Social venture

Bill Gates on social entrepreneurship..

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I am listening to Bill Gates on his visions. Incredible to listen to one of the most powerful persons alive mentioning that the future of the world relies on taking care of huge issues such as global health, education and energy.

He is one of the few i have heard being very firm in explaining the policy issues being extremely central to solve in the future, and that foundations (such as the Gates foundation of course) and corporations such as Cisco, Microsoft, Google, Intel will play an important role making change happen. Subsidies for rural areas were mentioned. Very interesting.

Why we do need social entrepreneurship and what it is

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It cannot have passed anyone that the Grameen Bank got awarded the Nobel Peace Prize some time ago, and the scientific community thinks about the social entrepreneurship more seriously than ever before. Yet many both inside the social entrepreneur community as well as outside tend not to see what social entrepreneurship is and more importantly why we so desperately need it.

Simply put, social entrepreneurship is to share knowledge of the developed world with the developing, whether that is building water pumps or creating distance learning programs. It all comes down to the very simple passage from a well-known book the bible and a certain Jesus. “Give a man a fish and feed him for a day, or teach him how to fish and feed him for a lifetime.” There have been a lot of misconceptions about this historically. A lot of the so called aid work has been focused on ether giving funds or just pure charity technology.

Why is this fundamentally wrong?

I did some consultancy work as for an IT-strategy some time ago and explained what I see the five characteristics of any strategy – financial, technological, legal, management, organizational – which should be well-known, but too often seem like total surprises to clients.

  • Flexibility
  • Stability
  • Sustainability
  • Maintainability
  • Scalability

Considering these characteristics, it isn’t that hard to realize that the traditional aid work strategy is doomed to fail, and so it has. Here is where the social entrepreneurs take or honestly should take on the challenge to create sustainable projects which hands over tools/instruments for the people themselves and not finished products. The Stanford GSB professor and economist Paul Romer calls these tools and instruments meta-ideas and he in an article in The Concise Encyclopedia of Economics, David R. Henderson, ed. Liberty Fund, 2007 puts it as

“Perhaps the most important ideas of all are meta-ideas. These are ideas about how to support the production and transmission of other ideas.”

These meta-ideas are very, very important as we will see later. For now let’s leave it and further consider the challenges met inside any social venture. The ventures will of course all have financial, technological, and legal issues, but you will also have to think about the management issues as well as the organizational issues. A majority of the ventures I have come across tend to forget the latter two. They look very nice, but will probably never be sustainable. The ever so important legal issues are today well-known. Copyrights, patents and intellectual property rights are all daily elements of entrepreneurial work today unfortunately. Extremely put, in the developed world we have too much regulation, and in the developing world we have none. Hernando de Soto talked about this in The Mystery of The Capital, which discusses how to recreate the so often existing informal economy in the developing world to a formal economy.

We now realize that a social venture is any venture – for-profit or non-profit, which aims to bridge the knowledge gap and empower individuals and the community in the developing. Ironically, the developed world will have something to gain by getting more closely involved in the developing world in another manner than before. Without getting into details about the nature of it I would remind any skeptics to read the basics of trade-off, comparative and absolute advantages, and you will see that it is pretty obvious. In order for it to work we need to have consistency in the legal and economical system as Hernando de Soto is talking about.

What few people realize is that we have to have a consistent view on how we should work together and how economical growth is created. Living in a global economy requires a lot, and we still haven’t found the right path to create a sustainable and fair global economy. Considering the ever so important environmental problems we will also by this create a structure in which we can solve this as environmental problems are global whether we like it or not.

Paul Romer and his well-known New Growth Theory explain it all.

“The knowledge needed to provide citizens of the poorest countries with a vastly improved standard of living already exists in the advanced countries. If a poor nation invests in education and does not destroy the incentives for its citizens to acquire ideas from the rest of the world, it can rapidly take advantage of the publicly available part of the worldwide stock of knowledge. If, in addition, it offers incentives for privately held ideas to be put to use within its borders – for example, by protecting foreign patents, copyrights, and licenses, by permitting direct investment by foreign firms, by protecting property rights, and by avoiding heavy regulation and high marginal tax rates – its citizens can soon work in state-of-the-art productive activities.”

Interesting stuff, right?

Freedom of movement of merchandise, labor and money is crucial for success and economical growth. Many tend to forget that the fairness needs to be there. Some claim the market should tell us completely where we should go, but we have some moral and ethical obligations to protect and inhibit a too unfair market to emerge. Think of it as a supervised evolution.

The European Union is an example of what can be done to, but also gives us insight in what the difficulties are when creating the global economy. Start by considering the break in a pool game. The tightly assembled balls will rush off in all sorts of directions after the white ball smash into the formation. In time they settle in a new more “relaxed” formation. The nation’s economies will react similarly to the shock of change when opening up the borders. Letting it all loose at the same time would be careless, and just look at the shock waves which happened in Russia after the fall of the Soviet regime. It is just about calming down now. We cannot let this happen on the entire globe.

Looking at the developing world and honestly the developed world too, the governments play an essential part of how to implement a structure to handle these new scenarios and interactions. The important part is that they realize what role they should play and stay focused at their part, that is create an educational and legal system that nurtures technological, process and value innovations.

It cannot be over exaggerated how important the educational component is. Education should not only teach the youths (as well as the adults) the necessary tools and knowledge, but also create confidence in the people and a sense of seeing possibilities and not problems. Here is a huge opportunity for social ventures, and thus we find many attempts here.

In more general terms, Paul Romer puts this as:

“The one safe measure that governments have used to great advantage has been to use subsidies for education to increase the supply of talented young scientists and engineers. They are the basic input into the discovery process, the fuel that fires the innovation engine. No one can know where newly trained young people will end up working, but nations that are willing to educate more of them and let them follow their instincts can be confident that they will accomplish amazing things.”

Now we have this arsenal of with knowledge and confidence armed youths who will save themselves. Let them do the magic. They can and will do that… It will happen as we did the same thing here in the 19th century. We have just forgotten about it.

Wow, what a sunshine story, Erik! It sounds so nice and neat, but what about the entrepreneurs and what is the role of the open-source mentality?

I will use the previously quote:

“Perhaps the most important ideas of all are meta-ideas. These are ideas about how to support the production and transmission of other ideas.”

Do I really need to say more? Openness and exchange of ideas is crucial. If they legally are open-source or not doesn’t really matter so much as long as the mentality is to share information. The social media also known as Web 2.0 is an excellent example of how the openness should be. It should be easy to build on top of other solutions and ideas and derive new innovative solutions.

Why do we need to do this?

Again Paul Romer:

“First, the country that takes the lead in the twenty-first century will be the one that implements an innovation that more effectively supports the production of new ideas in the private sector. Second, new meta-ideas of this kind will be found.”

It explains it all. What’s so cool is that you get to create a better world in the same blow. Who doesn’t want to do that?

Final question to you: Do you really want to be on the losing team?

In the Wake of the Birth of Web

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“Did you know the web is 15 years old today? Huge change to the world in such a short time!”

The question is from a chat this morning with a very good friend of mine, Tom Calthrop, who is the founder and maintainer of the organization Barnraiser. For those interested in the history of the web can take a look here – You could also use some modern encyclopedia or maybe your flavor of the month Wikipedia.

Tom and I started to chat about the future of the web, the history and where it is heading. Tom pointed out that the web has evolutionary cycles thus “web 2.0” is merely a stepping stone in a long non-stop creative process. This is not something new and this happened during the last bubble where e-commerce and e-learning were equally hyped only to under deliver.

Interesting hey…

– I am thinking of giving away a shovel to my lawyer friend to help him in his daily work.
– Erik, why would you do that? It will not help him in his work?
– Of course not, but you never know. We are trying to provide him with internet solutions that are equally as stupid as giving him a shovel so why not?

Okay I am maybe a bit too sarcastic and I am a believer of the web. However, many in the business, so to speak, still believe technology solutions alone will solve the mystery, yet do not realize that successful and sustainable technology solutions all fulfill true needs of real people.

I will use some words by Tom here to illustrate where the opportunity arises: “Instead of writing all this hype I would prefer it is people explore technology today, social interfaces, social consequences and social evolution as affected by technology. Then we may all be better placed to develop real world solutions rather than just talk about something that has no relevance, but then I am tired with the “post-dot-com” brush of pessimism when it comes to all the discussion – all talk and no action.”

Action it is!

Why? People thinking outside their own little box have been changing the world throughout history and they are usually found in places where the resources are very much constraint and where there is a real need of change. Today emerging markets and the developing world provides us with this wonderful playground to exercise out creativity and still change the lives of people. For those who are hesitant I recommend that you read Hernando de Soto’s book “The Mystery of The Capital”. Whether he is telling the absolute truth or not is left for the reader to decide, however his points are valid.

Moving on to the core of anyone in the entrepreneurial game, that is the money flow and business models. We all need money for different reasons. Recently I have had quite a few discussions about business models and I do understand you need them, but you should realize what should be in them and why they are needed. Somehow this has been lost in this tumbling environment. The reason has been preached for quite some time by Guy Kawasaki so I am not the only one. The question according to me is: Isn’t it more important to convince your customers rather than investors? If no one buys your product, does it really matter that you have a lot of venture capital backing you up? If you are a venture capitalist, why would you support ventures that are hard to sell to the bigger market? If we are doing that, are we not just doing the same mistakes as we should have learned from last bubble?

Is there a right way to find out the business model? I am a true believer of the users as they always know the answer. Hand it to the users and they will tell you. Oh, so you don’t believe that is possible. Ask the Google boys. Create an extremely easy-to-use and flexible product, hand it over to the users and see what happens. React to the response and voila! They will then tell you what needs to be added and where the opportunity lies.

Now let us go over to a big challenge for the future.

We need to face the challenge of bringing the policy makers into the game and diminish the gap (not eliminate) between them and us to put it very directly. Now the industry is more or less experienced and has been taught a few lessons in the last boom. Tom’s words are put well here speaking about the web: “I also feel as though there are Bubble 1.0 veterans around to stop the hype, but the government/lawyer involvement in web together with the corporate mingling have all the hallmarks of chaos. As you know I am no Microsoft fan, but I absolutely cannot see why the European Union is fining them – a typical example of government/corporate/policy setting/messing that will stifle any software evolution (again).”

He is so right. Unfortunately one might add. The most dangerous development in any matter is the lack of understanding. Today many of the policy makers are lagging in their understanding. They haven’t followed the development and are in many ways several years behind in their understanding of the edge stuff of the web. In itself it is not a problem but in some ways they are too far behind.

However we should have faith. This is nothing new and the same thing happened 15 years ago when the web was born, as so for most other technologies. Look at the birth of the PC, the cars and not to mention the steam machine. There will always be a resistance towards the change, and so it should.

We will come there as we did come here. The will always be a lag between the readiness of the policy makers and their understanding of the technology edge. It is so hard to keep both in sync and I am not sure we should either. It is healthy in a way, and not healthy in another.

What we as entrepreneurs should remember is that we need to open up our minds to something new more exciting than to try to fulfill our utter most dreams of flashy technology. We should start to develop (technology) solutions for people and not for the sake of technology. Look for needs outside our little bubble and fulfill needs of real people. If you want call it user centric design, iterative prototyping or rapid prototyping, do so. What label we choose to put on this is less important however. Why? Because it is cool regardless and it has been done in for a long time already…

… and after all, it is in the same feeling the web was started. A few guys playing with a need to share research information, and thus they created something to fulfill that need. Who would have imagined that it would end up like this?

Now that is is cool!

The sailors and the media

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This rather strange title probably make less sense. However it does. I started to think about the new media and what the purpose of it is. I thought of the following analogy:

Sailors aren’t afraid of storms, they learn to live with them, learn to handle them and/or build better ships. The same can be said about wars. They will come, but we will need to learn how to deal with them.

I am not naïve, but I am as said so many times before optimistic. There is a way.