Must Reads: At an event at the American Enterprise Institute last week, Bill Gates gave his thoughts during a conversation on poverty and prosperity on U.S. labor prospects and why we should pivot away from taxing labor to a consumption tax. In Salon, financial author Thomas Frank looks the political power of banks and says the game is still rigged in favor of the one percent. In Bloomberg View, Edward Niedermeyer takes a look at the uphill fight facing electric-car maker Tesla Motors (a Heron investee via a double-bottom-line fund manager) over the company's attempt to "build a retail network free from the franchise-dealer monopoly."
In the New York Times, Anna Bernasek says that nonprofits' share of the economy is growing:
As the population ages, greater demand for health care services drives growth in hospitals and health care organizations, many of which are nonprofits. Another factor is that charities focused on the needs of poorer Americans have experienced higher demand after the Great Recession. In addition, family foundations have grown in popularity, providing a convenient repository for untaxed wealth that often remains under the control of the donor. Because none of these factors seems ripe for change, it seems likely that nonprofits will play a growing role in the economy.
Meanwhile in the New York Times Sunday Review, Jeremy Rifkin argues the "internet of things" is making it more likely nonprofits structures are the future of capitalism:
THE unresolved question is, how will this economy of the future function when millions of people can make and share goods and services nearly free? The answer lies in the civil society, which consists of nonprofit organizations that attend to the things in life we make and share as a community. In dollar terms, the world of nonprofits is a powerful force. Nonprofit revenues grew at a robust rate of 41 percent — after adjusting for inflation — from 2000 to 2010, more than doubling the growth of gross domestic product, which increased by 16.4 percent during the same period. In 2012, the nonprofit sector in the United States accounted for 5.5 percent of G.D.P.
What makes the social commons more relevant today is that we are constructing an Internet of Things infrastructure that optimizes collaboration, universal access and inclusion, all of which are critical to the creation of social capital and the ushering in of a sharing economy. The Internet of Things is a game-changing platform that enables an emerging collaborative commons to flourish alongside the capitalist market.
Check out this TED talk from Boston Consulting Group's Philip Evans talking about how technology and falling transaction costs within value chains and what it means for future business strategy:
You might also want to check out this piece from Kate Barr, who writes to follow up on her Overhead Myth initiative with a challenge to nonprofits to “please, get a new recipe” for better financial reporting.
Over at the White Courtesy Telephone blog, the Greater New Orleans Foundation's Albert Ruesga debates the utility of "theories of change" in philanthropy:
Grantmakers fall into error when they engage in armchair speculation about effects that lie at the distal ends of long causal chains. If our intervention depends on a tightly choreographed march of causes and effects, we will almost certainly be disappointed. Are we therefore to abandon trying to pinpoint causes and effects in social interventions? Are we to declare the causal nexus an impenetrable mystery? Not at all. Causes and their effects are as much at work in the social as in the physical realm and we need to understand them as best we can. As for felicity conditions, most times when I ask you to pour me a glass of wine, there will be no menacing pianos about. Our problems begin when we overreach. Our arrogance is on full display when we ask grantees to engage in exercises beyond the abilities of Stephen Hawking. Moreover, a great deal of what’s been written and discussed about theories of change and other jetsam from the world of “strategic philanthropy”—this post included—is a bunch of arm-waving that will continue to enrich technocrats like me but fail to advance the cause of justice, the latter having much more to do with truth and repentance than with logic models.
In the Pioneers Post, Social Return on Investment Network's Jeremy Nicholls explains the value of an SROI approach:
Our argument is that the current approach, financial accounting, contributes to inequality because it is based on the interests of investors excluding costs and benefits that are not seen as relevant to those investors – despite of course, being very relevant to anyone else effected either positively or negatively by our actions. We need a new way to account and include this extra value which has less of a tendency to result in inequality and won’t generate such extremes in inequality; an approach that rethinks the nature of the investor, and therefore also rethinks which costs and benefits are relevant. This will shift the relative profitability of different goods and services towards those that on balance create more social value and on balance have taken into account a wider sense of value.
Check out this chart on how b-corps are doing:
With the passage of benefit corporation legislation in 20 states, including Delaware, home of the American Corporation, investors now have the freedom to invest and hold management accountable to create value for shareholders and for society. Benefit corporation legislation helps address the problem of short-termism in public capital markets. By increasing transparency and accountability (and reducing transaction costs and risk), it creates more efficient and effective capital markets for taking purpose-driven companies to scale. Today, there is a $3.7 trillion U.S. market in socially responsible investing. However, these investors have only been able to nibble around the edges, removing so-called “sin stocks” like tobacco or weapons from their portfolios or simply advocating for businesses to do the right thing. With benefit corporation legislation, these investors can now hold companies legally accountable to operate in a sustainable and responsible manner and to balance the interests of shareholders with the broader interests of society. By meeting the highest standards of corporate purpose, accountability, and transparency, benefit corporations build the most important corporate asset: trust. This trust enables benefit corporations to attract the best talent and to turn their customers into evangelists. Assuming strong underlying business models, this makes them attractive investments.
Amy Chung and Jed Emerson of ImpactAssets propose that “aligned grants can be critical to unlocking impact investment capital”:
Grantmakers can involve impact investors early on in their due diligence process to help identify and support organizations that have a higher potential of developing into investable business models. And they can work with impact investors to structure their grants in ways that attract future investment by incorporating the kinds of evaluation metrics and performance requirements that will satisfy the due diligence needs of impact investors.
Regarding global impact investing, here’s Amanda Feldman sharing her summary of what’s happening in aid and impact in Africa, and David Bank of Impact IQ discussing why former mayor Bloomberg is “jumping into the ocean” of investing in sustainable fisheries. Lisa Genasci blogs about the KL Felicitas Foundation’s impact portfolio, and Jean Rogers of the Sustainability Accounting Standards Board is interviewed by the Shared Value Initiative’s Michelle Morgan. In the Stanford Social Innovation Review, Social Finance’s Tracy Palandjian and Jane Hughes envisions a future “in which mainstream impact investors, government, and foundations continue to co-fund SIB transactions.” For more on these topics news this week, see our post on impact investing’s potential. Heron gets a mention in this 3BL Media piece about a RSF Social Finance conference as an example of how restructuring an organization can provide a solution to “internal turf battles and mission conflicts”.
Climbing above the poverty line has become more daunting in recent years, as the composition of the nation’s low-wage work force has been transformed by the Great Recession, shifting demographics and other factors. More than half of those who make $9 or less an hour are 25 or older, while the proportion who are teenagers has declined to just 17 percent from 28 percent in 2000, after adjusting for inflation, according to Janelle Jones and John Schmitt of the Center for Economic Policy Research.
Today’s low-wage workers are also more educated, with 41 percent having at least some college, up from 29 percent in 2000. “Minimum-wage and low-wage workers are older and more educated than 10 or 20 years ago, yet they’re making wages below where they were 10 or 20 years ago after inflation,” said Mr. Schmitt, senior economist at the research center. “If you look back several decades, workers near the minimum wage were more likely to be teenagers — that’s the stereotype people had. It’s definitely not accurate anymore.”
According to the Washington Post's Emily Badger, the country's youngest workers are having a hard time finding a job:
In some ways, this may reflect the particular circumstances of a recession rooted in housing collapse: Many retirement-aged workers who had their savings tied up in their homes suddenly needed to stay on the job much longer than they had planned. And the impact of that decision cascades down to younger, less experienced and less educated workers who've had to compete for jobs with the overqualified.
You also may want to watch this HBO documentary about one woman's experience living from paycheck to paycheck as a nursing assistant.
Could a melting Arctic spell disaster for the global economy? Check out this report from the Center from American Progress. Meanwhile, the Guardian reports on a recent NASA-funded study that found that trends show that global industrial civilization could collapse in coming decades due to unsustainable resource exploitation and increasingly unequal wealth distribution. Want a way to help the poor and mitigate climate change? Set up a universal income model funded by taxing carbon emissions, says the University of Maine's Mike Howard in the Bangor Daily News.
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