The Blue Sweater
I spent a few days on the beach this Presidents Weekend and while lying in the sun, I read The Blue Sweater, a terrific book by the founder of the Acumen Fund, Jacqueline Novogratz.
Jacqueline has spent her entire career working at the intersection of philanthropy and the financial markets. Her story is all about finding a middle ground between the two.
The Acumen Fund was started almost a decade ago and it is a non-profit entity that receives grants from its donors. But instead of giving away those funds, it invests in entrepreneurs who are making a difference with for profit initiatives in the developing world; particularly India, Pakistan, and Africa.
I have always believed in the power of entrepreneurs and for profit initiatives to change the world. If you share that view, then you should read this book. I'm not suggesting that there isn't a role for pure philanthropy in this world. There is and will always be. But I am also suggesting that in the middle ground between philanthropy and raw capitalism lies a very powerful model that is worth understanding, promoting, and developing. Read this book if you want to understand that model better.
I’m going to the bookstore now. Thank you.
physical or virtual bookstore?
A VC with your interests would want to know?Physical. I’m not going to wait. And I might want to make notes in the margins, or mark certain pages with sticky notes.I strongly agree that the convergence of entrepreneurial creativity and philanthropy is a powerful engine for good, on many levels.
You won’t be disappointed.
I was going to add this to my Kindle queue until I saw the price for a paperback is $2 lower.
ugh. that makes no sense at all!!
It can sometimes make sense for me (leaving aside that for a book with a good cause I am less concerned about the price): people like me, who live 12 hours away from New York by plane, saving shipping cost and weeks of delivery time is definitely worth more than $2!
Thanks for the recommendation Fred. These increasingly popular concepts fit very well within the development of the creative economy.
the thought about philanthropy & capitalism intersecting made me think of an old quote: “Waste no more time arguing about what a good man should be. Be one”
I like it
Loved that quote James!! thanks
you know you change that if you click on the picture: it either takes you to a bigger picture or to the website of the book. I can’t see the cover! (I might need an new eye appointment)
My eyes are shot after the past year or two of 3 hours of phone reading/writing, and 12 hours of screen reading a day.
I’ve worn glasses since grade school. I think since third grade. You soundlike you need an eye appointment too. My doctor is pretty good if you wanta recommendation and you want to come further west on the Island.
I need one diopter stronger in the left and two in my right eye. I got a checkup three months ago but haven’t upgraded yet
Fred, excellent choice. I read this last summer after Seth Godin recommended it and it has honestly changed my perspective on the role of aid (though I do agree with your comment that philanthropy has its place). I think one of the key takeaways from The Blue Sweater is summed up by Jacqueline herself when she says towards the end of the book:”After more than 20 years of working in African, India, and Pakistan, I’ve learned that solutions to poverty must be driven by discipline, accountability, and market strength, not easy sentimentality. I’ve learned that many of the answers to poverty lie in the space between the market and charity and that what is needed most of all is moral leadership willing to build solutions from the perspectives of poor people themselves rather than imposing grand theories and plans upon them.”
I loved that phrasing too. It really inspired me
I think it’s more about philanthrocapitalists having less money to spend in the recession, and they need to explain their austerity by ascribing the new lean, mean approach by attributing it to what the poor people themselves want.
Thanks for sharing, just picked up the book, and look forward to reading it. Just saw an inspirational video that said that “change begins in the heart of a nation.” I think there’s a lot to be said about changing the world as an entrepreneur, and people understand that change can start with one person, a vision, and a dream.
Completely agree that the entrepreneurial spirit, unleashed for philanthropic purposes, can profoundly change the world for the better. I’ve been thinking about how we can take the inefficiencies of one system and use that to support philanthropic causes. Gift giving is a perfect example. So much money is spent on gifts that are unwanted. The internet and social networks can tackle this problem and do good at the same time.For example, let’s say a child has a birthday coming up. Instead of receiving a lot of random gifts that the child doesn’t want or need, the child selects one gift (iPad) and one charity (DonorsChoose). People contribute blindly, ie, they do not know how much has been raised toward the gift, to incentivize them to contribute sincerely. After the deadline, the child receives the gift, and whatever is left over is donated to the charity.
That’s a brilliant solution, but many folks may put the rest of the gift money towards college for the child. I can’t imagine paying for college tuition in 20-25years
Since you agree and seem very enthusiastic about this idea, could you provide a concrete example from personal experience preferably that shows how this works.
Hi Fred, I am sorry but I have to digress. You say “…..it invests in entrepreneurs who are making a difference with for profit initiatives in the developing world; particularly India, Pakistan, and Africa.”. As a Nigerian and an African, I can tell you authoritatively that we are really offended when Africa is categorized as a country. From their website (http://www.acumenfund.org/i… they mapped where they do their investments which is basically Kenya and South Africa, which leaves out 55 countries in Africa. This simplification of Africa (e.g there is war in Darfur, a City in Sudan, therefore Africa is at war) is one of the major causes of the negative perception of Africa and its countries. I will be really glad if you make the correction.As a side note I commend their approach of helping people catch their own fish rather than give them fish.
I’m sorry if that was the implication. I didn’t mean it that way. If you read the book, you’ll note that the vast majority of it is about her time in africa
I know you did not mean it that way, I just thought I should point it out, I hope you understand. If you ever have the time, please listen to this TED talk http://www.youtube.com/watc…
I listened to the video, but I simply reject the implication that all Americans are stupid and that the tendency to write of “Africa” than about individual countries is somehow a marker for ignorance. It’s anecdotal, it’s very stylized– and it’s very politically-correct for this $6000-a-head audience desperately looking for third-world chic and credibility (perhaps they should all send the price of their conference tickets to an African school).The notion that these African and black stereotypes persist in American literature is as stereotyped as the stereotypes as Chimamanda tries to purvey. It’s unfortunate that unlike American students her age or older, she only had access to old British colonial novels instead of books like Maya Angelou’s “I Know Why the Caged Bird Sings” (1969) or Toni Morrison’s “Song of Solomon” (1977). Sorry, but we’ve been addressing these issues of racism and ignorance about the world for at least 40 years, even if Chimamanda is just tuning in. And actually, she admits she herself is filled with “American Psycho” stereotypes — and even says the problem of stereotypes isn’t that they aren’t true, but that they are partial. BTW, I, too, wrote childhood stories with characters who drank ginger beer, not knowing what it was, merely because I, too, like many of us, were influenced by the Narnian Chronicles by the British writer C.S. Lewis. And that was a good influence, frankly.You would think from watching this video that there is no African literature widely known in the U.S. and the West generally, but it’s just not the case. The notion that there is no place for the black female in literature is woefully outdated and itself prejudiced; indeed, the task, if anything, these days for city high schools is to get novels in the curriculum that *aren’t* about black females.Let me suggest that the problems of stereotypes and ignorance about African countries will not only be fixed by making the media spin every story in the thirdworldist vein, but when journalists are no longer jailed and killed for reporting in Africa. I know about the female lawyer litigating about the sexist laws — but I know because I bother to go read the online African press, or get NGO bulletins via email, and Nigerian journalists and lawyers themselves will be the first to tell you that their main problems isn’t the evil North and the outside world, but their own government at home.
The major causes of the negative perception of Africa isn’t the simplification by outsiders. It’s the very real tyranny and wars that African governments and people are themselves responsible for. I’ve never encountered a single aspiring nation in the world that won the right to be called a country by guilt-tripping even their most sympathetic listeners; they win it by achieving maturity and independence and becoming accountable.
Fred might not like it if the comments on this blogpost stray from the point of the post ( “..I have always believed in the power of entrepreneurs and for profit initiatives to change the world. If you share that view, then you should read this book”).Therefore, this will be my last comment on my initial comment . I am willing to continue the conversation elsewhere. You can check my Disqus profile to see how you can contact me if interested. If you have the time, listen to the video I posted above maybe you might see things a bit differently.
I’m not one to worry about what Fred doesn’t like, and I let him do the talking. I don’t believe in the power of philanthrocapitalism to quite the extent he does, and I question *how* they want to change the world, because it’s very, very political, and usually skewing to extremes without democratic participation.I’m happy to watch your video, but I have to say that over the years I have worked with a number of Nigerian NGOs and journalists and I’m not ignorant of the issues. I’ve seen them struggle with the demands of government-run aid programs and Western foundations that often dictate faddish and politicized themes that don’t always fit the needs of local people. I’ve also known what it’s like to see an organization have their funds stolen by a fake Nigerian NGO. So I’ve been around the bend, and I’m not easily shaken by charges of political incorrectness. It’s very much on topic, because so often the aspirations of the philanthrocapitalists stray very, very far from home to foreign lands where they are really quite removed from their beneficiaries, instead of doing things less glamourous needed at home.
Thanks for the recommendation! Social Entrepreneurship is integral to solving major social issues of our world. It is fun to be on the cutting edge of technology, but to help find solutions that truly impacts lives in the bottom billion can be equally exciting and rewarding.You can also check out NextBillion.net and socialentrepreneurship.chan… for related information.
There’s no reason why you couldn’t be on the cutting-edge of technology and also looking for solutions to major social problems. In fact, some of those solutions require high-tech approaches, which can deliver a double dose of excitement!As an example, mobile banking is taking off first in Africa while saving bottom-billion customers a lot of money and time. Acumen Fund does not invest on technology enterprises but other social funds like Echoing Green do (disclaimer, my venture is an EG Fellow).
Agreed.I applied to Echoing Green once but I didnt make it through :(What is your venture?
“…in the middle ground between philanthropy and raw capitalism lies a very powerful model that is worth understanding, promoting, and developing.”We do this model since 2005 – for profit, with social purpose – with Aidpage (http://aidpage.com) – but for disadvantaged people right here, in the US. Volunteers on Aidpage get a share of the revenue.
Given the compounded interest model of yesterday, is it better I give as much as I can now towards causes I believe in, or reinvest and delay giving until I’ve sold my first company and then contribute?What will benefit those in need the most? What are the risks? Is there something better than giving money I can do to instill real social change? Money doesn’t cause change by itself, people do. But the money does open up options…
On the topic of for-profits with a social mission, you may be interested in this short video we did with Peter Thum, founder of Ethos Water: http://bit.ly/IT03d. He built a for-profit water business, which brings clean water to children in need globally. He eventually sold it to Starbucks. It’s an inspiring story.
acumen fund also has an investment in a for profit water business in india.
Should water be sold, or be a public utility?
either way is fine with mebut it costs money to get clean water to peopleif the government is incapable of it, entrepreneurs can and will and havefilled the gap
Thanks for the recommendation.Buying it on kindle for iPhone now.
it’s right up your alley bijan. you’ll love it.
You’ll read an entire book on your I-Phone?
Yep. Until my ipad shows up!-bijan
Do u think Apple will offer the Kindle app for the IPad?//keenan
No idea but I hope so-bijan
It would create an intersting dynamic. Having two book reading options. One that makes you money and one that doesn’t.It would get me to buy the IPad for sure. I would all but abandon my Kindle.Being able to play on both devices would be a boon for Amazon.//keenan
I don’t know. It’s another case of a blessed non-profit work that totally miss the elephant in the room. The problem is not types of philanthropy, but a totally flawed banking system.These small-micro loans are actually in lower risk for the bank – anywhere. People who run their own small biz to support their family will make everything they can to succeed. However, the banks conceive these loans as higher risk, demand higher securities, in the same time they easily finance billions to much riskier enterprise class loans, with really bad securities, or to overpriced assets. That way billions are fumed by bad debt, while chalking the lower risk sector which can really produce value and jobs.
the acumen fund makes equity investments in companies started byentrepreneurs. it is like VC
This is a great initiative. Still, credit markets are frequently influenced by the style of the suit and not the real risk of the business 😀
Excellent post, Fred. I believe the bright future lies in reconciling profit and purpose.
Fred, good to see you posting on this. Weaving entrepreneurship and innovation into creating a better future for all of us is increasingly important. What matters is building viable initiatives that drive change and public benefit. It can be done with all sorts of legal structures – for-profit, not-for-profit, something in between (there are hybrid structures in US and UK), or even without a structure. There’s a role for all of it and making the world better can be done in any structure.Some good resources for this whole field can be found at:- http://socialedge.org- http://blendedvalue.org/There's also an entire financial marketspace opening up that offers a range of financial returns along with a range of social returns. Katherine Fulton of Monitor Institute framed that space up nicely a while back in this deck too: http://www.slideshare.net/w….Lots more always available if you/others interested. Just google ‘social finance’ ‘social capital markets’ ‘social ventures’.
Fred-So awesome – glad you are a supporter of microfinance (it’s become quite a passion of mine – http://www.mykro.org/)!
when i first started giving my blog revenues to charity in the early days ofthis blog, we gave the money to a grameen mobile phone program in africe
Thanks for highlighting this book Fred, I’ll have to check it out.Having spent seven years in the non-profit world and now working in finance I’m always interested in this stuff. Personally, I’m impatient, so my dollars tend to go for the straight micro-finance route through organizations like Opportunity International (opportunity.org). That said, I’m always encouraged to know there are folks out there with more patience than me that are putting in the effort to go after some of these bigger picture scale opportunities. A great example would be the organization Social Venture Group my friend Grace founded. She blogs at chinaphilanthropy.typepad.com and covers the gamut of strategic charitable opportunities in China. Turning willing donors and a desire to do well by others into sustainable, effective, scalable programs is the real work. Props to all those out there who are going after it.
Great suggestion. Thanks. I look forward to reading the book. I love the notion of fusing “philanthropy and raw capitalism”. My favorite example of this happening closer to home is Homeboy Industries in LA. They started off with a standard non-profit approach by providing social services to former gang members but the organization’s founder, Father Gregory Boyle (an entrepreneur’s entrepreneur), had a ground breaking idea … start for profit businesses run by former gang members and staffed by former gang members. The businesses provided first time job opportunities to those who otherwise can’t get a job given their background and it creates an entrepreneurial environment for everyone involved. Great mission and wonderful execution.
that’s a new one for me. thanks for pointing it out. great stuff.
Returned from Kenya this week and read this book while living in the Kibera slums. Novogratz is truly inspiring and authentic – a great example of financial talent concentrated in the most needed areas of the world. Finally having internet and seeing this review on Fred’s blog made my day. I hope to follow by example with careforkenya.org
I assume you don’t have the time but I would love to hear more detailed thoughts from you on Acumen, because it’s one of the most tremendous endeavors I know of. I’ve always been interested in the intersection between social (in the microfinance sense, not in the finance sense) and business, and I think Acumen is the most exciting model we’ve got so far, with Kiva. I haven’t read Novogratz’s book but I want to, I saw her TED talk, and I think she’s really impressive.I even thought about applying for an Acumen Fund fellowship, but when I had the time I was too young and now I don’t have the time (also I have a wife).
Another aspect that I like about Acumen Fund is their ability to attract highly talented people, people that easily could have fit in the world’s best companies or build the most promising startups.These type of organizations might open up an alternative career path for bright university/MBA graduates. Why not postpone corporate life/big pay checks and do something amazing with a potential impact/responsibility that would require decades to achieve in a large company? It might well change you for the rest of your life.A second point: a call to all freelancing professionals with a flexible time schedule (i.e., no boss telling you what to do). Think how you can help organizations like Acumen, not with money, but with your professional skills. A powerful gift. Don’t ask anything in return (if you want to, it is not the right cause), and treat these client’s deadline exactly the same as you do those who pay invoices in cash.
“Shameless” plug:People who are interested in what Acumen does are invited to visit/signup to the Acumen Community in this Ning-powered social network: http://community.acumenfund…
This is GREAT, I’m fascinated how these two essentials interact. Can’t wait to read it!
This is an excellent book. I’m an MBA student at Babson College and went to a talk about social entrepreneurship where this book was the topic of discussion. After reading this book it made me wonder if some variation of micro finance would work in this country given the current credit environment.
i’m sure it would, particularly in the poorest communities
I’ve been able to learn quite a bit about microfinance as Lili works for ProMujer – a Latin America based organization. These companies do amazing things with very little capital. Recently I was at a dinner party explaining what she does… that they provide small loans to women in South America to start their own businesses. The person said, “Oh, how much? 20K? 30K?” I was like oh no more like $20 and $30. The person simply didn’t believe me. But it’s true. It doesn’t take very much to change their lives and help them start a business. We forget that in our climate where the numbers are closer to a million dollars.Of course I’m biased for personal reasons, but I really like Pro Mujer’s approach. They do two things really well. 1. They give to only women as women are much more likely to earn money and then spend it on their family and their family’s healthcare (sadly, men are more likely to buy beer and the like). And 2. They group their loans. This is the part I think is really smart. Meaning they put 30 different woman together and they all share in the responsibility to repay the group’s loan. So, if one woman defaults on her portion one month, the other 29 pick up the slack. There is a tremendous social bond among the women as a result and they really feel a responsibility to not let the group down. Very motivating. As a result Pro Mujer has a default rate of less than 1%. It’s pretty amazing.
Thanks for the rec. As a non-profit to entrepreneurship/VC crossover, this sounds like a must read. Next on my line.Something I have noticed in reading lots of VC oriented articles and blogs – successful startup investors love to read. not like to read, love to read. Maybe its all the time on planes, maybe curiosity-by-nature, maybe something else (insert psychology here).
Her TED talks are well worth watching too. http://www.ted.com/talks/la…
Thanks for the link
I’m a critic of philanthrocapitalism, or do-gooding entrepreneurs as you might not be surprised to know. For one, they impose on non-governmental organizations too much of the ruthless market competition and business speed-ups like “90-day impact statements” and such that aren’t always a good match with a struggling NGO in difficult country conditions, or even just any NGO that wants to be an independent social movement — and that means independent of heavy influencers like their funders, too. And on the other side, the entrepreneur who thinks that he can fix the world usually has some primitive ideology to go with it, often extreme left or right (usually left) that belies the actual ideology he used to get his own money in the first place. There’s also the leftwing critique of philanthrocapitalism that is interesting to read:http://www.opendemocracy.ne…While I disagree with the Marxist prescriptions of Edwards (revolution to overthrow governments), I think his questioning is spot on: what can we really show as the “success” of philanthrocapitalism? When we look at some of the projects like “One Laptop per Child” or Bill Gates obsession for a time on AIDS/HIV as the only disease to treat, we see failures or misapplied extremism, not success stories. I don’t even know what you’re claiming *are* the real success stories.Most of all, what I dislike about this new hybrid is its unaccountability, disguised under a wave of social media transparency hype. An NGO has accountability to its beneficiaries or members or constituents that the “social entrepreneur” does not. A business has a bottom-line-oriented realism that an entrepreneur blowing his money on a leftwing cause does not. It seems the hybrid takes the worst of both worlds.
read the book and you’ll get literally dozens of great examples of how”philanthrocapitalism” has worked extremely well
Oh, I’m happy to read the book, but I’m afraid you’ll find me back here merely armed with better arguments for my points : )
Wow Fred, you could not have brought this topic up at a better time. At the February NY Tech MeetUp, this Fund was my favorite presentation. http://technbiz.blogspot.co…I am a Third World guy. I grew up in the poorest country outside of Africa, Nepal. This speaks to me at a fundamental level. How can you impact the largest mass of people the fastest? I ponder upon that question a lot.This is a gem phrase: “…. in the middle ground between philanthropy and raw capitalism lies a very powerful model that is worth understanding, promoting, and developing….”
Hi Fred – I wanted to thank you for writing about this book. I’ve been thinking a lot lately about how to give back to society, and this model of giving – using business to enact social change and to empower the poor – really spoke to me.Watching you and Jacqueline on the Good Company Ventures panel earlier this week further cemented in my mind that I needed to read this book, and so I sat down and read it this afternoon and was completely moved.Rob
she is living it as opposed to me who is mostly talking about it
From my understanding there is a key distinction between the two however, namely that Grameen loans funds directly to small business owners in poor countries whereas Acumen is somewhere in between a VC fund and a mirco-finance fund in that they loan to companies (of any size) that seek to address a specific gap in the market.
Grameen is always mentioned hagiographically in these discussions, but you need to peer closer. Grameem is basically the class third world hustle, taking large IFI and other international loans themselves, and re-loaning them out to poor people at high interest, complete with really awful browbeating and peer-pressure to make people pay up. I can’t help thinking that even the Blue Sweater lady would have some problems with the way it is run from the top down, while feigning to be “grassroots”.
Very cool Charlie. Will check it out
If they don’t invest, how do you expect these foundations to keep their endowments and operating funds viable?! Honestly, I’m not a financial expert, but that seems obvious.There is an awful lot of investing in start-ups that is wasted or lost, or amounts to just a few bit IT companies trading around the companies like baubles, only to disappear them.
I doubt many people are blind to the problems with microfinance, but these institutions are offering loans to a segment of the population deemed untouchable by traditional lenders. We can talk tactics all day, but I think that misses the larger issue. And the book never claims that to be “grassroots”, indeed Acumen Fund is exactly the opposite.Of course this is all anecdotal so I will have to defer to respected individuals working in this field for evidence of success.