Friday Roundup ? 6/10/11: Balancing Idealism Vs. Pragmatism
This week felt like a bit like a tennis match between pragmatism and idealism. That’s always the balance we try to strike on NextBillion, to mix a metaphor. But this week, the volleys seemed to move a bit more fast and furious than ususal.
Early in the week, Mark Hand, an analyst at First Light Ventures, presented a pragmatic argument that one-for-one models such as those practiced by TOMS Shoes, generally are not sustainable from an investor’s standpoint and should only be used sparingly. That same day, idealism (if you will) seemingly pushed ahead as TOMS Shoes announced it would expand its buy one give one business to offer eyeglasses.
Meanwhile, the $300 home project, first unveiled by Vijay Govindarajan in the Harvard Business Review (admittedly not a wide-eyed idealistic publication) in February, was largely castigated in a recent New York Times op-ed by Matias Echanove and Rahul Srivastava, the co-founders of the Institute of Urbanology. The piece, titled Hands Off Our Houses, argued that “replacing individual, incrementally built houses with a ready-made solution would do more harm than good.” They later would add: “The $300 house could potentially be a success story, if it was understood as a straightforward business proposal instead of a social solution.”
Govindarajan, in a blog post with Christian Sarkar, responded: “We disagree completely. We do support other applications for low-cost housing – bringing these dwellings back to the industrialized world for hurricane relief, for example, would be a reverse innovation success story. However, trying to pigeonhole ideas as either “for good” or ’for profit’ is an outmoded way of thinking.”
Finally, neither passionate advocates nor skeptical dissenters are likely to be completely thrilled with the results of a new study published in the journal Science on microcredit today. Conducted by Dean Karlan of Yale University and Jonathan Zinman of Dartmouth College, the economists compared 1,000 recipients of microloans in the Philippines with a similar group that did not. I haven’t pored over the study, but according to a Christian Science Monitor report, the research reveals that microloans “don’t help expand businesses nor did they contribute to a better sense of well-being among the borrowers.” However, there were other benefits, the newspaper reported.
“It is likely that helping poor families borrow and manage cash ?ow – reliably, ?exibly, and for a range of uses – will end up being the truly big idea behind microcredit, even if it’s not the big idea that inspired the global movement,” writes Jonathan Morduch in an analysis with the study. “The idea that microcredit creates a new class of hard-working, independent entrepreneurs sells well with investors and donors. … But it risks undermining support for what may be a more important reason to care about access to ?nance: that it helps families cope with economic challenges that may not be related to business.”
The question, as always, is does it help more than it hurts. Is it the “good debt” of growing income or the “bad debt” that immobilizes the borrower?
A Spring Health Update
I’d encourage you to check out Paul Polak’s April TEDx Mile High talk in Denver, CO (video below). We’ve featured several blog posts featuring Polak, his book Out of Poverty and inklings about on his startup, Spring Health, the first company formed in 2008 under his firm, Windhorse International, and featured prominently in his talk. Spring Health began with a nine-month beta test in rural villages in eastern India, which showed positive results, i.e. customers displayed the desire and ability to purchase the water. A company representative told me over email that good results paved the way for investor interest and the closing of the first round of investments. It officially became an LLC earlier this year, currently has two kiosks in operation and has about 10 employees. The representative told me those numbers are expected to increase and sales are on track to exceed projections.
In Case You Missed It … This Week on NextBillion