Archive for December, 2013

Do the Evolution

Thursday, December 19th, 2013

Incredibly rich article on “Redefining Capitalism” in Democracy: A Journal of Ideas. I’ll be unpacking this one for a while. Let’s get started.

The authors’ entry point is coming up with a better measure for prosperity than GDP, of which there have been several attempts, but their end point is, as the title implies, far beyond that question of measurement. They redefine capitalism as an “evolutionary, problem-solving system”:

A capitalist economy is best understood as an evolutionary system, constantly creating and trying out new solutions to problems in a similar way to how evolution works in nature. […]

[T]he entrepreneur’s principal contribution to the prosperity of a society is an idea that solves a problem. These ideas are then turned into the products and services that we consume, and the sum of those solutions ultimately represents the prosperity of that society. […]

Capitalism’s great power in creating prosperity comes from the evolutionary way in which it encourages individuals to explore the almost infinite space of potential solutions to human problems, and then scale up and propagate ideas that work, and scale down or discard those that don’t. Understanding prosperity as solutions, and capitalism as an evolutionary problem-solving system, clarifies why it is the most effective social technology ever devised for creating rising standards of living.

The orthodox economic view holds that capitalism works because it isefficient. But viewing the economy as an evolving complex system shows that capitalism works because it is effective. In fact, capitalism’s great strength is its creativity, and interestingly, it is this creativity that by necessity makes it a hugely inefficient and wasteful evolutionary process. Near one of our houses is a site where each year, someone would open a restaurant only to see it fail a few months later. Each time, builders would come in, strip out the old furniture and decor, and put in something new. Then finally an entrepreneur discovered the right formula and the restaurant became a big hit, which it is to this day. Finding the solution to the problem of what the local residents wanted to eat wasn’t easy and took several tries. Capitalism is highly effective at finding and implementing solutions but it inevitably involves trial and error that is rarely efficient.

There’s so much here with regard to philanthropy and the nonprofit sector, I hardly know where to begin. An initial map of the terrain might be:

  • Social entrepreneurs: How does the second paragraph quoted about change if you put the word “social” in front of “entrepreneur”? Does this redefinition of capitalism mean that all entrepreneurs are social entrepreneurs? This would certainly fit with the idea that the way companies have social impact is by doing a really good job at delivering on their bottom line. Or perhaps instead, does it mean that there are certain kinds of problems that “social” entrepreneurs are particularly likely or able to take on?
  • The role of foundations as labs for innovation: One of the most frequently cited raisons d’être for foundations is that they have the ability to foster small-scale innovation, that they can be risk capital in areas the market won’t go and the public sector is too slow to find. The redefining-capitalism lens suggests that this function is essential to philanthropy’s role in the capitalist system. By focusing on specific problems and promoting creative solutions to them, foundations play their part in helping capitalism function more effectively. Which depending on your point of view, may not necessarily be a good thing. But this redefining perspective certainly makes it sound more palatable.
  • The “overhead myth”: A recent, laudable campaign seeks to disabuse funders – and especially individual donors – of the notion that overhead (the ratio of administrative and fundraising expenses to total expenses) is the single most important metric for gauging a nonprofit’s performance. The campaign makes the (valid) argument that investment in a nonprofit’s administration often helps performance, and that organizations with overhead ratios that are too low will actually do worse. This is in essence an argument about the balance of efficiency and effectiveness. The redefining-capitalism lens takes that analysis to the level of the overall economy. And the unit of analysis is not the individual organization, but the problem (or solution). High levels of surface inefficiency (it took several tries to find the right restaurant for that location) mask an ultimate focus on effectiveness – a good solution to that particular problem was ultimately found. This is the overhead myth at the level of the sector or local economy, rather than at the level of the organization. Does the analysis still hold? And what does it mean for place-based funders, who have the longer time-horizon that multiple attempts at starting a business would require?
  • The connection between small business and place-based economic development: Relatedly, the restaurant example puts me in mind of the role of foundations as investors in place-based economic development that I highlighted in a prior post. Defining a problem in a very specific geographic space and deploying a range of tools over a long period of time seems like a meaningful way for a foundation to make a difference.
  • The value of long-term general operating support: Another way in which foundations express long time horizons is by making long-term grants. The redefining-capitalism suggests that it is critical for the effectiveness of economic activity for economic actors to be allowed to try, fail, and try again until a solution is reached. Translated to the funding world, this argues for long-term general operating support to give organizations the space to experiment, innovate, and iterate.
  • Strategic “vs.” responsive approaches: The language of problems and solutions is native to “strategic philanthropy” as framed by the Hewlett Foundation and others. In a reflection on a decade of practice, former Hewlett Foundation president Paul Brest identifies “problem-solving philanthropy” as one of the two principal modes of strategic philanthropy. This would suggest a close connection with the redefining-capitalism approach. However, those authors identify as one of capitalism’s key strength its ability to foster a wide variety of potential solutions, arguing that “it is not how hard we try to solve a problem that is critical, but rather […] it is the diversity of ideas and approaches that matters most in problem-solving effectiveness.” This suggests a link with responsive approaches to philanthropy, which are about letting a thousand flowers bloom. So perhaps the redefining-capitalism lens shows strategic vs. responsive to be a false dichotomy.
  • The concept of “social impact solutions”: The redefining-capitalism lens views prosperity as a volume and pace of solutions to social problems. This suggests that the greatest value the nonprofit sector can provide to society is to generate “social impact solutions” – products or services that address a social need not being addressed by market actors. From this lens, nonprofits should be explicitly solutions-oriented, and funders should seek opportunities to foster the iterative, long-term development of viable solutions. Stated like that, this sounds like what should be business as usual, but as we know, it’s not. Does “social impact solutions” provide an organizing principle for understanding the work of companies, foundations, nonprofits, and government?
  • Potential filters for impact investing: The authors recommend measuring prosperity in terms of access to solutions, and judging the social worth of business activity by the extent to which it creates meaningful solutions or simply generates more problems. It seems easy to imagine translating such an approach to impact investing. How does this lens relate to existing socially-responsible screens for investment portfolios?

Lots more there, but this is a first pass. What grabs you about this article or the ideas I’ve shared?

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Windmills in My Mind

Thursday, December 12th, 2013

I saw a preview screening of the new Spike Jonze movie “Her” this week, and I haven’t been able to stop thinking about it. In a studiously bespoke near-future Los Angeles (all the men were comically high-waisted pants in a sly prediction of what 2020 Brooklyn will be like), Joaquin Phoenix, freshly divorced, falls in love with a uniquely intuitive operating system voiced by Scarlett Johansson. The main romance, I guess you have to call it, is compelling enough, but it’s the throwaway details of the imagined world in which the characters live that feels so uncanny – almost too real. At a certain point, everyone is walking around talking to their OS in the same way Phoenix’s character – a thumbless version of the bubbles we all float around in on the subway in New York. All these people isolated but feeling cozily connected in a perfectly individualized way – pure, comfy atomization.

What the characters enjoy most about the OS is that it knows them intimately, based on their data (emails, contacts, browsing habits, conversation). To be understood and accepted is what everyone longs for.

Ironic then, that what is so readily achieved with one’s own device is so very hard to achieve with others. We find ourselves imagined so well and so thoroughly, our desires and needs catered to, and find it increasingly difficult to understand the experiences of others, to imagine what their lives must be like, or even to think to ask that question in the first place.

The semi-fake essay “Poverty Thoughts” blew up in my social media feed, before what now seems like the inevitable backlash of puncturing the hype balloon. The author wrote searingly of the thought processes that make “bad decisions” by poor people seem perfectly reasonable, even rational, given the circumstances. People reading and sharing it resonated with the (apparent) truth-telling, particularly at a time when the GOP was slashing food stamp benefits. Here was some real talk, insight into what it’s like and why apparently mystifying behavior (buying luxury goods when you have minimal income) can be reasonable in a frame of reference where saving for the future doesn’t accomplish anything and hope is the true luxury.

I take it as a sign that we’re so hungry to know the experiences of others that so many people, myself included, fell for this semi-hoax. The world of “Her” is not yet upon us if these kinds of stories resonate, even if they turn out not to be as cut and dry as originally presented. Our credulity is a sign of our humanity, our longing for insight and connection. So I’m glad that the Times’ series on homeless youth in New York is gaining traction.

So when it comes time to do your holiday giving, ask yourself, whose experience of everyday life do I want to improve? When I think of the “beneficiaries” of my giving, how well can I imagine them? How different are they from me, really? Giving is an act of solidarity, but it’s also an act of imagination. Dive into stories like the Times’ “Invisible Child” and make a connection with a reality outside your own. The Joaquin Phoenix “Her” future of coddled solipsism doesn’t have to be the one we create.

Partisan

Thursday, December 5th, 2013

Larry Kramer, the head of the Hewlett Foundation, has written a provocative post in the SSIR opinion blog about the Foundation’s newly announced initiative to tackle political polarization in the U.S. Kramer has three pieces of advice for funders pursuing similar goals: make multiple, small bets; build bridges; and dig in for the long run.

All laudable. But I want to dig in on the implicit conception of the actors in this space. Some of Kramer’s strongest language is reserved for political parties and “myopic partisans anxious to preserve or enlarge their party’s current prospects.” Of funder strategies aimed at reducing political polarization, Kramer notes:

“Further complicating matters is the very real risk that grantmaking intended to reduce polarization will itself become polarizing. This is certainly the case when democratic reforms are a proxy for underlying substantive agendas by a particular group.”

The language is studiously neutral, but it’s hard to imagine a world where particular groups aren’t pursuing underlying – or overt – substantive agendas. What else is politics?

“Partisans” is similarly vague. It literally means supporters of a particular party, and so is appropriate in the way Kramer uses it. But what I can’t help but wondering is where social movements fit into this picture. They’re particular groups pursuing overt substantive agendas – and often through democratic reforms: the civil rights movement sought among other things to make the 14th Amendment real. Hard to be much more of a democratic reform than the Voting Rights Act.

One of the most difficult challenges social movements face is defining their relationships with political parties. In Latin America in the mid-20th century, the place and time I studied as a doctoral student in political science, the relationship used to be straightforward: citizen demands were channeled through labor unions allied with labor-based political parties. There was a structure of interest representation and intermediation. That’s basically gone now, and it’s not clear what has taken its place or how representative that structure really is.

And despite the continued strong relationship between labor unions and the Democratic Party, the situation is not all that different in the United States. It’s hard to think of the Democrats as a labor-based party: just look at what a strong hand insurers had in the most recent signature piece of legislation, the Affordable Care Act. What’s different is that social movements organizing different elements of the Democratic coalition have emerged and have complicated relationships with the party.

So I’m skeptical of conflating group-based mobilization around substantive agendas with partisanship. Social movements can and should have a degree of independence and critique with regard to political parties. But when they advance substantive agendas that include the historic securing or protection of rights through democratic reforms, this is a different world than the one Kramer paints.

I look forward to learning more about Hewlett’s agenda as it plays out, and the Foundation begins to make its “multiple, small bets” addressing political polarization. I’ll be particularly interested to see how social movements are viewed and participate in its efforts.

What do you think: How independent are social movements in the U.S. of political parties? Are movement mobilizations inherently polarizing?

 

Disclosure: the firm for which I work, TCC Group, has had the Hewlett Foundation as a client within the past few years. As with all posts on this blog, the opinions expressed are my own.