Burgess COMMENTARY
This e-conversation took place about three years ago in September 2009. It was circulated again today by Jeff Mowatt, and i am delighted to see it again.

The conversation was not 'new' in 2009 and similar conversations still go on in 2012. Why is there so little movement forward?

I am convinced that part of the answer ... and a big part ... is the fact of metrics that really don't matter. The World Bank used to measure its performance in large part by the scale of its disbursements ... and when metrics like this are used for decades, then the staff are going to act accordingly. Though many of the World Bank staff are very well educated ... multiple PhDs and all the rest ... but they are inexperienced in the metrics of performance.

The following conversation highlights a series of issues ... and most of these would disappear if the metrics being used were smart about performance.

The reference to 'markets' is important. But markets only work when there are reliable metrics, and when the metrics are relevant to the goals of the organizations raising money.

Three years ago, I was engaged in the forulation of a system of value metrics to address the problem of relevant metrics for the 21st century ... it has gone through many interations over the past three years and is now quite well developed and called TrueValueMetrics.
Peter Burgess

Who will build a more efficient marketplace? ... This week is Social Capital Markets week!

The SOCAP 2009 conference is taking place in San Francisco, and we're here to keep the conversation flowing online, too.

Kevin Jones (picture by Global X here), co-founder of SOCAP and founding principal of Good Capital, talked to the Huffington Post about this year's conference:

You know, there are a lot of conversations about the future happening around the world, but mostly they're taking place inside walled gardens. The thing that I'm most proud of is that this conference builds bridges between these gardens, and between them and the street.

Specifically, he said, 'SOCAP brings together the big players and their rigorous processes with the folks who are just starting out' as social entrepreneurs.

That's bridging a gap we've talked about a lot here on Social Edge -- the gap between a bright, even brilliant, idea and the funding organization that can give it impetus.

How can we best bridge that gap?

At the moment, there's terrific duplication of effort when many small social entrepreneurs do the same research to find out what funds might be available -- and there's also the issue of the 'poor fit' whereby one funding agency's requirements my differ so greatly from another's that a small outfit may spend needless hours filling out different forms as part of similar applications.

Another issue that has come up here is that of the startup that finds it needs to present itself in a way that aligned with foundation or investor interests, but tilts it away from its own driving passion - perhaps just a little at first, but in such a way as to significantly reduce its vision over time...

• What's slowing you down, in terms of getting needed funding?
• What do you need to know from funders?
• How could you most easily find it out?
• What are your questions about funding?
• Have others asked them before you?
• Do you have access to their research?
• Would you be willing to share yours?
• How does collaboration work in a competitive market?
• Could some kind of software ease the burden?
• Who will build the application that solves their problem -- and yours?

Who is stepping up to help make the whole sector more efficient rather than trying to solve only part of the problem internally just for their own organization?

These aren't easy questions, and they're all the harder when they're asked in a context where beginning entrepreneurs are talking among themselves -- the funders need to be in on the conversation, too. We all want to help, we all want things to go more smoothly, for the best ideas to get effective implementation... But sometimes we need a bridge to get across the gaps.

SOCAP offers us one such bridge. Let this conversation be another, in parallel with SOCAP. It's time we talked! Join Charles 'hipbone' Cameron in the conversation.

Well Charles, I guess someone has to start.

My own interest in a social market was aroused about a decade ago and it came from discussing the concept with Terry, P-CED's founder and what he'd been doing in Russia. My real participation began in 2003/4 when we incorporated in the UK, as a business for social purpose.

There are two elements of funding which affect us. First is the revenue which drives core operations and second the seed funding which puts the ideas into action. In the Russian instance, I understand that the latter came from USAID.

The great obstacle in the former are the differing perceptions of a social economy. I offer an illustration in a social enterprise which had need of a software product like our own. What they saw as something which should be opem source, we saw as something to yeild revenue for social objectives.

With a profit for social purpose model, we need referrals and recommendations as a reputable supplier also delivering social outcomes, though typically the experience is one of denial.

So, skipping the questions about funding as regards this revenue element, I'll continue by saying that yes, others have access to our research. The economic paradigm being posted online in 1997, free to use and rather difficult to imagine how it could be ignored in any conception of social business.

Theory of collaboration doesn't translate into practice unfortunately. I've approached countless organisations over the last 5 years with nil response. We've been obliged to go it alone.

Software certainly eases some of my burdens. I develop it after all. I see many attempts at online social directories, most promoting just a select few, some going further in their selectivity.

In a recent experience I encountered Royal Bank of Scotland soliciting input from social businesses. As is often the case, they seem to have their own interpretation of social business, measured in terms of accumulated fund and have no response to offer.

http://www.se100.co.uk/

Tragically, the interpretation of a social capital market seems typically to be one in which organisations compete to imprint just their own approach and brand. On that basis, social capitalism simply will not work.

Thanks for getting things started, Jeff.

I wanted to add a quick note to my intro - just to say that Jill Finlayson will be representing SocialEdge at SOCAP, at the panel she describes here:

http://www.socialcapitalmarkets.net/[…]/p,511

Jill's also hoping to live blog some of the proceedings, as time allows - you can follow her on twitter @socialedge - providing a third strand, along with the conference itself and this online event, for this miuch needed conversation.

I agree with Jeff, Charles.

In the continuum of the conundrum, competing organisations simply cannot create the social capital needed to bridge the gaps.

Given that markets are driven by self-interest, I think what it's going to take for impact and action, in creating more efficient markets and cross-sector collaborations, is the partnerships themselves - in seeding innovation in new marketplaces, (ie. in the developing world, the bridge building of the poor themselves, in creating their own markets by connecting their products and services to other markets with better transparency and metrics) and in finding new ways to do business (driving mainstream capital to social capital markets -giving the poor the resources they need to create their own markets.)

I think the time is really ripe for seeing new ways of looking at, what markets can do to unleash the potential in human beings - and in human nature - because what's needed now is a new vision-based, values-based kind of capitalism.

I've got another Einstein quote for you, 'today's problems cannot be solved if we still think the way we thought, when we created them.'

Hi Jo,

This is where P-CED came in as you know, by defining a model in which a social business would compete in the existing free market system alongside conventional business with the output of these businesses modified to deliver social outcomes at the same time as a financial ROI. One social objective would be to provide a 'social investment fund' to seed both conventional and P-CED type businesses.

In the first instance of applying it in 1999, P-CED capital was used to research and source an initiative for USAID which yielded 10,000 new businesses and 36 spin off social projects. From a few thousand dollars own investment, 6 million more were leveraged with full cost recovery over 4 years.

This was Siberia, where application of the 'Chigaco school' doctrine preceded Russia's 1998 economic collapse.

Now Skoll's proposal is to identify social entrepreneurs who are 'vetted', those who've won awards. That doesn't address the problem I describe above of the UK Third Sector, where recognition is highly selective.

At SOCAP, I understand there's to be a presentation of PULSE, a software product designed to assess social metrics. This may be a step in the right direction.

As a software business with social objectives, I'd been interested when Acumen had been seeking a PULSE Manager. A brief exchange with Brad Presner enquiring as to whether there were opportunities for smaller businesses like ours in local collaboration revealed that they wanted a global support organisation with 'partners who can provide the support, as well as the ongoing product development and sales and implementation role', something I've been doing for several decades, coincidentally.

Now imagine the possibility of a different approach to distribution, where small social business like ours could take on such a support role for their local region and add value through their own experience. A network of collaboration rather than a competition for major suppliers. Acumen could stimulate a social capital market over and above its microfinance work and we all win.

Jeff

'In the first instance of applying it in 1999, P-CED capital was used to research and source an initiative for USAID which yielded 10,000 new businesses and 36 spin off social projects. From a few thousand dollars own investment, 6 million more were leveraged with full cost recovery over 4 years.'

This needs to be clarified. I proposed only three components: a community development bank, assistance for childcare reform, and emergency food relief. Tomsk was awarded the fourth and final US regional development initiative in Russia through USAID. The proposal went via the White House. I never had any contact with USAID. Their project was ready to go and needing only a suitable location. The components I proposed were added into the RDI, which already had 33 components focusing mainly on civic development/rule-of-law initiatives. Tomsk turned out to be a good match, The project design meshed with a shift in US policy from big-money top-down development aid to smaller-money, bottom-up in carefully selected locations. It was also a fundamental shift away from what Naomi Klein later referred to as 'disaster capitalism'. That isn't to say disaster capitalism doesn't still hold sway. It does, by a wide margin. (For those who haven't read her book 'The Shock Doctrine: The Rise of Disaster Capitalism', it is a must-read.

So, yes, there were a total of 36 project components. I spent $2500 on project research and design, plus two years time pro bono leading up to the actual field research. USAID added $6 million in funding, $1.5 million in tranches over four years, to get the community development bank started. That became Tomsk microfinance bank. It became self-sustaining within three years. It was then replicated in other locations in Tomsk oblast, in nearby Novosibirsk, and in Tbilisi, Georgia. For the record, I gained no income whatsoever. My profit was measured in people, with an eye to financial sustainability to ensure long-term viability. It was and is the complete opposite of disaster capitalism.

Terry, what you started is a new economic platform for the world. Using a bank to assist with a society's needs is the ideal, especially since we've seen what disaster capitalism can do. It's definitely time for the new, and by the way you're a hero too.

You're right Jeff, a network of collaborations - within global support systems - would beat competitions.

In the last few days I was rather interested to see the subject of peace building crop up on the Beyond Profit site.

http://beyondprofitmag.com/?p=258

So I thought it relevant to introduce our own efforts and I'd be interested if anyone else can see my comment. I added the same comment to the Ashoka Peace blog that the article refers to. I can't see that at all.

To me, there's the impression that conversation isn't actually welcome, in the same way perhaps as one might expect in responding to a corporation by commenting that you have a similar product.

Is this where social enterprise is headed I wonder? Corporations for doing good, I'm all for, but do they see us as competitors, rather than wanting to colaborate, I wonder?

Hi, Jeff:

Yes, I can see your comment on Beyond profit, and no, not on the Ashoka Peace page. I hypothesize that might be because your comment contained 2 URL links, an many kinds of blog software refer comments with links to moderation, since posting URLs to blogs is a major device of spammers...

Or their software may not be configured to show comments (yet) - to my mind, a less likely possibility.

Jo - you just know how I love it when you throw me those Einstein quotes! ; )

I think there's a pretty simple explanation for why the world as a whole, and perhaps social entrepreneurial orgs too to quite an extent, lean towards competitive rather than collaborative strategies in some circumstances. I suspect that majoring in competition with a side of collaboration works all the way up Maslow's hierarchy until you get to 'self actualization' -- where majoring in collaboration with a side of competition would work better. In that sense, competition is a low risk strategy, and moving to collaboration a higher risk leap.

Taking that leap from profit into social entrepreneurship is already a big hurdle, and takes considerable courage. A further leap from competitive to cooperative strategy within the smaller market of a particular social entrepreneurial problem area may seem even riskier...

Worth thinking about? Hope it helps...

Yeah Charles, Einstein was on to something, saying we have to evolve (our thinking) to confront our behavior as human beings on a living planet.

Maslow's hierarchy reminds me of one of those food pyramid charts from the 50's. It could do with some updating, he's right though, the next level in evolving is 'self-transcendence.' So those entrepreneurs working for very little, while solving societal problems locally, have already 'self-transcended' - which is a self-sustaining state, right?

I think THE cause for the 21st century is, freeing women - from oppression, violence and discrimination - to your question, who will build a more efficient marketplace - I'd say, for large scale, long-term impact, it's those with social capital who empower access for women.

Jo, One excellent outcome from SOCAP has been the publicity raised on the new L3C structure which has gathered 500 members on Linkedin. It's been a welcoming experience to join them.

http://www.linkedin.com/groups?gid=1971652 I'd come up on their radar recently when describing the ethical roots of the concept of a business for social purpose Terry (above) created, including that of Maslow. http://www.ecademy.com/node.php?id=134346 With the kind of weight that comes with the foundations who are now taking interest, there's a possibility that what you describe in terms of freedom and empowerment will have substantial funds behind it. I think there good reason to be hopeful on this one.

Jo,

It is the beginning of a better day. That part of the discussion mustn't get lost or overshadowed.

The question posed in this discussion is 'Who will build a more efficient marketplace?' The best case scenario is that governments will do that. But why governments?

Because governments control economies and markets worldwide. Friedman/von Hayek/Vienna School/'free market' -- Chicago School economics -- died in September 2009. Government intervention was required to prevent complete collapse of Vienna/Chicago School economics that denounced government intervention. But, government intervention a la Keynesianism fell on hard times before that, which opened the door for Chicago School to start with. So we're back to Keynesianism, knowing that it doesn't work either. Both lead to bust, just from different directions. Neither is sustainable.

So where is the expertise that governments need going to come from? Not from inside the box. It isn't there. And: the same filters used to select government employees hired to figure things out simultaneously preclude and block the very talent they're looking to employ to start with. Which is to say, governmental bureaucrats are by selection not equipped to invent or even repair an economy. The Peter Principle. On that count, the Chicago School was correct in keeping government out as much as possible. Then CS adopted the Disaster Principle, with a school dominated by predators and parasites.

Now, choosing between Keynes and Friedman is an exercise in logical fallacy -- the fallacy of false choice. Who wants to choose between being slow-broiled and roasted? It's the same sort of choice.

There is another option now. The expertise? Us.

Terry, I was vague (not the latest, opps) Paul Krugman's article was in the last week's magazine section titled How did economists get it so wrong? Your comments reminded me of it, I already knew you were ahead of the game, so I make no apology.

The reference to the unspeakable, wasn't just about how the East views the cow but to a book - James Douglass's JFK and the Unspeakable. I'm a poet, so I like double- meanings.

I really do applaud your and Jeff's bravery and efforts to shine the light under rocks, even though it requires putting yourselves in difficult situations. Strong institutions, strong democracies and the likes of you both, are a counter-force to the world's dark and ruthless people. I'm sure the lack of recognition has more to do with tunnel vision thinking of any field than anything more personal. Pioneers often have the hardest road, right?

One of the great leaders in the post-Soviet transition is a poet and writer -- Vaclav Havel, former president of Czech Republic. I wonder how much different this world might be if we had more poets and artists and less (poison)-Ivy-educated MBAs and such running financial markets, economies, nations, and their various aid agencies. The only thing the latter could put up to defend 'their' turf is that poets and artists are ill-trained to run finances, markets and nations. In which case, they've checkmated themselves, end of argument.

I agree in part with the comment about tunnel vision. I see it is linear thinking, as contrasted with holistic thinking. But there's a little more to it than that, I suspect. It's the boy-looking-for-the-lost-dime metaphor. He looks for it within safety boundaries with plenty of light, even though it's not there because it was lost someplace else, someplace more dangerous. But he won't go there, and will continue looking under the light where the dime isn't.

PS from Dr. Krugman's article 'How Did Economists Get It So Wrong?':

'And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. Lucas says the Obama administration’s stimulus plans are 'schlock economics,' and his Chicago colleague John Cochrane says they’re based on discredited “fairy tales.” In response, Brad DeLong of the University of California, Berkeley, writes of the “intellectual collapse” of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten.'

http://www.globalresearch.c[…]0090906&articleId=15083

'As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth ... as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations'

Nice to hear it said by Krugman.

I shalt not gloat or demagogue.

PS Original source for the article is NY Time magazine, as Jo indicated. Here's the URL:
http://www.nytimes.com/[…]/06Economic-t.html?_r=1

That's the main reason why folks like Jeff and I are 'overlooked', and why most SEs are overlooked. This is an issue across the spectrum of social enterprise: turf war. Those with plenty of funding coming into the SE sphere feel and believe they control it at their whims because w/o funding critical start-ups, there won't be many others to say otherwise.

Hi Terry,

prior to becoming a social entrepreneur I worked in development aid consulting for about 10 years. There is enough to criticize about the big aid agencies to fill books, which many others have written. The question here is who is going to step forward and make the social enterprise sector more efficient. I, for one, do not in a million years believe it's the large aid agencies who are going to do that - thus my assertion that criticizing the aid agencies is extraneous to this particular discussion.

I was responding specifically to Charles' question 'how does collaboration work in a competitive market?' My suggestion is simply that collaboration can be funded. If the competition that exists in our sector is for funds, and yet collaboration is desirable, then funders could decide to finance collaborations. In that scenario, we would see collaborative groups competing against each other in a competitive marketplace. So it could be conceptualized that competition and collaboration can co-exist.

As far as data on how aid agencies' track records requiring collaboration between consulting firms has worked out, no, I don't have any. But I don't think it's worth comparing either, since that policy is (in my experience) more motivated and shaped by political expediency than a desire to see developmental challenges really solved.

By the way, I should have been more clear that it's the European Commission who provides over 8 billion Euro in development and humanitarian aid each year, making them the 2nd largest donor among the 22 members of the OECD. When the EU finances the implementation of large scale projects, it's most often consortia of companies representing multiple member states who get those jobs.

What I am suggesting is not that social investors of the SoCap ilk should try to make taxpayers from different nations happy, simply that if they decide to finance collaboration in this sector, then collaboration in the competitive market they are creating can exist.

small correction for clarity:

When the EU finances the implementation of large scale projects (through the European Commission), it's most often consortia of companies representing multiple member states who get those jobs.

Hi Christine, Thanks for the response.

'The question here is who is going to step forward and make the social enterprise sector more efficient. I, for one, do not in a million years believe it's the large aid agencies who are going to do that - thus my assertion that criticizing the aid agencies is extraneous to this particular discussion.'

Yes, we do differ in that respect. Aid agencies need to get public funding annually. It's extracted in the form of taxation. Those providing that money -- the public -- have a right and responsibility to decide how it's put to use. If aid agencies cannot be reformed -- and I am strongly inclined to agree that is likely -- they can be liquidated and replaced with programs that can and are likely to fulfill aid org's core mission: to aid the economic development of the have-nots of the world. That's what they're ***supposed*** to be doing. To the extent they cannot or will not fulfill their function and responsibilities to the satisfaction of those providing their funding -- us -- we can pull their plug. To the extent that they impede innovation they claim to be pursuing -- which USAID, for example, are practically begging for [or else their days could be numbered, and they know it] -- they've crossed the line of the very civility they're trying to foster. They're our employees, and that would be grounds for firing them.

I don't necessarily rule out aid orgs learning how to do their jobs. They have incentive to learn: survival. They can be replaced outright by the people they need to be learning from -- social entrepreneurs, problem solvers, resource organizers. They have the advantage of an auto-funded ready-made bureaucracy. It could be remodeled to our liking ;)