Thank you.

Employees give a warm Georgia Tech.

Welcome to our guest walk.

Thank you.

So I'm going to start by
talking more from sort of you.

WALLACE possible people that have ideas
and want to start them tell you a quick

story about a recent MIT Sloan certainly
came back and spoke in my class.

Along with that I want to tell
you a little about my story.

And then I'm going to.

Then switch to some thinking I have about.

Sort of evolution and trends that I'm
seeing about how we're actually going to

tackle big social issues.

And finish off by giving you guys some
pointers on what I think is a twenty

first century leader if you're interested
in actually using your skills graduating

to actually enter this field but I want
to start because I actually think that.

Having been an undergrad
a graduate student and

out teaching it a graduate school that
you all actually have this tremendous

opportunity whether you're a freshman or
a senior right now you're given this

free time where you're paying
to sort of practice ideas and

you may not actually think about college
that way or business school that way but

actually it was interesting to
have a student come back this

year to talk about a business that he's
now launched which is actually both.

Helping with sanitation in Kenya.

While at the same time turning
that sanitation into profits.

And what's less interesting is not the
innovation but how he got the business off

the ground in terms of the message about
thinking about you all the students but

are you students or
are you being given this time for

free to actually test your
ideas without a lot of risk.

Here's what I mean by that.

So this student at Sloan comes to
school and he goes and I can trip and.

Hiking trip he starts to talk
with another student and

they start to talk about this idea they
have because they heard that you know

sanitation is a really big issue and maybe
there's some way that they could help

to try to deal with that they had
both traveled around the world and

noticed that people live in
poverty have sanitation issues.

So they entered a class and in that class.

They just briefly started to
explore what that idea might be.

They came out of that class and they they
actually entered not unlike this ideas

competition a competition very similar to
that and they came in I think like fourth.

From that competition they actually
went in they applied finding some

university resources a little bit of
money to go to Kenya and actually start

to test out some of their thinking talk
to local people think about their idea.

They got a little bit more traction.

Then they came back after that and
what did they do they

did some really interesting things they
started the go across campus to other

parts of the school for areas of expertise
they needed and started to build

a team from the engineering school
from the rim policy school.

They re entered a different
competition at MIT and

then they started enter
competitions all over the country.

And all of a sudden they
went from just this hiking

trip to actually a full blown
start up all while they were just

still in school starting to build their
team from just the students they have.

Using the different competitions
to start to raise you know.

Twenty five hundred bucks here three
thousand bucks there five thousand

bucks here.

And lastly and what I thought was most
important about the story was they

actually started to enroll themselves
in classes that specifically

were teaching them things that they needed
to figure out for the business itself.

So they took a pricing class because they
really had no idea how to price the waste

that they were trying to deal with
that they were then going to.

Resell back to the Kenyan government.

They took a marketing class because they
had no idea what to call the company so

they actually used the marketing class to
figure out how to learn about branding.

And what was really interesting about the
story was each step of the way there was

very little risk and the challenge that
happens when you're in a startup situation

is once you're in it and you're out of
school the risk really raises right.

Your parents are asking you
why are you not getting a job.

You're wondering where the next
dollar is going to come.

Are you going to make payroll all the sort
of challenges that come with a startup

by thinking about school.

If you're entrepreneurial and
have this interest and passion as a way to

test your ideas by using the assets
that you have within that school and

I share that story with you because what
I understand many are in classes right

now are concentrating entrepreneurship
just think about your time here.

If you're interested in a start up as
a time to really test those ideas.

And use it as a time which is really free
time for you all and I was not that smart.

That's not what I did.

I did not use my time at school to
actually test my ideas completely.

My grandfather was a councilman.

He was a councilman in Pittsburgh who
spent twenty five years of his life.

Coming up without a lot of pretty
interesting innovations he was

the founder of small
control in Pittsburgh.

He started the first
School of Public Health.

Civic light opera and was pretty
unique about him and why he was able

to do that time is that Pittsburgh
was a place where a lot of the big

industries were happening during the
fifty's when he was a councilman Steele.

And a lot of the big foundations you
know today were the big Titans and

Carnegie Mellon for example so
he actually was able to

develop relationships with some of those
philanthropists use those relationships to

get a lot of interesting innovations
off the ground like I just described

my father was a twenty five
year veteran on Wall Street.

So tried and
true capitalist trying to make and

maximize profits which we know
all about in today's economy.

My journey and what I'm doing
in my work quite frankly is just

the angsty of how those
two worlds fit together.

That one side of the equation which is
this you know sincere commitment for

public service and trying to figure out
how we can make a difference in the world.

Couple with the fact that we live in the
strongest capitalist society in the world

that sort of about profit
maximization at the same time and

how do those two concepts fit together.

Is really sort of the pursuit and

journey that I've been on ever since I
really started to go into this field.

So how did that journey begin.

Well.

Followed in my father's footsteps and
I actually started on Wall Street.

I soon left there because
it was just not my thing.

Not my cup of tea.

It's not that it's shouldn't be for
some just wasn't for me and

I went through a series
of careers that was my

own journey to explore what
I was most interested in.

I was in film for a moment in time I

started my own business which I'll talk
about briefly in terms of the journey.

I went travelling to sort of explore
the world which was also part of

my education each step of the way I
think I was learning different things.

Beginning to understand what it is
that I'd be most interested in.

Along the way as I did do a start up.

It's not root cause the war the one
I did at some level of success.

It was a multi restaurant
delivery service.

You may have them here in Atlanta.

It's pretty basic concept gather a whole
bunch of restaurants together you'll say

they'll publish a magazine or do it online
is probably the way to do it now and

I'll deliver from any
restaurant to you anywhere for

a certain price terrible business.

I would say I used to
teach entrepreneurship and

I was starting a class by saying why is
this a terrible business to be in and

if you were my class I'd ask you to try
to figure it out but I'll tell you that.

You're dealing with people who
have another jobs you have

no control over them.

You are working lunch and dinner so
the hours are terrible and

there's no quality control over the work
so you've just got all the makings of just

a business you just want to get out
of this quickly as possible and

you need should think about
that when you think about what

ideas you may be generating you're really
going to like the business you started.

You're going to want to work at it.

That's really important.

But but in that business what happened
to me was I started to realize that what

I was really enjoying about that business
was the types of people I was employing.

And I was noticing that by
giving them a job that I was

actually really truly
impacting their lives and

at that point in my life I had actually
never stepped foot in a nonprofit.

I had never volunteered a day in my
life I was twenty eight years old and

I was just thinking I want to be a notch.

Nor I want to start this business and
I was going to go and

do that and we were very successful.

We grew it starting in Stanford
Connecticut and we grew it to be all over.

If you know that area all over
Fairfield County Connecticut.

There were a couple of smaller
services that we acquired and

it was doing quite well.

But I started a couple of programs in
there which had really nothing to do with

the business so I started bringing bankers
in to help my employees get mortgages

because I noticed that I thought if they
could build an asset that that would help

them to have a better life moving
forward so that was something I did just

on my own and also because most people
I employed had a job during the day so

I put software programs on the computer
terminals while they were waiting for

the phone to pick up and they increased
their skills they could perhaps get

better career ladder and the job that they
had when they back back in the morning and

I started to say to myself
This is interesting.

My business actually has a stopper to
actually make people's lives better.

Besides just the paycheck of them.

And that's when I started to I think the
Web was there because this is one thousand

nine hundred two through one
thousand nine hundred eighty seven.

Started just recognize that the people
were starting to talk about

the role business could play in
change had know much about it.

I think it was just beginning to.

Talked about you know I think the term
social entrepreneurship was perhaps around

terms like corporate
social responsibility.

But it was clear that I had finally found
something I was pretty interested in.

So I decided to put my business up for
sale.

And oddly go back to business school so
I started and sold the business but

then I went back to business school but
I went back to business school.

To get a degree in nonprofit management
and entrepreneurship where I could get

a concentration on those two as
it was a Boston University and

I had this one of two big turning points

that got me to understand where I
thought that I could really add value.

I sold my business and
right before I went back to school.

I found myself working as a volunteer for
my first time.

In Rudy Giuliani's administration in
New York City and the job unpaid was it.

What's called a voluntary action center
I'm not sure they're called that anymore

and my job was simply to interview people
who are interested in volunteer ing.

Find out what they're interested
in a look at a database and

within that database tell them that.

Here's a nonprofit they may want to go and
match with so

if you came in and you said I'm
interested in animals I would look up and

see whether the local
animal shelter was looking.

Phone tear I click print type and
them a piece of paper and they'd leave.

I think at the time they were getting
let's say approximate three million

dollars as a line item
in the Giuliani budget.

And I asked the person who
was my supervisor if they had

any idea what happened
when the people left.

And she said we don't do that you know
you're giving me the number of people you

see and then I'm reporting to my boss how
many people we've seen over a given year

and we're trying to hit that target and
if we hit that target we should be

able to maintain our budget so I asked her
she would mind if I would just go back and

sort of track maybe the last six months
of people to see whether I could find

out you know what happened
once they left and I there.

They have that piece of paper what
I found was is they were actually.

Matching about three percent
of the people who came in.

That only three percent of the people
there actually coming through the door

had actually solidified a volunteer
relationship that didn't even tell you

because only three percent
whether the relationship last

it added any value to the volunteer
whether to add any value to the nonprofit.

Now you might say that's alarming but that
actually was not the most alarming fact

the most alarming fact was that when
I went back to my supervisor and

I told her this she said that's not
what we're being measured by but

we're being measured by is the number
of people that we're seeing and.

I had just gone through.

Literally a feral fair amount of hell.

Over the last past seven
years starting a business.

Raising money going through a tough
time to have to try to meet payroll

getting a line of credit borrowing money
from friends and family packaging my

business for sale really rigorous
due diligence each step of the way.

And here was this world where I thought it
was just a simple thing I was asking and

it was completely ignorant to
them why it would matter and

it sort of hit me like that that what
I thought was a pretty good skill set.

I had was entrepreneurial
instincts business instincts.

I had gone undergrad to
business that I could bring

that expertise to social change.

So I left there thinking that I was.

Pretty strong and vigorous and
what I was going to bring to the world so

that was number one of
the two big turning points.

Number two.

So I get to business school and
I think that I now have all the answers.

So in having all the answers not unlike
I'm telling you what I decided to do was

to start to learn about the nonprofit
sector to bestow the greatness that I had

just learned from my startup experience
and from that one volunteer experience.

I started to go out to various nonprofits
in the community to try to tell them.

What I thought were the answers to what
all the things that they were doing wrong.

Fortunately I didn't
really see it that way.

Instead they told me you have no
idea what you're talking about

you don't know it's like
to do mission based work.

How can you tell me what
to do business is evil.

You know all sorts of
opposing points of view and

that was the other big turning point
that I realized that while I may have

some interesting insights like today that
you might think are interesting that

the world of social change the world of
actually trying to deal with social issues

is much more complicated and complex than
a balance sheet and income statement.

And if I was going to begin to actually
be able to talk about the things that I

thought I knew in a setting where we're
actually trying to affect people's lives

and people who are so
passionate and committed their life

to helping a kid get a better education or
help someone get out of poverty.

I need to learn how to
speak their language and

to really understand who they were and
why they were doing this work.

And you know between those two
experiences of this balance

of what I thought was bringing more rigor
with this balance of really understanding

Mission Bay who work has really been
the driver of the balance that I've tried.

To walk each step of the way so
some of you may have been on my website or

seen our work.

That's really the fine line we really do
try to bring a real balance between those

two and I think worst that journey
is still trying to happen because.

It is a fine line between how you
actually can affect change but

bring Mir more rigor when you're
trying to fact change the same time so

I left business school
I had one small stint

where I tried another
startup this one failed.

And it was a national magazine

why I thought that I actually could
start a national magazine to this day.

I'm not quite sure it's
a terrible business.

It's next.

Impossible without large
lots of capitalization.

But it was probably good
to go through a failure but

when I was starting that business.

What I recognized was that.

That many people that were in my position.

Who were trying to start or

grow organizations that were dealing with
social issues actually needed expertise

and slowly people in town once I was
taking a little bit of a softer approach

were coming to me and wanting certain
levels of expertise from them and

so I decided to start root cause
because it was clear to me that.

Having a consulting arm that could
actually offer expertise could be a real

value.

To nonprofit organizations and
that was the impetus we did see

that we thought that the different
sectors should work together but.

You know in all candor in the early
parts of ROOT CAUSE I think it was can

we find a business model with a consulting
practice they can actually go out and

support non-profits on.

And then we had a little bit of luck.

And a little bit.

Alok is where my startup experience
goes to the talk that I'm going to

briefly share with you.

We.

What I recognize when I started to meet
with different organizations was that and

I think some of you are actually using
the book is that nonprofits were all

using strategic plans.

And those plans were actually developed
based on like a two day retreat.

They go for a weekend and
they would set like.

Five goals they'd revisit their
mission and their vision and

they'd be done and
I just had to go through a fairly rigorous

process to write a business plan
rewrite a business plan to raise money.

And I didn't understand why
the same process was not used in

the nonprofit sector.

So we started to try me in one
colleague to start to think about and

work with really any nonprofit that would
work with us on what would a business plan

look like for
dealing with a social problem.

We got a few guinea pigs to work with us.

Started Bill little bit
of a reputation and

we had this one client that came to us.

From a very large national foundation
called the Atlanta philanthropies

at this point root cause
was just starting out.

We had been practicing this business
planning methodology and this.

Probably sixty two year old woman
woman called me up and she said.

I understand you've been helping this
other really small organization in

Portland Maine and I need a business plan
I don't know what a business plan is but

Atlantic will have to be
told me that I need one.

And so I want to talk to you.

She been given a whole bunch of
other names from the foundation.

And she had started this organization
called i t n Portland which

was dealing with the senior transportation
issue which is a which is a very simple

the average person out lives their
driver's license by seven to nine years.

The senior population is expected to
double over the next thirty to forty years

and the majority of all people use their
car to get places in a concentrated

area so you have all of these people
that will not be able to get anywhere.

And currently.

There are some solutions but

those solutions are very minimal and
how you can get around and so she started.

A twenty four seventh's three hundred
sixty five day year service where for

a small membership fee and half the price
of a taxi you could call her up and

she would take you anywhere
you want whenever you want and

at that time she was doing fifteen
thousand rides in Portland Maine.

She went to Lenox philanthropies for

a million dollars for technology to
grow our model in Atlantic said we'll

give you a little bit of money to write
a business plan and we'll think about it.

So I met this woman at the time I
was teaching at B.U. at a small bar.

And we had just been playing with a few
different organizations with their ideas.

I was moving for.

Sloan And.

She decided to work with us and she said
you know at the end of the whole project

for two reasons only one was our price was
a third of the prices of everybody else.

And two because if I was
going from B you to MIT

probably was making a pretty good bet.

It had nothing to do with how we thought
she said she had no idea what a business

plan was she just was doing it to
do it for for the sake of doing it.

What do we do we poured all of
our thinking into the work and

her three hundred thousand dollar going to
zation Atlanta gave him three point two

million dollars to capitalize or plan to
spread it around the country not unlike

the way the private sector
would work from that Atlantica

right place right time like you'll
hear many entrepreneurial stories.

Found that the way we approach
the work that we did with her.

They started giving us made what
made it much more work that we could

actually handle.

I think if we didn't
have that moment in time.

I'm not sure we would have been able to
grow the way we did be able to produce

the book that some of you may have
seen to get to the sort of size and

credibility we haven't and and the kernel
of that is while perseverance and

all the other things that you might hear
in the entrepreneurship courses you take

is there's a lot a lock of which have
to see what the luck is and capitalize

on the opportunity because there was
a lot a lot that she was introduced and

she decided to work with us and then we
just poured everything we did I mean what

she charged us what what what what
we charged her was a fraction

of the amount that we would charge
today for our work but we took a bet.

Whether that was the right better not and
and

I say that just because you think about
the ideas that you may be developing.

You've got a balance lock I think
Jim Collins book new book is about this.

Actually you got to balance luck with
opportunity each step of the way

that's just so critical.

So from that allowed us to get
root cause off the ground.

And.

Really.

Becomes the basis for

the work that I'm going to talk about with
you now as I sort of transition from.

Sort of start up.

Stories in my own founding because
my thinking has evolved a lot since

that thinking that a business plan was
really going to be the key to everything.

To actually.

You know a much more sophisticated problem
I think we have about why it is that we're

maybe having challenges around
how we actually advance

issues that we really care about a lot so.

I think that there's a new construct
that's beginning to emerge for

twenty first century problem solving and.

The first part of that construct that I'll
talk to you about is that we need to start

to get as good about how we advance
innovation which we've become very good at

in our country in the world as we do about
Social Innovation the idea of innovative

ideas to advance social problems but

I believe that the only way we're going
to do that is if we start to actually

create what we're calling social impact
markets similar to capital markets but

from a social impact perspective and in
order to do that and things I'm going to

share with you as leaders going out in the
world and maybe interest in the subject.

We're going to need a new type
of leadership that's emerging.

So what do I mean by we must
advance social innovation.

Well let's just take a look from my
perspective on where we are right now.

Right now we have
trillions of dollars that

go into literally millions of nonprofit
and government institutions and programs.

I don't know what the county here
is in the city of Atlanta or

the state of Georgia.

But I know that the average
had to stick is on your

to fifty nonprofits start a day.

In Boston.

If you know you you throw a rock and

you're going to hit a nonprofit and
the reality is is that.

We're not.
I'm making significant progress on

the social issues I think
we care about most.

So we've got tons of money going in to
the programs and institutions and yet.

Are we really making the progress we want

you know this data source is old because
now if you saw the census data that just

came out recently there's a lot more
evidence of this but from two thousand and

two thousand and eight for
a couple of data points here.

The U.S. population grew by six point
eight percent the number of people in

poverty grew by eighteen percent
got plenty of programs of

say they're trying to
deal with that issue.

So why is that happening.

Another one.

During that same period of time the number
of young people in this number is also

gone up significantly who are not
attending school not working or

have no degree beyond high school is
increased by thirty percent plenty of

programs dealing with dropout prevention
College Access so on and so forth so.

So there's something wrong.

From my perspective on
that picture same time.

Why is this more important
than ever right now.

Well you know we hear more and
more every time we hear a presidential

cycle about education and
health care and stuff like that.

But I would actually argue that
the issues I'm going to bring up right

now are actually critical to our ability

to just advance generally it's
like we can't wait any longer.

We're starting to hear more and

more that we actually have to deal
with our education system if we're

going to compete in the global economy
that's a social issue that's not finding

the next great industry energy
we're hearing more and more

that you know it's finally come to the
point where we need to find alternatives.

So this is no longer a something
we talk about more we really have

to pay much closer attention to this while
we got ourselves a health care bill.

There are very few people that say that
health care bill actually dealt with

quality and
cost coming from my state Massachusetts.

Our health care is blowing up on us.

So while it helped.

To get everyone to have health care.

The cost keeps going up and
the quality is relatively the same so

it was more of a Band-Aid
workforce development.

We're hearing more and more that
the people that are being trained for

the jobs of tomorrow are not
sufficient for what those jobs are so

each one of these are telling us that.

What one would view as the social issues
that we should be trying to do to let's

say Help people are actually
the critical issues for

us to actually have societal progress
which puts us in a situation

where the ideas of social innovation
become that much more important.

So one may say OK well.

Government is the place where we
need to look to well we've got

another problem there because the problem
is is that can make I get any bigger.

This is generally the pie chart for

spending on social issues in the United
States where you might not realize it but

most of the money comes from government
for either the government programs they

run or the grants and
contracts that they put out there.

This chart shows you the U.S. government
spending as a percentage of G.D.P..

This is during the World War so

it skyrockets this is going up because
of the combination of the recession and

the two wars that we're fighting and
now we've got this whole budget deficit.

There is no money.

There is no money and

as far as I understand it with the
recovery we're having right now if we can

even call that whether it's the city
the state of the federal government.

No time in the near future
are the coffers going to be really full

to figure out what we
can do about that money.

To about that.

So that's really where innovation
entrepreneurship thrives and

is at its best right.

Innovation entrepreneurship is new ideas
figuring out new more efficient ways to do

things finding transformative ways to take
old problems and figure out new solutions.

So you hear.

You're all this talk.

If you listen really closely about
the importance of innovation and

entrepreneurship for the private sector.

But it's really no different from
the issues I talked about as well.

It's why we actually have to be much
more clear about how we're going

to advance social innovation not unlike
how we're going to actually advance

regular innovation.

So it becomes critical that we take.

Social Innovation as importantly
as we think about regulation.

But there's a problem with that.

And that's because of the way
the markets work right now.

So right now.

If you are someone who is trying to
start a business while not perfect and

it certainly is hard.

It's a fairly simple
equation where performance

capital follows performance and continues
to follow performance along the way.

So you're sitting in class here and
you come up with some idea

market disseminates data about
how well you're doing and

investors of those ideas are going
to invest in the strong performers.

Investors are going to
penalize weak performers.

So the market is actually
incentivizing performance for

you to get continuous investment and
innovations grow if you start.

If you have a come up with a good idea and

it begins to show that you could actually
make a profit return the money back.

Whether it's a loan or
equity you're going to find capital and

if you keep showing more
success you're going to

find more capital that's generally worked
because people want to make money.

So while it's not
a completely perfect system.

It's pretty clear how it works.

You know the bank.

You know the rules they're
angel investors venture capital

investors the rules of
the game are pretty clear.

How does it work in what I would
call the social impact market.

So here is how it works.

So you come up with an idea.

Right now we really don't have
any data that tells us about.

Performance right now it's like this
huge fragmented area where each social

issue is different.

You've got thousands of organizations
working on the same issues.

So the performance information by
organizations is limited by their

capacity there.

They're not measuring that much.

There's no public
transparency of some way.

So investment is based more on
storytelling in relationship building.

It's not like you go and you show that
I have these great outcomes of people

start swimming to start
to throw you money.

So what do organizations do right now and
they're smart to do this.

They build strong development apartments.

Because that's what they should do
they can sell to a really good stories

when they build strong
development departments.

Actually the things that
are really working.

They don't really have the opportunity
to spread because the problem is that if

you're just being focused on who is
the best storyteller relationship builder.

That doesn't necessarily mean that
the work you're doing is the best I

can tell you.

Countless examples of things that are
working that don't have the smartness to

actually market them pretty well.

So there's a gap.

There's a gap between
the things that are working.

And how you actually get them for
more people to adopt them overall.

So if we want to advance social
innovation which is what we must do.

We've got to figure out how we
can fix this market problem.

So.

What I am calling
a social impact market is

a mechanism that provides
the infrastructure information incentives

to enable individuals or
institutions to provide for

all financial volunteer and kind of
resources with the expectation of impact.

So it's not now about relationships.

It's not about storytelling
Not that those are important.

It's a transaction.

That's based on impact.

And the reason why I'm not
just including money here.

But also volunteer time and

kind resources that are actually
a core to how a lot of models.

Can work so for
example let's take Habitat for Humanity.

A key part of Habitat for

Humanity S workforce is the volunteer
that comes to do a build to build a home.

So the more we can organize those
volunteers the faster Habitat for

Humanity can actually do its work in
kind resources are not that different.

The more that.

In fact I was hearing a story about one
of the classes is dealing with you.

So.

Right.

That's an incoming donation
that they get out to third

world developing countries
such as an incline donation.

So how does that in kind
donation get maximised to make

sure that it's resulting in social
impact for example if we get that so and

we send it off to a third
world country and

we find out that the people that we
got the so to actually are using it.

Well that was not probably
the best use of the soap.

So we may get we made a lot of them for

the fact that they're doing this great
thing you know I heard the sort of like

you know I throw away my soap all the time
but the reality is we really want to

know that soap is actually getting to the
place where we say that it is that it's

actually being used by the people there
actually more sanitary because of that.

And there's so
much money between financial volunteer and

in kind that we're not organizing
in a way for impact that.

It could be quite transformative without
us actually needing any more resources.

Now the interesting thing about this for
those who are thinking about

starting ideas is that they're
actually quite a lot of early signs.

You know even if we don't call it markets.

There are examples of that I
want to share with you some of

you've heard of maybe
none of them you have.

So the first is there's now beginning to
be this emergence of research analyst

reports we happen to be an organization
that has started doing these but there

are three or four going as ations that are
doing them as well in the private sector.

It's what they soley rely on to me.

Investments in the early
seventies they started

with research companies like Gartner
Group Yankee Group Forrester Research but

now every Wall Street firm
has the research departments.

So what what about research that actually
tells you what the college access market

looks like right now what works
best in the city of Atlanta and

what about within those research reports
if it tells you what it looks like to know

what a high performance looks like so
you can actually use real data to really

understand what they're like so then
actually people that provide the resources

can actually use hard data to get
a better understanding of allocate them.

I'm so these are actually beginning
to be used and are becoming more and

more public for people to actually use and
this type of and now support was actually

how markets got far more organized in the
private sector and next thing is emerging

which I've heard that there are some that
are here locally is social innovation

funds also we could call them impact
investing which you may have heard about.

So you made a heard about Akman fund
which is an international fund.

Where there's also the federal
Social Innovation Fund that emerged.

The I three is an education
fund focused on impact

There are lots of impact investing funds
investing in for profit social ventures

all of these have one thing in common
they are fundamentally only about

allocating their resources based on impact
they're managing the money in that way.

The amount of money.

It adds up to is not tremendous
compared to the total amount of money

that's transferring But

it's again an early sign of the way
that impact markets can get formed.

One of the ones that I'm probably.

Most encouraged about.

Not because I am really sure
how it can actually scale but

because of what it means is this idea of
outcome based preferred provider governor.

Contract That's a mouthful but

I don't know how many people have heard
of the social impact on social and

I'll explain because it's
really quite intriguing.

So the social impact bond was create
in the U.K. Obama put it in his

most recent budget which chance of it
getting through are probably zero but

it spurred this whole thing where I think
they're like seven states right now

they're all trying to be the first
here's out works pretty interesting.

I'm a government agency and
I'm granting out or

contracting out two million dollars
right now to a host of non-profits and

I'm not sure because the contracts
are set up more as programatic to serve

certain people the government no longer
does it say people who get out of prison.

The way it works is the cost for
providing that service

you find a philanthropist who
instead will cover that cost.

If the nonprofit or the series of
non-profits can actually deliver the same

service for an outcome at a less cost
than the government will pay the cost and

the savings will become
a return of the philanthropist.

So you've got two interesting
incentives that are going on there.

You've got one and said for

the nonprofit to be much more focused on
outcomes in the most cost effective way.

You've got incentives by the private
philanthropists to perhaps.

Put up some risk capital.

You've got the government who's now
developing a very different relationship

with on the nonprofit.

That's been a contractor
grant based relationship.

I'm encouraged by this less because

I think it's be very hard to
get the pilots off the ground.

If you really interest in them.

We did a talk with some of the.

The leading people trying
to figure this out someone

from the Kennedy School a woman with
something called social finance.

Even though our website and
hear the talk to really understand them.

What I think is most interesting
is it's creating this convo.

Station between government and nonprofit.

And that's where the big money is that's
where the big relationships are that we

have to figure out how to get the markets
moving in a more efficient way.

So again another sign of these
early social impact markets.

Lastly is this idea about issue focused
allocation of research volunteers and

that actually we're seeing signs as well.

The one Star Foundation is
a foundation in Texas that decided

they're the people that get all the
America who are in Vista slots if you're

familiar with those volunteer programs
out of the National Corp corporation or

national service they decided to use all
of their volunteers just on education and

not only that they're going to use
all their volunteers on education for

the nonprofits that they believe are
showing the best evidence they're actually

having impact other harnessing all of
the volunteers that they're getting from.

The corporation in that one area.

City Year which is their city here and
I think there's a city or Atlanta.

That's the organization that
you do a year of service.

In your community.

Well up until four or five years ago

they were basically promoting
volunteerism as a good thing to do.

I'm not sure how many of you know but
they've completely transformed the way

they actually allocate their volunteers
their core now goes in to schools.

With a total focus on
reducing dropout rate so

their core is now a dropout
reduction strategy.

So highly focused allocation of that
volunteer service towards social impact in

some sort of way and these are just early
signs of what I believe are going to be

more and more of a formation of different
ways for social impact markets to be for

where resources get out the K.
to basically buy performance so.

So besides just being
an interesting story.

Talk perhaps why.

Why should you care.

For those of you who are thinking about
doing any type of work that has to do

with social change for profit or nonprofit
to operate in this environment which

I think is what the future looks like it's
going to take a new kind of leadership and

I'm going to share with you what I think
are the five principal characteristics.

And then we'll open up for Q. and A.

So number one you know in the past.

I think you could actually have
an interesting idea come up with it and

it's actually not that
difficult to start a nonprofit.

Now you're going to need to be far
more versed in what the social

issue is that you're really trying to
a desk and how to analyze that issue.

You're really going to need to understand
if you really want to help kids increase

their literacy rates.

You really need to understand
what the issue is about what

the challenges are about that.

It will not only give you
a competitive edge but

it will eventually be the norm
not the exception to.

That's the first competency.

The second is.

You know more now than ever
the expectations are that you know how to

build real organizations it's not enough
anymore to just sort of go out there and

have an organization that does not
have a solid team is able actually to

know how to build that team and do all the
things that organizational development aid

in a regular for profit structure.

So that competency is going
to be a very critical one.

Organizational sustainability which

is where the the field of social
entrepreneurship really started.

Is now really essentially
were a resource constrained

environment it's harder
harder to raise money.

So the ability to really understand what
your business model is you hear about

business models in the for profit side but

what your business model is when
you're dealing with a social venture.

For profit or
nonprofit becomes a critical competency

starting with that initially it's
critically important important

strategic collaboration you hear
collaboration is important.

All the time but

really understanding where your work fits
in with the other sectors and the other

players whether it's government business
similar organization doing your work

is going to be another critical component
if you have any aspirations for growth.

And lastly and the one that's
probably from my perspective.

The most important is this
idea of adaptive learning.

Using measurement as a tool for how you
grow and adjust as you're moving along.

As opposed to an evaluation tool or
something that you're supposed to do but

how do you actually be adaptive and learn
along the way and adjust as best you can.

I share these with you.

Because if we go back to.

My story.

My story has just been a series of
adjustments to my thinking along the way

while I've been doing that.

You know I've been trying to get a better
assessment analysis of what's going on

in the market.

Trying to build a stronger and
stronger organization for a cause figuring

out my business model which is a
consulting practice primarily recognizing

our reach out more and more and work with
a lot more I can't do it on my own and

I'm measuring and
adjusting all the time as we go.

So as you all think about these
points in your own ideas.

Think about how they might change
the way you think about your own

leadership whether you're
starting your own idea or

going into your own work
going to stop there.

I think we have plenty of time for
questions.

It was no clock of.

THANK YOU THANK small thank you for
coming very much.

My name is it would be
almost fourth your business.

I'm.

Major And as a former banker How do you
feel but banking is going to be able to

integrate with social responsibility and
I mean you talked a little bit about how

the how the capital markets could
hopefully change but what's your outlook.

Yes So I mean my my experience so far.

Is you know all of this work is going to
be much more from a disruptive innovation

perspective I think with
the exception of sort of outliers and

some big banks that control lot of money.

I think evidence continues
to need to be built on

what returns could look like
in the banking setting.

I think that for those who are familiar
with the impact investing field I think

if you were to go and look there
are some maturing that are emerging.

There is one person for example a J.P.

Morgan who if you looked up a report
on J.P. Morgan impact investing.

He's trying to say that there's
an important asset class

I think there's a lot of talk right now

about how people could think differently
about how they allocate their money.

But I would be honest I would have to
be honest and say I'm fairly skeptical.

You know the maximization of return
is still chiefly most important and

I think what's probably more important
is that the people who are involved

on the other side continue to just get
really rigorous whatever it is that

they're trying to prove out.

As the way that things are going to
actually move the dial because you know

on the other side of the equation I mean
they just have lots of pressures on them.

And you know as a as a bank.

You're there to make money.

And we can't forget about that and the
best way to think about it is you know if

you're if you're a pure nonprofit you are
just trying to figure out how to do good

and if you're a pure for
profit you're trying to maximize return.

And if you're so
kind of somewhere in between

investors don't know what to
make of that they really don't.

It's like.
I'm either a philanthropist.

Or I'm an investor and
that's a confusing gray space

to be in banking doesn't really
know what to do about that.

I guess this is kind of motivated as a
social interpreter or entrepreneur rather

you know you're not only motivated by
doing something the Sustainable right.

But you're trying to put something in
place is going to drive social change.

And so my question is kind of motivated.

How do you put you there is a possibility
of you rethought to putting in a monetary

value on the effect of social change that
you're bringing about in order that you

have some sort of measure of that added
change that you're bringing about and

not just being.

This is providing more of a push to
get this sort of movement to go on.

Yes So if I understand the question
correctly I mean for our work.

It's not possible.

I mean I do agree with you.

I think there are people
that try to do that.

The key is though I mean the only way
to really do that is in the context of

our society which means you
have to be as narrow as

possible about the social issue and
the outcome you're looking for.

It's not like this they unfortunate thing
is it's not this generic P. and L..

You either made money or lost money right.

It's and that's what our social
issue reports are trying to do so.

It's like school readiness is trying
to prepare people to be ready by

kindergarten right.

And research says that if you're
ready by kindergarten the long term

returns to society is that they
will be taxpaying citizens and

they won't be using money in the future.

So you really have to put in the context
of what the return on investment might be

and that's a tricky thing I think
that the more we can try to do that.

The better off that we are.

But that's a tricky thing but my primary.

Advice would be is that you want to be
really clear on what's the social issue

with what outcome you're trying
to do with what population.

To do that.

Sorry about that.

I mean.

I'm a fourth year visit ministration
student your college amusement and

my question how did you actually
with a title of the slide you had

actually earlier your presentation.

Those titles social progress
equals societal progress.

Yeah I was just kind of wondering if
you could expand on that only clear by

the just an issue scale or like I just
want to hear a little more about that.

So I fight or stand again.

The question and I'll bring up the slide.

You know.

My claim which.

Is that.

All the issues that are listed here.

If whether it's the United States or
globally are going to be competitive and

see more and more people prosper which is
I think what you would like to see right

you'd like to see a larger percentage
of people that I quality of life.

These are issues that we can ignore and

these are not saying that we need to find
the next potato chip company that's going

to supply the one hundred
thousand two million jobs

that these issues are connected to that
next prosperity we're going to see.

And so

there is a link between driving what I
think is social innovation on this screen.

And our own economic progress.

That's my perspective

you know one may argue that you
know we can find other types of.

Ways to start new industries but my
perspective is that these are critical and

they actually connect possibly to
even those next industries and

you know the two times in our country
that we've seen significant prosperity

it's been when we found big industries
that have started and we're only going to

get out of this mess if we actually
get to that next growth curve right.

And I'm just arguing we can't get to that
next growth curve unless we actually deal

with these things and these are all things
that are dealing with social innovation.

So much for coming and
thank you thank you thank you thanks.