The Extraordinaries

Charity Is Not Always the Answer

There's been a great discussion over at Beth Kanter's blog on charity and social change. Serendipitously, I came across this apropos passage in Muhammad Yunus' book Creating A World Without Poverty last night:

"The importance of charity cannot be denied. It is appropriate in disaster situations and when helping those that are so seriously disabled they can do nothing to help themselves. but sometimes we tend to overdo our reliance on charity. 

In general, I am opposed to giveaways and handouts. They take away the initiative and responsibility from people. If people know that things can be received "free," they tend to spend their energy and skill chasing the "free" things rather than using the same energy and skill to accomplish things on their own. Handouts encourage dependence rather than self-help and self-confidence.

Even in disaster situations, Grameen Bank encourages borrowers to create their own disaster funds rather than rely on donations. When we were distributing free wheat to Grameen Bank borrowers during the 1998 flood, we encouraged them to agree to make small weekly savings in a disaster fund. After normalcy returned and they started earning money, that would eventually add up to the value of the wheat they'd received. This new savings pool will be a community fund to help them cope with the next disaster.

Handouts also encourage corruption. When aid monies are donated to help the poor, the officials who are in charge of distributing the free goods and services often turn themselves and their favored friends into the first beneficiaries of the program. 

Finally, charity creates a one-sided power relationship. The beneficiaries of charity are favor-seekers rather than claimants of something they deserve. As a result, they have no voice, and accountability and transparency disappear. All such one-way relationships are inequitable and only make the poor more vulnerable to exploitation and manipulation. 

To strengthen the capacity of the poor to create, expand, and improve their own communities, I would emphasize the creation of democratic institutions for local self-government... Paternalism, however well-intentioned, leads only to a dead end. When the poor have the ability to control their own destinies, they can achieve a lot more, a lot faster." (p115) 

I realize that Yunus is speaking about direct charity to the poor here - and the discussion at Beth's Blog has focused mainly on charity campaigns for organizations... but throughout the book, Yunus makes parallels to the poor and organizations who are also asking for money. In the book he outlines a type of social good organization - a "social business" - that does not ask for money and is self-sufficient. In sum, he approaches organizational doing-good just like programs for the poor - and leans away from charity in both cases. (although not as an absolute).

also see:

http://www.theextraordinaries.org/2009/03/social-media-for-charity-versus-change.html

and

http://beth.typepad.com/beths_blog/2009/03/sxsw-social-media-for-social-good-bbq.html

Nobel Laureate Muhammad Yunus, The Extraordinaries, and “Social Business”

WHAT’S AT STAKE

If we do things right, in less than one-year, The Extraordinaries has the potential to impact the way that 100 million people use spare time for social good.

In three years nearly 700 million people will use smartphones, and with The Extraordinaries software, they can plug in from anywhere on Earth within cell reception and start making a difference.

I have no illusions about the boldness of these statements, and I will not apologize for the audacity of our aspirations.

We’ve talked about our reasoning in many blog posts, so I won’t bore you with any further repetition of ideas on other pages of this blog. But to make sense out of the rest of this post, I had to revisit what’s at stake.

MUHAMMAD YUNUS AND “SOCIAL BUSINESS”

With competition winnings coming in, and with the impending launch of version one in the App Store, Ben and I have been struggling with finding the right business entity for The Extraordinaries.

Here’s the proverbial pickle:

“How do we create a business entity that allows us the greatest flexibility with business decisions (and therefore the best shot at being successful), yet still maintains the culture, philosophy, and social mission that Ben and I originally set out to accomplish?”

Forprofit? Nonprofit? B-Corp? L3C? (Ben’s got a great post about this thinking that he’s about to make live.)

But, nothing has seemed like the right fit, until Ben told me to walk into Barnes and Noble and buy a book called “Creating a World Without Poverty: Social Business and the Future of Capitalism” written by none other than Nobel Peace Prize winner Muhammad Yunus.

Here’s a video of Professor Yunus talking about his book, the work of Grameen Bank, and his new proposed system of social business:

WHAT THIS BOOK MEANS FOR THE EXTRAORDINARIES

In the most profoundly descriptive verbiage that I can find, let me say, “THIS BOOK ROCKS.”

The words on the first 40 pages leap off the paper – each paragraph brings the same clarifying fulfillment of the “plot twist reveal” in the last ten minutes of any Hollywood movie. Yunus explains the economic hardship of half the world’s population, the inequitable structure of current banking systems, government problems, the role of nonprofit organizations, corporate social responsibility, and his new proposal for “social business.”

I can say without question that this has struck a chord with me in a way like nothing before.

Here are a few quotes from the book:

“The company itself may earn a profit, but the investors who support it do not take any profits out of the company except recouping an amount equivalent to their original investment over a period of time. A social business is a company that is cause-driven rather than profit-driven, with the potential to act as change agents for the world.”

“A social business is not a charity. It is a business in every sense. It has to recover its full costs while achieving its social objective, [however] it is defined as a non-loss, non-dividend business. Rather than being passed on to investors, the surplus generated by the social business is reinvested in the business. Ultimately, it is passed on to the target group of beneficiaries in such forms as lower prices, better service, and greater accessibility.”

I could go on an on -- nearly every page of my book has scribbled notes in the margins and underlined sentences – but frankly, the first 41 pages are a must-read for anyone in the social sector.

I won’t speak for Ben, nor am I announcing our decision, but I can say with authority that this book has had a major impact on our thinking.

Read it.

Is there a crowdsourcing business model in Data Rot?

Just reading this story by David Pogue about data rot and wondering if there's a business model here for The Extraordinaries. In sum, new data storage formats leave the old ones in the dust. So, we've got cassette tapes and VHS tapes disintegrating in shoeboxes. And now there are companies springing up to deal with it. They'll scan your old photos and transfer your old tapes to the cloud. 

I’d imagine that there’s a concomitant problem with making sense of all the scanned and transferred material. It has to be organized/tagged somehow. Who is doing this work? Perhaps the crowd can do it – and maybe people will pay for it? Could we offer this kind of task as a way to support The Extraordinaries – by doing work for us that generates revenue – and thereby supports us doing the other non revenue generating work for social causes.

Making money as a journalist in 2010

Just want to clarify an idea that's been rolling around in my head for a while (by blogging it). Sparked to action by this tweet:

DailyMe#wemedia will kindle rescue print journalism? Dale: No. Notion of paying for content is an old media biz model 3 minutes ago from web

(NOTE: DailyMe is quoting Dale in the tweet above; it's not DailyMe's opinion. But the quoted tweet spurred me to write, so thanks DailyMe...wouldn't have been galvanized otherwise).

Perhaps there's a model where stories are delivered to the reader in the context of taking action and a percentage of the value generated by that action goes to the journalist. 

For example: if the story is about the ongoing plight of Hurricane Katrina victims and the action is giving legal advice at a low rate to someone who needs it... maybe the journalist/publication can take a small cut of this transaction. And/or, the reader can be asked if he/she wants to join an organization or purhase a product from a related entity. Eg: ActiveVoice.net wants you to watch its documentary film about Hurricane Katrina called Trouble The Water. Maybe they'd pay the journalist a couple of bucks per reader that agrees to be added to ActiveVoice's mailing list. Or, if they were sell the film online (they don't at present), a percentage of that sale.

In sum, the journalist creates a compelling narrative and then ties it into what the reader can do about it. The business model lies somewhere in the realm of monetizing the readers/doers' actions. I suppose the latter part of this idea is just like a Google Ad... maybe it's only the first "action transaction" part that is unique.

And, I know! There are a lot of problems with the system as described above... including integrity of journalism and logistics feasibility... but maybe there's a nugget here that one of you smart blog readers can fully extrapolate? 

Related post:

Future of Independent Journalism

Kyte, a similar business model

Jacob just sent me the link to Kyte: http://www.kyte.com/platform

A "Universal Digital Media Platform" - they've got an iPhone app framework as part of their package which was just launched yesterday. Check out the announcement and screenshots of sample output. They're using a model similar to one that we've been considering (but for social good focused crowdsourcing apps).... basically - create on the Web using a toolset and then publish to Web, Mobile, Widget, Facebook, wherever.... They build in various monetization schemes that you can use as a client:

* Ad integration

* Sponsored channels

* Ecommerce / micropayments

* Premium content

And then it looks like they charge a monthly fee using the SaaS model... although they don't list any pricing on the Website. Looks like they've got a good number of pretty high profile investors. Wonder how well it's going? Anyone have an inside scoop?

Verizon launches 7-Minute Abs!

Sometimes these tech announcements:

"Verizon expects 4G launch next year"

remind me of this great scene from "Something About Mary":

Virgance

Woa, over the last few days I've received about 6 emails and one article cut out of the Economist (from my ever-thoughtful wife) about these guys. 

"Virgance is a for-profit company that takes new activism ideas and uses the power of online social networks to scale each idea into a large-scale, citizen-powered global campaign to improve the world."

They seem to be a very like minded organization. Really interesting to hear how they've navigated the for/non-profit line. We've been struggling with this debate for the last several months... Thier crowdsourced philanthropy seems most interesting to me. Wonder how that's working out:

"Lend Me Some Sugar is a way to crowdsource corporate philanthropy. We ask corporations to give their philanthropic budgets to Virgance, and then we give our users the ability to determine where the donations should go. Our goal is to create a mutually-beneficial paradigm shift in power whereby citizens have a say in what charities and non-profits companies should support."

Some of the recent links:

http://www.virgance.com/about.php

http://socialentrepreneurship.change.org/blog/view/obamapreneurs_the_economist_gives_virgance_some_love

http://www.techcrunch.com/2009/02/11/virgance-harnessing-the-community-to-save-the-world-business-plan-included/

http://www.economist.com/business/displaystory.cfm?story_id=13031214

(why the heck does the economist online "close the comment window" ???, preventing new comments)

go to market: partner with businesses that serve people with spare time

Just wanted to document this idea that Jacob had for a go to market strategy. We could partner with businesses that serve people who have spare time. Starbucks is the prime example. Would Starbucks pay us (or co-promote us) to enable people to do social good on their phones while sipping their coffee? Could we deliver Starbucks related social good tasks via their in-store WiFi network (or by checking GPS)? Could you earn coffee points as you do good? Seems like a win for Starbucks. I know that this biz isn't on the top any social good lists, but there's a great opportunity here. Or does Starbucks just want to churn as quickly as possible? If not Starbucks, which other businesses might be interested and have some scale? 

Flickr photo credit: Starbucks uploaded by wolfsavard

Social Venture Capital & Business Models

Interesting article on social venture capital - saying that in these tough economic times, it's the one area that may still have some juice.

"...If you're looking for investment money during these tough economic times, then the way to go is with a business venture that's socially responsible."

Great! We've got one. Let's talk.
VC's mentioned in the article:
Good Capital - Kevin Jones, Tim Freundlich
Benetech - Jim Fruchterman

The thing is, we've been structuring The Extras as a nonprofit (501c3) and seeking foundation funding (which incidentally costs about $0.50 for every $1 granted). It also takes us off the radar of investors expecting a return (in dollars vs. exclusively social good). We have, however, been considering for-profit/non-profit hybrid models. We've got so much on our plate right now, but perhaps exploring this type of model should move up to the top of the list. There are a lot of opportunities to generate revenue such as:

• Licensing the software on a white label basis (you can use it to create almost any iPhone application, with crowdsourcing applications being the easiest to produce quickly)
• Charging nonprofits to participate
• Selling the 'volunteer' service to corporations
• Selling the application to organizations as tool for operating intra-organization predictive markets (i love this idea!)
• Re-selling to existing volunteer organizations such as Volunteer Match & that cohort (since our approach very much complements and extends their model)
• Selling sponsored listings (assuming we have a lot of people using the thing)
• Charging the end-user
• Selling user contact info to nonprofits (with user permission). This, being the way that petition-based organizations earn revenue.

What we'd love is a business mentor - or a smart and committed biz-school type who can hash through the possibilities and models with us. Any takers? Any feedback on the business model ideas listed above?