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Sally Osberg at the Yale Club of New York: “New Directions in Philanthropy”

March 10, 2009 by
 
 
 
 
 

Sally Osberg delivered the keynote presentation — New Directions in Philanthropy — at the Yale Club of New York on March 10, 2009.

Thanks so much. It’s wonderful to be here with you all, to see many friends in the audience—and to acknowledge Yale’s exceptional role in nurturing so many powerful agents of social change over the years, with more than a few of you here tonight among them.I’m happy to be here and have a chance to share some thoughts about this phenomenon we call social entrepreneurship and how the Skoll Foundation pursues its mission to drive large scale change where it matters most by seeking out and investing in folks we think of as the world’s most exceptional social entrepreneurs.

A bit of history to start us off. Jeff Skoll – our founder – didn’t stray too far from his roots in founding the Skoll Foundation.  A serial entrepreneur – who did OK with a  little startup called eBay – Jeff was drawn to what he recognized as “a special kind of nonprofit leader,” folks he first began meeting upon founding the eBay Foundation—which he created for the company in a unique way: dedicating pre-IPO shares of eBay stock to seed an endowment that soared to more than $35 million upon the company’s public offering in 1997. Two years later, Jeff launched his own foundation, and two years after that, he recruited me to partner with him to design the Foundation’s strategy and get to work.

In 2004, capitalizing on five years of experience in investing in social entrepreneurs, we integrated an issues framework to ratchet up our investment discipline. This framework encompasses 6 content areas: Tolerance and Human Rights, Health, Environmental Sustainability; Peace and Security; Institutional Responsibility; and Economic and Social Equity. We have come to believe it’s not enough for those blessed, as we are, with resources to make a difference in the world simply to identify and invest in social entrepreneurs—we must intentionally look for that intersection of promising solutions and pressing problems. Today, that discipline is front and center for us as we scout for those social entrepreneurs with a shot at achieving not just great results but lasting change where it is needed most.

Over the last six years, we’ve been heartened to see social entrepreneurship gain traction as a model for driving social change.  More funders are backing social entrepreneurs, both the business and mainstream media use the term and cite the exemplars, colleges and universities around the world are teaching social entrepreneurship, and the White House has embraced the paradigm with its domestically focused Office of Social Innovation and, next month, its global Summit on Entrepreneurship, which will include both social and commercial entrepreneurs working in Islamic countries.

And yet, people are still somewhat flummoxed about all this .  Are social entrepreneurs business people running charities?  Nonprofits acting more like businesses?  Both?  Neither?

I don’t promise to clear things up definitively, but I will give you my take: I’ll start by tackling some fictions, fix on some facts, and close with some possible futures. And just to keep that “F” theme going—I’ll stick with five for each of those fiction, fact, and futures categories.

Starting with 5 fictions.

FICTION #1 – Social entrepreneurship is just a fad,  cooked up by Silicon Valley types who have an issue with traditional philanthropy.

A corollary of this fiction is that social entrepreneurship is really just a way of gussying up the non-profit descriptor-that there’s really no difference.

Neither is true.  Social entrepreneurship, first and foremost, is entrepreneurship. Both the concept and practice of entrepreneurship have been around for hundreds of years, way before the Apple Computers and Googles of the world.  As early as the 16th Century, the term was used to describe someone who undertakes a business venture, and by the 18th Century, economist Richard Cantillon introduced idea that the entrepreneur is one who bears the risk of bringing an idea or innovation to the marketplace.

And just as entrepreneurs are distinct actors in the business world, so social entrepreneurs are distinct actors in the social sector.  (Fred Adair and Ginger Rogers slide is next)

Recognize this couple?

I like to characterize the social entrepreneur to the entrepreneur as Ginger Rogers to Fred Astair: social entrepreneur has to do everything the entrepreneur has to do—but backwards and in high heels.

Social entrepreneurs, like entrepreneurs, are game changers—they are pioneers of innovations whose purpose is to benefit humanity.

Social entrepreneurs are out to change the status quo—what Roger Martin of the Rotman School of Business at the University of Toronto and I have characterized in an article in the Stanford Social Innovation Review as societal equilibria that reinforce human suffering, marginalization, and oppression—that hold people back from realizing decent lives and their human potential.

Social entrepreneurs, like entrepreneurs, see opportunities where others see intractable problems. Fueled by the power of their visions, they assume the risk of building ventures, generally in the form of organizations, to drive their innovations forward, to bring their vision for change to fruition.

In both their way of working and their zeal to effect equilibrium change, social entrepreneurs are different from social service providers and social activists. This matrix, drawn from Roger’s and my article making the case for a rigorous definition of social entrepreneurship, locates the different models along two axes-the lower axis is the envisioned outcome for the work—whether the goal is simple improvement or ultimate transformation of an existing system and the left-hand axis looks at the nature of the activity, whether direct or indirect.

Advocacy and social service are both valid and effective, but different from social entrepreneurship.

FICTION #2 – Anyone can be a social entrepreneur

Lots of us see and are disturbed by societal problems; some proportion of those of us disturbed by those problems come up with ideas about how to address them; but it is the rare human being who actually turns that idea into an innovation and builds the venture needed to drive change at scale.

Just as not everyone is cut out for entrepreneurship, not everyone is destined to be an social entrepreneur.

This stuff is not easy, success far from certain. The social entrepreneur’s journey nearly always begins with inspiration—a challenge worth tackling and a personal tipping point, that existential moment when these remarkable individuals put to themselves the “if not me, who; if not now, when?” proposition—and then demands of our tipped and ripe social entrepreneur the creativity needed to come up with an innovative solution,  the courage to mount the venture—often in the face of skepticism– and  inexhaustible funds of fortitude to drive his or her solution through to fruition and market adoption.

FICTION #3 – You can do this without resources. Not true.

And yet, we’ve all encountered those who think societal change can be done on the cheap, that second-class talent is good enough—oh and by the way, the venture will still be expected to achieve world-class results.

The social entrepreneurs I know are, to a woman and man, world-class talents, ever bit as driven to succeed as the most wildly successful entrepreneur you know. But in order to succeed, they need skilled and experienced staff and everything else necessary for an organization to carry out its work.

At Skoll, we’ve adopted Jim Collins’ concept of the resource engine. Where private sector entrepreneurship demands a business model, societal entrepreneurship requires a resource engine–a resource model aligned with its purpose that enables it to achieve superior performance.

For an organization like Teach for America, the resource engine is largely dependent on the  U.S. government’s Americorps funding, which provides the stipends for the organization’s core asset, its recent college graduate teachers; for Habitat for Humanity, the resource engine is largely dependent on the faith community, with churches of all denominations supplying the volunteers who are Habitat’s work force; for the Mayo Clinic, fees for service are the fundamental resource.

The point is that for any social entrepreneurial venture, there’s a proportionate mix of resources—business revenues, grants, contributions, government funding and contracts—that is fundamentally aligned with an organization’s mission and hence, more sustainable. A resource strategy must be in place to provide the assets essential to carrying out the venture’s mandate.

FICTION #4 – Social change is a nice idea—and as such, doesn’t demand accountability.  This fiction is based on old thinking that social entrepreneurs are do-gooders, and doing good is inherently soft.

It’s completely untrue. The organizations in the Skoll portfolio are intensely rigorous and intentionally driven to measure their results and demonstrate their accountability.

A couple of examples:

Mothers2mothers, dedicated to preventing mother to child transmission of the AIDS virus – has detailed data on the size of its market. About 1% of all pregnant women globally are infected with HIV, with 95% of those infected women in Sub Saharan Africa; if untreated, 24% of these infected women will transmit the virus to their newborns—resulting in 3 million infant and child deaths annually. M2M knows exactly how many clients it is reaching and the effectiveness of its model and protocol. In the past 4 years, M2M has expanded to 634 sites in 6 African countries and doubled its client base, from 1 in 10 to 1 in five of its potential  market, reached annually.

Kickstart  has a great approach to “before and after” measurement of the impact of its super-moneymaker pumps.  The process is built into the retail chain.  The retailer doesn’t get a commission unless he gets “pre-pump” data on the buyer’s family – health, income, education.  Kickstart then tracks these families after 1 year, 2 years, to see the impact of the pump on these indicators. Kickstart ‘s data show that  88,600 new businesses have been started thanks to their products, generating some $88.7 million a year in  new income for farmers and their families.

FICTION #5 – No one fails.  Maybe you’ve noticed that many folks working in the social change arena are pretty wonderful, and awfully nice; that propensity has a downside, though, when folks hesitate to discuss failure—motivated, possibly, by our all-too-common tendency to ascribe blame.

But, like commercial entrepreneurs, social entrepreneurs learn through trial and error.  Mistakes and failures go with the territory.

Kiva is a huge success now, but almost didn’t make it through year one.   The organization’s bank account was nearly empty in the fall of 2006 when the PBS television program Frontline World, with Skoll Foundation support, did a story.  The night the story aired, Kiva’s servers crashed due to traffic overload. 3 days later, when Kiva got back up, more than $250,000 in new loans flowed in in the first week.  Without that right intervention at the right moment,  they might not have made it.  Even today, Kiva—which has crossed the $125 million dollar lending threshold– continues to face challenges – witness the debate a few months back about its marketing (peer to peer lending, when actually the lending is done via microfinance institutions).  The key is that they’ve been transparent, admitting where they’ve made mistakes and engaging in an open dialogue with their critics.

Funders, and the Skoll Foundation is no exception, screw up, too. It’s one of the best ways to know that we’re actually taking some risk! The key, of course, is in learning and transparency.

FACT#1 – Social entrepreneurs are increasingly demonstrating results at scale.

Notice my language here—I’ve intentionally coupled results and scale, rather than using the more common “going to scale” phrase, which suggests—to me anyway—that scale is more about an organization and its size than about impact.

A few examples of what results at scale looks like.

As I mentioned earlier, Kiva has hit $125 million in loans made to—accurate as of last night—314,000+  poor and determined clients in 194 countries around the world. In only 4 years.  Just stunning. (another nice piece of data: 337 volunteer translators…)

IDE – India, founded and led by Amitabha Sadanghi,  has reached nearly 1 million small hold farmers, helping them turn from subsistence farming to become income-generating producers. IDE’s work has added $1 billion in wealth to these farmers.  From drip irrigation technology it developed and sells that costs about $1.

Ceres, led by Mindy Lubber – has staked out a sweet spot in the mega climate change issue by focusing on getting big institutional investors to factor carbon and climate risk into their investment decision-making. Its “Investors Network on Climate Risk” brings together investors with over $7 trillion of assets under management. Talk about leverage.  Mindy’s work was key in the recent SEC decision to issue guidance on incorporating climate risk into financial statements for U.S. listed companies.

FACT #2 – Social entrepreneurship has moved from the margins toward the mainstream

Even 6 years ago, when we formally launched our Skoll Awards for Social Entrepreneurship program, the concept was not well known or understood. Of course, Bill Drayton and Ashoka had used the term for years, but its currency was still limited.

That’s changed significantly. We like to think we had something to do with this—having identified in our original strategy work the opportunity to strengthen the emergent field of social entrepreneurship by focusing largely on media and academic partnerships.

Over the past several  years, that strategy has paid big dividends. Look at the academic embrace – MBA programs around the world are integrating social entrepreneurship.  Many dedicated centers exists – Skoll Centre at Said Business School at Oxford, Center for Advancement of Social Entrepreneurship at Duke.  A forward-thinking university in Tennessee recently launched an undergraduate major in it.

Media also covers social entrepreneurship far more..  Leading business writers – Matthew Bishop of the Economist, Stephanie Strom of the NY Times – frequently write about it, David Brooks cites it, and we’ve created partnerships with PBS programs like the Lehrer Newshour, the BBC and Sundance to generate content and create distribution channels to make sure some of those great stories about what social entrepreneurs are doing get out there.

And, as I mentioned earlier, even President Obama talks about it.  The office of social innovation in the White House a clear recognition of how innovation and entrepreneurship are increasingly seen as catalysts for significant social change.

And while there’s more to do, of course, it’s clear social entrepreneurship is on the media’s, thought leadership’s, and policymakers’ radar as never before.

FACT #3 – Foundations and other donors are making bigger bets on social entrepreneurs.

Doing this requires that we raise our game at understanding what the characteristics of impact at scale are.

We’ve now done in-depth analysis on two cohorts of grantees under SASE program, with that exercise  focused on how much closer they’ve come to really changing the underlying conditions of the problem they’re attacking –that equilibrium change I referenced earlier.

We also look at how well they’ve built out a resource engine, believing that discipline is essential to their long-term sustainability and success.

Based on our assessment of how much impact we think they can achieve, we’re making big bets.  In our most recent round, our highest potential breakthrough social entrepreneurs received $2 million in follow-on funding.  We’ve also seen our “connect and celebrate” investments pay off as well. In 20007, for example,  the Gates Foundation put $27 million into IDE India to expand its work, taking its microdrip methodology from India to Africa.

Fact 4 – As a field, the social change sector is making progress on better metrics.

We all understand that, to really grow the sector, we need standards,  consistent ways to measure results and document impact.

There are multiple initiatives underway to do this, with every consulting organization under the sun weighing in with opinions and case-based examples. One of the more rigorous efforts out there is the Global Impact Investing Network’s IRIS  initiative—which aims to establish a common language and precise definitions as the necessary foundation for  comparative measurement. The underlying theory here is that both the taxonomy and the discipline will give social impact investors the information they need to direct their resources more effectively.

At the Skoll Foundation, we focus on metrics specific to each venture’s goals: Riders for Health’s model measures a set of indicators that begin with the numbers of motorcycles but go on to assess maintenance, efficiency, miles covered, clinics served—rolling up to health impacts realized (malaria mortality rates). In the process of working through a higher level analysis on a cohort, we’ve begun to uncover a set of characteristics that are more common to those on that path to significant impact—two of which are the importance of strategic partnerships and an open-source approach.

Additional characteristics include:
*Evidence of market feedback mechanisms, that in turn drive virtuous cycles of learning, improvement and innovation
*Evidence of strong individual and effective team leadership
*Clarity of mission
*Evidence of mission-aligned revenue streams

Fact #5 – Social financial innovation – including by foundations, and by pioneers like Chuck Harris and his SeaChange Capital partners – is an essential piece of the ecosystem needed to drive breakthroughs.

This is related to previous truth around metrics. Just as the Silicon Valley ecosystem of venture and angel investors, entrepreneurs, and great universities has been key to driving waves of technology innovation, so will the emerging ecosystem for social entrepreneurship be vital to driving waves of social and environmental innovation.

Foundations like ours have a major role to play here in unleashing the potential of their myriad assets. As one example, we are among the few foundations making both program related and Program-Related Investments (PRI).

We’re an anchor philanthropic investor in Root Capital’s $63 million capital raise—and we’ve twice augmented a grant to Root Capital with a PRI that goes directly into the organization’s lending pool.

We also put a $3.5 million PRI  into Riders for Health, with that capital used to purchase the fleet of vehicles  Riders leases to the Government of Gambia – thus providing the first universal health delivery capability in Africa.

A story we like to tell… Our PRI investment via Shorecap I in Uganda microfinance returned an IRR of 28% to Skoll the same day Lehman Brothers collapsed.

PRIs and Mission-aligned investing represent  major opportunities. We’re seeing growing interest in this space, with investor appetite for double-or triple-bottom line returns definitely on the rise.

Now that we’ve debunked some fictions and established some facts about today’s social entrepreneurial landscape, let’s look ahead.

I’m sticking with the “5” theme and next is  5 futures:

FUTURE #1 – Social entrepreneurs will become more powerful by plugging into their issue ecosystems.

Social entrepreneurship is not only about the power of the brilliant individual.  Increasingly, it is about the power of strategic partnerships—the coalitions that take the solutions social entrepreneurs design and bring them to scale.

We’re headed toward a powerful model of social change—smarter, broader collaborations with businesses, governments, universities, and of course, with each other.

It often takes an individual to have the game-changing insight—to see what no one else has seen—to make the leap beyond what is known to what has only been imagined.

But without institutions, without partners, and without invested stakeholders throughout the system,  even the most transformative ideas are unlikely to translate into sustainable change.

And when we take that truth one step further, and unite many institutions in strategic, multi-sectoral alliances—that’s when we see the full potential of brilliant ideas to change the world.

This is the next step in our work—achieving this “network effect” wherever possible—whether it’s in fighting disease, building schools, or devising new solutions for delivering clean water to people everywhere.

Future #2 – Social Entrepreneurs will increasingly plug into supply chains or lines of business of commercial partners . This is a subset of the last point, but particularly compelling. We see some early successes in our portfolio:

HealthCare Without Harm has become a key partner to Kaiser – and vice versa – as
Kaiser works to makes its business practices and its hospitals greener, more cost-effective, and healthier.

Root Capital and Starbucks are teaming up to ensure Starbucks hits milestones on its way to delivering on its promise that by 2015 100% of its coffee will be “responsibly grown and ethically traded.” This isn’t CSR. It’s cultivating strategic advantage, it’s business.

Future # 3 is is also connected to the earlier points.  But while those were strategic in nature—focused on the role of partnerships, supply chains and ecosystems – this is dynamic, looking over time.

Social entrepreneurs will be key, we believe, in helping to accelerate the cycles of social change.

History shows that new ideas tend to be hatched by individuals.  Then activists can push the idea to build movements or social entrepreneurs can take the idea and build the institutions needed to implement and drive progress.

Look at microfinance– or civil rights.

One can argue that the civil rights movement has its origins in the 18th Century Enlightenment—with philosophers arguing that slavery violated man’s inalienable rights. Abolitionism gathered steam in the 19th century, constituting enormous challenges to agrarian societies that had come to depend on slave labor.

One of the pivotal events of the movement came with the landmark Brown vs. Board of Education suit decided by the Supreme Court; one of the plaintiffs of that suit was the NAACP, created decades earlier by some great social entrepreneurs, among them Jane Addams. Another great social entrepreneur, John Gardner, had quiet hand as Lyndon Johnson’s Secretary of HEW, in bringing civil rights legislation over the finish line in the 1960s. All-told, some three centuries to rid Europe and the U.S. of slavery…and decades more to defeat apartheid in South Africa.

Microfinance was faster.  Mohammad Yunus had the idea of microfinance 30 years ago.  He created an organization – Grameen Bank – to implement it.  Over time, his success led others to embrace it.  Now, many of the leading commercial banks have microfinance arms.  Still, that took 30 years.

With technology today, globalization, and the increasing danger of many of the threats we face, the social change cycle must accelerate.

Human rights abuses are uncovered faster.  Environmental impacts become quickly known.  And ideas – thanks to the power of mass media – can be generated, explored and deployed more quickly than ever before. Think here of the role An Inconvenient Truth—a partnership between a great social entrepreneur, Jeff Skoll, and a great activist, Al Gore—has played in bringing climate change to mass public attention.

And speaking of big issues.

FUTURE #4  – we will see the real power of social entrepreneurs at the nexus of social entrepreneurs and the big issues facing humanity.

Social entrepreneurs tackle a range of challenges.

We think some of most interesting work is happening on the really big challenges.

Climate change, water scarcity, pandemics, conflict in the Middle East, nuclear proliferation.  These are all existential threats.

Not surprisingly, there’s a ton of innovation going on around them—I’ve already mentioned Mindy Lubber’s work with Ceres, but let me cite it again. I was in Copenhagen for COP 15 and I can tell you that the chances that 190+ countries will achieve a binding agreement to reduce their greenhouse gas emissions is zero. Meanwhile, Ceres’ work with institutional investors—whose fiduciary mandate requires them to invest for sustainable results over the long term—may just begin to move the juggernaut of business in the right direction.

And future #5

Another great social entrepreneur, Paul Hawken, says that when he’s asked if he’s pessimistic or optimistic about the future, his answer is always the same: If you look at the science about what is happening on the earth and you aren’t pessimistic, you don’t understand the data; but if you meet the people who are working to restore this earth and the lives of the poor and you aren’t optimistic, you haven’t got a pulse.”

We’ve faced big challenges before. But we’ve never had the upwelling of talent—men and women the world over who have asked of themselves that question of questions, “If not me, who; if not now, when” and then, rolled up their sleeves and gotten to the business of building a better world.

This is one our favorites quotes at the Skoll Foundation….and a good way to end.

Thank you.

 
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