driven by the mechanism he has in mind. I tend to see good social science explanations or proposals as intrinsically messy and complex and involving many different perspectives, not all of which can be reduced to a single common framework. I know that many of my claims sound vague to Robin's logical atomism, but I believe that, given our current state of knowledge, Robin is seeking a false precision and he is sometimes missing out on an important multiplicity of perspectives. Many of his views should be more cautious.

The full post is here.

[GlobalGiving]

Just don't return their calls...

"Just don't return their calls; you don't need them."

The scene was 1990 in a World Bank staff meeting. Our director, a very imposing guy, was telling us that he thought we spent too much time talking to people contacting us from outside the World Bank. His view was that we should focus on our work - in other words, process our reports and loans - and ignore everyone else.

Last week, a friend told me that she had been in discussions with a potential partner on a deal, but that suddenly her emails and phone calls were no longer returned. She felt powerless, since she was dealing with a very large company, and her own start-up was at the mercy of the partner.

This reminded me of my own path over the last few years. In late 2000, I was a powerful person after 14 years at the World Bank. As co-head of the Corporate Strategy and Innovation Groups, I had many staff and huge resources at my disposal. When I called people, they left other meetings to take my calls. Emails were returned instantly. In my last few months on the job, I was overseeing the allocation of the World Bank's entire $1.2 billion administrative budget, and senior executives went out of their way in the staff cafeteria to come say hello.

All of this changed on October 15, 2000, when I resigned from my job to help create GlobalGiving. Suddenly, my co-founder and I had no staff and no power. No one returned our calls. The office was quiet: no one came to visit. We were on our own. It was one of the most humbling and frustrating experiences of my life. But then I realized: this is what life is like for almost everyone outside the walls of power.

Now, after much hard work, many people have heard about GlobalGiving, and my calls usually get returned. But my experience made me determined not to repeat old patterns. Having experienced both ends of the power spectrum, I identify with the people who contact our office every day wanting to post a project or offer their expertise.

We are trying hard here at GlobalGiving to have a culture of responsiveness. Although we still feel small in the grand scheme of things, we are often perceived by those who contact us as the powerful one. As we continue to grow, I want us never to never lose sight of that.

[GlobalGiving]

GlobalGiving 3.0 has launched...

Check it out: we have re-launched GlobalGiving with a whole lot of new features, including widgets like the one above that you can add to your blog, Facebook profile, or MySpace page.

Do Dogs Use Deodorant?

"Dennis, do dogs use deodorant?"

It was a sweltering day out there a couple of Saturdays ago, and I was sitting on the neighbor's porch with Kobe and Alvin. Usually we spend an hour in the morning cleaning up the remnants of Friday night from the sidewalks in our neighborhood. Kobe and Alvin, ages 8 and 11, live nearby, and they work with me to earn a few bucks. Then we usually go to 7-11 to get a drink, or to Ben's Chili Bowl for lunch, or sometimes to the Thurgood Marshall Center to play basketball.

But that day was too hot to work. So we had taken refuge on the front porch next door and were just sitting there in the shade and passing the time doing nothing.

"What do you mean, do dogs use deodorant?" I replied to Kobe.

"Well Alvin says that dogs use deodorant, but I say they don't," Kobe replied.

I didn't know what to say; I just smiled and thought back to those hot summer days when I would sit around with my own older brother, who would spin tales and deliver random facts, many of them made up (I realize now) for his entertainment.

"Some dogs do, and some dogs don't," I told Kobe, and left it at that.

[GlobalGiving]

Giving Up Their Francs and Marks - but Not Their Phone Companies

I have been in Europe three times over the past year for business, including trips to Spain, Portugal, England, France, and Switzerland. And not too long ago, I visited a sibling in Ireland. On all these trips I was astonished at the progress being made by the historical experiment called the European Union. Although not all countries are fully on board with this experiment, its impact has been profound.

I am amazed that the French gave up their beloved francs, and the Germans their rock-solid marks, in favor of a highly uncertain new currency called the Euro. England has not yet given up its pounds, but many merchants already accept Euros, which are becoming a second currency there.

In addition to the common currency, the common labor market has had a very tangible impact: when you check in at a hotel or eat at a restaurant you are likely to be greeted by someone from another country. (It also means that the quality of food served has risen significantly, on average, in the countries I have visited.) But what has impressed me most is the EU's far-sighted "equalization" scheme.

Under this scheme, the richer countries contribute money to a pot that is then allocated to the poorer countries. This scheme has funded major infrastructure projects in the poorer countries such as Ireland and Spain (which have prospered hugely over the last decade) and Portugal (which is still poor but making progress).

After a long stagnation, these countries are building and improving roads and bridges and public places. The improved infrastructure, combined with the freer movement of talent, goods, and capital, have resulted in rapid growth in many of the poorer countries.

They have also unlocked hidden sources of growth in the richer countries, which can now deploy their capital and labor more efficiently and have a larger market for their goods. As a result, they are becoming far more cosmopolitan, and opportunities for younger people have expanded dramatically.

While change always has its costs, you can feel the vibrancy in the air in the countries I have been to recently, and the benefits seem to far outweigh the problems.

But regulation of the internet and cell phones is one glaring failure in Europe. Public access to the internet in the UK and Europe remains very expensive – I have had to pay between $20 and $40 per day in hotels in London and Portugal recently, which is a huge extra cost of doing business there. And I was effectively unable to do my normal business when staying with a friend in Paris, because the modem system at her home was incompatible with my computer.

And don’t get me started on cell phones. I recently purchased a plan here in the US that gives me 1,000 minutes of calling anywhere in the US for just $39. By contrast, it often costs $2 per MINUTE to call across country boundaries within Europe. EU regulators have pledged to cut this in half, but that would still mean my 1,000 minutes could cost me up to $1,000 per month!

For developing countries, telecommunications is a core part of their infrastructure. Recognizing this, many developing countries are taking steps to ensure that access to the internet and cell phones is freely available and relatively inexpensive. That is one area where they are well ahead of the new Europe.



[GlobalGiving]

You're Fired - Here's 35,000 Euros!

The French Paradox is not only about how you can eat lots of fatty food and stay skinny. It is also about how you can have a relatively state-oriented, rigid economy that increases the cost of labor, produces high unemployment and still have a reasonably high standard of living.

I was in France this past week for a couple of days, and a friend there told me a story about how hard it was to fire her babysitter - even after the babysitter had scalded another friend's child, requiring hospitalization. Firing the babysitter for unsatisfactory performance turned out to be almost impossible(!).

So she decided to take another route that was legally easier: she informed the babysitter that she had found a state-supported childcare center for her child. Still, my friend had to go through an elaborate process of sending formal letters (worded just so) to the nanny, waiting a specified number of days, then inviting her to a meeting, the purpose of which was to inform the babysitter that she would be fired, and then waiting a certain number of days before sending a letter informing her that she was in fact fired.

"Why go through all that?" I asked. "Because if you don't you can be sued," my friend replied. She then told me the story of a friend of hers who had to pay a fired employee 35,000 Euros after failing to put the right words in the letter and failing to observe the specified intervals between initial letter, meeting, and firing letter.

She also said that large companies generally find it impossible to fire poor performers workers. Instead they often send them home with pay, sometimes for a couple of years, until they can reach a severance agreement that usually involves a large payment to the slacker.
And yet, despite its problems, France remains one of the world's largest economies, and Paris is vibrant - and one of the world's greatest cities in all dimensions (except for the lack of air conditioning on the metro and suburban trains; the lack of taxis at night and on the weekend; and the lack of service in restaurants-but knowing how hard it is to fire waiters, I am now a little more understanding).

So what gives? How can an economy with such an inefficient labor market survive? In the end I came up with the following hypothesis: very strict education, starting young, and a relatively meritocratic system of advancement to the higher schools and university.

Earlier that day, I had spent time with my friend's 9-year old son, a product of the French school system. I was astounded by his knowledge of everything from the history of space travel to the nuances of the New York subway (and he had never been to New York). And his smarts were not just limited to facts; he had confident, nuanced opinions and theories on why certain things were the way they were.
Admittedly, he was probably above average intelligence given his parents, but still I was rocked by his sophistication compared to nearly all 9 year olds I have met anywhere else.

This is at least partly a result of strict schooling starting very young (some say too strict, and having tasted a little of it myself when I was young, I tend to agree). And the curriculum is accompanied by a never-ending series of national exams that determine where each person is able to go to university and professional school.

So my theory is that by the time they get to the workplace, most French workers have been heavily conditioned from an early age that they must work hard and perform. This means that the number of slackers is relatively small compared to most other countries. And this in turn means that French workers are on average productive enough to make the economy go. The system is bad, but the unusually high quality of the work force makes up for it.

But before the French get too complacent, there is an alternative explanation. The formation of the EU has led to much freer markets for labor, goods, and capital. This undoubtedly has enabled France to realize huge gains from deploying labor and capital more efficiently, and by creating larger markets for its goods.

To be sure, Sarkozy is preparing the country for some fundamental reforms, including a roll back of the astonishing 35-hour work week in France. And without reforms, France will continue to lag its fast-growing competitors in the EU and suffer high unemployment. (Fortunately those unemployed get generous benefits, and have even been known to go on strike to resist efforts to lower them!)

In the mean time, even without the reforms, there is no apparent crisis, thanks to the training and conditioning of the workforce (and probably the formation of the EU). Though problems loom in the long term, France will continue in the short term to survive, and life will be good. And that is the French Paradox.