Below are slides from my talk on "Securitizing Happiness" at TEDxShanghai later today. This presentation is a slight update to the original talk i gave back in March 2008 at the O'Reilly Collective Intelligence FOO Camp, held at Google HQ in Mountain View:
Note: many of these concepts are still fairly raw, and since i'm not really a financial engineering expert they could certainly use further refinement... so your feedback and comments are appreciated. That said, i'm optimistic the basic ideas here are viable, worthwhile and can have substantial economic impact on society in the future.
These SME initiatives have tremendous potential, and i wish Sonal & Google.org & other groups best of luck with their efforts. Go small business investment!
Below are two short video clips that explain more about the five core initiatives Google.org is doing; the end of the first video & the second video specifically discuss the SME initiative.
Fuel the Growth of Small & Medium-Sized Enterprises (SMEs, @ 7m30s)
Video on SME Initiative:
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My Steamy Love Affair (!) with Microfinance, Startups, & Small Business Finance
Helping grow SMEs is an interesting topic that is closely related to two of my favorite subjects, startups & microfinance. Over the past 5 years i've spent time learning about microfinance & helping support Unitus, Kiva, & Microplace, and more recently running the Silicon Valley Microfinance Network (SVMN.net). For the past 10-15 years, i've been trying to learn how to start & run tech startups better, and figure out how to make it easier to get them funded & financed.
That's Right Ma'am.. I Got My MBA from The School of Hard Knocks
Having spent a few years at PayPal & eBay, i was always fascinated by how small business provides a huge engine of growth for many global economies, yet equally amazed at how little access to capital & business education most SMEs have. As a small business owner myself for a few years back in the mid-90's, i learned this the hard way. My first company, Aslan Computing, was a small consulting shop performing internet & e-commerce projects for clients in Silicon Valley and San Francisco. I started out as an independent developer doing database consulting & programming for Microsoft & Intel, then gradually we grew into a small consulting group of ~15-20 people.
But i was pretty clueless about basic business finance, and altho we grew rapidly so did my personal debt: in the first few years of the business i ran up almost $250K of personal & business debt, and explored every possible wacky financing angle including: high-interest credit cards (~10 of them, at one point over $100K in debt), borrowing money from employees, equipment leasing, factoring invoices, and selling equity to friends & family. I even tried raising venture capital, but slowly came to realize most VCs aren't likely to fund consulting businesses (tho US Web, Scient, & Viant all did manage to get plenty of VC funding during the late 90's). I once had an offer from an angel investor to put $250K into the company in exchange for 20% equity, but i wasn't very experienced at the time, and i wasn't sure about the investor. Well, you know the old adage: experience is what you get when you don't get what you want.
Folks, lemme tell ya: i got a lot of experience out of those years.
Overall it was quite the financial & emotional rollercoaster, and while i managed to make payroll mostly on time for ~3 years, eventually we ended up selling the business to a larger partner for a rather modest sum. It was a small win, but i wish i spent more time learning how to manage our finances better, and had created a better financial foundation for the business with more reasonable access to credit. Ah well, nothing like the school of hard knocks to teach you a tough lesson. And perhaps also, to discover a new market opportunity.
Getting Back on the Bike... After RTFM
Anyway, that experience made me hungry for more info on venture capital, startup finance, and in general on how small businesses get access to capital. In 2000, i read The Venture Capital Cycle by Gompers & Lerner, which explained a lot about the motivations of VCs and their LPs. In 2001-2002, i read Hernando de Soto's incredible book The Mystery of Capital, and Muhammad Yunus' first book Banker to the Poor.
Both books focus on how sole proprietors & small business have limited access to capital, and also typically a lot of bureaucratic red tape, but that in the right environment & with good capital availability small businesses can thrive. Around the same time i also read MoneyBall by Michael Lewis, which made me think a lot more about how people overlook & underemphasize metrics.
Creating New Asset Classes & Securitizing Small Business
Ever since reading these books, and after i wrote the first draft of my magnum opus on Securitizing Happiness, i've become convinced there is a huge missing asset class in small business debt & equity that could dramatically help fuel the growth of the global economy. All we are missing are 3 things:
a way to automate business metrics & provide greater transparency
a way to lower transaction costs & accelerate the financing process
a way to provide back-end liquidity / fuel exits to 'make' the market
Gotta be a Pony in Here Somewhere !?!
While these are difficult & challenging issues to address, i'm optimistic several organizations are working on solutions that may emerge over the next few years. In that light, it's great to see Google.org and others going after these opportunities. I'm hopeful for the future, and i look forward to seeing what happens next :)
hopefully i didn't end up looking like too much of an idiot, but
regardless it was great for me to finally get this out in the public
domain and get some reactions. appreciate any feedback or thoughts on the concepts & proposed solutions, and particularly any good hacks you think i've overlooked...
Beth Kanter didn't sleep for 2 days, and proved that one passionate individual can make an amazing amount of difference. In this case, over $50K worth of difference.
Beth Kanter is an awesome blogger & non-profit evangelist who does terrific stuff to help people around the world, particularly kids in Cambodia (her adopted daughter is Cambodian too).
Right now, she's competing to help raise funds from the largest unique # of donors (not amount of money, rather # of contributors). Interestingly, she's competing as a 1-woman social media-enabled army against other bigger organizations.
So why don't you take one minute to donate $10 to her cause, and help her get over the finish line? She needs 28 donors to catch up with the leader, and i just gave $10 so now she only needs 27.
Hurry the F up! this needs to happen by TOMORROW 3pm (Eastern) SO GIVE IT UP NOW, BITCHES -> CLICK HERE <-
(click above, pull out your credit card, & take 60 seconds to donate $10 you cheap bastards you. yes you. right now, dammit. YES I SAID! STOP reading this shit, and CLICK! Click Click CLICK!)
you're still reading this, aren't you asshole? you didn't click yet?
oh you did? ok, good. you can stop feeling guilty that you haven't helped change the life of some poor cambodian kids for ten measly stinking bucks. which you probably spent yesterday on some really shitty ham & cheese sandwich at some fancy-schmancy california foo-foo restaurant. you pathetic piece of slime you.
sorry, you gave that $10 right? much better. kisses. XOXOXO
no seriously, click on that fucking link and give $10.
still feeling guilty? re-blog this & recruit 5 more people NOW.
(btw, i promise i'll take lunch meetings in Q2 with any startup that can show me they gave at least 5 x $10 donations to Beth's cause -- how's that for pimping with a purpose?)
ok, i think i've exhausted every psychological trick i can think of now. if you folks get creative, pile on in the comments with your best Catholic guilt trip.
There's a WSJ article this morning about Bill Gates' new ideas for a more creative "kinder capitalism" that needs to work better to address the issues of the world's poor. That #, depending on how you count it, is somewhere between one-third to two-thirds of the world's 6 billion people. Altho he says the ideas are still a bit fuzzy, he's planning to talk about it further in his speech at the World Economic Forum in Davos.
Here's a brief video clip on his concepts:
I applaud this kind of thinking, and Bill's efforts through the Gates Foundation are groundbreaking & innovative. Other similar-minded groups at Omidyar Network, The Skoll Foundation, & Google.org also do amazing work. I'm a supporter of microfinance accelerator Unitus also doing terrific stuff on economic innovation & emphasizing market forces to make the world better.
Securitizing Happine$$
However, I think there are still a few critical missing market components in what Bill is calling "creative" or "kinder" capitalism. In fact, i'd say there are several hundred-trillion dollar asset classes that don't currently exist that, once created, will dramatically stimulate market forces to address global poverty issues & other beneficial public infrastructure. I call this effort Securitizing Happiness, or in the long form "Solving Global Economic Issues by Making Markets for Individuals, Small Business, & Natural Resources". I think this is along the lines of what Bill's talking about, & i've written about it a fewtimes.
Note that i'm not professing some wacky socialist proposal for redistributing wealth -- i'm talking about unleashing the power of the market via the creation of huge new untapped economic asset classes, similar to the creation of mortgage markets and financial derivatives markets.
In particular, i think these missing asset classes include:
small business equity markets (~50% of US GDP, more globally)
human health impact of natural resources (water, air, land, etc)
For my more wacky & lengthy thoughts on this topic, please read this post from a few years back. I'm continuing to refine my thoughts on the subject, and the concepts i'm working on with Startup Metrics are related in a somewhat convoluted but very essential way.
hope to do more work on this down the road, and i welcome feedback.
UPDATE: put together a rough slide deck on this here:
btw, also mentioned in the Gates article is Dr. Muhammad Yunus, founder of the Grameen Bank, one of the fathers of modern microfinance, & recent winner of the Nobel Peace Prize... and certainly one of the most amazing social entrepreneurs i've ever met. He was in town recently speaking about his new book, Creating a World Without Poverty.
Two other books mentioned in the article are among my favorites:
The Mystery of Capital in particular is a book that really opened my eyes to the value of property rights and housing / mortgage markets in making economic progress. It's worth the read.
as i made the loans, i noticed Kiva is using Beacon to share info about the loans i'd just made on Facebook. that's cool :)
Here's the Facebook screenshot showing the new Beacon opt-in user notification:
And here's the screenshot showing the Kiva microloan stories published in my Mini-Feed:
While i'm talking about microfinance, i should also mention another organization i'm involved with called Unitus, that also does amazing work in the field. Kiva works with individual borrowers, while Unitus works with microfinance institutions to help provide financial capital & management expertise.
"The United States congratulates the winners and is calling for calm, and for Kenyans to abide by the results declared by the election commission. We support the commission's decision," said spokesman Robert McInturff. He reiterated a State Department statement from Saturday that asked Kenyans "to reject violence and respect the rule of law."
I'll admit i've only been following this over the past few days, but the recent Kenya election certainly would appear to be far from a free & fair one. EU monitoring officials expressing significant concerns, initial results showing opposition challenger Odinga winning were overtaken by Kibaki at the last minute, slow election result reporting, the Kenyan government bans national news television broadcasts...
and the US State Department is congratulating the election winner?
What. The. Fuck?!?
Perhaps this was an inaccurate report of our country's representatives in this situation... i sure as hell hope so. Otherwise it sounds like we're passively supporting yet another not-quite-democratically-elected African leader.
Someone please explain to me how we could be screwing up US foreign policy any more than we have in the past 6-7 years. Sigh.
75 of the 210 constituencies — meaning more than one-third of the vote — had serious question marks and that the election chairman initially agreed to investigate. But later on Sunday he changed his mind.
Kenya is a close American ally, and a team of Western diplomats, including the American ambassador, tried for hours to persuade election officials to recount the votes. One Western ambassador said they knew that if the dubious results were certified and the president declared the winner based on them, Kenya would plunge into crisis. But the commission would not budge.
“The government was determined to hold onto power,” said the ambassador, who did not want to be identified because he said he feared reprisals from the Kenyan government.
If the above account is accurate, it seems hard to understand why the State Department would knowingly congratulate the winner of a likely fraudulent election process.
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side note: i'm a supporter of Unitus, and one of the microfinance groups Unitus has funded is Jamii Bora in Nairobi. they've made incredible progress in helping make business, education, and housing microloans to over 100,000 working poor in Kenya.
if you want to make a real difference for someone, i encourage you to support Unitus and other microfinance organizations around the world.
LitLiberation is a fundraising contest my friend Tim Ferriss has been running in the month of October to help fund literacy projects thru two terrific organizations: DonorsChoose & Room To Read. Tim has already contributed over ten thousand dollars personally to this cause, and over a hundred thousand dollars has been raised / contribute by bloggers & other folks like you.
Today is the last day to make a contribution -- please click on my fundraising page belowto support one of several literacy projects on DonorsChoose. Both Tim & I thank you, and kids around the country & around the world do too :)
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as i made the loans, i noticed 
While i'm talking about microfinance, i should also mention another organization i'm involved with called 
I'll admit i've only been following this over the past few days, but the 
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