Monkey business

Behavioral economists have are enjoying their day in the sun. They got it right for recognizing that there are limits to our rationality and there are major problems when we design systems - from financial systems to health care systems - that ignore this truth.

Dan Ariely who I've written about in a semi-fawning post (ah, love the man) is just one of the best behavioral economist who is standing on the shoulders of giants of the field. We all share systematic decision-making biases and a new study shows we share this with our monkey friends. Keith Chen, Laurie Santos, and Venkat Lakshminarayanan, recently published a paper "How Basic Are Behavioral Biases?: Evidence from Capuchin Monkey Trading Behavior". The abstract is worth a read if you aren't interested in the full paper.

Behavioral economics has demonstrated systematic decision-making biases in both lab and field data. Do these biases extend across contexts, cultures, or even species? We investigate this question by introducing fiat currency and trade to a colony of capuchin monkeys and recovering their preferences over a range of goods and gambles. We show that capuchins react rationally to both price and wealth shocks but display several hallmark biases when faced with gambles, including reference dependence and loss aversion. Given our capuchins’ inexperience with money and trade, these results suggest that loss aversion extends beyond humans and may be innate rather than learned.

The below picture shows you our irrational little cousins!


Thanks to Matt Yglesisas for hat tip to this research.

Guest Post: Camp Good Days Fundraiser

The following is a guest post by Sarah Lowenstein. Sarah and I will be hosting a fundraiser for Camp Good Days on Wednesday October 7th in NYC.

Please go here to purchase tickets or donate. We look forward to seeing many of you there!
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On Wednesday, October 7th , we are hosting a fundraiser for Camp Good Days, an overnight camp for kids with cancer in Upstate New York.

Since its creation in 1979, Camp Good Days has grown to provide programs and services not only for kids with cancer, but also kids who have or have lost a parent or sibling to cancer, adults with cancer, children with sickle cell anemia and children who have lost a family member to violence.

Camp has been a part of my life for the last ten years, and this past summer I had the privilege of conducting research with some of the campers in their homes and at camp. One general finding that came out of this research is something that any camper, counselor, family member or visitor could tell you after spending just a few short hours there – that being a part of Camp Good Days is an invaluable experience that affords these kids opportunities that they would not be able to get anywhere else.

Why?

Many campers have told me that camp is one of the only places that they can feel “normal.” One young camper told me that at camp you can “push cancer away like it doesn’t exist, you can stop talking about cancer for once and about how we’re all different from everyone else.” Another camper explained, “[At camp] I felt less like an alien. Not like, ‘hey I have this disease and no one else has it.’ But a lot of people have it!” Camp is a place to compare stories and scars, to feel a sense of community and even pride for having been through this common experience.

Camp gives kids with cancer the opportunity to be around other kids that “understand.” Many of these kids don’t have friendships with any other kids with cancer before they go to camp. Not only are they constantly forced to field questions about their illness, they also have to endure their peers’ often insensitive responses (“Whaaat?!?! You’ve had CANCER?”) For some, the simple freedom of not having to explain to every new acquaintance the basic facts about cancer, chemo and radiation is what sets camp apart from everywhere else in their life.

Camp also gives kids the opportunity to do things they would not otherwise be able to do. Because it is offered free of charge to the families, for some kids this simply means being able to go to any camp at all. For all campers, it means being able to try new activities, meet new people, be away from their families and their everyday lives - which for many include routine medical procedures, often painful and disruptive.

And of course, as one very young camper so accurately put it when I asked him what the best part of camp was – “having fun, duh.”

These kids have had to face, at a very young age, one of the most daunting challenges that a person can experience in a lifetime. Some would argue that they have had their childhood taken away, in a sense. However, what these children have gained in return is a sense of strength, optimism, maturity, tolerance, and a tremendous love and deep appreciation for life.

Recently, I was taken aback when a young camper told me that she may have cancer for the rest of her life, and not one minute later told me that there are so great things in her life she doesn’t even know if she could list them all. It was certainly clear that I was talking to someone wise beyond her very few years.

As our fundraiser approaches, please consider donating to Camp Good Days, regardless of if you can attend the event - although we would love to see you there! Please help us to ensure that these extraordinary children have the opportunity, for one week a year, to “just be kids.”

Impact Investing to Solve Social and Environmental Problems

Here is my 2nd post from Socap, again re-posted from NextBillion.net, a powerful convening point for leaders, social entrepreneurs, NGOs, policy makers and academics who want to explore the connection between development and enterprise.

The topic is Impact Investing - the practice of making profit-seeking investments that generate social and environmental value (read more here) - and where we might go from here.

Impact Investing is important because public money and aid is not enough to solve the social and environmental problems we face. We need private capital to support innovative and entrepreneurial approaches to solve the problems of global poverty and to help avoid further environmental damage. NextBillion and in my organization the Global Impact Investing Network tries to support - by highlighting great work, advocating for policy change, producing research, educated leaders and investors, and channeling capital - strategies that bring opportunities and improve the lives of the world's approximately 4 billion low-income producers and consumers and drive us all towards a healthier planet.

At the GIIN we will help support a group of leaders to work together effectively to accelerate the pace in which the impact industry matures. We will work to increase capital flows to innovators working across the globe to solve our gravest social problems. Along the way, we will make more people in high places feel a little less comfortable with the current distribution of money, medicine, and basic services in the world (re: my reading of Paul Farmer).

Time to work!

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Social Capital Markets 09: Forecasting a Marketplace

What is the future of the impact investing marketplace? Where will the social capital market be in 2010? Those with the unenviable task of taking on this questions in the Wednesday morning plenary at SOCAP09 where Charly Kleissner from the KL Felicitas Foundation, Dan CrisafulliSkoll Foundation, and Amit Bouri from the Global Impact Investing Network (GIIN). SoCap convener Kevin Jones moderated.

Matthew Bishop wrote in the Economist before the conference that SOCAP08, "proved long on optimism but rather short on coherence." Our 9am futurists were skeptically optimistic, but argued that growth and maturity for this field could only come through dedicated collaboration. This message reinforced what Willy Foote of Root Capital said the night before that we "need to be pathologically cooperative with would-be competitors." Thankfully each panelist has collaboration written in their job descriptions and are all in positions to help drive coherence and scale to the field.

Kleissner started with a sobering note about the strained carrying capacity of our planet. With our population growing, the reality of scarce resources opens up opportunity for actors to maximize return at the expense of sustainability - a tough trend to counter. He followed with the acknowledgement that impact investing is still a rounding error in the current capital market and "CSR in the U.S. is merely a marketing band-aid." Further, the fiscal crisis has wounded all portfolios and as Kleissner noted, "the people are on the sidelines last year are still on the sidelines - and they are more scared."

At the same time leaders in the space are "stepping on the gas" and increasing involvement. KL Felicitas' portfolio as one example has 45% of investments in impact investments today and is targeting 100%. By making their portfolio strategy and results open to all, Kleissner is both inspiring and enabling others to develop or increase their mission and program related investments. Kleissner predicted a tipping point for impact investing in 2015 reaching a 5-15% of the total capital markets (a bold claim seemingly out of line with his other predictions, but I'd love if he proves correct).

Amit Bouri built on these comments while being clear that "while he was not trying not to paint too rosy a picture, there was clear momentum we can build on as a field" There was evidence the impact investing field was going in both depth and breadth. Players like responsAbility and Gray Ghost Fund continued to raise capital and post returns even in the depth of the downturn. Mainstream players like TIAA-Cref, Prudential, JPMorgan Chase and others are increasing their impact investment activity. There has been a greater level of public-private partnerships and many more deals referred to in the Monitor Institute report of 2008 as "Yin-Yang deals."

One great example of such a deal is how AGRA and other partners made a $10 million loan guarantee fund, allowing Standard Bank to make $100 million available for lending over three years to African small-hold farmers. While impact investing is still an underleveraged niche, coordination and sophistication is growing.There's a long way to go.

With proliferation of funds, Bouri warned "we'll see increased scrutiny and demand for data on impact investments." As Brian Trelstad of Acumen Fund noted that day, "Right now our investors care that we care about metrics, they don't care as much about the metrics themselves. And that will change." To solve this problem and ultimately drive more capital to impact investments, the GIIN (of which I am an employee as a disclaimer) and its partners including B Lab, Acumen Fund, PricewatershouseCoopers, Deloitte, The Rockefeller FoundationIRIS).

These standards will be key to improving the effectiveness of impact investments through performance measurement, while allowing for benchmarking on social metrics in addition to financial returns. Bouri added that field-building projects such as IRIS will only succeed with the support and adoption from leaders of the field. Just as the growth of the venture capital industry took committed investment from leaders and academics to grow and scale, the impact investing community will need similar commitments.

Dan Crisafulli, perhaps the least rosy of all, reminded us to "keep in mind the tough realities." Our current problems are getting worse (e.g., climate change, global conflict) and we won't return to the wealth generation of the past. Crisafulli preached that the promise of social impact is not to make us feel better or give us a fuzzy feeling from doing good, it is to scale social impact with major amounts of capital to reverse trends on major global problems. While he was preaching to the choir on this day, Crisafulli's articulation was a reminder of the messages we need to bring outside of the confines of an insider conference.

So how can we get to a brighter future Crisafulli asked? "Social capital" will not be sufficient - we'll need to mobilize dramatically more support from the government and private sector. On the private side, we need more highly scalable business models beyond microfinance drive investment capital at the scale that is needed. As far as business models and transparency, Cristafulli stated "businesses either need to be paid for their social impact or someone else needs to be paying for it." If the latter, the social subsidy needs to be made clear and not hidden. Further transparency and lower transaction costs can also create a more efficient "conveyer model" from seed to growth capital to later stages of investment capital that doesn't exist today. On the government side, the bigger value will be from policy rather than funding (the size of the Social Innovation Fund on Day 1 was a stark reminder of this fact).

All panelists agreed that growth of this industry is not in any way inevitable - it instead will depend on the willing commitment from leading actors to build industry infrastructure and build a unified voice to lobby for specific policy/regulatory change. Just as important, we'll need to share best practices, business models, deal, and metrics.

Greater transparency will not only drive search and transaction costs down for the current players, but also help attract new players. Kleissner stated how it "amazed him that his rich friends didn't fire their advisors and seek out new models" when they lost 40% of their money with current advisors. Unfortunately, the endowment effect and status-quo bias and other realities of human nature are hard to shake - they give out Nobel Prizes for studying how people make decisions that appear inconsistent with standard economic rationality. (Note: See behavioral economist Dan Ariely's TED Talk for an entertaining explaination).

While we can't change human nature, we can work together to achieve and then showcase the promise of impact investing to those still on the sidelines. While the crisis has shaken the confidence in established investment approaches, we need a louder and more unified voice to change the minds that matter. from the and others have been developing standards for measuring and communicating the social impact of investment known as The Impact Reporting and Investment Standards (

Sexy Metrics (reposted from Next Billion)

This week I attended the SOCAP conference in San Francisco for people at the intersection of "money and meaning." I attended as a representative for my new employer (!) The Global Impact Investing Network (GIIN) and was asked to write a few posts for Next Billion during the event. This post covers a panel on social and environmental metrics, the hot topic at SOCAP, and something I've been jazzed about since my work with Acumen Fund (see my post on their blog).
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Social Capital Markets 09: Metastasizing Metrics

Hal Varian, chief economist at Google, has said that the sexiest job in the next 10 years will be statisticians. It was clear statistics, data, and metrics - in this context to measure, report, and track outputs and eventually outcomes of our work - were indeed sexy topics throughout the first two days of SoCap.

Believe it. Nearly every panel in some way brought up the need to increase transparency and credibility in how organizations define, track, and report on the social and environmental performance of their investments - whether they be in nonprofits or for-profits. When some of the leaders of this metrics movement gathered for a panel to discuss our emerging solution, the people came in droves. The room, set to fit 50-60, had at least twice that many people in the audience when the session started with managing directors at foundations, social enterprise founders, and nonprofit executive directors watching from the back without seats.

The panel they came to see included Brad Presner of Acumen Fund, Steve Wright from Salesforce.com Foundation, Kevin Starr of Mulago Foundation, Laura Callanan of McKinsey, and Margot Brandenburg of Rockefeller Foundation. Lucy Bernholtz of Blueprint R&D was charged with the task of letting each speaker talk about their role in the evolving impact metrics field (while limiting long-winded self-promotion) and leaving enough time for a vibrant Q&A (while cutting off speeches masked as questions). She led by calling metrics "the carbon in the ecosystem of impact investing space" (oxygen being the policy), before passing it off to her panelists.

Presner talked about Acumen's portfolio data management system, called Pulse, that helps impact investors manage their performance more effectively and efficiently. Built with Google and Salesforce, Pulse was created at first to replace spreadsheets as a better way to track impact metrics over time across the Acumen portfolio from hospitals in India to bed-net manufacturers in Tanzania.

While the system was valuable internally, what was missing was a way of seeing how the Acumen portfolio was benchmarking vs. peers. To allow for side-by-side data management, they encouraged others to track their data using the Pulse, which is now available for free download from Salesforce.com. Presner told the crowd that leaders of the field who had spoken throughout the day, including Root Capital and E+Co, were early adopters.

Pulse is fully integrated with Impact Reporting and Investment Standards (IRIS), the project Margot Brandenburg of the Rockefeller Foundation has been working on with B Lab, Acumen Fund, PricewatershouseCoopers, Deloitte, the GIIN and others to build a common set of definitions used to measure social and environmental impact of investments.

When Rockefeller interviewed impact investors across sectors at the launch of their initiative on Impact Investing last November, Brandenburg explained that reoccurring issue that investors highlighted that would enable them to implement more money, more efficiently in impact investments what as consistent set of social metrics and common definitions for nonfinancial terms. A common taxonomy was needed to as the base for a number of projects - from a single rating system for investors to a market intelligence database. Most importantly Brandenburg highlighted, was this taxonomy needed to be consensus-driven and adaptable. IRIS and Pulse have both been driven by a transparent and inclusive governing process that has been driven by feedback from the actual users of this data from the start.

Wright from Salesforce talked about his project to help nonprofits to use effective data management tools to know whether or not their projects are working. Wright noted that "improving efficacy of the nonprofit sector, starts from driving efficiency at the single organizational level." Callanan at McKinsey is similarly trying to help individual organizations more efficiently track data but building a database called TRASI (Tools and Resouces for Assessing Social Impact). TRASI, due out this fall, is an open clearinghouse for tools that is easily searchable and filterable. Starr, from Mulago, said current attempts to measure impact are "too complicated and not rigorous enough.

The heat in the room rose as the questions came in from the audience. The questions and answers dealt with the obvious tensions in the room from those being rated and those doing the rating, from those seeking funding to those with dollars to disperse, from those in offices in Manhattan to those running social enterprises in Rwanda.

When Starr was questioned about the "slippery slope" of trying to measure attribution from an organizations work, he responded, "Why would you fund something that you don't think causes outcomes?" This followed with a headed discussion distinction between measuring "outputs" rather than "outcomes." While some advocated random controlled experiments to drive to drive to better answers, others questioned the efficacy of these studies.

David Bonbright pushed the group to instead think about a range of methodologies that is triangulating to causation. Brandenburg talked about the need to understand the nuance of data and circumstances on the ground, while also delivering data at the appropriate level for different audiences, including investors who don't want social science data. She noted, "We don't want to abandon obligation for intellectual honesty, but need to make data useful. We can't overwhelm people so they throw up hands." In other words, if we want the investors to pour in the private capital money that is needed to scale market-based solutions, we need to deliver the breadth and depth of data that investors need.

Other questions focused the cost and feasibility of evaluation for bootstrapped organizations. Callahan highlighted how the TRASI tool will let organizations find the right studies for their cost and stage of their growth - and they need to "apply rigor within reason." Panelists acknowledged the costs of reporting, but talked about various ways to minimize cost by working as sector to do the heavy lifting on technology and taxonomy tools. By unifying a network of funders along a common set of reports and metrics, organizations reporting burden can move down and ultimately more dollars can drive to high performing organizations.

The panel responded to the related concern that metrics can be used as a tool to de-invest in organizations. Wright responded with the broader comment that regardless of sector or geography, metrics will help investees become better at measuring what they do and in the end more effective at driving outcomes. Money will flow more efficiently to projects that are working. The danger of course is we are measuring and therefore rewarding the wrong set of metrics. Presner and Acumen Fund kept this concern front and center when rolling out Pulse to their investees, "Organizations will see it as a cost if it is not helpful to them to achieve their mission. They won't get a benefit if what is being measured isn't what is applicable to them."

As Rob Katz predicted before the conference, this was not a 101 panel that stayed at the level of introduction or hyperbole. Metrics are sexy, but metrics are contentious. It was obvious that we still have a long way to go to drive coherence to the marketplace and consensus to drive scale. Ultimately everyone in the room wants to drive more dollars to more solutions to fight big world problems and see the world we want to see. As Andrew Kassoy of B-Lab so eloquently put it later that afternoon, "In this space, we are so naturally fragmented by people's passions. We need to put aside some agenda for the greater good and work together." Amen.

The alchemy of suffering

Last month I took the month off from writing - hence the silence. Instead I've done more reading.

This mostly has been driven by a change in my life – having recently switched jobs – and the feeling that I have so much to learn to prepare for the new world I’m entering. This has also been driven by my desire to listen more, absorb more from other people, and talk/preach/rant less. I’ve also wanted to unplug a bit and read good ol’ fashion books. While I used to read a book for about an hour a day – I was picking through my parents bookshelves while home in early July and had the realization that I hadn’t read a book start to finish in an uncomfortably long time.

During August I’ve read two very important books and started a third. All were non-fiction and by the first few pages in of all three I had this magical feeling that I was meant to read that book at that time in my life. I intend to write about Death be Not Proud (John Gunther), Mountains Beyond Mountains (Tracy Kidder's biography of Paul Farmer), and Development as Freedom (by Nobel Laureate Amartya Sen) over the next few weeks.

I read Death Be Not Proud based on a recommendation from Brian Trelstad of Acumen Fund. I met with Brian to tell him about my new job and mentioned that I was headed off to be a camp counselor for my vacation week b/w jobs at Camp Good Days, a camp for children who have been touched by cancer. Death Be Not Proud is a memoir written by a father (John) about his son Johny’s final months fighting a brain tumor in the 1940s. “You must pick it up today and read it before camp” I was told.

I started it Sunday afternoon as I headed off to camp. I finished it just as I was assigned for two days to care for a 12 year old boy named Tristan who has a terrible brain tumor. By all accounts I received he will not live through the year. Both the book and my time with Tristan were difficult to get through, but the literary and life experience I had over the past week were formative.

While I loved John Gunther’s work and could write for pages on the many powerful passages, I was particularly struck by his wife Frances’ note at the end. She writes after Johny has passed:

“I wish we had loved Johny more when we was alive…What does it mean? What can it mean now? Parents all over the earth who lost sons in the war have felt this kind of question, and sought and answer. To me, it means loving life more, being more aware of life, of one's fellow human beings, of the earth. It means obliterating, in a curious but real way, the ideas of evil and hate and the enemy, and transmuting them, with the alchemy of suffering, into ideas of clarity and charity. It means caring more and more about other people, at home and abroad, all over the earth.”

The “alchemy of suffering” in a way represents how I felt as camp. It was hard to see kids dealt such a hard hand in life, but I left the week so refreshed, feeling so energized, and in many ways appreciating life and the cards I was dealt in a new way. Tristan and his fellow campers have to go through childhood while doing rounds of chemo and losing their hair, while being held out from sports or held back a grade b/c they miss too much class, while losing limbs or their vision, while gaining weight b/c of medications, while having to explain to friends why they can’t come over and play even when they desperately want to.

But these little warriors don’t sit around and complain – they have courage and they fight. They appreciate life like I never did as a kid and they are more thoughtful, caring, and kind than most kids and adults I know.

10-year-old Mitchell told his mom that he wanted to shave his head before camp b/c he felt bad that he has hair and other campers don’t.

8-year-old Ellie sometimes gets frustrated that her brain tumor has rendered her blind. But when she gets sad and hung up on this fact, she puts her tiny fist up against her dads and repeats, “Courage, strength, and dignity.”

17-year-old Arancha let little squirmy little Ellie sleep in her bed to make her happy.

12-year-old Katrin limped proudly on to stage at the talent show, sang a wonderful rendition of Taylor Swift (or something of the genre), and brought the house down.

And 12-year-old Tristan, a former skateboard dynamo, didn’t let his wheelchair ruin his time and get in the way of his priorities. He woke me up – passed out next to him after a long day in the sun – to remind me it was time for “tuck-ins.” Tuck-ins happen at the end of each day when the boys and girls line up and every boy says good night, shakes hands, or hugs every girl before bed. Tristan wasn’t going to miss that because his lazy counselor passed out early!

To me the “alchemy of suffering” is that the world has more of these special kids around. I was lucky to read this memoir and even luckier to spend a week at Camp Good Days.

What we're reading

Yesterday I came across two new sources with the title: "What we're reading" from the One Campaign and New York Times.

To stay informed and do their job effectively, the One Campaign communications team scans the web to stay up to speed on what is going in the world of global development. They then curate this information and provide readers with a daily digest or articles documenting the fight against global poverty. In the appropriately titled What we're reading page, you can get this daily dose. I've been reading these links for a couple days and am quite sure this will be a resource for me for years to come.



At NYT, the Bits blog just officially released the What We’re Reading feature last week. This is a curating tool of all articles, blog posts, and pages that caught the attention of the technology reporters and editors at the NYT.



Scott Karp at Publishing 2.0 has a great write up outlining 6 ways why this is smart journalism.

1. Make it a collaborative effort. Even curation takes work!
2. Comment to explain why the link is worth clicking. NYT tech journalists tell the reader what is interesting about the article and that differentiates the service from a computer algorithm. It's like a tweet of the description field of a social bookmark.
3. Attribute links to individual journalists. As Karp notes, "Blogs on news sites are a great way for journalists to build up their personal brands — sharing what they’re reading is an extension of that."
4. Share links on Twitter. A throw away lesson maybe, but important nevertheless.
5. Integrate into existing workflow. This is the most important lesson and something highlighted often by people who study social media adoption in large enterprises. In the paper, Six ways to make Web 2.0 work, McKinsey analysts highlighted this important point.

"Perhaps because of the novelty of Web 2.0 initiatives, they’re often considered separate from mainstream work. Earlier generations of technologies, by contrast, often explicitly replaced the tools employees used to accomplish tasks. Thus, using Web 2.0 and participating in online work communities often becomes just another 'to do' on an already crowded list of tasks.

Participatory technologies have the highest chance of success when incorporated into a user’s daily workflow. The importance of this principle is sometimes masked by short-term success when technologies are unveiled with great fanfare; with the excitement of the launch, contributions seem to flourish. As normal daily workloads pile up, however, the energy and attention surrounding the rollout decline, as does participation."

By integrating this into the existing workflow of journalists and making the process incredibly simple (in the case a very simple browser plug-in) journalists actually use these services.

6. Complement original reporting. There is clearly value from related articles, posts, or simply reading what is on the mind of these journalists. If we care about their outputs (articles), I certainly care about their inputs (what they're reading).


Sharing is caring, keep it coming!

Apple's next moves..

I've been yapping for a while now on two points: 1) that mobile data connections will mean the end of voice service, and 2) The capabilities of the iPod touch as a phone.

In this Wired article Apple Preparing iPod Touch as With Camera and Phone, both are looking much closer to reality.

My further hunch is that with all my important contacts on GMail now, I'll be using Google chat for communicating on my phone- using standard chat, voice, and video.

Rumors have swirled about Apple readying a new version of the iPod Touch with a camera and microphone, which, combined with a Skype account, would pretty much obviate the need for a home phone line once and for all.

A well-connected source tells us those rumors are on the money, and that Apple’s factories in China are already manufacturing iPod Touch models with integrated cameras and microphones. An Apple spokesman declined to comment when reached by phone.

If iPod Touches with cameras and microphones go on sale “in two to three months,” as our source expects them to (and which corresponds with our expected timeframe), they will transform the entertainment-oriented iPod Touch line into a voice communications tool wherever WiFi is available.

In addition to these voice-over-IP capabilities, which should have telephone providers quaking in their boots, the microphone (and camera) would enable the iPod Touch to understand voice commands, capture video and images, and work with a wider variety of programs in the App Store.

(Plus, as some Wired commenters have suggested, one could combine a microphone-equipped iPod Touch with the Verizon MiFi personal hotspot creator to enable — at long last — the iPhone experience on Verizon’s network.)