Active Investing & the Shift to Profit

At last week’s EVPA (European Venture Philanthropy Association) Conference, Pieter Oostlander, Managing Director of Noaber, discussed how active investing can multiply investment impact.

Noaber is an internationally charitable group which operates as a venture philanthropist under the Noaber Foundation label and a (social) venturer under the Noaber Ventures name. For venturing, the group deploys two separate funds. Hochst Investments Ltd is a venture capital fund that aims for a financial return only, whilst George Avenue LLP is a social venture capital fund that focuses on a a blended return (combination of a social and financial return).

Pieter shared the story of an organization that came to Noaber with a grant request for building a software program to use in schools for special needs students. Traditional foundations would have given the grant for the software. However, Noaber noticed that the software could and should benefit many other schools beyond the reach of the grant-seeking organization. Instead of simply funding the request, they connected the organization to partners and developed and sold the software. Now, the revenue is enough to return money to investors and provide funds for maintenance, which would otherwise be funded through additional grants. Noaber have also identified new applications and markets for the software. By offering connections, assistance and advice, they multiplied the impact of their investment.

I couldn’t hep but get excited about the idea of NGOs-turned-social-enterprises and this new wave of philanthropic investment. When a few friends and I started what was to become Reach the World – Chicago in 2004, we were at university. We knew we wanted to create a web-based, but dynamic educational program for kids that would connect them to a more global education. We didn’t know a lot else – we were juniors in college. We met with professors at Kellogg and Northwestern and took in advice from many sources. For a brief period, we were adopted by the Kellogg Social Enterprise Incubator, but promptly booted out when they decided to reserve the honor only for masters students. During this time, we settled upon the nonprofit business model and incorporated as Tradewinds Educational Resources. Days after graduation, we drove to New York City and met with Heather Halstead, founder and Executive Director of Reach the World. A few weeks later, we were the Chicago branch of Reach the World.

After a successful 6 years, RTW-C is exploring ways to move toward a profitable approach. If we had been advised early on to structure it as a social business from the start, we could have created a better program, faster, with the ability to pay a full time director from the get-go. Significant impact has been achieved, but I believe the shift toward profitable enterprise will bring a range of new opportunities and increased impact.

The social landscape is changing and with the growth of active investing, its horizons are growing exponentially. It’s an exciting time to be in the social business world.

Fast Fashion: Fast Landfill

Business school professors have fallen in love with fast fashion. Characterized by small production quantities, fast moving inventory, assortment rotation and quick response, the likes of Inditex’s ZARA retail chain are making a killing with the aid of slick IT systems and supply chain logistics. It’s no wonder we are being preached the wonders of this new consumption vehicle in nearly every class – from the perspective of Marketing to IT, Strategy, Operations and even Business in China & India, the model is admirable.

Indeed, Inditex has changed the way people buy clothing. Just like how McDonald’s revolutionized the restaurant industry, ZARA and other stores have encouraged people to consume and dispose of fashion like never before. Whilst this is obviously good for the economic bottom line, what are the implications of fast fashion on the social and environmental “bottom lines”?

1. More CO2 emissions from increased shipment?
It seems that the fast fashion model would create more CO2 and more waste. However, it is possible that producing in large quantities from farther away locations (Asia to Europe twice a year) could create more CO2 than those produced by smaller, frequent and closer shipments (from Europe to Europe).
2. More waste from disposable clothing?
With this shift, seems to have come a shift toward lesser quality, or in the least, expendability – ZARA says their clothes are designed for 10 wears. As people buy higher fashion more frequently, they create more waste as their clothes fall apart. There is also waste created by unsold items from the “slow fashion” model, but these clothes can be sold and used by other markets, whereas used clothing waste is simply waste.

Perhaps the continuous factory jobs are good for development in some countries, but this too is not likely to create a big impact considering that the clothes in the Fast Fashion model are produced in more developed countries.

While the data is lacking, it is clear that fast fashion (also, in electronics) encourages consumption and disposal, which if not dealt with properly, could lead to significant increases in waste and pollution. What are companies doing to ensure their customer loyalty strategy doesn’t ruin the planet?

Crisis? What Crisis?

Friday we had a fantastic guest speaker at IESE – Nando Parrado. Many are familiar with the story: his rugby team was flying from their home in Uruguay to Chile for a game. The plane crashed in the Andes and 15 survived after 72 days in the mountains. Nando was one of two who hiked out and sent helicopters back to rescue the rest. . It was the most moving and personal, as well as inspirational and motivational speech I’ve ever heard. He didn’t talk about his own numerous business successes, just about his story and life. It’s rare to find a speaker with such amazing credibility when it comes to perseverance and teamwork, and so humble. He colored in, in black and white, the things that matter: Family, friends, staying alive.

At the end, nobody could talk. He had packed this center of 800 people from around the world (the executive and African programs were on campus in addition to us MBAs and all the aisles and walls were lined with more people) – and he calmly asked for questions at the end, but I don’t think anyone had anything to ask because any question seemed unnecessary. The whole place was dead silent after the applause, and we were all standing up from it, but sort of frozen not wanting to leave: awed, inspired.

His entire demeanor made me, and probably everyone, understand that he’s been to another level of thinking and existing that puts life into sharp perspective. The title given to the lecutre, “Crisis? What Crisis?” makes that point.

Nando talked about the team knowing one another quite well before the accident, and how quickly they organized themselves to face the challenge of living in the Andes. He talked about returning home after all this to find his belongings had been given away or sold: How easily the world continues without you. Yet he managed to get his life together. The teamwork and perseverance they exhibited are unbelievable. The element of chance, too was frightening. He said that since that experience, he’s never had trouble making a decision.

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If you want to learn more, you should see the “Stranded! The Andes Plane Crash Survivors 1/11″ clips on You Tube. There are 11 segments uploaded to complete the video. It captures the incredible brotherhood far better than the Hollywood adaptation, Alive, does.

Slumdog 100Rupee-air

This was the first time I spent my entire time abroad as the only person from my country/ school/ company/ group. I learned a lot and probably a lot more than I know I learned in some areas, and a bit less than I think I learned in others.

I was to spend the first week doing nothing but reading up on Indian labor markets, history, and the state of urban poverty, micro insurance, and many other topics. I was located within the Labor Markets Cell at the Tata Institute of Social Sciences – amid PhD candidates tiring over pressing issues in labor economics and urban poverty. These local experts and resources helped me learn about the culture and history so when it came time to apply my foreign perspective, it would actually mean something, which I hope it did.

I’d like to share a bit from an informal discussion with some of my colleagues about the perceptions around the movie Slumdog Millionaire. In a speech class during the first year of the MBA, an Indian classmate had proclaimed it a fantastic movie – we should all see it. I had seen it, enjoyed it in parts, and been charmed by the music, speed and chaos it captured.

Throughout my research, I learned things about India that made me change my original opinion of the film. I realized suddenly how unbelievable it was that Jamal came out of the slums to get a job as a tea walla in a call center. This was absolutely absurd upward mobility! Where did he learn English? How did he jump into the 3% of the population with formal sector employment? It angered me that the film portrayed this incorrectly. Understandably, movies are movies, but to make such a leap in a movie arguably intended to open the eyes of the Western world, seemed unjust. I asked my co-workers for clarity.

“It’s an outsiders anthropologic perspective of India,” they said, “It’s poverty porn.” “Middle and upper class India like it. People who like to think things are changing like it. It’s a happy movie. People can brush everything under the rug again.” Someone else added, “I think there were riots in the slums over it. People don’t like when they are misrepresented.”

I suddenly felt guilty for my own perception of India. The colors, the vibrant, chaotic, whir is such an overwhelming experience for the viewer that one can too easily forget that it is life for the viewed. Indeed in the movie, there was a distinct feel of looking at something from a removed perspective, not the insight of an insider. How dangerous that I only learned that after hours of research and conversation! It seems to me that some people never have to think about this because they innately get it and some people never will. I hope now I will be more aware.

I think music compatibility is really imperative in a marriage. I mean, just imagine if Thom didn’t like Toto. Where would we be?

Art and writing professors I’ve had, please weep with me as I work in the medium of PowerPoint.

Indie music, social media, board games, late nights at modern art museums, DIY… It is great to be with you all in this age of DorkLightenment.