Happy 2016. I’m writing to you because you subscribed to my personal newsletter. Thank you!

I’ll try to send these at least once a week and discuss my challenges growing Sama and Laxmi and my thoughts on social justice, technology, and social business. They’ll always be written by me. You can unsubscribe at any time using the link below my signature, or contact me at leila@samagroup.co.

For starters, I thought I would share something that’s been on my mind a lot.

Americans are obsessed with donating stuff. Even if that stuff isn’t really helping poor people. We see a person suffering, and we think: she needs a meal. He needs a blanket. The barefoot family needs shoes.

But when we give meals, blankets, and shoes, people don’t escape poverty. In fact, they tend to stay in it. After decades of food aid to sub-Saharan Africa, most Africans are still extremely poor. Why is this? It’s because food doesn’t solve poverty. It’s a stop-gap.

We know this. We’ve all heard the “teach a man to fish” slogan. We all know that giving people income is the most obvious and sustainable way to move them out of poverty.

So why don’t we implement this on a broader scale?

What if we rewarded companies based on how many jobs they created among disadvantaged communities that might otherwise be the recipients of aid or welfare programs?

What if there were tax breaks based on the number of veterans a company hires, or the number of people who were previously below the poverty line?

What if we thought of businesses as true agents of social change, rather than cause marketing vehicles, and rewarded them for doing the work of social service agencies and paying a living wage to marginalized people? More businesses would become social businesses — they’d take a hit on profit in order to achieve more social impact. We’d have a third, powerful category of business emerge — deeper business — and we’d see entrepreneurs lining up to enter this space.

Cause marketing is dead. We need to think beyond One for One type models, even though they’re better than what came before them. I wrote a post on this recently for Laxmi, and described why impact sourcing is so much more powerful than One for One donations as a strategy for changing lives.

A few years back, a longer critique appeared on WhyDev covering the challenges of One for One.

I also shared this thinking in a few articles last quarter, in case you missed them:

Jessi Hempel in Wired

Laura Arrillaga Andreessen in The New York Times T Magazine

Maria Konnikova Hamilton in the Pacific Standard: Bringing The Poor Into the Digital Economy

The only way to make poor people less poor is to put cash in their hands. The best way to put cash in their hands is through a job. Our team at Sama wrote a paper on this, comparing work to cash transfers, and found that work provides longer term benefits than a handout.

What do you think?

All my best,

Leila

ps. Here are the last few blog posts I wrote. You can also follow me on Twitter or Facebook for updates.

Check out more pics here.

The finalists included paper infused with organic herbs that keeps fruits and vegetables fresh 2-4 times longer, a brick grown from sand and active biologics without firing, and a wind energy system that uses the same principle as kitesurfing. 

If you’re interested in investing or supporting these entrepreneurs, read more here.

Below is an excerpt; read the full article here.

“Frustrating. Galling. This is how some of the best social sector leaders I know describe the fact that funding to intermediaries and consultants often dwarfs the support they receive for their work on real issues at the front lines. I’m not talking a small differential — the disparity is large.

The Problem

Here’s a fictitious example that illustrates the disparity, based on several true stories: A well-regarded international nonprofit uses mobile technology to educate youth and bring local populations into the global economy. Say it receives a $50,000 grant to execute its programs and open a new location in India. That is terrific. But then the same funder turns around and pays $500,000 to a fancy consultancy to assess the work of this nonprofit and a number of its peers and write up a report to inform the foundation’s grant making strategy on this fast-paced, emerging field. The consultant has little experience at the nexus of new technology and developing markets and no on-the-ground expertise. Therefore, they must lean heavily on the nonprofit’s knowledge, networks and experience to gather information for its report. In another instance a well-known social entrepreneur was invited by a consulting organization to collaborate with a corporation in a “shared value” venture. The social entrepreneur was skeptical, concerned about the time the project would require and that it would take valuable time from him and the entire organization. Eventually he was convinced that the opportunity’s benefits would materialize quickly and agreed to the venture. As of today, 18 months into the process, the social entrepreneur has given his knowledge, time, and organizational resources to advance the project, with no gains to speak of. He has received no compensation for his contributions or his staff’s to the “shared value” proposition. On the other hand, the consultant is getting paid for every hour of work involved in brokering the project.

Does the tendency to compensate intermediaries more generously than the people actually doing the work bother you as much as it bothers me?”

Fifty years after Dr. Martin Luther King, Jr. presented his dream to the world in one of the best speeches of the twentieth century, we are far behind. Though his words inspired progress — many regard the March on Washington as the pivotal moment that paved the way for broad support of the 1964 Civil Rights Act — Dr. King believed that rights weren’t enough. 

In the last four years of his life, King’s focus shifted from civil rights to economic justice. He pointed out that despite the legislative and moral victories of the civil rights movement, the majority of African Americans still lived in poverty, had low rates of literacy, and could not enjoy the basic elements of human dignity that most Americans took for granted. Weeks before King was killed in 1968, he addressed a crowd of strikers in Memphis:

“Now our struggle is for genuine equality, which means economic equality. For we know now, that it isn’t enough to integrate lunch counters. What does it profit a man to be able to eat at an integrated lunch counter if he doesn’t have enough money to buy a hamburger?…What does it profit one to be able to attend an integrated school, when he doesn’t earn enough money to buy his children school clothes?”

We should be careful not to ignore this shift. As we celebrate great gains for civil rights today, we must acknowledge current economic injustice. King’s broader message, that human rights are hollow if people can’t afford to exercise them, is scarily applicable today. Nearly 2 million American households, including 3.5 million children, live in extreme poverty (defined by the World Bank as under $2 per person per day). This number is on the rise. Globally, over one billion fellow humans survive on less than $1.25 per day, adjusted for purchasing power. 

Living at this income level requires people to endure a constant state of suffering without enough food, permanent shelter and access to basic healthcare and education. More than 6 million children die annually from preventable poverty-related causes; life expectancy in the lowest-income countries is thirty years below that of the richest countries. Lest we think poverty can be explained by differing attitudes towards work, one third of the global labor force, over 900 million people, work a full-time job, often under grueling conditions, and earn less than $2 a day. According to the Gallup organization, what the world wants most is good jobs, not handouts. This does not exclude the poor.

Three weeks ago in Uganda, I met a hard-working driver named Hamza whose five-month old baby girl died of pneumonia because the local public clinic in Kampala can’t afford to pay for a doctor on weekends. His eyes welled up as he told me that he and his wife didn’t have the funds to send his only child to the better private hospital nearby, where the doctors are available 24 hours a day, 7 days a week. 

The deep economic injustice we tolerate today will shock future generations as profoundly as the brutal racial inequality that characterized Dr. King’s era shocks us today. On the fiftieth anniversary of his historic remarks, Dr. King would not want us to become complacent. We are making slow and unsteady progress towards his dream — billions of people live in avoidable suffering, despite their best efforts to improve their situation. But there is promise in new approaches that use entrepreneurialism, evidence-based approaches, and technology to make poverty reduction programs effective and increase the “voluntary tax” people are willing to pay to promote equality. In honor of Dr. King, below is a list of these.

One Acre Fund
Rising Tide Capital
Nuru
CARE*
Partners in Health
GiveDirectly
Samasource*
Project Muso
Kiva
GlobalGiving
Samahope*
Last Mile Health
One Heart Worldwide

*Note: I am affiliated with starred organizations in some capacity.

The Refinery29 team stopped by the office a few weeks ago to learn about Samasource and Samahope. (Check out the full story here.) I had the chance to describe my vision for Sama ventures, inspired by Thomas Pogge‘s moral philosophy: “My job forces me to travel from a city with the highest median income in the United States to places like rural Benin and Uganda, where the average person makes less than $1.25 a day… They literally break their backs to mine the minerals used in our electronics and stitch the clothes we wear. How is this morally permissible? Our greatest natural resource is the human capacity of the people our current economic system has written off. What propels me forward is the vision of building massive social businesses that enfranchise these bottom billions, treat them fairly, and offer them the chance to achieve their human potential.”

We are often asked, “what do workers spend their new wages on?” Last quarter’s report focuses on how household expenditures change when a young person gets a job at Samasource, and finds that the biggest increases are in housing and food.

You can view the full report here.

I am reminded of one of my favorite quotes by Martin Luther King Jr., after we’d passed civil rights legislation: “What does it profit a man to eat at an integrated lunch counter if he can’t afford a hamburger?”

This is the central challenge to those of us in the field of poverty alleviation. The problems we face are less linked to rights and more linked to economic justice. How do we put more money directly into the hands of low-income people?

What do you think?

Samasource VP of Business Operations and Strategy Jill Isenstadt poses by an inspirational message at an offsite activity

In the last four and a half years, we’ve tried a lot of strategies to generate income for as many poor people as possible. Along the way, we’ve learned some things that we think would be helpful to share for the benefit of others in the fields of poverty alleviation, impact sourcing, and international development.

Inspired by the groundbreaking transparency displayed on Givewell’s “Our Shortcomings” page, each team at Samasource put together a list at the end of 2012 of mistakes and key things we learned. Below is our compiled list. Please send questions or comments to info@samasource.org.

Major Issues

• We waited too long to begin our annual strategic planning process (starting in October 2012). This meant our leadership team spent too much time on day-to-day issues during the year versus focusing our organization on driving higher impact numbers in the long term.

• We had turnover in the COO role after only nine months. We believe we did not spend enough time clarifying expectations of this role or investing in our new COO’s success.

• We did not clearly communicate donor impact per dollar. We underinvested in measurement and evaluation and did not have a dedicated Impact Team until mid-2012, which meant that we had to rely on self-reported data from our workers and delivery center partners.

• We underinvested in facilities management and teleconferencing infrastructure. This led to lost productivity across the organization (meetings were 20% less effective than they could have been). Specifically, we waited too long to hire a dedicated Office Manager and this created unnecessary stress for our Operations team.

Minor Issues

• As a young organization, we have struggled to find our market niche. As a result, we have taken on projects that are outside the sweet spot of what our product (the SamaHub) does well, and what our workers can do well with minimal training. On any projects that fall outside the sweet spot, we should work to set client expectations up-front to ensure we have proper ramp time for worker training and onboarding.

• We should have supplemented our Delivery Team headcount with offshore team members earlier in the year to prevent burnout and turnover (we lost two Delivery Team members in Q2 2012). Offshore support is important for the delivery team to ensure timezone and cultural alignment with delivery centers. Offshore support also ensures that the Delivery Team can respond to issues faster.

• We are still trying to predict and plan for spikes in client work volumes. Poor planning and an increase in projects caused tremendous strain on our Delivery Team this past December and led to a rough transition in January.

• It was not the best idea to use the SamaLab (a demonstration site in Nairobi with 6-12 workers that we hire, train, and manage directly) as a financial model for our in-country delivery center partners, given that we chose to co-locate the SamaLab with our East Africa regional office. Though this saved on overhead costs, it made it difficult to pinpoint certain costs related to starting a delivery center.

• Our Field/HQ communications were poor. We didn’t train staff in best practices for working in multiple time zones, resulting in lost productivity and delays in execution on projects due to miscommunication. We created a “Best Practices for Communicating with the Field” document, but it came too late in the year and evening call fatigue/burnout had already challenged some members of the Nairobi-based team.

• Our Field Team should have requested more details and clarification from our Finance Team on annual audit requirements early on in the year. Instead, the Field Team found that the system they put in place was of no use to our Finance Team. This required our Field Team to spend a lot of time reconciling financial data for the 2013 audit.

• Our Field Team should play an active role in business development for both fundraising and sales, handing off screened leads to heads of each department on a regular basis. This fell by the wayside in 2012 due to other initiatives.

• Our Impact Team should have been more proactive in driving organizational goals (including fundraising and setting our target number of beneficiaries), even with limited information, instead of serving the organization more reactively as a data analysis function. Data isn’t useful unless it’s translated into a digestible format and communicated frequently and with a purpose.

• The Business Operations function was not staffed with any full-time employees until mid-Q3. While continuity of ongoing activities (closing the books, legal processing, etc.) were maintained, the upleveling needed to support a growing organization targeting enterprise customers was not started until late in the year.  We have had to scramble to keep up with the insurance, invoicing, the legal needs of enterprise customers, communications systems needs for an increasingly remote workforce, financial controls necessary to manage accounting for multiple Samasource entities, and grants tracking to support new levels of restricted funding.

• We did not focus on market research early enough in the year to inform our product, sales and marketing strategies. During our planning discussions, it quickly became apparent that without gaining a better understanding of our market we could not decide on any initiative with confidence.

• In our communications materials to potential funders, we should do a better job of orienting our value around the impact we have on our beneficiaries instead of focusing on our technology and business model.

• We have under-invested in important tools that will allow us to be more effective in both sales and development. We are particularly late to invest in a robust CRM system for development leads. As a result, our existing CRM implementation is not performing for our sales or development teams.

• We inaccurately forecasted our individual development pipeline for 2012 and as a result, we did not hit our development goals. We have learned over the last year the difference between a cultivated vs. non-cultivated lead, which was instrumental in re-forecasting for 2013.

• Our Marketing efforts were spread across Development and Sales. Marketing was not rolled into one function until October. As a result, donor communications were not as frequent as we wished, we did not have enough communications materials to support our Development Team, and the 2011 Annual Report was not released until early 2013.

• We recognize that we need to be clear with new potential partners and donors that SamaUSA is a different model than Samasource. From the website, people assume that SamaUSA is providing guaranteed jobs and using the same model, which creates confusion when we are trying to explain what SamaUSA is aiming to do. The SamaUSA microsite will help, in addition to having the business plan, executive summary and flyer as collateral.

• In the SamaUSA program, it’s hard for students to win projects without a reputation online (work experience with positive ratings/work samples, etc.). Therefore a very short term training model will not ensure that students will win online work projects on their own, or be motivated to try (they won’t win projects fast enough, or be able to get paid enough).  To respond to this challenge, we will pilot a model where students do supervised work in class before embarking on the online platforms by themselves so they can build up a reputation but with the support to ensure work quality. So SamaUSA becomes a work-based training model: a) training—> b) supervised work on during class—> c) program graduation—-> d) continued support from staff, mentors.

In 2005, Thomas Friedman asserted that the rise in cheap access to connectivity and hardware in developing countries was flattening the world. Outsourcing, he argued, was transforming poverty in countries like India, where over two million young people work in call centers or business process outsourcing firms (BPOs) completing work for multinational corporations. His book marked a turning point in Americans’ perceptions of India; people began seeing the subcontinent as an economic powerhouse and competitor for white-collar jobs, not as a country racked by extreme poverty.

I’d worked at the World Bank briefly as an undergrad and studied poverty levels around the world. Though emerging markets like India had seen income increases for those at the cusp of poverty, not much had changed for people at the very bottom—particularly those earning less than $1.25 a day. The outsourcing industry had by then generated billions of dollars for a few wealthy businessmen in India, China, and the Philippines, and I thought: what if we could invert the model to generate a few dollars for billions of people at the bottom of the pyramid?

Soon, the idea became a business plan, and in 2008 the business plan became a non-profit called Samasource. At the time, I called my idea “socially responsible outsourcing,” a term that has since been shortened to “impact sourcing” and adopted by a growing number of organizations. The Rockefeller Foundation has created a definition that could one day apply to a broad range of programs and people:

“Impact Sourcing is outsourcing that benefits disadvantaged people in low employment areas…they include those living in rural areas of developing countries or in slums, those without access to secondary or tertiary education, and educated people in areas of high unemployment.”

Back in 2008, no one had heard of impact sourcing. We were front-runners in the movement to run outsourcing delivery centers as non-profit businesses aimed at serving the poor, growing their incomes and, importantly, demonstrating to the world that poor people want the same things as rich people: a decent job with a steady income, and agency over their health, education, social and political choices.

The model is appealing to many in the development world because of how it differs from traditional foreign aid. Impact sourcing distributes wealth using the mechanism of the market. Foreign aid collects revenues from taxpayers and maintains a large and often costly bureaucracy to distribute it to governments of low-income countries and large NGOs that supplement government offerings.

The latter method has its challenges—aid can create perverse incentives to misreport how money is spent, to be more responsive to donors than to beneficiaries, and to allow the root causes of poverty to persist so that funds keep flowing.

Impact sourcing is a cleaner model. In this framework, sourcing firms win business from corporations that have already set aside funds for completing projects, often competing with other vendors (which forces efficiencies). The sourcing firms make a commitment to hire poor and marginalized people to complete the work, to pay workers a living wage, and to be audited on the above.

Clients pay nothing for the extra benefit of reducing poverty; they pay what they would have paid a vendor to complete their work. Impact sourcing firms, many of which are run as non-profit businesses designed to break even or earn a small profit, benefit from growing client revenues that offset the cost of recruiting and training a marginalized workforce. Workers gain a living wage, valuable computer and English skills, work experience, and socialization in a formal work environment—factors known to catapult people out of poverty.

The movement is growing. Impact sourcing within business process outsourcing alone is expected to be a $23B market by 2015. This is remarkable—fair trade, a similar concept for commodities and handicrafts, is tiny by comparison (my latest estimate is $5B).

In 2008, we started humbly with $30,000 in sales revenue and about the same amount in start-up donations, with a team of thirty Kenyan agents. Four and a half years later, Samasource has paid over $3 million in wages to over 3,500 people on three continents working from 16 local delivery centers. This direct income has supported over 14,000 people in slums and villages with few other formal income opportunities.

And now the real challenge begins. Today, roughly 75% of people living in absolute poverty (over one billion people) reside in middle-income countries like India. How do we scale the impact sourcing model to reach them? How can we get every major corporation to set aside a percentage of their sourcing budget to fight poverty through impact sourcing?

One idea is a 1% for impact sourcing campaign. The campaign would encourage every business owner to encourage her company to pledge to devote 1% of its outsourcing budget to marginalized workers; essentially, it’s an affirmative action program for global poverty reduction with no cost to the end buyer.

If every company swiftly moved in this direction, we’d eventually make good on Thomas Friedman’s promise of a flat world.