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Power of the Markets

Sasha Dichter of Acumen Fund gave the keynote at FPL Americas conference on Tuesday, November 1. It was a great talk, just as inspiring as I’d hoped it would be.

Here are a few observations from his talk:

The Well Being of the Tribe is Everyone’s Responsibility

The concept that “charity begins at home” is relatively new in history. Traditionally, there was more of a sense that the well-being of the tribe was everyone’s responsibility. If a member of the tribe was struggling, the rest of the tribe chipped in to help the struggling members without expectation of recompense or profit. Sasha quoted Deuterotomy 23:19-20 “Do not charge a fellow Israelite interest, whether on money or food or anything else that may earn interest. You may charge a foreigner interest, but not a fellow Israelite, so that the LORD your God may bless you in everything you put your hand to in the land you are entering to possess.” (NIV). He also told the story of the Potlach ceremony. This was a practice common in many west coast Native American tribes. During the ceremony, the wealthiest members of the tribe passed out gifts to the other tribe members. In this social setting, status was based not on how much you had, but on how much you gave.

Sasha’s point was that the concept of the gift economy – of charitably helping members of our tribe without expectation of recompense – has shrunk in much of the modern world. It first shrank from the tribe to the extended family and now has shrunk even further to exclude most everyone outside our nuclear families.

Shockingly, some of this transformation has actually been driven by our government. According to Wikipedia, the Potlach ceremony was actually made illegal in Canada and the United States in the late 19th century. The ban was only repealed in 1951.

I wonder what the world would look like if we eliminated the axiom that “charity begins at home” and started accepting responsibility to help the less fortunate across the board? (Note: Politically I’m actually a fiscal and social conservative. While I feel it’s everyone’s responsibility to help each other, I’m not convinced that the government welfare system is capable of delivering a sustainable solution.)

Can the Power of the Markets Inspire Innovative Solutions to Poverty?

The developed nations have created tremendous wealth and provided innovations that changed the lives of most people who live in the Western world. But there are still massive problems with extreme poverty throughout the world. More than 3 billion people still live without basic sanitation (which is vital to health). More than 2 billion lack access to safe drinking water.

The Acumen Fund asks, “Can we take the best of philanthropy and the markets, the best of accountability and patience, the best of innovation and extend it to solve the problems of extreme poverty?”

The Acumen fund works in some of the poorest parts of the world – in Pakistan, India, and East and West Africa. In these areas, basic infrastructure such as roads is terrible; they have no access to electrical grids, clean water supplies, or sanitation. Corruption is high, trust is low, and interaction with the markets looks very different than it does in the developed world.

They apply a concept Sasha calls “non-profit venture capital.” They invest in innovative solutions to fundamental problems – such as providing villages with inexpensive access to clean drinking water, building electricity generators powered by rice husks, and providing lower cost lamps to replace kerosene lamps. They allow longer time horizons for the return of their capital, and they look for long-term social impact instead of short-term financial gain. At the same time, they understand that having a long-term impact demands a sustainable business model. While not all of their investments are successful, many are having significant impact and are gradually figuring out a business model that allows for scale and financial sustainability. Acumen Fund lives up to the old Taoist proverb, “If you give a man a fish, you feed him for a day. If you teach him how to fish, he’ll feed himself for a lifetime.”

I’d like to hear your thoughts. Have you seen other innovative ways to solve extreme poverty?