February 2006

I had the privilege of attending the TED conference, one of the more extraordinary gatherings of worldchangers. Acumen Fund is particularly honored to be associated with TED, given our support from the Sapling Foundation, which owns TED. The conference includes 1,000 individuals who come to Monterey, CA from around the world to listen to some of the most innovative and creative thinkers and doers in the fields of Technology, Entertainment and Design. The experience was thrilling, filled with insights and inspiration. You couldn’t leave without wanting to be smarter, do better, make more of a contribution on earth.

One thing that struck me was how TED increasingly is a reflection of a new wave of idealism that is cresting across the world. Speaker after speaker talked about their inventions and discoveries, their insights and plans with an eye to do something of real significance for the world. If there were commmon threads, they were around the importance of private sector initiatives and resources to solve tough problems of today’s world. No one is waiting anymore for governments to solve problems; individuals and companies are looking to pave the way themselves. There was great focus on the need for more innovation, for bottom-up thinking, for quick prototyping and for more listening around the world, even to - or mostly to - people we don’t know and those who think they hate us. Indeed, the quest for new technologies that clean water, clean the environment, allow for early detection of pandemics and bring energy to the poor was combined with a search for better understanding and more open and complex moral frameworks. This confluence of skills and technologies with moral imagination must be at the heart of the future we will create together.

As Sir Ken Robinson said, TED celebrates the gift of the imagination. This conference pushed all of us to think harder to make a better world for everyone. I was proud to be part of it.

Our friend Roshaneh Zafar, who runs the microfinance organization Kashf in Pakistan (one of Acumen Fund’s investees), was a participant in the recent World Economic Forum at Davos. She attempted to raise issues of gender inequity in the Muslim world at that event, and she writes about those efforts in this week’s The Friday Times, a Pakistani independent weekly. Access to the article online is by subscription only, so we’ve included the text of the article here.

I’ve just returned from my first trip to Africa to visit Acumen Fund’s investments in South Africa, Kenya and Tanzania. One of the most striking things is that within 24 hours (5 airline meals, 4 movies and 3 hours of sleep) I went from sitting in the living room of a woman with AIDS in a poor semi-rural community in tropical Africa to picking up my daughter at elementary school, knee deep in snow, and somehow did not feel the culture shock I expected to feel. (Frankly, I felt much more culture shock readjusting to driving, and not having to lock my doors and worry about the carjackings of JoBurg). I suppose this is largely because the trip was extremely short or it may have to do with weak antennae on my part, but I actually think there might be two things: First, the kind of struggle and community support and perseverance I saw are not something so foreign to us in the U.S. I see the same kind of commitment, optimism and heartbreak in the U.S., particularly through involvement with urban community development corporations. Just add a few zeros to the per capita GDP and a decade or two to the life expectancy, and the circumstances, at their core, are not that dissimilar.

This article in The Guardian highlights the ongoing struggle to house Indonesian survivors of the tsunami. It’s a reminder that money is not enough. It is criminal that less than 250 of the 16,000 houses needed have been built in Aceh since the town was devastated by the tsunami. Political will is critical for things to get done. We need as much public outcry today as we saw public support when the crisis hit. We also need to find - and communicate - metrics on progress so that there is a chance for real and sustainable change.

This past week I was in Lahore, Pakistan visiting LUMS, the country’s leading graduate business school. I had meetings with the superintendent and several professors before making a presentation to students on Acumen Fund’s work. Approximately 50 filled the auditorium, and no one left before the end of our 90-minute presentation and Q&A. I usually try to talk about why and how we do what we do, rather then talk about organizations. It was exciting to see how enthusiastic these 24- to 28-year-old Pakistanis were about the idea of investing in businesses whose customers are mostly poor. We fielded question after question about these resource-poor organizations and how Acumen Fund tries to help them: How do you keep the strategic plans simple? How capable are the managers, and how do you help them? How involved do you get in running companies? What do you do when there is a great idea but no leader? Are there good ideas in other countries that we should try in Pakistan?

What is most interesting to me personally is how similar these questions and conversations are with graduate students of the same age in the U.S., or those in India. They all get excited by how hard this work is and seem to really understand. Also, they seem interested in working with us because they are interested in the problems and our solutions, and are eager to do this in any country, not necessarily their own. The more ambitiously we set the goals, the better the reaction. It says a lot about this emerging generation of leaders.

The challenge of structuring appropriate Acumen Fund housing investments is that they do not - cannot - look like traditional real estate development projects. The population we target does not have the disposable income needed for 15-20% equity down payments, and often the full family’s monthly income flow is insufficient to carry a very large mortgage. This means that we are looking for innovative financial structures, or small-scale projects that have primarily demonstration value. These features translate to higher lending risk, which causes most property lenders to step back from commitments. Acumen Fund’s strength in bringing commercial lenders to the table is that we have a higher threshold for risk then other institutions, and thus are in a position to leverage their involvement by bearing the first loss. We are demonstrating this leverage in launching a commercial mortgage lending program, as well as in lending to squatter property purchases in Pakistan, where our Housing portfolio is varied and growing after four years of investing.

In India, we are still looking for the initial momentum to build our learning and credibility. The scale of numbers, projects and expectations is higher then in Pakistan, which makes the role we are trying to play much more difficult. But having just returned from India and Pakistan, I am excited by the opportunity and optimistic about the possibilities.

Understanding how poor people make economic choices and how their spending decisions are shaped is fundamental to providing them with affordable good and services such as housing, clean drinking water and health services and products. If we can become better at identifying what people want and what they choose to spend their meager incomes on (rather than assuming we know what they need), we can move closer to giving them access to those resources.

Acumen Fund’s Pakistan office came across a paper published by two directors at the Abdul Latif Jameel Poverty Action Lab at MIT, which provides interesting (and some surprising) insights into how the poor make economic choices. The paper uses survey data from 13 countries to document the economic lives of the poor (those living on less than $2 dollars per day per capita at purchasing power parity) or the extremely poor (those living on less than $1 dollar per day). It describes their patterns of consumption and income generation as well as their access to markets and publicly provided infrastructure. The paper concludes with a discussion of some apparent anomalous choices.

The world needs good, crisp writing on delivering goods and services to people making less than four dollars a day. Especially interesting are the business models that may work in terms of delivering critical goods and services like clean water, healthcare and housing to the poor. The IFC and Financial Times have launched an essay competition on “Business and Development: The private path to prosperity” to promote best thinking on the role of business, development and social entrepreneurship. We hope friends of Acumen Fund contribute.

Excitement around China and India were major themes of Davos. Who will be more successful most quickly? What will it mean for the US? For Europe? Does foreign investment have a direct correlation with economic success? These questions were raised in many sessions.

It is time to celebrate the enormous progress of both India and China. At the same time, while Africa is finally on the map of a greater collective conscience, it is still seen in a much more marginal way that smacks of despair rather than celebration.