Apologies for the radio silence.  Not sure that  blogging is something that I can keep up with, but a few new posts in the works… one thing I had to make sure people heard was the story of the century: that we might combat the obesity epidemic and climate change by turning down our thermometer to 64degrees.

http://www.npr.org/templates/story/story.php?storyId=102964807

We keep our house at 58 degrees at night and 64 degrees during the day… activiting the good fat 24 x 7.

Groggy, landing after the long flight, early morning in Heathrow.  Flight attendants passed through the aisles, handing out immigration forms.  I’m in transit, so don’t need one, but reflect on my entry into Kenya.  Reason for visit? Easy, business, I check.  Occupation?  Blank line, blank stare.  Non-profit manager?  Investor?  Non-profit investor?

Many of my colleagues in the field of social enterprise and social investment confess to being equally flummoxed when asked to summarize what we do (not to mention explaining to our family over Thanksgiving dinner exactly what we do).  My business school alumni office must also cringe whenever I check off 5 to 6 boxes to describe my current occupation: finance and health care and the environment and non-profit and…

I now find myself writing “social investor” on those blank lines.  Increasingly, I am not alone.   Over the last decade, a new breed of venture capitalists has emerged.  So called “social investors” (alternatively impact investors) seek to combine financial returns with social or environmental impact by using the tools of venture capital to make principal investments in private, high-growth companies that have the potential to deliver measurable social or environmental benefit.

Building on the success of microfinance in demonstrating the commercial viability of an overlooked asset class, social investors believe that you can achieve a commercial or quasi-commercial return and outsized social impact by betting on innovative entrepreneurs addressing underserved markets. For the social investor, the hockey stick is not a company’s valuation, but the liters of clean water delivered, the cases of malaria prevented, the tons of CO2 emmissions averted, the lives changed.

With several billion dollars raised for social investment funds in the last few years, social investors are a growing and influential phenomenon, but are still a relatively small part of the global capital markets.

While we all share a desire to do more with their capital than simply maximize financial return, there are as many differences among social investors as there are differences among venture capital funds. Some take product risk, others avoid it; some are stage specific, others invest across company lifecycles. Some are shrewd investors; some are not. And the commercial versus social orientations of funds is all over the map, and is in large part is driven by their sources of capital.

I wrote short note on social investing for some of my colleagues in the Kauffman Fellows Program to define further how I think about this evolving field.  But make no mistake, social investing is here to stay. There is too much evidence that combining social or environmental criteria with a disciplined approach to principle investing generates real change and sufficiently attractive (but perhaps not-quite risk-adjusted commercial) financial returns.

The Obama Administration is proposing a social innovation fund that might use a range of tools from grants to patient debt to stimulate social innovation in the United States and abroad. The Rockefeller Foundation’s Global Impact Investment Network is looking to build the infrastructure for the sector, particularly in emerging markets.

Even traditional large foundations like the Bill & Melinda Gates Foundation have recognized the need to use a wider range of tools to generate positive social change through “creative capitalism” as Bill Gates has called it.

Savvy venture investors should not dismiss impact investors as mere philanthropists, dumb money, or part of a passing fad. Rather, impact investors are part of an emerging asset class that can generate serious deal flow, test new ideas, or expand into new market and in the process contribute to solving some of the most intractable environmental and social problems of our time.

Certainly a reasonable return on investment by most measures.

In February 2006, when travelling with my colleague Jacqueline in South Africa, we stumbled on the Guardian’s top 100 works of fiction of all time. Being competitive sorts, we immediately ticked off the books that we had read, or could have claimed to have read, and I was shocked.  I am a well-educated guy who likes to read, so going in I thought I had a chance…  I was skunked!  I had only read 18 of these classics of literature while Jacqueline had read 45 or so.

Since then, on my travels around the world, I have enjoyed discovering a treasure trove of ideas, insights, and compelling stories from the list of books (current count, 38).  Many of the novels resonate with the work that I do, inform the complexity of the current political and economic crisis, or remind us of our common humanity.   And some are just plain old good stories. 

None, perhaps, more so than Independent People, the great Icelandic novel, by Haldor Laxness, the great Icelandic author and winner of the Nobel Prize in 1955.  I added it to the list largely because of the wonderful 3 weeks I spent in Iceland in 1990 writing for Let’s Go Europe.  Picked up for a song last fall in Portland at Powell’s (the world’s greatest bookstore), I hadn’t made much progress on the book until the long flight from London to Nairobi.  

Set in early 20th century rural Iceland, it chronicles the life  of a proud and stubborn freeholder Bjartur who is desperate to remain independent–of the banks, of family, of God–despite desperately harsh conditions and extreme poverty.   At times hilarious, but poignant throughout, I was struck by how the economic boom and bust today is just an echo of the credit crunch that Iceland lived through following the prosperity of the Great War. (And how ironic is Iceland’s own particular financial collapse today).

Towards the end of the book, we revisit some of Bjartur’s contemporaries to see how they have fared over their lives.  One, Olafur, who had lost his wife and children early in his life, continued to live in poverty in the same turf hut despite the arrival of a host of social programs and  modern conveniences to his fjord.  ”Human life isn’t long enough for a peasent to become a man of means” Laxness reflects.  

Further, in discussing the government’s attempts to improve the conditions of the poorest of the poor, through subsidies to buy tractors or ploughs, cheap credit, “access to water on tap, linoluem and eletric light”, Laxness concludes:

“The fact is that it is utterly pointless to make anyone a generous offer unless he is a rich man; rich men are the only people who can accept a generous offer. To be poor is simply the peculiar human condition of not being able to take advantage of a generous offer.  The essence of being a poor peasant is the inability to avail oneself of the gifts that politicians offer or promise and to be left at the mercy of ideals that only make the rich richer and the poor poorer.”  

I am not sure that I fully agree, as there are millions of the poor around the world whose lives have been transformed within their lifetimes, but Laxness has a point.  There are no quick fixes, this work can take generations, and it may not be through our generosity alone that they get out of poverty.  We should pay heed to these fairly strong words of caution from nearly a century ago about how the best intentions may not, in the end, lead to real change for the poor.

Malaria Haiku

Malaria sucks.

New cool tools can beat it back

To save babies’ lives.

On Friday, Richard Allen, the CEO of the MENTOR Initiative, briefed friends and partners of Acumen Fund about malaria, which kills an estimated 5,000 people per day in Sub-Saharan Africa, and gave an update on his new anti-malaria tool: anti-malaria wallpaper.  Unlike spraying, which you have to do every 6 months, or bednets, which people have to sleep under, malaria wallpaper can protect an entire room for about the same cost as a couple of bednets and last for more than 4 years.  We have invested in Richard through a partnership with Vestergaard-Frandsen, one of the world’s largets maker’s of bednets.  It’s an exciting and innovative new partnership, and Richard is a compelling whose personal journey and story-telling make him an extremely effective leader in the malaria control community.

What a day in Washington.  The energy, optimism and hope in the millions of people was truly unbelievable.  We arrived Monday night at 7pm, no traffic on 95, to stay at the home of a college friend.   A great night of reminiscing about 17 years ago when we all lived in DC, and a champagne toast to the end of a forgettable era and the cusp of an unforgettable moment in history. 

We started out at 8am, two kids in tow, not sure how far we would make it and what we would see when we got there.  My friend set out on bikes to the House Rayburn Office Building, where he worked; we walked.  

Through Adams Morgan where we lived in the early 1990′s when I worked for the Clinton Adminstration’s national service program AmeriCorps, an era of hope without virture, as we learned in retrospect…

Onto the 42 bus to Farragut Square, where we disembarked among thousands of people streaming to the Mall.  Over to the Washington Monument, under the bright gray skies, with hundreds of thousands of people milling about, soaking in history, and reliving the fantastic concert on Sunday.  Thousands of people of all races, but the girls were struck by how many African-Americans there were. 

We decided to risk it… to Rayburn or bust.  Swimming upstream was not easy.  Tens of thousands of people were coming over the Virginia bridges on foot, heading to west.  We were walking east, and it got harder with each block.  We finally made it to within sight of Rayburn, but a flood of people made it unthinkable, especially with a six year old in hand.

Disconsolate in front of HHS we sat, a decent line of sight to the podium, not sure we would be able to hear.  Should we stay?  We decided to push one more time.  Through a line of ticket holders a mile long, twenty abreast, we finally made it across.  Into Rayburn was remarkably easy… public entrance, office B373, obstructed view to the capitol, but I grew up with Fenway and the Boston Gahden, where obstructed view was pah for the course.  And with CNN in the background, it became like a political sky box.  

And what an all-star performance.  Aretha singing and Yo-Yo et al playing the theme from Simple Gifts, the most elegant theme of American classical music IMHO.  And then Obama’s speech.  After fumbling over the oath (another Supreme Court conspiracy?  He never said it in order, maybe he is not president?), Obama was forceful and strong, polite but clear.  There is a new sheriff in town.   

He was thoughtful and dignified, so fundamentally inspiring.  In the grand arc of the American narrative, Obama’s swearing in was the completion of a chapter started by Lincoln in 1863, amplified by King in 1963, and the beginning of a new chapter, where the political landscape has fundamentally shifted.  

Everyone in Washington today and around the world is ready for that new chapter, eager to turn the page, and read what will be written.  For now, the chapter starts with one word, “Wow.”

The 7:10am express train from Trenton to New York is delayed.  Again.  As I begin to triage my Thursday morning appointments, my blackberry starts to vibrate.  “Due to Amtrak overhead wire problem, inbound trains subject to 10-15 minute delays”.  Thanks for sharing.   If I am not mistaken, this is the third time this week that the commute has been delayed.   Monday it was some disabled Amtrak equipment and Wednesday it was an Amtrak train that conked out around Metropark. 

As gas prices flirted with $4 per gallon last summer, many commuters discovered one of the state’s hidden secrets: the pleasure of a commute on New Jersey Transit.  Over 110,000 passengers ride NJ Transit trains each day (each way), up 6% from last year.  That’s 50 railcars of new passengers added to the system in just one year.  The trains are clean and heated (or air conditioned), the conductors are friendly, and the passengers courteous (most of the time). Seriously, it’s a great way to start and end the day reading, reflecting or doing e-mail.  That is, when the trains run on time. 

And the trains seem to be running late more and more often.  I used to plan on one 15-minute delay per week and one hour-long delay per month.  And once a year there is always some act of God (or trespasser on the tracks) that throws everything up for grabs and shuts the entire system down for the morning or evening.  In the last six months, however, the frequency of delays seems to have doubled.  In just two months of 2008, there were 25 separate incidents sent out by NJ Transit and their handy “transit alert” system announcing delays of 10 minutes to an hour. 

What’s most frustrating is that the cause of the delays is frequently not NJ Transit, but Amtrak.  Of the 25 incidents, 10 were, by my count, the result of Amtrak, 12 were NJ Transit failures and two were “acts of God” (including one ominous sounding “police activity”).  The raw numbers of failures, however, need to be put in the context of NJT and Amtrak’s proportional use of the system.  There are roughly 500 NJ Transit trains that run on all or part of the Northeast Corridor from Trenton to New York per day, compared with 104 Amtrak trains.  In that two month period, Amtrak caused four times as many delays per train than NJ transit did.    

The problem stems from the fact that while NJ Transit operates the trains, Amtrak maintains the tracks, switches and signals that keep the whole system functioning.  And from one rider’s perspective, Amtrak seems to be doing a poor job.  Amtrak wouldn’t respond to my requests for information about their maintenance plans.  After years of budget cuts, Congress has finally passed a budget that restores funding to Amtrak, but even with better levels of funding there is no guarantee that Amtrak will focus on resolving the infrastructure issues in the Northeast Corridor. 

By my rough math, using the same approach that the Texas Transportation Institute uses to calculate the cost of traffic congestion in major US cities, the current delays are costing commuters roughly $250 million a year in lost productivity.  If NJ Transit were to take over maintaining the tracks that run through the state, I estimate that delays could be reduced 25%, translating into roughly $60 million of gains for commuters. 

I don’t know how much it would cost to fix those overhead wires in Elizabeth or the signals near Secaucus, but even in a tight fiscal environment, I can’t think of a bigger bang for the buck for NJ’s taxpayers.  I know that Congress just approved a new tunnel under the Hudson River that will be dedicated to NJ Transit trains.  This should help relieve congestion in the long term, but in the short term, I’d love to get some of NJ’s finest from the International Brotherhood of Electrical Workers to spend time riding (and fixing) the rails. 

Don’t get me wrong.  I love Amtrak trains.  Riding to Washington, DC or Boston on Amtrak beats flying hands down, and family trips on the Zephyr from Oregon to California are some of my favorite memories as a child.  And to be fair NJ Transit is not perfect either.  But it’s a professionally run system, the fourth largest in the nation, and one of NJ’s real assets.  Let the professionals in New Jersey take care of the system that most affects the people of NJ, and not allow hundreds of thousands of commuters be held up on a weekly basis by benign neglect from Washington.  And let’s add a serious investment in Amtrak to the stimulus package.  

The picture above is of artemeisa annua, a plant grown in Southeast Asia and East Africa used as an ingredient in the new front-line anti-malaria treatments, called Artemisinin Combined Therapies (ACTs).   Acumen Fund, where I work, has invested in a company, Advanced Bio-Extracts, to grow, process, and sell the artemisinin derived from the plants into the global market.  Pictured are two of ABE’s stalwart team members demonstrating to me the features of a mature crop.

Malaria prevention is a tough business, but it is worth taking stock of how much recent progress has been made against the disease and how much promise the next five years hold. Focused efforts in Rwanda, Ethiopia, and in Tanzania to distribute long-lasting bednets, rapid diagnostic tests, and more effective anti-malarial drugs called ACTs have led to dramatic reductions in the incidence of malaria in just a few short years.  

Buoyed in part by these successes, and the shame of having done so little previously, the global public health community had been poised, prior to the financial crisis, to spend billions of dollars over the next five years to further combat the disease.

Assuming the global health community doesn’t scale back on this big short-term push, we  need to think about how to build long term public and private capacity to sustain these efforts after the public funding wanes. Where will a mother be able to find a replacement net for a damaged one, or an extra net for a newborn child? Will the subsidy for ACTs push prices low enough to become affordable to the working poor? And who is thinking about the next generation of products if this resilient disease resists our best efforts at containing it?

The answer depends in large part on the role that the private sector plays during this short-term “surge” to bring life-saving products to those who need them most. In Acumen Fund’s investment experience, there are three things that the global public health community can do to reach as many people in the short term while supporting sustainable solutions for the long term.

First, the public health agencies should focus not on the manufacturing costs for the products but on their delivered costs to those who need them. UNICEF, which buys millions of bednets per year, is obviously looking to find the lowest cost manufacturer for the long-lasting nets. Our partner in Tanzania, A to Z Textiles, faces higher raw material costs than its competitors in Asia, but is actually able to deliver nets to various parts of Africa for much less than any of its competitors. If UNICEF were to change its procurement policy to favor high quality local manufacturers, it could reduce total costs for commodities while stimulating significant job creation in the very regions affected by the disease.

Second, we should seek to reduce the volatility of projected demand so that private manufacturers can invest in capacity and lower costs. For example, when ACTs were first approved as a frontline treatment against drug-resistant strains of malaria, the WHO estimated an annual demand of 100 million doses. When demand turned out to be less than half of that, the ripple effects through the supply chain were nearly devastating, particularly for the low-income farmers growing artemisia annua, many of whom were located in East Africa.

More accurate forecasts, faster disbursement of funds to Ministries of Health, and financing for companies to smooth the ups and downs of demand will make investment more predictable and attractive, potentially spurring innovation of new products and technologies to address these underserved markets.

Finally, the public health community should carve out a small portion of the funding that will be used for “free distribution” programs to subsidize market-based distribution programs. There is encouraging evidence that public sector distribution programs can move nets and ACTs more cost-effectively than the market, but they often require the poor to “pay” in terms of time and travel to collect the free goods. We also know that the current products are far too expensive for the poor to pay full price, so the right answer might be a small but growing private sector strategy to complement the free distribution programs.

If smart subsidies can be used to provide incentives for retailers to carry anti-malarial products at affordable prices, corner stores across Africa might ultimately become a sustainable distribution channel to reach those passed over by the free distribution programs. Malaria is a terrible scourge and the public health community is finally rising to the challenge to prevent needless deaths throughout the world, especially in Africa.

Unless we eradicate the disease in the next five years, however, let us be careful to make sure we use the public funding to anticipate the long term needs of Africans by supporting African businesses that can sustain the distribution of essential anti-malarial products long after the giveaways have come and gone.

January 2008 was warmer than average in Lambertville, NJ: only 961 heating degree days compared to the 30-year average of 1074. This is a bad thing if, like me, you think that global climate change is already underway and that we may be too late to stop it. This is a good thing, however, if you paid $3.50 a gallon for heating oil and are still trying to find ways to weatherize your new (old) house. Who knows what January 2009 will bring? Thankfully the price of heating oil is coming down ($2.00 anyone?), we repointed the foundation in August, and are in the process of adding weather stripping to every door and window in the house.  Lots of work…

I haven’t thought about heating degree days since 1990, when as a senior in college, I helped Harvard University create an inter-dorm energy efficiency competition that pitted one residential house against the other residential houses. We called it the “Ecolympics” until the US Olympic Committee told us it violated their intellectual property for the use of the word “Olympic”, and so we changed the name to the Green Cup (it is still active, go check it out).  Some houses used gas, some used oil, for heat and it required some complicated calculations to figure out who would win an energy conservation competition.  I recalled that the heating degree days (which is calculated as the difference between the day’s average temperature and 65 degrees Fahrenheit) got us to a place were all of the information could be reduced to a single number, and a monthly “gold, silver, and bronze” winner could be announced.

My experience at age 20 with the Ecolympics–er, Green Cup–launched my career of thinking about social innovation, environmental protection, and communicating complicated ideas in a simple way. This blog will attempt to muse on a range of these issues. My 2009 New Year’s Resolution is to take the time to reflect and engage more on the inter-connection between my avocations (innovations in philanthropy and environmental problem-solving) and my vocation (at Acumen Fund) and to share some of my thinking real time. I’ll look forward to seeing if this experiment bears any fruit. Perhaps I’ll joined the ranks of the many well intentioned, but rarely updated blogs… the tippy, tip of the long-tail in the blogosphere. But who knows?