To innovate, connect.

"Successful innovation depends less on how smart you are than how connected you are."

That is the finding of a new study from University College London. They find that the sharpest bursts of innovation in history occurred when population density and migration reached a certain critical level. The advent of the internet and social networking tools to some extent enables a form of virtual density that can partial substitute for physical density.

Recommended reading.

Photo: iStock Photo via Science Magazine.

[GlobalGiving]

The limits of selflessness?

New Philanthropy Capital (NPC) in the UK has just published a brave attempt to make the case for more mergers and acquisitions among non-profits. In general, I agree that more mergers are likely to be beneficial, but it is surprisingly difficult to make a compelling case for this conclusion. And it is maybe even more difficult to come up with an effective framework that would provide the right incentives.

First, there are problems making the case ex-ante that more mergers are needed. The report notes that, among large non-profits, the "rate of merger was just one-tenth of that among for-profit companies." So that seems to be a reasonable basis on which to presume more mergers among non-profits would be useful. The problem is that the value of any merger can generally only be determined ex-post. And in that context, it is important to keep in mind that an estimated 50-80% of mergers in the business world fail. So it's far from clear that the comparison with the for-profit sector is compelling.

The second issue is the incentive framework. There are two big reasons that make non-profit mergers much rarer than those in the for-profit sector:

i) There are no returns to non-profit shareholders. In the for-profit sector, the firm taking over the other generally offers a price higher than that prevailing in the market for the shares of the other firm. This provides an incentive for shareholders to sell - and it provides a healthy reward for the shareholders when it happens.

ii) In many cases, managers of the acquiring and acquired firms get bonus payments for concluding a merger. It is typical for the managers in the acquired company to get buy-outs. Sometimes these payments are even large enough for managers to put pressures on the shareholders to buy or sell by painting a rosy picture of the potential value created by a merged entity. By contrast, mergers in the non-profit sector generally mean that some managers lose not only their jobs and source of income, but their identities and status as well.

As I said, I agree with NPC and others that more mergers and acquisitions would probably help the non-profit sector realize efficiencies and sometimes create additional new value. But more data, more awareness of trustees, and more urging by commentators are unlikely to provide the incentives needed for that to happen. Something more catalytic is needed.

[GlobalGiving]

Photo: creative commons/flickr/ by aturkus

Sticks and Stones...

Sticks and stones can break your bones, but words can never hurt you. Or at least that's what I learned when I was young.

But I was wrong. The power of words is everywhere. Some of the most powerful words in history are the following:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government.

But words can also do terrible harm, as Isaiah Berlin reminds us in this lecture he gave about Jean-Jacques Rousseau at Oxford fifty-seven years ago. Berlin describes the evolution of Rousseau's ideas, and how Rousseau's inability to overcome internal contradictions in his thinking led him to a delusional philosophy that laid the groundwork for fascism and communism. In dissecting the harm done by Rousseau's words, Berlin's own words provide a strong innoculation against all forms of totalitarianism.

What a pleasure to be able to sit in and listen to this lecture as if one were a student at Oxford in 1952. Berlin is one of the best philosophers of the last century, and I am always surprised at how nontechnical and straightforward his writings are. There are four Berlin lectures available at iTunes, which deserves credit for making the spoken words of this extraordinary man available to us all.

(Thanks for the pointer, April!)
[GlobalGiving]

Should'a eaten that spinach

This paper by my old professor Angus Deaton, and Raksha Arora, finds a strong positive correlation between height and income/well-being.  Very interesting findings and conjectures about what is at work:

[GlobalGiving]

Coral Reefs for Development?

Mario Morino posted a nice piece recently about the need to nurture "coral reefs" for innovation in the US. I like his metaphor very much. He notes we don't know how to create reefs from scratch. Silicon Valley and other innovation centers such as the Research Triangle in NC, the Boston/Cambridge area, and the Seattle/Richmond area have grown organically, without a lot of top-down planning or intervention. The key, Mario notes, is to make sure that conditions are favorable for these reefs to grow, and to avoid disturbing or destroying them when they emerge.

Though Mario is making the case for innovation in the broader sense, it is particularly relevant to developing countries. Per capita income throughout the world was more or less the same from the beginning of recorded history to the early 1800s. People struggled to produce enough to survive. In the early 1800s, a variety of technological and institutional innovations drove an incredible increase in per capita income. These innovations increased output beyond what was needed for immediate consumption, and the surplus could be re-invested to produce even more output in the future. Continued innovation meant that the returns to each unit of invested surplus (ie productivity growth) kept increasing as well.

Few of us realize the extent to which we live in a period of unprecedented affluence. But the picture looks very different for people who live in what we call developing countries. Here is a comparison of growth in per capita for developed vs. developing countries (click to enlarge):

The astounding gap between growth in developed vs developing countries is hard to explain. There have been many schools of thought over the years, but most have turned out to provide few useful insights about how to spur faster growth in developing countries.

The whole international aid field is built on the notion that the developed countries can invest additional capital into the developing countries to accelerate the latters' rate of growth. Unfortunately, the returns to the $2 trillion in aid spent over the last 50 years have been disappointing. Some studies show zero return, while other studies show a positive, but small return. No one questions the fact that there has been little or no productivity growth in the returns to the aid spent.

The low or zero productivity growth for aid reflects the lack of innovation in the field, which resembles the world economy pre-1800. But there is hope: when Mari and I did the first Innovation and Development Marketplaces at the World Bank ten years ago, we accidentally tapped into an exceptional well of innovation that the current aid system is ignoring.

The prescription here is clear: "Physician, heal thyself." The top challenge for the aid system is to infuse innovation into its own DNA. GlobalGiving is a first step in that direction, and we are planning many new features in the year ahead. There have been other admirable new approaches arising out there as well. But much more needs to be done to bring the aid business into the modern era.

[GlobalGiving]

The paradox of the silver bullet

On Monday, I spent an hour with an Ivy League professor who is considered to be a contender for a Nobel Prize.  He has an idea that he is sure - absolutely sure - can revolutionize the field of development and economic growth.*  As I listened, my right brain could not help but be taken in by his enthusiasm, and I told him to let me know what I could do to help out.

My left brain, however, was flashing a yellow light: his idea has been tried many times before, though in somewhat different incarnations. Based on my long experience, he is unlikely to achieve what he is hoping (though he may well make a solid contribution).

I realized I was listening to was a guy in thrall to a silver bullet.  After thinking long and hard about a problem, he had come up with what he was SURE was going to be the breakthrough answer.

After our conversation, I began to think about the last 25 years of my career in the field, and about the  silver bullets that I had become enthusiastic about over those years.  Here is a partial list, starting in 1983:

- population control through family planning
- rural off-farm employment
- agricultural productivity
- smallholder tree crop farming
- housing reform
 -household energy retrofits
- girls' education
- microcredit
- SMEs (and credit for SMEs)
- better rule of law, especially property rights
- more open trade
- financial sector reform

In many cases, I got as enthusiastic about my latest silver bullet as the professor.  And in most of the cases, I made some progress and hopefully some positive impact - although never to the extent I had feverishly dreamed.  After so many silver bullets, you would think I would have learned.

The paradox here is that, on the one hand, there *is* no silver bullet; but on the other hand, you almost have to believe in your particular silver bullet to expend the energy and make the sacrifice to make progress.  Many of the projects I did in my "official" development career required levels of effort and commitment that were irrational when the personal costs and benefits were tallied.  And lord only knows what an irrational labor of love GlobalGiving has been.

Today someone sent me a link to a spirited discussion on SocialEdge about Kiva.  One of the commenters pointed out that microcredit is not a silver bullet for poverty alleviation.  He is right.  But the folks at Kiva have done an exceptional job in advancing the popular understanding of the role that credit can play as part of a package of things that can raise people out of poverty.  And in doing so, they have sacrificed much personally.  For that, we owe them (and the Ivy League professor) thanks.

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* The professor asked me not to identify him or the idea until he reveals it later this summer.

[GlobalGiving]

Facing down a fear

Recently I decided to tackle one of my demons head on.  I went to New York for a drawing course that lasted all day for five days.

Previously, my drawing ability had been close to, or maybe less than, zero.  In the 1960s, when my grade school teacher saw that I was unable to stay within the lines while coloring, she gently recommended that I focus on reading and writing rather than pursue art.  A couple decades later, a former girlfriend used to roll in the aisles when I tried to play Pictionary (a game that requires you to "draw" clues).

To make matters worse, my older brother and uncle are excellent artists who can conjure beautifully rendered objects seemingly from thin air.

Some friends encouraged me to take a weekly 2-hour class at a local art school or gallery.  But I knew that I would not stick with that.  So I signed up for a sort of voluntary incarceration with Brian Bomseiler.  It was very difficult mentally and emotionally for many of us in the class.  Brian said one day when we were struggling with drawing faces: "Now you understand why van Gogh cut off one of his ears!"

I am happy to report that, in the end, we all made huge progress.  Brian taught us some straightforward but effective techniques.  More powerfully, I think, was learning to see differently - especially shadows and light and texture.  That new way of seeing has broad implications in life, I expect.

I would never in a million years normally do the following.  But fully vanquishing my fear of drawing (and of my grade school teacher) requires me to put two ofmy drawings out there.  The first is my "before" self-portrait, done on the first day.  The second is my "after" drawing from Day 5.

Day 1

Day 5

I am in no danger of being asked to exhibit at the National Portrait Gallery any time soon.  But I am happy with my progress nonetheless.  (You can see other students' progress here.)


[GlobalGiving]

He can have whatever he wants

I met this woman early one morning last summer at the Starbucks near our office.  She walked up with her huge, hobbling dog, handed me the leash, went inside, came back out a few minutes later, and fed him a maple scone.  She told me that he is seventeen years old and loves scones, so she gets him one every day.  "At his age, he can have whatever he wants," she told me.  I have not seen her recently and wonder whether her dog has died.

[GlobalGiving]

Substance over Form

Only small NGOs it seems are able to actually get out in the field and get their hands dirty making things happen. Past a certain size (what is that size?) the demands for official looking papers, reports, audits and the like overshadow the demand to actually provide aid. Large donors are just too caught up in the appearance of good business and good government. Form without substance.

That is by Scott MacLennan over on Bill Easterly's Aid Watch blog.  Read his short post - it captures well the underlying rationale for GlobalGiving.


[GlobalGiving]

As goes the NY Times, so goes the World Bank?

That is what real revolutions are like. The old stuff gets broken faster than the new stuff is put in its place. The importance of any given experiment isn't apparent at the moment it appears; big changes stall, small changes spread. Even the revolutionaries can't predict what will happen. Agreements on all sides that core institutions must be protected are rendered meaningless by the very people doing the agreeing. 

In this piece, Clay Shirky discusses Elizabeth Eisenstein's The Printing Press as an Agent of Change and draws parallels with the revolution facing the newspaper industry.  But he could just as well have been talking about the revolution facing the international development industry.  Is he also talking about your industry?

[GlobalGiving]