Sunday, November 23, 2014

Paradox in the social sphere

Remember: Poor people have money

When you give out of pity, you tend to create a dependence and a mindset that the rich should give and the poor should just receive. If the poor is "given" enough to get buy and by working, this giving stops, it will destroy ALL motivation to work.

Subsidy / Wage Gap

If you work, you get less support and less that when you do not work. Sometimes, subsidies prevent people from working as the rules for subsidies prevent those low income earners from getting subsidies, making them poorer than those on subsidies.

Free things make destroy local economy

When you donate food to end hunger, the food is usually imported and local farmers and workers lose their jobs because they cannot sell. Ending up with more people who need food.

Free / subsidized housing.

When the best of intentions build subsidized housing, free schools and offer jobs, millions will move in. If there is not enough money as the money is intended for thousands, there will be slums created, schools will be overcrowded and there will be not enough jobs. Eventually, education standard will be poor, living conditions bad, and jobs scarce -- leading to more poverty. (Dertu, Quest to end poverty)

Owen Barder (Center for Global Development)

If we believe that trade is important, we could do more to open our own markets to trade from developing countries. If we believe property rights are important, we could do more to enforce the principle that nations, not illegitimate leaders, own their own natural resources. ... If we believe transparency is important, we could start by requiring our own companies to publish the details of the payments they make to developing countries.

This is seen in many developed countries as well, like rich families owning everything, creating monopolies and unfair advantage as they can influence government to create laws which favor them.

Free Mosquito nets

Angelina Jolie and a few other famous artists gave out more than 1 million mosquito nets to fight malaria, destroying the whole industry of mosquito net makers and repairs. Many could pay for mosquito net repair decide to just use the new ones which put many out of jobs.

More food /= better nutrition.

In many projects where people are given better food, more protein. (Subsidized diets) In many cases, the receipients who save some money on food do not use the protein to subsidize their diets, but decide to make it what they only eat, and spend the moeny saved on cigarettes.

Unequal perception triggers wrong innovation.

When a neighboring village gets a clean water project and other benefits because of polluted water, many other villages will soon have polluted water, because many of them may be smart enough to see that having polluted waters may result in them having cleaner drinking water for free.

Funding do not fund results.

In many cases, funding is spent on the doing. Many people like donate to initiative to fix clef lips, give stationaries to students, deworming kids. And funding can be massive to impact millions, yet there will be no funding given to investigate reports whether doing such initiatives could reduce poverty, build capacity or give the kids a brighter future. No tests, no accountability, no results.

Overheads to run charity well are seen as "inefficient"

Most of the time, NGOs are compared based on total % delivered to beneficiaries. However, they are not measured by quality of service rendered, or transparency and detailed reporting. As intelligent humans, many NGOs pay their staff very little, and provide bad service.

A soup kitchen using a 60% of donations for free food may be seen as a worse soup kitchen than one using 80% of donations for free food. But here are the numbers.

Kitchen 1
$10,000,000 donations per year
$2,000,000 Auditing, Administration infrastructure and salaries
$2,000,000 Marketing and fundraising

Quality campaigns and events are run to engage donors, Donors can visit and communicate with receipents directly. Quarterly reports given, 2,000 beneficiaries served.

Kitchen 2
$200,000 donations per year
$30,000 for Salaries
$10,000 for Marketing and Administrative

Not much awareness created, run by volunteers. No reports or accountabilities. 30 beneficiaries served.

With just some numbers, it is hard to compare charities as numbers do not show the whole picture.

Success, scale, fail

This is seen in many projects, whether in entrepreneurship or social impact. The skill set to run a startup and to run an enterprise is very different. without the abilities to delegate, many founders of these companies will fail to scale.

Through lean startup, many people are able to run a simple model to verify their assumptions and test their ideas, and once proven successful, some are able to get funding to scale. Our idea of think big, scale fast in many cases are the root cause of these failures.

When a VC or a large foundation provide a big grant, they expect results fast. Hence the implementation is done without further testing and based upon initial prototype. In many cases, the situation is different and without understanding other communities that they wish to operate in, the assumptions that may have worked with the prototype may fail. And with testing and firefighting multiple sites at the same time, catastrophic failures is inevitable.

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