Category Archives: Development Economics

Population and Poverty in the Philippines

Why DIY Foreign Aid Amateurs are Necessary

This is part two of a two-part post about amateurs vs. professional in aid and development.

In my experience, development professionals tend to be a jaded and cynical bunch, but also eternally optimistic, well-meaning, and principled. In one post, a blogger who writes “Good Intentions are Not Enough” (another blog I read and respect) explains what it means to be an “aid professional.” Here are a few:

First and foremost – Do No Harm – whether what we do is right or wrong, we are doing it to the people that can least afford for us to fail.
There is a need for fresh perspectives and a variety of ideas and approaches. However this must be tempered with knowledge of the factors that led to success and failures in the past so the same mistakes are not constantly repeated.
Stick around long enough for projects to have a chance to fail. Then try to stop them from failing and learn from your mistakes.

While I agree with these principles, I don’t think the status quo promotes them. In Algoso’s article, he explains how failed projects sap money from potentially successful projects. Yet Good Intentions is right – we need to learn from mistakes. Some of my good friends in Ghana worked for Engineers Without Borders Canada. One was a mechatronics engineer, another a geoscientist (by training, not profession). The amateurs at EWB Canada even created a website called “Admitting Failure” and held a conference called FailFaire, which is cited by professional development workers as a step in the right direction. To fault “amateurs” for their mistakes, while saying experts should learn from theirs is a bit hypocritical in my opinion.

Regarding the second point – how can experts bring a fresh perspective if they all draw from the same pool of knowledge? Successful projects bring expertise and best practices from many different fields and apply them to development. This is how you bring fresh ideas.

And, most importantly, regarding “do no harm,” I have seen aid projects literally destroy the rural banking sector of a country. In this particular case, it was a multi-million dollar government aid project. Not to mention, the amount of collaboration between aid agencies from different countries is appalling. I once sat in a meeting between aid officials from two governments who found out that they had been training the same group of farmers on the same skills for the past six months and didn’t even know it. Of course, do no harm. But don’t assume that amateurs will do more harm than “professionals”.

In my personal experience, the organizations I have worked with run the gamut from large-scale bureaucratic government aid projects to the one of the most capitalist social enterprises around. And, frankly, the most innovative and effective are the ones founded by development amateurs with a professional background in other fields – the self-taught warriors who bring their insight and skills from other industries to bear on the social sector.

My intention isn’t to say that everyone with a masters degree in international development and a resume overflowing with public sector and development experience is wrong about everything. Clearly, that experience is valuable in understanding context and knowing what has worked and not worked in the past. It is particularly relevant in the policy sphere – designing programs like Bolsa Familia or advising governments on legislation and policy.

Rather, I want them to recognize the critical role amateurs play in this work. They bring new ideas, enthusiasm, optimism, and much-needed skills. They may not always succeed, but, if history is a guide, applications of traditional development theory haven’t produced overwhelming results either. If the CEO of a company had the same track record of results as the development experts during the past four decades, he would have been fired without a second thought.

The second and more important point is that this “leave it to the experts” mentality is far more destructive in the long-run than the trial-and-error nature of DIY foreign aid. Algoso explains that failed ventures take money away from other projects and ventures that might work. This, to me, is a recipe for the status quo – an approach to poverty alleviation and economic development marked by a lack of innovation, fresh ideas, and competition for funding dollars.

Take the Millenium Villages Project – a massive top-down development project thought up by a bunch of “experts” at the Earth Institute at Columbia University. The brainchild of Jeffrey Sachs – one the most influential economist in the world whose commitment to the cause no one can deny – the MVP has been criticized for its high costs and limited impacts. At a cost of $300,000 per village per year, the project achieves modest gains that, frankly, will do nothing to solve the much larger problem of food security in the regions it serves. This, to me, is a good example of an unsustainable project and a waste of money in development.

Among the amateurs, on the other hand, the failure rate may be high, but successes can be far greater. Play Pumps may have been a failure, but what about Kiva? Kiva – an online peer-to-peer lending organization that uses the Internet to connect lenders with borrowers around the world – might the most successful and effective non-profit in modern history. It has more than one million users and has distributed over $250 million in loans to borrowers in 216 countries. The video above, titled “Intercontinental Ballistic Microfinance,” shows a stunning visual displays the movement of Kiva loans around the world. More importantly, unlike Millenium Villages, it is fully financially sustainable – something that is paramount to the founders, who cut their teeth at PayPal. It is a good thing that Matt Flannery and Premal Shah didn’t decide to return to their day jobs and leave it to the experts.

World Vision

For a more tangible example, the first comment on the article is illuminating. It is from someone who works for WorldVision. For those who do not know, World Vision is the organization that distributes the Super Bowl t-shirts in Zambia, and is responsible for undermining the local cotton industry throughout sub-Saharan Africa. This practice is widely reviled by the “professionals,” and resulted in the online castigation of a poor sole from Florida named Jason Stadler who tried to get donations of one million shirts. Apparently, the irony is lost on experts. In any case, here is what the World Vision employee has to say:

This is not something amateurs should be meddling in but unfortunately starting your own non-profit is the new “starting your own business”.It is absolutely petrifying to me that independants are starting nonprofits, especially the often open access some are giving donors to vunerable children. They are also fostering a mentality of donor needs before community desires.

The next comment comes from someone who works in a rural village in Lesotho, who isn’t a fan of World Vision and raises very specific criticisms of the organization:

World Vision! This is one of the worst organizations with the least understanding of local conditions, cultures and solutions; they chase huge amounts of money in the name of religion.

The World Vision employee then gives a puzzling response:

I think you point out something really valid – INGOs make mistakes. We have made mistakes, which we are bound to do after 60 years of working in communities. We are after all a human organization and humans make mistakes and in some circumstances, get everything wrong.

We are encouraged not to hide those mistakes. To talk about them, learn from them and to try not to repeat them. I think that’s why I find it scary to think of a bunch of rouge nonprofits coming in without having lessons learned. Its more about the experience than it it is about credentials.

This, to me, is the essence of the professional aid workers mentality. They condone mistakes made by professionals and condemn them from amateurs. If the professional fails, it is a learning experience. If the amateur fails, it is destructive.

An amateur at work, with Auntie Agnes, a rice trader in Ghana

So here is my advice to anyone who is thinking about quitting their job and taking up the cause of making the world a better place: do it. Don’t hire a professional. Don’t even try to become a professional. Should you read a book or two about what works and think about how you can maximize your impact without being detrimental? Definitely. But be wary of what they tell you, because, for the last 40 years, they have largely gotten it wrong. You don’t need an MBA to start a business, and you don’t need a degree in international development or a job at an aid organization to make a difference.

Ignore the “professionals” telling you to leave this work to the experts. Try something. If you fail, learn from it. If you succeed, share it, and help others to scale. Don’t be deterred by people telling you that you don’t have the experience. Just go out and do it.

Over the past two years, I have seen innovative and creative minds building great things. When I do, I am reminded how refreshing it is to be one of the amateurs.

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The Roots – What They Do by The-Roots

Advice to the Amateurs: Ignore the Professionals

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This is part one of a two-part post about the role of amateurs and professionals in aid and development.

The other day, Develop Economies was asked to move to a different table at the iHub because a European government aid agency would be holding a workshop on gender equality. Grudgingly, he moved. They spent the next few hours coming up with ideas on how to “engage the private sector” to develop programs that would empower women to increase their incomes while turning a profit. If I had to venture a guess, less than a third of the people brainstorming ideas had ever actually held a job outside the civil service. Needless to say, their ideas didn’t seem grounded in practical reality.

If you read development blogs, as I do from time to time, one consistent theme is animosity among “experts” toward to amateurish do-gooders. In 2011, Nicholas Kristof, the voice for the voiceless, wrote a long piece in the New York Times magazine titled “The DIY Foreign-Aid Revolution,” in which he highlights the good works of people who decided to give up their day jobs to come up with solutions to problems in the developing world. The centerpiece is a young lady who develops a low-cost sanitary pad made from local materials for girls who cannot afford or do not have access to other products. It is a great idea and, if executed well, has the potential to prevent girls from dropping out of school.

One of the major criticisms of articles like this is that Kristof typically focuses on a young American protagonist, and fails to acknowledge the local staff and community-based organizations that making the biggest difference. It is a fair point, and this development blogger, for one, has defended Nick Kristof on that very issue on multiple occasions. Yet, this criticism took a backseat to the concept of “do-it-yourself,” amateur foreign aid. The notion that anyone can change the world caused a backlash among a great many bloggers within the development community.

In an article from Foreign Policy magazine titled “Don’t Try This Abroad,” Dave Algoso, a development worker and blogger who writes “Find What Works,” responded with criticism:

Yet Kristof’s headline is: Do it yourself. Bring the same attitude you would have toward re-painting the living room or installing a new faucet. After all, how hard can it be? The developing world is like your buddy’s garage. Why not just pop in, figure things out, and start hammering away?

But in this field, amateurs don’t just hurt themselves. A project that misunderstands the community or mismanages that crucial relationship can undermine local leaders, ultimately doing harm to the very people it was meant to help. There are also opportunity costs when funding could have been used better. Every dollar spent on PlayPumps or an unnecessary orphanage could be spent on other, better interventions in the same communities. My advice is to hire a professional. And if you want to do this work yourself, become a professional.

Despite all my complaints, I think Kristof’s article does some good if it convinces more people to pursue international development as a career. We all start as amateurs. The difference is whether we seek to learn more or assume that we can just start doing something, muddling through as we go. The “DIY foreign aid” concept might spur a few people to launch ill-advised ventures that eat up scarce resources and get in the way of better efforts, but it might also convince a few others to read a couple books, go to graduate school, get jobs with professional aid organizations, and spend their whole careers making a real impact.

I enjoy Algoso’s blog and admire the fact that he has committed himself to this work, but I have to disagree with his main points. He cites the example of PlayPumps, an infamous example of how DIY foreign aid projects can go awry. A South African billboard advertising executive and couple of engineers developed a playwheel to be placed in rural communities that would actually pump water out of the ground as kids played. A huge amount of money was invested in developing Play Pumps and installing them in villages around Africa. Unfortunately, they were expensive and, as with most aid projects, once the funding dried up, so did the maintenance, causing them to lie idle and break down frequently. By most accounts, the organization, while well-intentioned, was a failure.

While many of my loyal readers may have never heard of Play Pumps, the organization actually relates to how I became involved in this work. Back in 2006, when I was 22 and living at home after college, I sat down to watch an episode of Frontline World with my mom. In this episode, Frontline highlighted the works of two fledgling social enterprises that had the potential to put a real dent in poverty in Africa. One of them was Play Pumps. The other was a small tech non-profit based in San Francisco called Kiva. The latter organization was founded by Matt Flannery, a programmer at PayPal, and Jessica Jackley, an MBA student at Stanford – hardly the profile of microfinance or international development experts. At the time, they had a handful of partners in Africa and had built a platform to allow their friends and extended network to lend money to women who did not have access to banks.

I thought it was an amazing idea and, at the time, I thought to my unemployed self: “I’m going to work for them.” Unfortunately, I didn’t know anything about finance, business, computer science, or anything else that might be useful for an organization like Kiva. Plus, I didn’t have any money and couldn’t afford to volunteer. So I took a job in what one might call the private sector and, after three years, applied for a fellowship with Kiva, where I would represent Kiva on the ground at one of their partner institutions. By that time, they had grown to over $100 million in loans and over 100 partners. I flew to San Francisco for a one-week training on microfinance, quit my job, and moved to the Philippines.

Since then, I spent nine months working in microfinance in the Philippines and another six months working in agriculture in Ghana before moving to Nairobi to work for an education company. There is no doubt in my mind that, had I tried to work for Kiva in 2006, I would never have learned certain things that are valued by the organizations I have worked with in Asia and Africa. If I had gone back to school and gotten my masters degree in international development with no real substantive job experience, I would have been all but worthless to the microfinance institution I was sent to work with.

My story is hardly unique. Out here in Kenya, I see former lawyers, software programmers, investment bankers, management consultants, journalists, engineers, college students, product managers, teachers, physicians, and tech entrepreneurs starting and working for very cool companies that are making a difference. None of them are “experts” – in fact, nearly all of them come from the private sector in their previous lives. And if they had taken the advice of some development bloggers, they, like me, would still be at home.

These people are what the development economist Bill Easterly calls “searchers.”

In foreign aid, we see the follies of planners manifest in numerous ways. Mosquito nets, medicine, and food are often traded away to support non-necessities or vices. On-the-ground habits, lifestyles, and environmental conditions often spread diseases faster than medicine or recommended methods can contain them. Even when real, entrepreneurial spirit is successfully channeled, there is often no infrastructure to competitively bring certain products to market.

At the end of the day, the clearest and most simple demonstration of the failure of planners is that after billions of dollars in aid and systematic tweaking, there appears to be no real or lasting change in the developing countries in question (at least, not attributable to aid). In fact, many countries appear to be getting worse.

It seems reasonable, then, that the answers for developing countries can be found by tapping the searchers therein — the entrepreneurs, the missionaries, the workers, the teachers, and the students. Instead of seeing the people in these countries as victims, our policies need to focus on empowering them as individuals. We need to focus on their potential, not their limitations.

The searchers don’t necessarily listen to the professionals. Instead, they came out here – just as the “amateurs” criticized by the community of aid bloggers did – and got to work implementing their own ideas and vision. They seek inspiration and guidance from a broader range of sources. And, for the most part, they have pretty successful, picking up the requisite anthropological knowledge along the way.

In my next post, I will discuss why amateurs bring a fresh perspective to development, and why that is so important.

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Africa Rising: Venture Capital on the Continent

China the Troublemaker

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Develop Economies often waxes philosophic from his armchair in Africa about China’s role in the development of the continent. For some, the China love-fest is rooted in the fact that bilateral trade is not patronizing, unlike aid. For others, China is a ruthless competitor – a less explicit colonialist than the Europeans. In this journal, Develop Economies tries to remain neutral, presenting the facts. But, in recent months, he has given a disproportionate amount of airtime to the views of the former group. So it is timely that Yuriko Koike, Japan’s former minister of defense and national security adviser, has a none-too-kind piece in Project Syndicate titled “China’s Africa Mischief.”

From 2006

In discussing China’s last-minute, $200 million arms deal to former Libyan president Muammar Gadaffi, Koike explains how China has played its cards:

But, in recent years, China became an obstacle to Qaddafi’s African ambitions, and China did so by copying his methods: buying the support of dictators with weaponry and finance. Since 2000, China has actively courted Africa’s unstable and dictatorial countries with offers of aid and a refusal to back United Nations sanctions against them. Indeed, China has blithely entered into business with African countries that Europe and America refuse to engage with, owing to sanctions.

International sanctions, it now seems, were the door through which China rushed to gain access to Africa’s mineral wealth for its voracious industries. For example, instead of making an effort to foster peace in Sudan, as a permanent, veto-wielding member of the UN Security Council should, China’s deep involvement with Sudan, through the provision of oil infrastructure and weapons, actually prolonged the Darfur conflict. A letter to Chinese officials, signed by many members of the US Congress, and a report by Amnesty International state that China exported weapons to Sudan in violation of UN resolutions. The Oscar-winning film director Steven Spielberg embarrassed China by resigning from an advisory post for the 2008 Beijing Olympics because of its support for the government in Khartoum, calling the Chinese games the “genocide Olympics.”

It is hard (actually, impossible) to deny that China has been unscrupulous in its dealings with kleptocrats and dictators in Africa. But, by its own admission, China explicitly maintains a “no questions asked” policy when it comes to the scramble for resources. A few things come to mind, however, when thinking about China’s role in arming Africa’s “forever wars.”

Viktor Bout doing what he does

Today, Charles Taylor is on trial at the Hague. The ex-Russian military man who sold him the weapons – Viktor Bout – is currently sitting in a prison cell in Thailand, fighting extradition to face charges to in unleashing hell on Liberia, Sierra Leone, and countless other countries. The film “Lord of War” chronicles Bout’s escapades in the continent. These men are criminals of the worst kind – men whose actions, either directly or indirectly, led to unspeakable horrors. Now they are in court, where they belong. And Gaddafi, the jheri-curled tyrant who threatened to “show no mercy” to the residents of Benghazi, isn’t far behind (he’s hiding in Algeria, as a matter of fact). His onslaught against the people of Libya, as it turns out, might not have been possible had it not been for the subtle, behind-the-scenes deals cut with three major Chinese weapons manufacturers. The Canadian paper, The Globe and Mail, in a move that proves its host country is more than America’s top-hat when it comes to journalism, broke the story:

China offered huge stockpiles of weapons to Colonel Moammar Gadhafi during the final months of his regime, according to papers that describe secret talks about shipments via Algeria and South Africa. Documents obtained by The Globe and Mail show that state-controlled Chinese arms manufacturers were prepared to sell weapons and ammunition worth at least $200-million to the embattled Col. Gadhafi in late July, a violation of United Nations sanctions.

If China is supplying arms to a violent dictator – “in flagrant violation of the arms embargo instituted under UN Security Council Resolution 1970, which China approved” – then why is it not also treated as a criminal entity? That is a rhetorical question. It is a sovereign state and is technically free to do what it wants, particularly since the United States is bogged down in its own mess and Europe is on the brink of economic implosion. Not to mention, the West has not exactly been a model citizen when it comes to its dealings with Africa. China is the number two buyer of oil from Angola. The United States is number one. This leads me to my next point. The roots of geopolitical conflict can always be traced to oil. Always. From the Globe and Mail article:

The documents suggest that Beijing and other governments may have played a double game in the Libyan war, claiming neutrality but covertly helping the dictator. The papers do not confirm whether any military assistance was delivered, but senior leaders of the new transitional government in Tripoli say the documents reinforce their suspicions about the recent actions of China, Algeria and South Africa. Those countries may now suffer a disadvantage as Libya’s new rulers divide the spoils from their vast energy resources, and select foreign firms for the country’s reconstruction.

And Project Syndicate:

China has chosen a high-risk path – ignoring human rights and violating UN sanctions – to secure the energy and other resources needed to sustain its economy’s rapid growth. It is a choice that neither befits one of the permanent members of the Security Council, nor demonstrates China’s readiness to be a responsible stakeholder in the international community. China’s willingness to arm and defend African dictators, even in the teeth of UN sanctions, as in Libya, undermines its claim to a “peaceful rise.” Given China’s Libyan duplicity, the world should now determine whether it is a country that obeys international rules only when doing so suits its interests.

This principle, of course, is not limited to the countries of the Far East. One need not look further than the tiny country of Equatorial Guinea, where the per capital GDP is around $10,000 USD, yet more than half the population lives in poverty. Here is how Ken Silverstein describes the situation:

The United States historically had little interest in Equatorial Guinea and closed its embassy there in 1995 after the Obiang regime issued threats against Ambassador John Bennett, who had lodged protests over human rights conditions. But in an unfortunate twist, American companies soon discovered vast reserves of oil and gas in the waters off Equatorial Guinea, and successive U.S. governments have been slowly but steadily backtracking ever since. The key step came in 2003, when after an intense lobbying campaign by the oil industry, Bush approved the reopening of the U.S. Embassy in Malabo, Equatorial Guinea’s capital. (The embassy formally reopened three years later.) “With the increased U.S. investment presence, relations between the U.S. and the Government of Equatorial Guinea have been characterized as positive and constructive,” notes the State Department’s country profile.

Relations may be good, but the official U.S. assessment of the country is much less rosy. The State Department’s most recent global human rights reportcited abuses in Equatorial Guinea including “torture of detainees and prisoners by security forces; life-threatening conditions in prisons [and] arbitrary arrest.” Freedom House’s 2011 “Freedom in the World” survey put the country in its “worst of the worst” category for governments that violate political rights and civil liberties, along with North Korea, Sudan, and Turkmenistan. Equatorial Guinea’s economy depends almost entirely on oil, which generated revenues last year of well over $4 billion, giving it a per capita annual income of $37,900, on par with Belgium. “The oil has been for us like the manna that the Jews ate in the desert,” Obiang has said. It certainly has been for him. Obiang placed eighth on a 2006 list by Forbes of the world’s richest leaders, with a personal fortune estimated at $600 million. His population hasn’t fared so well. Human Rights Watch reports that one in three of Obiang’s impoverished subjects dies before age 40.

Silverstein’s article is worth reading in full. Whenever I write about the role of oil in the world’s conflicts, I feel like the Charlton Heston in Soylent Green – “It’s people!” Stories like these, however, lead me to believe I am at least somewhat correct in my assumptions. And I guess China isn’t so honest about it after all.

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American Poverty, Single Parenthood, and the National Review

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The New York Times published an article today discussing a disturbing trend: more than one in three young families – defined as under the age of 30 with children – is currently living in poverty. This is the highest percentage on record for this group. Some of the other statistics are not surprising – the highest rates of child poverty exist in black and Hispanic families, single-parent households, etc. Here are the grim facts:

Economists cited several reasons for the rise. First was the economy. College degrees hold greater value now, while opportunities for low-skilled workers have dwindled, as manufacturing and other industries have declined. That has pushed more young families into poverty. The number of men in their 20s with only a high school degree who worked full time fell by 22 percent from 2007 to 2010, while those with a college degree dropped by just 1 percent, according to census data. Fewer than a third of high school dropouts in their 20s were working full time last year. At the same time, the fortunes of poorer Americans, especially those with children, are more closely tied to the labor market because welfare reform in the 1990s made cash assistance harder to obtain. It was hailed as a success for getting more mothers to work, but now that jobs are scarce, young families have little to fall back on. In an analysis of government transfers over time, Professor Moffitt found that aid to the elderly living on less than half of poverty-level income rose by 13 percent from 1984 to 2004, while aid to single-parent families in the same situation dropped by about 38 percent. “The worst-off families have been left behind,” Professor Moffitt said.

The burden of poverty falls disproportionately on the children in these households, given that one in three families has difficulty providing for their family. It is a disgrace that, in one of the most developed countries in the world, this is the reality. Heather MacDonald of the National Review offered an explanation that I misinterprets a symptom for a cause. She wonders why the “mainstream media” (what a hilarious term) never highlights the fact that single parenthood is the most accurate predictor of poverty status. Like her colleague, David French, who I wrote about recently on this blog, she doesn’t seem to understand causality. 1. Causality

“In 2007, single-parent families were nearly six times more likely to be poor than married-parent families; that ratio has not significantly changed. The closest the Times comes to acknowledging the role of single parenthood in child poverty is to note that blacks and Hispanics have the highest rates of child poverty. Why that would be, the Times does not say, but it’s just what you’d expect from groups whose illegitimacy rates are 73 percent and 53 percent, respectively.”

Aside from the fact that this is an unambiguously racist argument, I will posit a few reasons while those people with skin a shade darker than Ms. MacDonald may happen to raise their children in a single-parent household. A year ago, Lexington, the columnist for the Economist, wrote a piece titled “Sex and the Single Black Woman.” In it, he reviews a book called “The Logic of Life,” which posits an interesting explanation for this phenomenon:

In the marriage market, numbers matter. And among African-Americans, the disparity is much worse than in Mr Harford’s imaginary example. Between the ages of 20 and 29, one black man in nine is behind bars. For black women of the same age, the figure is about one in 150. For obvious reasons, convicts are excluded from the dating pool. And many women also steer clear of ex-cons, which makes a big difference when one young black man in three can expect to be locked up at some point. Removing so many men from the marriage market has profound consequences. As incarceration rates exploded between 1970 and 2007, the proportion of US-born black women aged 30-44 who were married plunged from 62% to 33%. Why this happened is complex and furiously debated. The era of mass imprisonment began as traditional mores were already crumbling, following the sexual revolution of the 1960s and the invention of the contraceptive pill. It also coincided with greater opportunities for women in the workplace. These factors must surely have had something to do with the decline of marriage.

In this argument, the author explains why larger trends in the black community toward greater incarceration may explain the drop in marriage rates. Ms. MacDonald might raise the point that social dysfunction is the reason incarceration is on the rise. Wrong.

Could it be, however, that mass incarceration is a symptom of increasing social dysfunction, and that it was this social dysfunction that caused marriage to wither? Probably not. For similar crimes, America imposes much harsher penalties than other rich countries. Mr Charles and Mr Luoh controlled for crime rates, as a proxy for social dysfunction, and found that it made no difference to their results. They concluded that “higher male imprisonment has lowered the likelihood that women marry…and caused a shift in the gains from marriage away from women and towards men.”

The legacy of "Just Say No"

And why did incarceration rates explode among young black and Hispanic men? There are lots of reasons – in the 80’s, the crack epidemic and Ronald Reagan’s spectacularly counterproductive “Just Say No” campaign (see the graph at the left), coupled with draconian penalties for drug possession, saw the prison population skyrocket. With harsh restrictions placed on felons, rates of recidivism hover at around 60% at any given time – meaning that most ex-cons are back in jail within three years. Most recently, the for-profit prison lobby helped the Arizona state legislature draft a controversial bill designed to put more illegal immigrants in jail. More prisoners is, of course, good for business. Here is the conclusion, which would seem to support Ms. MacDonald’s conclusion:

The collapse of the traditional family has made black Americans far poorer and lonelier than they would otherwise have been. The least-educated black women suffer the most. In 2007 only 11% of US-born black women aged 30-44 without a high school diploma had a working spouse, according to the Pew Research Centre. Their college-educated sisters fare better, but are still affected by the sex imbalance. Because most seek husbands of the same race—96% of married black women are married to black men—they are ultimately fishing in the same pool.

This, of course, is only one part of her argument. She seems to posit that women are having children out of wedlock because they are fundamentally irresponsible and do not care for the prospect of marriage. According to “The Logic of Life,” this is not the case. What did not happen is that all of a sudden black and Hispanic men decided to no longer become good Christians and just divorce their wives en masse, leaving them in poverty. Such a shame that this isn’t the easy fix she claims it to be. This is one example of causality that Ms. MacDonald might prefer to overlook, since, if you trace the roots of single-parenthood among minorities back to its roots, it has less to do with the fundamental “depravity of the poor” and much more to do with social policies that have disenfranchised the poorer segments of the population over time – in large part, due to the platforms of the political party she supports. 2. The Mainstream Media

“The ban on discussing the effect of family breakdown is not surprising, since the single mother has become the cornerstone of Democratic politics. She provides the justification for the continuous expansion of the welfare state. Whether the topic is government-provided health care for the poor, taxpayer-funded housing for homeless families, federal Section 8 rental vouchers, more early-childhood-intervention programs, or greater redistribution of income from the rich to the poor, the frequent flyers in all these programs are single mothers. They provide the largest constituency for every means-tested government poverty program in the country, and they are a growing constituency.”

In this paragraph, Ms. MacDonald is reminding us that the subtle racist undertones of her first statement were not a fluke, and that she is, indeed, a racist. In this point, she is claiming that the mainstream media is the Fox News of the Democratic Party. In Ms. MacDonald’s warped sense of reality, by pointing out the fact that single parenthood and deadbeat dads are the sole source for poverty in the United States, the New York Times risks alienating its key constituency and the party for which it is (not) a mouthpiece. It’s just crazy. Regardless of this obvious fallacy, let’s dissect the argument. The New York Times does not want to alienate these people because they want them at the voting booths, creating a welfare state that is intolerable for the National Review. Unfortunately for Ms. MacDonald, the racist, the population is steadily becoming less white, which will empower minorities to elect officials that will reduce the penalties for the harsh drug laws that send one in three black men to prison during their lifetime. Right? Wrong again. Blacks and Hispanics are becoming increasingly marginalized at the polls as the GOP clandestinely makes it more difficult for minorities to cast a ballot, requiring new forms of ID and making it difficult organizations to conduct voter drives. Basically, they are screwed. I could go on, but it is not worth it. I have been reading politics for the better part of the last five years. I am not that old, and I understand that every generation thinks its political situation is worse than the ones that preceded it. But I swear – the discourse was never like this. Ronald Reagan, the hero of the National Review raised taxes 11 times during his presidency and supported amnesty for illegal immigrants who had laid roots in this country. It is absolutely amazing to me that people like this are even given the time of day when they posit arguments like this. The party of Ms. MacDonald has flown off the handle. But she is a symptom of a much larger, more nefarious problem with the political discourse in this country. The fact remains that the poverty rate, the income inequality gap, the wealth gap, and incarceration rates are at record levels. If you haven’t read it already, do yourself a favor and read Timothy Noah’s ten-part series in Slate magazine titled “The United States of Inequality.” Is single parenthood to blame? Let’s ask Heather MacDonald:

“There is a far more efficient solution to family poverty and the childhood problems associated with single-parent families: Revive the marriage norm among the poor. Public policy’s ability to restore the expectation that children be raised by both their parents is undoubtedly limited. But it is better to try than to do nothing. And making child poverty a political issue without mentioning father absence is worse than doing nothing.”

I agree. As a country, we should be trying to figure out how to reduce incarceration rates and look for other root causes for the breakdown of the family unit, and address them through smart policy. Abstinence-only education and “just say no” probably are not going to cut it. It is amazing how someone can spend five paragraphs making child poverty a political issue, and the close with a line disparaging people who make child poverty a political issue. Remember, however, that the New York Times is only making it a political issue because, in Ms. MacDonald’s mind, it is a stump for the Democratic Party, which minorities disproportionately support – the same minorities whose high rates of single parenthood are the major reason for their impoverished state. Fortunately for the world, she has identified the silver bullet we have all been looking for! It has been right under our noses all this time! Would loving, heterosexual, two-parent households end poverty in this country? If you are Heather MacDonald, the answer is irrefutably yes.

UPDATE: A friend sent an email offering a nice counterpoint to my argument. Here is what he had to say:

Interesting post. I’m really surprised you took such offense to that article. Maybe I’ve become a heartless bastard, but I am surprised you also think that her argument is racist. I think the angle of attacking the MSM is a tricky one, and yes, I generally think that Republicans are an insane, anti-intellectual, party of revisionist historians. But I wholeheartedly agree with what I think is a predominately feminist (not racist) and pragmatic undertone to the column.

The big problem is not single mothers but men that leave their wives and children. That is a serious issue. Extremely serious. Outside of the US context, from my limited time in Swaziland, I think that a complete lack of a family unit was the biggest driver of the country’s public health crisis (as in, the country could literally become extinct). Mothers with babies are everywhere, and fathers are nowhere.

As for why I don’t think the argument is racist, I point to a recent interaction that I had with a friend of a friend that teaches at a school in southern Illinois that has worse poverty rates than those we work with for GOTO. All of the students are white. All of them. And they have tremendously similar issues to poor blacks with the friend I talked to using a lot of the same language that conservatives use when talking about other single parent families that we think of as generally black.

Families matter a lot. A lot lot. We both come from insanely supportive families and have no clue what it’s like to have only known your father to be someone that had sex with your mom. This is an issue, and the fact that it mainly occurs in minority families is unfortunate but true and not racist. No more prejudiced than saying that Cambridge is really liberal. It is. Liberals live there. I hope I’m making my point or a point without being offensive or combative, but I take this issue extremely seriously, and I think it is at the crux of so many developmental issues.

Ultimately, change is driven from within, and it comes from the family. As a consultant, I think it would be irresponsible to look at the horrendous state of poor American families and not emphasize it and not notice that its most rampant incidence is among poor minorities. I’ll close this by noting that Bill Cosby, a black man, reiterates a lot of the same points that MacDonald does. http://www.theatlantic.com/magazine/archive/2008/05/-8216-this-is-how-we-lost-to-the-white-man-8217/6774/

And another:

I personally found both the NYT article and the Review article to be a little too dramatic (i.e. the “interview” with the single mom who looks for a job, and pretty much anything the Review writes) so I went to the Northeastern sourcehttp://www.northeastern.edu/clms/wp-content/uploads/The-Impact-of-Rising-Poverty-on-the-Nation.pdf After reading that, I basically just thought the Times and the Review are trying to draw more of a conclusion than is available from the data. What I struggle with is they’re attempt to portray what a “young family with a head under 30 years of age” looks like.

So let’s say it’s 2010, you’re 25 years old, married, and about to have your first child (this is the average age of first child birth). And let’s say the child bearing mother takes off time from work to give birth leaving her spouse to support the family. On average, I can’t imagine that a 25 year old dude 2-3 years out of college in the US even makes a per capital income of more than 30K…probably much less given the economy. So that means the “NORMAL” young family probably has at least 3 members with a combined household income of 20-30K. I think that basically means you’re POOR.

Thinking of it that way, I’d say the 30-40% rate doesn’t surprise me at all….but obviously that profile isn’t exactly what people imagine as “POOR”. If you look at table 3, in 1993, young families had poverty levels almost equal to current levels. By 2010, these individuals were in the 30-64 age bracket and had much lower poverty levels. I know there’s concerns about long term job prospects for currently young families, but I’m not sure the data in here suggests that these people are fucked. I really think it just says you’re young. Anyways….long winded way of saying I’m skeptical of all interpretations of this data…..

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How Burma Will Modernize

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Learning to read in Burma.

The photo on the header of this blog was taken in Bagan, a city in the center of Burma that is home to thousands of ornate Buddhist temples. I was sitting atop another of the thousand temples that litter the skyline, wondering how such a stunning place could have so few visitors. The temples in Bagan are relics of a once-prosperous society. Today, the country appears frozen in time, its potential ruined by a repressive military government that has left Burma in a developmental stasis for the last thirty years.

The strategic geography of Burma is undeniable.

But all of that is changing now. Traditionally, the West has always viewed Burma as a basketcase – a country rich in natural resources beset by post-colonial woes and chock full of human rights violations. Despite its hideous record of government and poor economic growth, Burma has always had a few things going for it. First, it has a wealth of natural resources. Diamonds, natural gas, oil, etc. Second, it is strategically located between two of the fastest-growing economies in the world, China and India. Combined, China and India make up a third of the world population and are contributing an increasing percentage of the global GDP. When speaking about the future of geopolitics and the world economy, these two countries are increasingly part of the conversation. And Burma, the basketcase of East Asia, sits conveniently between these two rising giants. Given that Russia lies further north, and Brazil dominates the Americas south of the Equator, Burma holds the distinction of being the only country in the world to sit directly in between two of the BRIC countries.

It makes sense that China and India would want to facilitate trade as efficiently and cheaply as possible. To do that, only one thing stands in the way: Burma. Given the Chinese government’s track record of long-term strategic thinking when it comes to developing its future trading partners, China has taken an active role in building up the infrastructure in a future vital trading partner. On Burma’s western front, India is taking a similarly proactive approach in making sure it takes advantage of the country’s location and resources. And, amazingly, it sounds like it could be a win-win-win situation:

A Hindu rite of passage. Day one in Burma

Watching these developments, some have warned of a new Great Game, leading to conflict between the world’s largest emerging powers. But others predict instead the making of a new Silk Road, like the one in ancient and medieval times that coupled China to Central Asia and Europe. It’s important to remember that this geographic shift comes at a very special moment in Asia’s history: a moment of growing peace and prosperity at the conclusion of a century of tremendous violence and armed conflict and centuries more of Western colonial domination. The happier scenario is far from impossible.

The generation now coming of age is the first to grow up in an Asia that is both post-colonial and (with a few small exceptions) postwar. New rivalries may yet fuel 21st-century nationalisms and lead to a new Great Game, but there is great optimism nearly everywhere, at least among the middle classes and the elites that drive policy: a sense that history is on Asia’s side and a desire to focus on future wealth, not hark back to the dark times that have only recently been left behind.

And a crossroads through Burma would not be a simple joining up of countries. The parts of China and India that are being drawn together over Burma are among the most far-flung parts of the two giant states, regions of unparalleled ethnic and linguistic diversity where people speak literally hundreds of mutually unintelligible languages, of forgotten kingdoms like Manipur and Dali, and of isolated upland societies that were, until recently, beyond the control of Delhi or Beijing. They are also places where ballooning populations have only now filled out a once very sparsely peopled and densely forested landscape. New countries are finding new neighbors. Whereas the fall of the Berlin Wall reopened contacts that had only temporarily been suspended, the transformations under way are enabling entirely new encounters. There is the possibility of a cosmopolitan nexus at the heart of Asia.

Readers of this blog know that I have a soft spot in my heart for Burma and its struggle. I’ve often ruminated on whether anything good would ever befall the Burmese people. But now, with two of the four BRIC countries looking to one another for a mutually-beneficial partnership in the post-American world, things are finally looking up.

Trekking to Inle Lake

I will close with a long paragraph from the Foreign Policy article quoted above that speaks to the optimism in the Far East:

A new friend.

It’s a fragile opening. The president seems determined to push ahead, but his is not the only voice. There are other powerful ex-generals in parliament and in the cabinet, and the structures of repression remain intact. Burma is at a critical turning point.

And now, for the first time, Burma’s politics matter beyond its immediate borders. If this opportunity for positive change is lost, Burma may remain a miserably run place — but it will no longer be an isolated backwater. The great infrastructure projects under way will continue, as will the much longer-term processes of change. Asia’s frontier will close and a new but dangerous crossroads will be the result.

But if Burma indeed takes a turn for the better and we see an end to decades of armed conflict, a lifting of Western sanctions, democratic government, and broad-based economic growth, the impact could be dramatic. China’s hinterland will suddenly border a vibrant and young democracy, and India’s northeast will be transformed from a dead end into its bridge to the Far East. What happens next in Burma could be a game-changer for all Asia.

As it turns out, rather than sanctions and a tourism boycott, simple economics might be just what Burma needs to become a vibrant democracy after decades of brutal military rule. I will look forward to going back.

Here are a few of my favorite pictures from this amazing place. The photos were taken by my friend, Gemma North, a fellow Kiva Fellow in Cambodia.

My first trip to the Kingdom

Tragedy in Kenya

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Joseph Mwangi, 34, sits in a state of shock after discovering the charred remains of two of his children at the scene of a fuel explosion in Nairobi on Monday. Image: Ben Curtis / AP

Today, a gasoline explosion killed more than 100 people in a slum in Nairobi. The ones who did not burn to death were left badly injured . Here is a description of the scene from Jeffrey Gettleman:

The whole slum seemed to spring into action, with men, women and children grabbing buckets, oil tins, battered yellow jerry cans — anything to carry the spilled fuel. Even minibuses raced in from miles away, looking for free gas, a small godsend in a place where most people are jobless and live in rusty metal shacks that rent for $25 a month.

But then the wind shifted, witnesses on Monday said, and embers from the garbage fires that routinely burn by the river wafted toward the gushing pipeline. There was no time to escape. The fuel exploded, sending a giant fireball shooting up over the slum, engulfing scores of people and scattering bodies that were left in various poses of anguish, burned to the bone.

I don’t know much about Sinai slum, other than that the company I work for operates a school serving the community. It is similar to the 65 other slums in Nairobi, which house more than 50% of the city’s population, yet occupy only 5% of the land. You can imagine the circumstances that lead to a tragedy like this.

My friends and family emailed to check in and see if I was affected, but the reality is the slums are another world from the other parts of Nairobi. Yesterday, I was thinking about writing a post on the cognitive dissonance that stems from seeing the Kenya I see, and the fact that the country is considered the 16th most failed state in the world. But I suppose this is it. The growing middle class and cosmopolitan young people that make Nairobi a culturally diverse and sophisticated African city stand in stark contrast to the kind of poverty that drives people to the site of a gasoline spill, risking their lives to earn a few extra bucks. Gettleman again:

Residents of the Sinai slum, where the fire broke out, said that fuel spills happened all the time.

“I can remember four times,” said Zackiyo Mwangi, a vendor of pirated CDs. “People started saying this morning, ‘There’s a spill, in the usual place, let’s get over there.’ ”

“Yeah, I know,” Mr. Mwangi added, “it’s dangerous, but that’s how life is here.”

“This just shows you how these people will do anything to generate a coin,” said Johnson Muthama, a member of Parliament. “Just look at them.” He gestured toward a crowd of thousands of onlookers, mostly young men in grubby clothes, staring gape-mouthed at all the bodies on the ground. “They are ready to risk their lives for anything.”

It is a tragedy. 100 people, including children, were killed. They shouldn’t have been anywhere near a broken gas line. Until the conditions change for Nairobi slum dwellers, the desperation that created this situation will remain. And that desperation will drive people to do it again. That is the real tragedy.

A woman is comforted after she saw the body of her child at the scene of a gasoline explosion in a slum area of Nairobi. (Tony Karumba / AFP/Getty Images / September 12, 2011)

Also, I need to comment on the photo at the top of this post. Few photos have affected me in the way this one has. For the last two days, I’ve come back and stared at this photo, which captures so vividly the numbness and despair when someone loses a child. This man, Joseph Mwangi, lost two of his children to the inferno. What is amazing about this photo, to me, is that it captures a moment in time that speaks to the despair felt by everyone in the community. This is the moment of realization after the initial confusion – somewhere on the spectrum of denial, anger, and acceptance. I can only imagine the grief he is feeling right now.

It shouldn’t have to be this way. After a period of mourning, everyone needs to take a long, hard look at the institutions responsible for creating this tragedy and demand a change. I’m afraid the fire in Sinai Lunga Lunga won’t be enough.

Depravity or Circumstance? The Nature of Poverty

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“It is simply a fact that our social problems are increasingly connected to the depravity of the poor. If an American works hard, completes their education, gets married, and stays married, then they will rarely — very rarely — be poor. At the same time, poverty is the handmaiden of illegitimacy, divorce, ignorance, and addiction. As we have poured money into welfare, we’ve done nothing to address the behaviors that lead to poverty while doing all we can to make that poverty more comfortable and sustainable.”

David French, Bigot

Believe it or not, somebody wrote that. Enough people have pointed out that David French, the author, confuses correlation with causality. Here is one argument from Seth Masket that sufficiently debunks the theory:

[T]hese key things — education, a successful marriage, and a job — are a lot easier to come by if you’re not poor. What’s more, they’re a lot easier to come by if your parents weren’t poor. But just being born into a poor home means a person is going to have a much harder time coming by these key things that keep him or her out of poverty. That doesn’t make the person depraved. It makes the person a victim of circumstances.

Here is another one from Matt Yglesias:

Now I suppose you could argue that the availability of drug treatment programs, battered women’s shelters, and food kitchens creates “moral hazard” and encourages people to become heroin addicts and/or bed down with abusive partners. But I don’t think that this is a very plausible story. People don’t become homeless drug addicts because the downside to being a homeless drug addict isn’t severe enough in the contemporary United States. And affluent parents don’t treat their children in this kind of punitive way. If a prosperous teenager develops an addiction problem, he’ll be given help. Any halfway responsible parent with the means to do so would bail out a daughter whose live-in boyfriend is abusing her. Poor people have, typically, made some mistakes in life and it’s often the case that had they lived lives free of error, they wouldn’t be poor. But it’s not like middle class people are living mistake-free lives. The difference is that middle class people have lives that give them a fair margin for error, whereas people who start out in bad circumstances can be crippled by a bit of misfortune, impulsiveness, or bad decision-making.

Arguing with someone like French would be like laying out all the factual reasons why a mountain is in the wrong pace, not to mention it sounds like he has the intellectual rigor of an inanimate piece of rock. But I ruminated on other aspects of why French is wrong (beyond the obvious), and came up with a few clear examples from my own life.

David French's personal heroes, the Dukes.

In most aspects of my life, I’ve been pretty fortunate. My parents are physicians who put a lot of emphasis on education. I spent most of my high school years grounded due to some harmless hijinks, and took a lot of AP classes because my parents pushed my brother and I to excel in school. I went to a good university, where I was surrounded by smart people and educational resources that I wish I could still access. After I graduated, I went to work for a company in Boston under smart people with graduate degrees from Harvard and MIT. At Kiva and Technoserve, my friends and coworkers came from diverse backgrounds, and had the resources (financial and otherwise) to volunteer for a few months. Now, in Nairobi, I live with a group of tech entrepreneurs and interact on a daily basis with some of the smartest people I’ve ever met.

All this is meant to stress the impact people have in your life. From the start, I was on a track that, at every turn, placed me in the midst of mentors who have shaped my intellectual and personal growth. My teachers in high school and college were committed and enthusiastic. My bosses and mentors are skilled and talented. I spoke with one of my old managers tonight after about two years to get some career and school advice. I’m grateful to have opportunities like that, but I hold no illusions about the role my own favorable circumstances played in providing them.

Conversely, without those role models, you need to have a superhuman combination of motivation, maturity, and intelligence at a very young age to see the benefits of education and hard work. And even if you do, there is no guarantee that an education is going to make your situation that much better (and in today’s America, with income inequality at its highest levels in 70 years, that is increasingly true). One of the great paradoxes of education in countries with chronic high unemployment is that the economic returns to schooling are marginal when there are no jobs to absorb all the graduates. Does that make people who pull their kids from school “depraved”? Of course not. As Masket says, they are a victim of circumstances. In fact, from an economic and financial perspective, they are thinking rationally, which, as someone who believes that the God and the Free Market are the only paths to salvation, should appreciate. Of course French is one of a great many thinkers today who have cobbled together all of the

People like French don’t actually really understand their own principles, and would probably be surprised to hear that the two most influential figures in developing their worldview – Ayn Rand and Jesus – would both strongly disagree with their stance on just about everything. Take the last two paragraphs of French’s article on the National Review blog:

Earlier this week, Walter Russell Mead highlighted disturbing research showing that the poor — far more than the rich — are disconnected from church and religion. While church attendance is dropping among all social classes, it’s falling off a cliff for the poorest and least-educated Americans. In other words, the deeper a person slides into poverty, the more they’re disconnected from the very values that can save them and their families.

The bottom line is that we need more free enterprise, and we need more virtue. Sadly, the Great Society and the sexual revolution have deprived us of both.

The key to ending poverty, despite the growing concentration of wealth at the top, is God and the markets. Of course, Ayn Rand, the intellectual figurehead of the kind of laissez-faire economics advocated by French, was a devout Atheist. I’ve read Atlas Shrugged and The Fountainhead, my “Introduction to Philosophy” professor was the editor of the Ayn Rand Reader, and my father would like to think himself an objectivist, but he cares about people too much to truly commit. These, I think, are enough to establish my bona fides. In her own words:

There has never been a philosophy, a theory or a doctrine, that attacked (or ‘limited’) reason, which did not preach submission to the power of some authority.

So now that we have kicked out one of French’s legs, let’s go for the other one: religion. I did a quick Google search for “Jesus poverty quotes” and it returned 7.3 million views. This one from Deuteronomy 15:7, 11 makes my point sufficiently:

If there is a poor man among your brothers in any of the towns of the land that the LORD your God is giving you, do not be hardhearted or tightfisted toward your poor brother. There will always be poor people in the land. Therefore I command you to be openhanded toward your brothers and toward the poor and needy in your land.

Were Jesus to return to earth today and come face-to-face with David French, do you think he would say, “You’re absolutely right, Dave – the poor are depraved.” I supposed that French would say that the Levites weren’t welfare queens.

David French is either an ostrich clinging to a romanticized version of the American dream, an idiot, or both. In this country more than many others around the world, if you work hard, you can be successful. But to posit that everyone in this world is dealt the same hand and the ones currently earning less than $40K a year to provide for a family of four have simply chosen a life of “depravity” is ludicrous. Remember Dave – that kind of thinking will get you left behind.

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The Myths and Realities of Impact Investing

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“[Africa] is a wonderful place to really make money. We have one billion people hungry for everything.” Mo Ibrahim

A friend posted an article on his Facebook wall titled “Why Social Impact Investing is a Crock,” leaving much to the imagination. Here is an excerpt:

Over the last decade the world of do-gooding has seemingly been taken over by MBAs. Social entrepreneurship, a field encompassing both mission-driven businesses and entrepreneurial nonprofits, professes to bring the efficiency, rigor, and cold, hard metrics of business to the most important causes on the planet. Does it really? Not so much, says Dean Karlan, author of the recent book More Than Good Intentions. “The social entrepreneurship world is in a weird spot, to be honest with you. It’s a world full of rhetoric about impact investing, yet I have very rarely seen an investor actually take that seriously. When you look at the actual analysis it lacks rigor.” He distinguishes between the type of scientific research done by his lab, Innovations for Poverty Action, with trials complete with control groups, and the type of data collection done in the vast majority of the nonprofit world, which is nothing more than a “monitoring exercise.”

I think both Karlan and the author have the right idea, but for the wrong reasons. Later in the article, Karlan explains why the cost of doing a rigorous impact analysis is cost prohibitive for an investor who is focused on financial returns, with impact studies accounting for as much as a third of the investment. I think the title of the article is excessive and meant to be provocative, but the argument is defensible.

The other day I listened to a presentation from Kentaro Toyama, one of the eminent thinkers in ICT (information, communication, and technology) for development (ICT4D, for short), a school of thought that sees technology as the silver bullet in ending poverty. His talk was titled “ICT or Development: Why it’s so hard to get rich and help the poor simultaneously.” It was also meant to be provocative, but for a different reason. Toyama’s point is not that the absence of verifiable impact makes impact investing a crock. Rather, he contends that it is difficult, if not impossible, to get rich by providing socially-beneficial goods and services to the base of the economic pyramid. You can get rich selling products to the poor, but they won’t necessarily be good (alcohol, tobacco, soda, etc.). Conversely, you can sell products that will address a social need (solar lanterns, cookstoves, etc.), but you won’t get rich doing it. He challenged the audience to come up with an example, and explained why his thesis holds in each case.

There is a myth of a fortune at the bottom of the pyramid, according to Toyama. At least, that fortune is purely measured in market size and raw purchasing power. It should not be confused with an opportunity to offer products that alleviate poverty and make a bundle to boot. The rural and even urban poor are difficult markets to serve profitably. A disparate and sometimes non-existent supply chain makes getting products in the hands of consumers a challenge even for the biggest multinationals. Branding products for the poor, or subsidizing them, makes them less appealing to the middle class, who might pay more and create cross-subsidization opportunities (on this point, I think he is wrong, having seen the same solar lanterns we were selling to microfinance clients in the Philippines being sold in malls in Manila for twice the price). Not to mention, selling products to the poor is not going to help them out of poverty. Employment, in the form of manufacturing and labor-intensive work, is the key to growth. In short, it is possible to serve a social cause, and it is possible to make lots of money selling products to the poor. But to do both simultaneously? Very difficult.

My friends and I discussed the talk over lunch. Most felt that the talk was good, but thought Toyama oversimplified a complex topic, creating a dichotomy that practitioners don’t really subscribe to. Anyone who honestly thinks that you can make serious money – young-rich Silicon Valley money – by selling socially-conscious products and services to the poorest segments of the world population is clearly dreaming. So that conversation should be a non-starter. You can make money, sure, and you do a lot of good, but if you’re goal is to get rich, then you are in the wrong business. For that reason, we all concluded that the talk wasn’t meant for people like us. It was meant for the people in Silicon Valley who have become a little too excited envisioning that Venn diagram.

During the talk, I asked Toyama what he thought of social impact investing. Basically, he thought it went through a period of irrational exuberance, where people thought they could make high returns and serve a social good, before dipping once people realized that was not the case. It has made a slight resurgence, as people have checked their expectations and come to sacrifice financial returns for social impact. What Dean Karlan and Kentaro Toyama have in common is that they both believe that it is very difficult to both make good money and help the poor. Karlan thinks the social impact of many investments is unproven, while Toyama thinks the social impacts are fine, but making money is a challenge.

The legacy of Mo Ibrahim

I happen to disagree with both. Ten years ago, a telecom industry in Africa barely existed. Today, most of the population, regardless of whether they are living in poverty, owns a cell phone. When I brought up this point, Toyama says that the telecoms are entirely profit-oriented, and could care less about helping the poor. Someone earning a dollar a day, for example, will think nothing of spending a quarter on a ringtone. But to say that the development of a mobile network that connects the most remote parts of Africa to the rest of the world has not helped the poor by several orders of magnitude is crazy. It is ironic to me that people interested in this developing products for the poor always leverage the cell phone revolution in Africa, but never seem to give it any credit for laying the groundwork for real, substantive change and improvement – moving the needle over generations, rather the 2-3 year time periods for the randomized control trials being used to measure impact. (My intention here isn’t to write off RCTs – rather to say that maybe there is a broader way of looking at impact).

There is often a paternalistic attitude (not necessarily among people like Toyama or Karlan, but others less in the know) toward serving the poor. People try to engineer outcomes, and are dismayed when someone spends the extra income from the dairy cow they bought with help from a microfinance loan on booze, cigarettes, and fast women. Judge not, I say, lest ye be judged. After all, in the words of Devin the Dude, “you only get one ticket, might as well enjoy the ride.”

Creating more opportunities should be the barometer of success in serving the poor. Microfinance was about providing access to financial services, which it did. It has given poor people a place to save their money and borrow money to smooth their irregular consumption. It created opportunities that did not exist. In a much less outwardly altruistic example, connecting Africa to the world and putting a cheap cell phone in the hands of every African is helping the poor and making a killing. If the poor then spend the school fees on ringtones, that is their discretion. But creating opportunity – in the form of infrastructure or technology – is what moves the needle.

That is why, in my opinion, social impact investors need to move in one of two different directions. They can either expand the definition of social impact beyond the “directly reach a million poor people” definition that exists today, and accept the fact that there is highly profitable companies that serve a social cause and are specifically targeted at the poor are few and far between. Or, they can accept the fact that the returns will be marginal, but the intangible social value created by the product will significantly exceed the financial opportunity cost. Either way, the current narrative that you can make lots of money and serve the poor at the same time (rather than serially, like Bill Gates, as Toyama suggests) is dangerous.

But where's the impact?

It is dangerous because it breeds unrealistic expectations and creates resentment when they fall short (“Impact investing is a crock! Those assholes lied to us!”). Social entrepreneurs shouldn’t feel like they have to be 100% financial sustainable to be successful. That is a nice-to-have, but there are billions of dollars being spent very poorly on development projects right now. Money is not an issue (Kiva, for example gets money with 0% returns) – impact is the problem. Similarly, investors shouldn’t measure success by the direct impact on the lives a certain number of poor people, or hitting specific targets in living standard improvement. They should invest in Africa, but do it responsibly. Stay away from oil, cigarettes, alcohol, or any other product that has a net-negative social impact, and focus on telecommunications, manufacturing, or even natural resources (so long as workers are treating well). Investment will generate employment, which, as Toyama says, is the real engine of poverty alleviation.

Until people recalibrate what it means to a) make money, and b) have an impact, and convey these goals honestly, I’m afraid social impact investing will continue to fall short of the expectations and face the same circular firing squad that has plagued other “silver bullets”, like microfinance. I think real social entrepreneurs and impact investors understand this push-and-pull. But Toyama’s intended audience is probably less informed about the realities on the ground, which is why he was giving the talk in the first place.