It's Not Enough to do Less
I spent last week at the World Economic Forum in Davos raising funds for Sama and building LXMI's global community of retailers and partners. Along the way I came across some especially powerful ideas, and reinforced one of our own (the impact bond).
Here are five key tech and social impact trends from this year’s Forum:
It’s not enough to do less bad. We say this a lot in the office — new businesses can’t define themselves by avoiding the bad (not polluting, not hiring slaves, not using toxic ingredients). The best emerging companies, and the savviest traditional/old brands, understand that creating positive social and environmental impact in the world is important to Millennial consumers. Corporate social responsibility is dead — it feels too weak. We want to see corporate activism on issues like climate change, human rights, and equal pay. It’s already happening. Richard Branson’s B Team hosted a lunch on this and entertained several ideas put forth by social entrepreneurs (including my friends Jeremy Heimans and Nancy Lublin). Chanel’s chief legal counsel said during a brilliant sustainable fashion session organized by Zara Ingilizian that in an era of rising inequality, “the only way luxury can exist is through total integrity."
- The Fourth Industrial Revolution is the way leaders will talk about tech. Professor Klaus Schwab, WEF's Founder, wrote a new book and named the conference after this theme. The Fourth Industrial revolution refers to digital integration across every industry, from agriculture (think smart crop monitoring via drones) to mindfulness (Paul Davidson’s Mindfulness-based Stress Reduction program is now online) and non-profit work (Nancy Lublin’s Crisis Text Line is a great example). Schwab’s idea is that technology is a revolution as profound as the Enlightenment — what came before will not predict what comes afterwards. There are pros and cons to this shift —we will see rising global prosperity and access to basic goods and services, but we’ll also see economic shocks as more jobs are automated.
Impact bonds and pay-for-outcomes models will dominate global social sector funding. It’s crazy that we spend billions on global development programs that may or may not lead to outcomes — instead, agencies fund programs and activities. We need a new way to fund the most important social sector work that gives organizations the freedom to innovate and spend as they see fit, so long as they deliver. The social impact bond has been tried in dozens of settings — to reduce recidivism, for example, in the UK and the US. How it works: non-profits with demonstrated outcomes commit to a certain target for a given sum — for example, 2,500 people moved out of poverty for $2.5M dollars over three years. Private investors put up the capital (a “security”) via an intermediary. If the non-profit hits the target, philanthropists pay back the investors with a return (usually 4-5%). Donors don’t pay unless the outcome is achieved, investors bear the risk, and non-profits have access to unrestricted capital. Sama is raising growth capital through an impact security - learn more here.
"Stakeholder capitalism" is no longer niche; it’s mainstream. Salesforce CEO Marc Benioff described Schwab’s early idea that stakeholders matter more than simply shareholders as formative. Salesforce’s 1-1-1 model (1% donation of product, profit, and employee volunteer time) was directly inspired by this thinking, as is much of the benefit corporation movement. “Stakeholder capitalism” shifts the focus of business from the narrow lens of short-term shareholder profit to a broad definition of profit that includes workers, customers, and the environment — a very important factor in how Millennials work, shop, and spend time. I think in time we will expand this idea to include “giving work” rather than donating capital — addressing poverty, recidivism, and a host of other social problems by incentivizing companies to hire from marginalized populations.
- Safe harbor provisions would allow tech platforms to innovate around labor. What does a job mean today, when 40% of US workers are “contingent labor” (read: contract workers)? 50% of Uber drivers work fewer than 10 hours a week. And what about Airbnb? The founders of these companies aren’t evil — they’re probably much more socially progressive than their Wall Street counterparts. So why not allow them to test things like contributions to retirement plans, better training, and the like without forcing these companies to risk massive lawsuits for being considered employers of record? This issue came up in discussions with US Senator Mark Warner and the Markle Initiative’s Zoe Baird, who are keen to propose legislation along these lines.