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The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World

The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World - Jacqueline Novogratz I really was drawn into this book, and how she told the story of her life. I particularly noted her reflections on the decision points / turning points. "The next morning, on a long run, I thought about what made Duterimbere successful and what I wanted to do next in my life. I decided to apply to business school. When we ran Duterimbere like a business, though we raised charitable money, we succeeded. When we acted more like a typical nonprofit, neither holding ourselves to our mission nor measuring results, we usually failed. I wanted a better understanding of management and how to build businesses." p.103on deciding between a fellowship at the Rockefeller Foundation to explore enterprise-development strategies for low-income communities in the US or move to Czechoslovakia to work on a fund that would build small enterprises there, one year after the fall of the Wall. "With my tendency toward wanderlust, I leaned toward working in a new land during a historic moment." Her mentor argues for the fellowship. "It will give you an imp. vantage pt on what philantrophy is, both domestically and internationally. And you have already worked in a developing country building enterprises. Life at your age should be about putting new and different tools in your toolbox. You already understand that communities today transcend geography and that you belong to multiple ones -- Stanford, women, the community that cares for Africa. But to be truly effective, esp internationally, you must root yourself more strongly in your home's own soil. It is time for you to know this country, as well. Only by knowing ourselves can we truly understand others -- and knowing from where you come is an important part of knowing who you are. . . You should focus on being more interested than interesting" -- something I'd heard him say countless times." p.123"I will be forever grateful to Duterimbere and to Rwanda for teaching me about possibility, about the power of markets, the need for smart and carefully invested financial assistance, and the constant hope for rebirth. I learned that microenterprise is an important part of the solution, but it is not the only part. I also learned that traditional charity alone can't solve the problems of poverty. Before we made the blue bakery a business, the women were demoralized, dependent, and still desperately poor. Big flows of aid can create as many incentives for corruption and mismanagement as for change. Markets alone won't solve the problems of poverty. Low-income people are invisible to most entrepreneurs, who don't see them as paying customers. Poor distribution, lack of infrastructure, and corruption all add up to a failure of markets to deliver to the poor what they want and need at prices they can afford." p.188Aravind Eye Care System, India. 2.3 million patients a year, more than 280,000 cataract surgeries a year, each dr. performs on average 80 surgeries a day. The US average is 6. "We run Aravind like McDonald's," he explained, "clean and organized, with every process known and understood sot that we get maximum efficiency. Two-thirds of the patients pay nothing or near nothing, and yet the hospital is consistently profitable -- and growing." p.197Avarind's simple business model was based on a sliding-scale pricing model whereby wealthier people paid the full cost of the operation and the poor paid a token amount or nothing if they were truly destitute. Aravind at the time had two hospitals in the same location, and it differentiated ability to pay by offering full-service, air-conditioned rooms at the newer hospital to the paying patients. The "free" or lesser-paying patients were treated at the older facility and slept on mats on the floor, but every surgeon rotated between the 2 hospitals, the actual quality of care was the same." p.199From this and other ventures, we determined that despite Aravind's success, grants typically weren't as effective as equity and loans, especially when trying to create markets for the poor. An equity investment would make us real owners with the ability to negotiate with greater clarity. Loans and equity also would impose a market discipline that could lead to raising more traditional forms of capital over time -- and that, we knew, was key to growing the innovations we wanted to support. We were learning. By the end of the 1st yr, we had modified our approach. We determined that we would no longer make grants, but instead invest equity in or make loans to social enterprises. We would establish metrics for what the entrepreneur hoped to achieve from the beginning and hold him or her to it, as we would hold ourselves to our own set of expectations and goals. This was the opposite of old-fashioned charity. Our new approach also differed from the type of investment that a venture capitalist or private equity investor might make. . . .We were interested in enterprises run by social entrepreneurs who were unafraid to work in markets where individuals had minimal income, where the roads were terrible and infrastructure was sometimes nonexistent. . .. We knew that the pipeline -- the number of deals we could support -- would be a challenge for a number of years, yet we were convinced that the many problems of poverty could only be solved if entrepreneurs were encouraged to overcome these hurdles. This meant we couldn't simply invest and expect quick results. . . . Our investment style was focused on what we termed "patient capital" -- not traditional charity, not traditional business investment, but something in-between. Patient capital is money invested over a longer period of time with the acknowledgment that returns might be below market, but with a wide range of management support services to nurture the company to liftoff and beyond.If it were easy to start a business serving the poor, patient capital would not be necessary. It's not easy. Social entrepreneurs focused on serving low-income markets work against all odds of success, facing enormous individual and institutional challenges. The only chance to overcome these hurdles is to combine an extraordinary entrepreneur with the kind of support that neither traditional investors nor charities can provide. We learned the power of having strong teams on the ground." p203-4.