All Things Impact.

private capital & the public good

All Things Impact 2016.8: Jamie Dimon says that "markets are amoral" and a job opportunity with Markets for Good

Brian WalshComment

Hi friends,

Welcome to my newsletter of interesting things I've seen from across the spectrum of impact: effective philanthropy,impact investing (in the private markets), responsible investing (in the public markets) and a wildcard topic. For previous posts and more, please visit All Things Impact.

Here are four links worth your time:

1. Effective Philanthropy: just how should Zuckerberg and Chan deploy $45 billion?
Michael Hobbes spent the past few months talking to more than 40 researchers, development practitioners, foundation employees, and Silicon Valley philanthropists to better understand the promise and the potential pitfalls awaiting Mark Zuckerberg and his wife Priscilla Chan, as they embark on their commitment to deploy 99% of their wealth for the public good. The result is an incredible piece in the Highline, a microsite of the Huffington Post. I highly recommend you read the whole piece - it's well worth it. Here are some select passages:

"Zuckerberg has interest and expertise in technology, and there's nothing inherently wrong with making bets on gadgets or innovations that have the potential to help the poor. But as he does so, he should acknowledge that the silver-bullet promise of technology only works at changing the world when it's combined with political will and popular demand. Until he finds a way to engineer those (please don't), he should focus on the small ways, at the margins, where technology can improve people's lives, 8 percent at a time.

…how Zuckerberg gives away his money will be just as important as what he gives it to. Because one way to look at his $45 billion is that it's a lot of money. Another way to look at it is that it's about what the United States spends on prisons every six months. Or education every four weeks. Or health care every five days. Even at a scale that large, efficiency matters.

…I heard similar arguments from almost all the tech people I talked to: Zuckerberg shouldn't be afraid to fail; he should approach philanthropy like a venture capitalist, testing out ideas to scale up later on. Bypassing legacy institutions is what Silicon Valley CEOs are good at, right? All those consultants must strike them as the charity equivalent of taxi medallions.

Still, running a charity does require fully understanding problems before you try to solve them. "Move fast and break things" is a fine mentality for Facebook, where the consequences of a few bad lines of code are mostly limited to a drop in revenue or an exodus of users to Snapchat. Applying the same philosophy to health or education or criminal justice has consequences that can't be shrugged away. 

…when Zuckerberg hears pitches from companies seeking to solve the world's problems, he shouldn't ask them if they have a plan to grow, or an ambition to exist in perpetuity. He should ask himself whether he really wants them to replace the systems that already exist, or simply make them better. Because successful companies don't just disrupt other companies—they disrupt economies, governments and the people who depend on them. That's not something that Zuckerberg ever had to worry about, but he has to start.”

2. Impact Investing: reflections from Ackman, Cohen, Branson, and Hoffman
The always-wonderful Paula Goldman, of the Omidyar Network, spoke with several prominent business leaders - Bill Ackman, Sir Ronald Cohen, Sir Richard Branson, and Reid Hoffman - and came away with a few themes, which she wrote about in the Harvard Business Review: “invest for impact in both non- and for-profits, measure results (but not at the expense of taking risk), and shape your existing business around social good.”

“Impact investing has an array of champions — from Pope Francis to the White House — and is gaining traction in sectors as diverse as education, financial inclusion, and alternative energy. Some observers worry that it diverts money away from worthy nonprofits. But Omidyar argues that it’s more about finding the right solution for each problem: “It’s important to invest in the best change-makers you can find regardless of what legal form their organization takes. It’s about using everything in your toolkit.”

…The drive for more and better data and analysis on the efficacy of programs is now widely accepted as best practice. As Jean Case (who started the Case Foundation with AOL co-founder Steve Case) says, “Moving more toward a dashboard approach is important where there is available data. Where there isn’t, you need to invest in getting the data or ‘being the data’ by innovating and breaking new ground to help those that come after you be farther up the learning curve. Don’t let [the lack of existing data] be an excuse to not take risks.”

…The opportunities to harness the power of markets for social good are enormous — especially for the next generation of change-makers who can build on these ideas. Richard Branson sums it up well: “If you put charity on one side and for-profit business on the other, we see the beautiful hybrid models in the middle as the greatest opportunity of our lifetime.”

Hoffman agrees: “Organizations with very few resources can now achieve a reach and scale that once would have required hundreds of employees and millions of dollars. It’s never been easier for good ideas to achieve massive impact.”

3. Responsible Investing: a Q&A with Jamie Dimon, CEO of JP Morgan Chase
Jamie Dimon has been CEO of JP Morgan Chase for 10 years, and recently sat down with John Micklethwait, editor-in-chief of Bloomberg, for a Q&A session:

John Micklethwait (JM) “[When you were growing up], being a stockbroker wasn’t a mundane career, but it wasn’t an amazingly glamorous one either. That all changed on your watch. Financiers rose to become “masters of the universe.” Now they are often vilified, albeit very well compensated [Jamie Dimon was paid $27 million last year]. Can you explain that story? What changed?

Jamie Dimon (JD): Finance went from being a small business, effectively, to being a big business. In part, that’s the growth of the world’s wealth. That’s called savings. As countries get wealthier—all of them, together—you’re going to have financial assets. That is a good thing. You could argue the assets were traded too much, or that they’re too highly valued, or too leveraged. But in general, as countries get wealthier, there’s going to be more savings, which means you’re going to have intermediation. So part of it is just the huge growth in wealth, and part of it was globalization—these companies, these clients getting much bigger and much more global.

…Remember that banks aren’t markets. The market is amoral. The market doesn’t care who you are. You’re a trade to the market. The market will sell you if they think you’re riskier. Banks didn’t do that.

JM: You’re saying banks are more moral than markets?

JD: Yes, because a bank is a relationship. I can’t desert you and expect to have a strong relationship afterward. If I told someone, “I know you’ve been buying milk from me and you need milk to survive. But the price is no longer $2 a gallon. It’s going to be $40 a gallon. I’m going to bankrupt you.” What do you guys think of me? You would hate us. I mean, obviously some of these banks did bad stuff. Yet even in the depths of the crisis, banks didn’t materially change the prices for clients...

JM: I suppose there’s an image of finance, and then there’s an image of capitalism—the general idea that capitalism is there to help, that it’s an integral part of society.

JD: I think the free-enterprise system has been great for society. That doesn’t mean it’s completely perfect. And also, when people say capitalism, I’m not really sure what they mean. I’ve been regulated my whole life. We have progressive taxes. It’s not a free-market free-for-all. I completely understand that society has a perfectly legitimate right to put in structures and regulations and rules that make it fairer, better, cleaner.

4. Wildcard Topic: core differences between Republicans & Democrats
Over at Marginal Revolution, economist Tyler Cowan picks up Paul Krugman’s inquiry into the differences between R’s & D’s:

"The Republican Party is held together by the core premise that the status of some traditionally important groups be supported and indeed extended.  That would include “white male producers,” but not only.  You could add soldiers, Christians (many but not all kinds), married mothers, gun owners, and other groups to that list.

(The success of Trump by the way is that he appeals to that revaluation of values directly, and bypasses or revises or ignores a lot of the associated policy positions.  That is why the Republican Party finds it so hard to counter him and also fears it will lose its privileged position, were Trump to win.  The older Republican policy positions haven’t delivered much to people for quite some time.)

Democrats are a looser coalition of interest groups.  They agree less on exactly which groups should rise in status, or why, but they share a skepticism about the Republican program for status allocation, leading many Democrats to dislike the Republicans themselves and to feel superior to them.  In any case, that underlying diversity does mean fewer litmus tests and potentially a much broader political base, as we observe in higher turnout Presidential elections, which Democrats are more likely to win these days.  That also means more room for intellectual flexibility, although in some historical eras this operates as a negative.

…Republicans, who are focused on the status of some core groups at the exclusion of others, are more likely to lack empathy.  Democrats, who oppose some of the previously existing status relations, and who deeply oppose the Republican ideology, are more likely to exhibit neuroticism.

It is easy for Republicans to see the higher neuroticism of Democrats, and easier for Democrats to see the lesser empathy of Republicans.  It is harder for each side to see its own flaws, or to see how the other side recognizes its flaws so accurately.

… both the Democrats and the Republicans have their ready made, mostly true, and repeatedly self-confirming stories about the defects of the other.  They need only read the news to feel better about themselves, and the academic contingent of the Democrats is better at this than are most ordinary citizens.  There is thus a rather large cottage industry of intellectuals interpreting and channeling these stories to Democratic voters and sympathizers.  On the right, you will find an equally large cottage industry, sometimes reeking of intolerance or at least imperfect tolerance, peddling mostly true stories about the failures of Democratic governance, absurd political correctness, tribal loyalties, and so on.  That industry has a smaller role for the intellectuals and a larger role for preachers and talk radio.”

Important Job Announcement: Markets for Good is hiring!
Markets for Good is an initiative that I helped to start, with the goal of improving the social sector's capacity to generate, share, and use information to make better decisions. It is now being managed by the incredible team at theStanford University Philanthropy and Civil Society Center, with support from Liquidnet and the Bill & Melinda Gates. We are seeking a dynamic Program Manager to help manage this program on a day-to-day basis. Please share this job posting with talented people in your network! (Or maybe that talented person is you?)

That’s it for this week. Help me spread the word about #Allthingsimpact to your friends and colleagues. People can sign up to receive this newsletter at All Things Impact. Please also send me any compelling links you discover in your own journeys across the web (even things like this gif of a cat confused by walking on ice).

Until next time, thanks for reading!

Brian Walsh
Head of Impact at LiquidnetFull Bio.