Capital: Resource or Crutch?

When I was in the Peace Corps in Costa Rica, the program office gave nominal support of community-led, community-funded projects, but the de facto operations of my Peace Corps program often told a different story.

Volunteers were given access to $2,500 through CR-USA, a development partnership between the governments of the US and Costa Rica, to go toward community projects. While a great opportunity, the money appeared to be offered without condition, and our community counterparts (typically leaders of a semi-formal local government organizations called Development Associations) were well aware of this. Instead of thinking of the best projects for the community without prior knowledge of virtually guaranteed funds, the community leaders thought of ways to spend $2,500. In fact, the center director of our program said directly to the counterparts that the volunteers bring with them access to these funds.

Rather than being a useful resource for volunteers and their communities, to be called upon when needed, the CR-USA funding (or at least the idea of it) ended up being a crutch for many. I often felt lonely (and even angry) in my fight against our image as vessels whose sole purpose is to transfer $2,500. It seemed like a waste of young, talented people to put them in an environment that stifled hard work and creativity--not to mention a waste of roughly $40,000 (anonymous source, 2007) in federal funds per year to support a Peace Corps volunteer.

Many volunteers used CR-USA as a crutch. They held onto the idea of that funding, assuming it would be available when it came time to execute their big project. In my opinion, many projects were shaped solely around the CR-USA opportunity, with both the volunteers and the community limiting their possibilities to whatever they could get done with $2,500 (plus a smaller amount of matching funds from the community). The tragedy here is that even the projects that are successful may have the unintended consequence of complacency. Maybe the community could have done something much more profound, and with greater long-term sustainability, had the people banded together to do something without regard for seemingly guaranteed funds.

So, that's my take on the successes. The second part of the problem was demonstrated when the CR-USA organization started tightening up funds. It became harder to get funding, as money was set aside for a far smaller number of projects and funding came with stricter guidelines. Many people rightly panicked because they had put off applying for funding, assuming the silver bullet for their community projects would be there. Many of those same people were already too far along in their service to come up with a contingency plan for a project that appeared to be set in stone. Consequently, many of the projects didn't go through.

This example from the Peace Corps shows us how capital--or at least the idea of it--can be a crutch. In this case, the crutch often made people think too small, limiting themselves to a narrow set of opportunities. It was sad to see smart, capable people underachieve in this way, because I knew they could accomplish so much more if they opened themselves up to real local solutions to problems, powered by the locals themselves.

Not all examples of "crutch capitalism" demonstrate an underestimation of opportunities. Often when large amounts of capital are available to entrepreneurial start-ups, the companies become spend-thrifts out of the gate and burn money too quickly. In this case the "let's see how we can spend $X" attitude overestimates the business opportunity. A company might spend $100,000 marketing a product that's worth $50,000. (Just like capital, marketing should not be a crutch.)

So, whether you end up underestimating or overestimating your opportunity, available capital can (perhaps ironically) be a bad thing. I know this can be tough to stomach if you're a resident of the capital-starved developing world--or an entrepreneur looking at the devastated capital markets--but a dose of skepticism with regard to capital can be healthy.

Life beyond ticker symbols

I used to obsess over large internet businesses, especially publicly traded ones like Google, Yahoo, and Microsoft. I am genuinely interested in the search business as it relates to my own profession and to society as a whole, but I have also been interested in it because I used to find pleasure in trading stocks. While my trading added a decidedly personal twist to my blog posts, I didn't find the trading itself fulfilling.

In my posts Searchonomics and and It's Search, Stupid, I crafted my own big-picture view of the search industry and the "Internet's Winners and Losers", but I ended up finding myself tracking ticker symbols a bit too much...and I'm no day trader. In fact, I haven't bought or sold a single share in over four months. I no longer find tracking stocks exciting, so Yacrosoft will no longer cater directly to the investment crowd. So, you won't find me talking about stocks very often, but I will certainly continue to talk about companies as they relate to technology, business, and economics.

For these reasons I am dropping the moniker "The Internet's Winners and Losers". I am leaving it the title of the blog as just "Yacrosoft" for the time being until I can better define the direction I am taking.

In the short term I plan on writing more about sustainability in an effort to complement conventional thought on the topic.

Scalability as Sustainability

People view sustainable development from different angles and through different lenses. While I was in the Peace Corps, the prevailing wisdom held that sustainable development required the commitment of host country nationals to the particular development projects after the volunteer had left the country. While this is easier said than done, it doesn't necessarily say anything very profound. Of course, development requires commitment from the beneficiaries of that development.

While I was fighting to have Peace Corps Costa Rica expand or clarify its definition of sustainable development, I came across this Foreign Affairs article (sorry, the full text isn't available for free online) that discusses the origins of sustainable development. According to the article, the notion of sustainable development arose in the 1980s, thanks to an academic report called "Our Common Future," put together by the World Commission on Environment and Development. The report claimed that "boosting the economy, protecting natural resources, and ensuring social justice are not conflicting but interwoven and complementary goals." This line of thought paved the way for what many now know as Triple-Bottom-Line Sustainability.

Oddly enough, the Peace Corps (Costa Rica) definition of sustainable development lacked the environmental slant that characterizes much of the sustainability movement. Essentially, the Peace Corps' perspective focuses on the people who would sustain the operations of a project, whereas the triple-bottom-line perspective focuses on the social and environmental factors that would eventually prevent the continuation of a project's operations.

While both of these viewpoints are valid and entirely necessary, they often fail to highlight an important part of sustainability that can facilitate truly powerful ideas: scalability. An idea is much more impactful if it can serve as an example for other communities across the globe to emulate. Even further, I posit that scalability can be evidence that an idea is sustainable, at least in the more traditional sense of the word.

In the business world, the most promising business endeavors are the ones that exist independently of any one person's unique expertise. If a company has to rely on the creativity or management expertise of a single person, the continuation of that company's operations is at great risk. Perhaps more importantly, the growth and profitability of a business may be stifled by the inability of its model to scale to other regions when it is managed by different people in different cultural contexts.

The development world is similar in a lot of ways. Development projects that involve local people with unique talents may be quite advantageous in the short term, but what happens when the leaders move away, move on to something different, or retire altogether? One way to assess these risks is to ask yourself if a project could be scaled to include the neighboring community, the rest of the country, or the rest of the world. If this is the case, then the project probably has good prospects for sustainability. However, if the project doesn't pass this test, it probably will not be sustainable in the long term, or even in the short term in a disparate group of places.

I don't mean to belittle grassroots development that relies on talented, dedicated people at the local level who work for local benefit. In fact, I believe this to be the only form of develop that truly works. Ideas must first be tested for feasibility at the ground level. However, it would be quite wasteful for outside development workers to ignore the impact created by scalable ideas, models that can be adapted to a greater number of communities. In my experience, this broader perspective is often lost on grassroots development workers who are fighting tooth-and-nail to achieve objectives at the local level.

So, ideas pass important sustainability tests if they are 1) not unduly restricted to a small group of leaders and 2) scalable to other environments, thus proving their validity in a very powerful way. With a slight shift of perspective, we can ask ourselves important questions of sustainability and scalability to make a greater impact in our organizations and communities. These questions include--but are by no means limited to--the following:

What if Charlie gets hit by a bus tomorrow? What would happen then?

Would this new product sell in another country? If not, are there powerful attributes we must keep, or others we must do away with to adapt the product to a new environment. (See Four Actions Framework.)

What are some processes we can put in place today that could make this project work outside the confines of our own unique situation?

If we forget about scalability in our quest for sustainability, we can miss out on great opportunities to make small ideas big.