Must Reads: In Nonprofit Quarterly, Heron's Board chairman Buzz Schmidt argues all enterprises are social and says using a tax status to define the roles of enterprises in society is wrong-headed and trips up conscious investors. In the New York Times, the University of California's Ivo Welch argues against the fossil fuel divestment movement, saying it would be more influential to own more, not less, to get the outcomes they want. (You can also read some letters in response.) Impact Economy has a new "hands on guide" for financial advisers and senior management to help better serve clients on impact investments. Editor's Note: Thanks to all of you who responded to our short survey to help us get better. If you haven't yet, there is still time to let's us know your opinion. Just click here.
Some Good News for the Job Market
Ooh, get your hard hats on, Millennials. Brookings' Joseph Kane and Robert Puentas has some good news for infrastructure jobs, projecting a growth from 11 percent of the current U.S. workforce to about 20 percent in the next decade--at the same time a quarter of the current sector's workforce is expected to retire. Even better, their report challenges the notion that infrastructure jobs are mostly in construction; check this chart:
Workers in infrastructure occupations earn significantly higher wages at the 10th and 25th percentile ($24,750 and $30,190) relative to all workers in the U.S. ($18,090 and $22,480). These not only include specialized occupations that pay above-average wages such as nuclear engineers and hydrologists, but also other sizable occupations such as telecommunication line installers and water treatment plant operators found in nearly every metropolitan area throughout the country. More than 80 percent of workers employed in infrastructure occupations typically have short- to long- term on-the-job training, but only 12 percent hold a bachelor’s degree or higher and generally need less education to qualify for these jobs.
Similarly in the New York Times, Brookings' Justin Wolfers says despite the gloomy talk, the U.S labor market is just bent, not broken:
The sunnier view is that this is not a permanent shift, but rather the natural course of a recession, which tends to cause short-run counterclockwise loops in this unemployment-vacancies relationship. It’s a sunnier view because it suggests that a continuing recovery will largely solve our unemployment problem: The recovery will cause the labor market to loop back toward its pre-recession Beveridge curve, leaving no lasting mark.
Well, let's get to the gloomier news. Last up at the checkout line no more, says John Tierney in the Atlantic, discussing yet another way in which technology might upend the labor market:
[M]any stores, especially grocery and drug-store chains, customers can use self-checkout kiosks. In Apple stores, for a couple of years already, you’ve been able to buy off-the-shelf items using an app on your smartphoneand walk out of the store with your merchandise, having never interacted with a salesperson. But just because the coming changes in retail checkout aren’t beyond our imagining doesn’t mean that they’re unimportant. For one thing, they’re likely to have profound effects on retail employment. In fact, according to data from The Economist, retail workers are among those whose jobs are most likely to be displaced by digital or computer-related technologies in the next 20 years.
In the Atlantic, Derek Thompson looks at the diminishing trend of entrepreneurship in United States and links it to employment -- check these charts:
Going back to the late 1970s, as globalization started to accelerate, the majority of net job creation has come from new companies, rather than old firms, which are often expanding abroad. The vast majority of job creation at big multinational corporations—as much as 75 percent of new jobs—happens overseas, since other countries are growing considerably faster than our 2-percent rate. One paradox of globalization is that it's localized employment. Since big companies off-shore much of their job growth (or replace what's left of it with software or smart hardware), the future of work in the U.S. will come from work that absolutely has to be here, like health care, education, and food services. Start-ups can be special for many reasons—they can challenge lumbering incumbents, they can create new demand for stuff, they can introduce more ideas—but from a big-picture macroeconomic standpoint, they're also special because they're here, and when they expand they tend to expand here.
Getting Down in the Philanthropy Mud
Quartz has this fascinating email exchange between philanthropist Peter Buffet and ethicist William MacAskill over the role of philanthropy and whether it is part of the "a perpetual poverty machine." Check out this cartoon from Khalil Bendib summing up the sentiment:
Here's some more thinking on philanthropy's role in society. Albert Ruesga is back with this blog post in White Courtesy Telephone suggesting funders stop trying to "straight-jacket civil society":
People don’t like to be played. They don’t like to be managed. They prefer to be the authors of their lives and the work they undertake. And yet so many exemplars of “strategic philanthropy” are top-down affairs. We grantmakers, myself included, act as arrogant elites, drawing arrows and triangles on the whiteboards of our well-appointed conference rooms with no one around to challenge our flawed thinking. We strut about like giant roosters puffing out our breast feathers and clucking incoherently about “disruption” and “theories of change.” We look foolish to everyone except ourselves and those even more foolish than we are. What’s missing here is a certain kind of sensibility rooted in the imperative that we treat people as ends not as means. This sensibility has as one of its fruits the goodwill people feel towards those who approach them in humility, asking for help rather than offering to save them from themselves. With this sensibility it becomes immediately possible for us to do things with humans rather to humans. Our causal chains become less brittle. A sense of commonality sustains our social change efforts through their rough patches.
In the Stanford Social Innovation Review Steven Teles, Heather Hurlburt, and Mark Schmitt discuss how foundations are both limited and freed by polarized politics:
Partisanship and polarization in the US political system have opened a disturbing gap between the approaches that foundations are comfortable with pursuing and the tactics that now drive the policy process. Foundations and the organizations that they support have three options for responding to this new world. One is to try to make the old model work under new circumstances. A second is to try to restore the old model by pursuing various kinds of procedural reform. And a third is to understand the nature of the current political environment and to work within it. We believe that this third approach—uncomfortable though it may be for nonprofit and foundation leaders who shy away from partisan conflict—offers the best opportunity to promote lasting social change...
Some of the most creative advocacy work currently under way builds cross-party coalitions that are anchored not by centrists, but by figures with unquestioned ideological credibility. We call this style of advocacy “transpartisan,” because it recognizes that the critical political gatekeepers are no longer ideologically neutral actors in the center, but the authorizers of ideological orthodoxy at the poles. The art of transpartisan policy entrepreneurship is to develop policy frameworks that can support gatekeepers who have chosen to bless certain unorthodox ideas or shifts in policy. Opportunities for transpartisan coalitions are rare, and it may take years before the work of building connections among outside advocates and peripheral but strategically important players pays off.
In March in the Chronicle of Philanthropy, former Enron trader and hedge-fund founder John Arnold wrote this op-ed answering what he sees as attacks against his philanthropic choices focused on public policy:
Government policies typically are not crafted by “policy wonks” with the goal of maximizing social welfare. They are enacted in a terribly messy process involving elected politicians, their donors, and powerful interest groups. Huge sums spent by corporations, organized labor and the business lobby skew debate and often dictate public policy. We strongly believe that the best use of our resources is to counterbalance these entrenched forces, on the right and the left, by providing policy solutions rooted in objectivity and solid analysis—from people who have zero financial interests in the outcome.
People may not agree with every issue or policy proposal we pursue. We expect reasonable minds to disagree, and we welcome constructive debate on the merits of every issue in which we are involved. And if presented with compelling evidence of a better approach, we will be the first to advocate for it. But we will not be deterred by personal attacks, blatant lies, or self-interested campaigns to keep in place systems and policies that do not work for anyone other than the few who continue to gain from them at the expense of the rest of society.
In lengthy response, Benjamin Soskis in The Atlantic says end the vitriol against billionaires but keep up the debate over the role of philanthropists in society:
It’s always a bit uncomfortable to see a private citizen taking his knocks in the public square. We probably shouldn’t take much pleasure in the spectacle. Yet in the midst of this latest Gilded Age, as the prerogatives of concentrated wealth march onwards with little resistance, an aggressive—even at times an antagonistic—engagement between the public and their benefactors shouldn’t be considered a mark of incivility. It should be considered a democratic imperative... It is safe to say that the golden age is over. Not that philanthropy has lost all its luster—there are still plenty of folks who consider it the best hope for, in the words of the Rockefeller Foundation charter, “promot[ing] the well-being of mankind throughout the world.” But there is now, once again, a significant and vocal faction willing to call those ambitions into question. In part, the push-back can be traced to the nation’s mounting uneasiness with income inequality and to the spread of an economic populism that refuses to regard the concentration of wealth charitably.
The National Committee for Responsive Philanthropy launched a website that posts public feedback about foundations’ giving: “think Yelp for the philanthropy sector.”
Also on Stanford Social Innovation Review, Jed Emerson and Lisa Woll discuss the evolution of impact investing, and say investors coming to understand that all investing has an impact:
As this field has grown and evolved, conventional investors are beginning to understand that if they do not consider, address, and manage ESG or sustainability factors, then they assume unnecessary risk. And in an ever-competitive global capital market, they simply cannot afford to do so. For example, investors in a clothing retailer need to understand how that company manages supply chains and upholds labor rights, to protect their bottom line and ensure that employees are treated properly; likewise, they must consider the amount of water that cotton production requires and its level of environmental impact.
Abigail Noble of the World Economic Forum was interviewed at NextBillion on why impact investing needs to go mainstream. Check out the video:
We shared last week about Nonprofit Finance Fund’s investment in the Pay for Success initiative: here’s the California Economic Summit’s take on the program. In Nonprofit Quarterly, Rick Cohen reports on the chilly reception social impact bonds received at a recent Senate budget committee hearing. In response, Social Finance's Jane Hughes and Alisa Helbitz offered these thoughts:
We view this as part of a healthy dialogue on an innovative and new mechanism to re-imagine the role of capital markets in social services; we welcome and even share many of these questions and concerns. The Senate hearings were an important part of this dialogue, in which senators posed questions that deserve a more thorough response than the limited time frame and format of the hearings allowed...
Senator King suggested that the only way SIBs would work was if the funders took on substantial risk—for which they would expect to be compensated by a substantial risk premium, i.e., high returns on their investment. In a similar vein, some articles about the Peterborough events have suggested that future investors will be deterred from participating in future SIBs because of the early winding-down of Peterborough.
In fact, these statements reflect a misunderstanding of the motives of SIB investors. SIBs do not and should not appeal to finance-first investors, who are primarily motivated by profit maximization. Rather, SIBs are designed for double bottom line or impact investors, who seek social value alongside financial value.
The Center of Financial Services Innovation has a blog post on how changing they way positive financial behavior is reported could open up more financial services to low-income folks and young people.
In the weird and random news, is Wall Street killing bankers? Over at Bloomberg, William Cohan looks at a string of sudden deaths in the investment world.
In Forbes, Sean Kelly examines the wave of new socially driven food companies.