Monthly Archives: February 2011

Development a Different Way: The Acumen Fund

The Acumen Fund is a nonprofit investment fund inventing a new approach to poverty reduction: patient capital. Acumen makes financial investments in businesses in East Africa, India and Pakistan that provide goods and services to the poor. Investments, not gifts.

Acumen’s 5-7 year equity or debt investments reach local poor populations that are under-served by existing markets and enterprises. Their long-term investments give companies and entrepreneurs time to evolve and adapt. When they invest, “[their] aim is not profit maximization, but profitability” – balancing social and financial returns on investment.

Acumen invests in scalable business models to unleash businesses that have the capacity to make broad social impact. For example, here’s a description of one investment they made in Kenya:

Acumen Fund invested $250,000 in Jamii Bora to build Kaputei, an affordable housing development outside of Nairobi. Jamii Bora has since repaid this loan, and Kaputei has 750 fully constructed homes for low-income slum dwellers who had proven their ability to repay but would never qualify for a traditional bank mortgage.

Since 2002, Acumen has invested more than $50M in companies that employ more than 35,000 people. To date, they’ve been repaid $4.1M and attracted more than $140M in “follow-on” investment from other funds and organizations following their lead into profitable investments in the developing world.

Does it work?

There are two metrics for measuring Acumen’s success: 1) Are they profitable?; and 2) Are they generating social returns on investment in addition to financial returns?

On the first point, while Acumen is a nonprofit organization, their long-term approach, including both debt and equity investments, means that it’s too early to say if they will be successful in generating profits from their investments. To date they have been repaid almost 10% of their total investment outlay, and many of their equity investments may prove profitable in the long term.

On the second point, I’m on the lookout for professional evaluations of the impact of their investments, but by their own account, yes. Acumen has created thousands of jobs. The companies they invest in have reached millions of people with affordable housing, accessible electricity, clean water and health and agricultural services.

They’re also bringing their connections to global marketplaces and other sources of investment. Acumen’s track record of seeding further investment from other funds and sources demonstrates that their investment is a trusted mark of approval for other potential investors.

Finally, Acumen is contributing to the social enterprise sector in other ways, by managing a fellowship program and inventing new ways to measure the performance of impact investing. In partnership with Google, Acumen developed Pulse, a real-time social investment tracking tool that measures not only financial data but social data. Tools like this make it easier for social entrepreneurs and investors to understand their progress and demonstrate their success.

Why It Matters

Acumen is doing something new – they aren’t giving things away. They are creating functioning equity markets that support businesses, jobs, experienced entrepreneurs and services & goods that reach the poor.

When their investments are successful and Acumen is repaid (as in the example above), Acumen is at its best. They’ve accomplished their goal of creating financial returns by recycling their capital and created social returns by increasing affordable housing in Kenya.

Acumen unleashes the latent power of local entrepreneurs, who have both ideas and the ability to execute. Their work supports the connects capable entrepreneurs to the capital they need to get started, creating a group of local businesspeople with experience building businesses, seeking investors and delivering products and services.

Finally, Acumen’s investment approach breeds respect. They respect the capacity of local entrepreneurs to develop their own goods and services and they respect the capacity of the poor to become consumers.


The Arab League Needs To Enforce That No-Fly Zone

In Nicholas Kristof’s New York Times column this morning, he suggests several courses of action the international community should take to “nudge Col. Muammar el-Qaddafi from power,” including enforcing a no-fly zone over Libya to prevent Qaddafi from using military aircraft against his own people. In his tweets, Kristof has also argued that the United Nation’s doctrine of protection would allow the west to legally bomb airbases Qaddafi is using against his own people.

In theory, I’m on board. (Although we should mention that the Libyan military is doing a pretty damn good job of not bombing its own people.) Certainly Qaddafi, and his maniacal actions, could not be worse – arming mercenaries to fight his own people! – and his speeches are both exhausting and delusional.

And the bravery exhibited by the Libyan people, in pursuing their freedom, is stunning. People who go back into the squares when there are dead bodies and bullet casings and tanks! This nutbar of a dictator must be stopped.

But we must be careful (yet quick!) in orchestrating a coalition for action. This can’t be another American-led coalition of the willing. Qaddafi and other Islamist extremists have perpetuated their influence based on a fear of the west, its military might and its support for Israel. Any kind of western military action in Libya will reinforce those long-standing world views.

This is true not just in the Arab world. Last weekend, the American Ambassador to China Jon Huntsman visited one of the squares where Chinese protesters are trying to get their own jasmine revolution off the ground. The Atlantic describes the Chinese state media’s portrayal:

The website M4 (四明网) posted footage of the ambassador being harangued by bystanders and cited his presence as proof the planned demonstration in central Beijing was part of a global US conspiracy.

Many Chinese have access to alternative sources of news (just as Libyans do), and they won’t uncritically believe this point of view. But this kind of west-vs.-the-rest framing reinforces patriotism, national pride and support for the institutions in place in China, just as they would in Libya. Generally, the perception of American interference in other countries’ political affairs perpetuates the cycles of behavior that have caused so much distrust of the United States and our allies.

In the past, we’ve been derelict in our responsibility to intervene in genocide. I hope we will not be derelict again. But if we wish to both support the Libyan revolution and improve the perception of the United States in the Arab world, we have to do it right. On Tuesday, the Arab League issued a strong declaration that the violence had to stop. Let’s encourage their leadership.

If the international community is going to pursue action in Libya, it better be under the auspices of the Arab League (and not just that of Saudi sheikhs) and with the blessing of the Arab street. And preferably the planes should not be American.

Photo Credit: Voice of America

Unions Aren’t Always Great, But Collective Bargaining Is

Last week, Wisconsin Governor Scott Walker introduced a bill that would weaken public sector collective bargaining rights and reduce public employee benefits. He argues that these measures are necessary to balance the state budget.

Let’s separate those two things: collective bargaining rights and balancing the state budget. Per the Wisconsin State Journal, Wisconsin’s public sector unions have stated that they are willing to negotiate decreased benefits:

Top leaders of two of Wisconsin’s largest public employee unions announced they are willing to accept the financial concessions called for in Walker’s plan, but will not accept the loss of collective bargaining rights.

I am emphatically not an uncritical supporter of unions, but I believe collective bargaining is an essential component of American civic life.

Let’s get the “cons” of unions out of the way. I acknowledge that unions can sometimes be too effective for their own good.

I’ve worked with public sector employees who deserved to be fired, but were untouchable due to their seniority or management’s unwillingness to tangle with the union to fire them. Furthermore, the “first in, first out” lay-off order protected by many unions ensures that employee seniority is valued over job performance. Finally, the well-documented struggle of many school districts to fire incompetent teachers demonstrates that unions can be uncritically protective of their members.

In all of these examples, the interests of taxpayers in getting good value for their tax dollars suffer when unions are over-powerful in protecting their members. But none of these are structural problems with the unions; they’re problems that occur when unions are mismanaged or union power is unchecked.

Collective Bargaining Creates a Balanced America

Our country values individual freedom and free speech. It’s in the Constitution.

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Unions are an organization of individual workers expressing their first amendment rights in order to negotiate for safe and reasonable working conditions, adequate pay and workers’ compensation systems.

In the public sector, without a union-protected civil service, it would be easy for elected officials to gut the civil service of experienced and effective employees in favor of political cronies. This is not in the taxpayer’s interest, or in the interest of free speech.

In the private sector, unions are critical for people who work in dangerous professions and in countries without strong worker safety regulations. Even professional athletes’ unions, which are easy to laugh at when they’re negotiating for six figure minimum wages, are protecting disparate individuals’ right to a safe workplace when advocating for football players’ safety in light of the lasting negative effects of repetitive head injuries.

Negotiated agreements between unions and companies/governments create common goals as large institutions fulfill their imperative to govern or make money: Economic productivity, strong civil services and safe, adequately compensated jobs.

Unions affirm individual freedom by giving a voice to individual workers when engaging with large institutions. Not every industry needs a union, and not every person needs a union. But when a group of individuals chooses to form an organization promoting their individual rights, they’re asserting their voice and their right to negotiate in their common interests.


The struggle between unions and “big business” (or government) is archetypal, and the showdown in Wisconsin illuminates our inability to have this discussion civilly. But weakening public sector employees’ right to organize doesn’t save money in the state’s budget right now – it just makes it easier to pay public employees less in the long term.

Conflating a budget discussion with a discussion of workers’ rights needlessly polarizes the issue of collective bargaining and pollutes the negotiation of compromises with public sector unions. Governor Walker could achieve civil discourse by respecting the rights of individuals to organize, and by engaging with these organizations to negotiate budget compromises.

If I were his adviser, I’d tell Governor Walker to take collective bargaining off the table. He’s not going to meet his goal of balancing the budget by busting unions.

Winning the American Dream: An Addendum

Ronald ReaganIn a recent commemoration of the 100th anniversary of Ronald Reagan’s birth, Sarah Palin said this about the former president:

“President Reagan held up a mirror to the American soul to remind us of our exceptionalism.”

This idea, of America’s exceptionalism, is persistent. To me, however, the greatness and uniqueness of our country is distinct from its being better than others or even the best of them all.

I’m proud that we have a different founding story than many other countries – one based on solid principles, if not solid implementation (see: Trail of Tears, slavery, etc) – but we still have a responsibility to play by the same rules that everyone else does.

It concerns me to see American exceptionalism reaffirmed aggressively. We’re one country out of a couple of hundred. We’re 300 million out of 6 billion. We are a military superpower and an economic juggernaut; but surely, in the increasingly globalized world, it makes sense for us to think about what connects us to everyone else, and not just what makes us different.

Note: Thomas Friedman has an interesting article on our irrational fear of China.

Image credit: spacedustdesign on Flickr

Winning the American Dream

It isn’t easy to be president when 40% of America thinks you might not even be American. Opportunities for subtlety are diminished. We’ve ended up with a president who is generating support for his policies by cajoling Americans to “Win the Future.”

He’s appealing to Americans’ reflexive pride, competitiveness and uncritical patriotism.

Politically, he has to. There’s no room for wishy-washiness given his goals and also the widespread discussion of his un-Americanism. The risk with this gambit is that the only metric for his success is an absolute victory, and one we may not achieve.

I grew up, like most of us, in the era of American mega superpower. It makes sense to me to be a global leader – beyond any other country in military might, economic production and moral standing – akin to Great Britain at the height of its colonial empire.

But we didn’t always hold this position, and Great Britain doesn’t hold this position in the world anymore. I imagine that the period of British decline was bleak, but they remain influential, symbolically and economically. They managed to hold a steady course, without a Rome-like collapse of the republic. That doesn’t seem so bad to me.

Let me be clear: I’m not suggesting we should happily accept 10% unemployment, failing educational systems and a growing and unacceptable wage gap. I’m separating the need for aggressive new economic policies from the language the president is using to sell them. We must do better, and creating a positive climate for small businesses is an important component of an economic recovery.

But the president’s language has no effect on me. I’m not inspired by competing or winning. I don’t believe that our country’s success and well-being is predicated on generating higher GDP than China. I’ll be just fine if we’re no longer the military or economic superpower that we are today. I’ll still believe that we’re a great country, founded on great principles and full of great people.

Maybe the “winning” language is necessary. A friend of mine argues that the language of competition is more than window dressing – that it’s a fundamental part of our culture. He argues that Americans have to feel like we’re winning and leading in order to believe in our future, and if we don’t believe in our futures, we won’t be brave, creative innovators.

During the Cold War, President Reagan bullied and bluffed the Soviet Union into its ultimate collapse by out-spending, out-investing and generally out-doing them. We want that kind of leadership and rhetoric from our leaders. The Chrysler Super Bowl commercial demonstrates how susceptible we are to manipulation of our faith in a larger idea of what America is.

I’m fine with being #2, but maybe that’s naive. Maybe this generation has to believe in the possibility of being the best in order to grow, make jobs and build an ever stronger union.

A Long Term Visitor to Alaska

I lived in Alaska for three years.  I never called myself Alaskan, although I loved the place very much.

With 650,000 people spread over 650,000 square miles, it’s a big piece of land but a small state.  There are only so many places you can go on the road system, keeping most Alaskans living close to the main arteries and connected to one another.  Outside the main arteries, rural, mainly Alaska Native communities fight hard against ecological, social and political obstacles to sustain their culture and way of life.

Alaska is what’s left of the American frontier, free and unbelievable in scale.  You can live the American dream there, now, among the woods and rivers and salmon.  It’s clichéd to say that it is beautiful there, but of course it is. It’s also huge. There aren’t many rules, and not a lot of government-per-square-mile to enforce them.

Alaska affords you the opportunity to live a modern but unfettered life, with tremendous access to wildness and wilderness.  The unique circumstances drive people to value different things in Alaska.  All over the country, you see political candidates judged on their ability to relate to the average man.  But this state is different.  Alaskans are not so worried about making sure that the governor knows the price of milk—they are considerably more concerned that the political candidates own Carhartts that are believably broken in.

It’s a specific and elusive identity, being Alaskan.  It means you’re the champion of something, and you’ve earned it.  You stand for something just by the choice you have made to live here—you stand for really American values—perseverance, adventure, and a Jay Gatsby ability to carve your identity out of a raw landscape.  Alaskans protect their exclusive identity, as they should.  They withstand unbelievable pressure to make a living that is often risky and unforgiving.   It is an achievement to call yourself Alaskan.

I don’t mind that I didn’t quite earn it. I will have to find other ways to be exceptional.