If you had $70,000,000 to give away...

[Guest]

.

[Soriak]

How would you decide what to do?

An economist who writes for the "Freakonomics" blog was approached by a man called Michael who inherited a significant amount of money. He wanted his help in determining what strategy would lead to the best outcome for the recipients - and who they should be. He had a few requirements and the question was posted on the blog, getting over 500 comments. (one of his requirements was that the money had to be spent in the US - but I think the insights on poverty are interesting for Kiva lenders als.)

In a follow-up post, the response from "The Thugz" was posted. This is a group of former gang members with which the economist watched the TV Show "The Wire." He asked them to comment on what they thought would improve life of poor people the most. Michael's sister is also faced with the same problem, though to a slightly lesser degree. (She has to give away $45 Million)

Now part 3 went up. The economist had set up plans for 3 other wealthy heirs and devised a strategy with which they can dispel stereotypes about the poor and challenge some of the conventional wisdom. It turns out their corporate approach to returns and improvements missed important measures. For example if a kid's grades didn't improve, they considered this a failure. They didn't think that the kid staying in school at all was already a success. They met the families and together talked about expectations and challenges, getting access to their budgets and even journals.

So Michael got back in contact with him and they're trying another strategy. Michael hired 3 consultant firms, paying a total of $19,000, that should devise a plan for his $70m. One condition is that he has to be involved and they need to find a way that educates him about the issues. He also tasked another economist at a cost of $275 to do the same. $225 is her fee, $50 the expense for bus fairs to get to get to the poor areas and investigate.

One of the important notes so far:

For example, they learned that poor families who have access to small amounts of cash — as little as $20 — can stave off problems that might otherwise spiral out of control. (Previously they dismissed the utility of using such small sums for change.) Of course, credit unions have long understood this — and one of the donors is now helping to fund organizations that replicate this strategy in New York.

The plans should be done in about two weeks and we'll hear about them in Part IV.


Well worth reading, here are the three parts:

Part I: What Would You Do With $70 Million?
Part II: Michael and the $70 Million Problem (Redux)
Part III: The Price of Advice: Chronicles of a Young Philanthropist

[waywardcats]

Thank you Soriak for the pointer to this interesting blog series.  I think it's fascinating that the lessons that this person is learning about their charitable giving so closely resembles the micro lending philosophy (about which the donors were quite skeptical):

One of the important notes so far:
Quote
For example, they learned that poor families who have access to small amounts of cash — as little as $20 — can stave off problems that might otherwise spiral out of control. (Previously they dismissed the utility of using such small sums for change.) Of course, credit unions have long understood this — and one of the donors is now helping to fund organizations that replicate this strategy in New York.

I was also very interested in this section:
 

Over the year, about two dozen poor families welcomed the donors into their lives. They opened up their household budgets; they were candid about their illegal activity; a few shared their private journals. The conversations were moments of honest self reflection.

Over dinner, the donors told poor families (sometimes angrily) that they expected change to occur more quickly; the parents around the table educated them about what kinds of change can reasonably be expected. For their part, the poor received an intensive dose of market logic, and many now use incentives in the home to motivate family members. Privately, the donors admitted uncertainty about the capacity of philanthropy to change people’s behavior. Along the way, each wondered whether they should give up and focus on other pursuits.

I'll be interested to follow the progress of these donors to see whether their expectations are modified in the future.

and the paragraph immediately following the one you quoted:

They also learned that, in some cases, process is as important as outcome. For example, service providers who keep families together — despite dramatic improvements — are playing a valuable function in communities where things always fall apart. And even if a child’s grades don’t improve, sometimes staying in school is a huge mark of success for the family.

Again, we see that education of one's children is one of the most important goals for many people.   Much food for thought there.

Thanks again Soriak.

-Kerry-

[moonfish]

$70,000,000 ... I'd be happy to have $7,000 to give away.

When looking at the # of loans some KF have made, I see that I am just a little rock among some bigger rocks and even some Boulders   

But it does not matter - even the little pebbles can make a difference.  I encourage anyone who has a spare $25 to get involved (or further involved) and make a difference to someone else a world away from you.

(And who the heck was it that said I cannot be serious at times  )

 

[Soriak]

Part IV: Michael, Meet Curtis: Philanthropy Gets Personal

The $20,000 spent on consultants returned nothing useful, so Michael decided to spend a year with Venkatesh, the economist behind it. Michael begins with a weekend following Curtis, who does not have a permanent home and stays in abandoned apartments. For the weekend, Curtis has $20 to spend. Michael explores the neighborhood and makes these observations:

Meanwhile, Michael drove his rental car around the neighborhood. When he returned to meet us he was exasperated. “The food here is awful! No fruit, vegetables are moldy. Only meat, canned food, and soda. What do kids eat? The guy at the store told me no one would eat fruit unless it’s in a can. Is that true?”

Curtis shook his head. I told Michael, “When we get back to New York, I will talk with you about diet and quality of food availability in poor neighborhoods.”

But Michael was growing upset. “All I see are liquor stores and dollar stores and fast food. There was one guy who said he’d buy my food stamps — 50 cents for a dollar in stamps? How can people live like this?”

Curtis' budget for the time:

$4.75 chicken wings and canned beans

$2.00 shirt, pair of socks

$2.00 coffee

$1.00 four loose cigarettes

$2.50 polish sandwich and fries

$2.00 rat infestation powder

$2.00 lock

$2.75 medicine, band aids

TOTAL: $19.00 (one dollar in savings)

[Christopher]

Thanks for posting Soriak, those columns are turning into an incredible story of enlightenment.

Thought this might interest: http://www.channel4.com/culture/microsites/S/secret_millionaire/index.html
It is called Secret Millionaire where various wealthy people go 'undercover' to see the world from a lesser perspective, and you can often see the transformation and realisation in them at the end.

This is a brief writeup I found on one of the programmes:

Each week a different multi-millionaire searches for people whose lives he or she can change for the better. Each of our modern-day philanthropists must guarantee to give away thousands of pounds of their own money. For ten days, the millionaires leave their wealthy lifestyle behind and go undercover to live in some of the UK’s toughest areas. They conceal their true identities and immerse themselves in communities with the aim of finding those people that they think deserve their help. On the last day of their visit, they reveal their secret and write their cheques.

Ten years ago, aged just 16, Ben Way made a life changing business deal worth 25 million pounds, making him one of Britain’s youngest self-made millionaires. Six years later, he’d lost the lot. Now, aged 26, Ben has successfully rebuilt his fortune. But, now fully aware of how tough life can be when you hit rock bottom, he wants to find others who deserve a helping hand. “I’ve been incredibly lucky to have ended up on this side of the tracks. I see it a bit like Russian roulette. My life played Russian roulette with me. Fortunately I won and some people haven’t and I can find those people and change their lives.”

In the opening film, Ben says goodbye to his private plane, his central London bachelor pad and his fine dining to live on one of the toughest estates in London. He travels just seven miles across town to Hackney - one of the city’s most deprived areas - notorious for gang culture, violent crime and where nearly 60 percent of the kids grow up in single parent families. For ten days he works as a volunteer youth worker at the Pedro Club alongside its inspirational manager, Ufu, who greets Ben by saying, “welcome to murder mile.” During his stay, Ben lives in a room in a shared flat on the local estate.

But how easy will it be for Ben to befriend a group of youngsters and discover who is most deserving of his help? The kids at the club have a tremendous support and ‘father figure’ in Ufu, who dedicates so much of his time to them and the youth club. Ufu is greatly supported by James Cook, ex-British and European professional super middle weight boxing champion. For the past ten years he has been a local outreach worker, patrolling the streets looking for young people who are truanting or involved in drugs.

Ben struggles to decide who deserves his money, but after an emotional ten day visit he finally reveals his identity and the true purpose of his stay…. how will his new friends react?

[waywardcats]

Part IV: Michael, Meet Curtis: Philanthropy Gets Personal

The portion that struck me was when Curtis began educating Michael:

Curtis showed Michael a rag and cleaning brush. “See this, Michael? Keep this around, and you’ll always have a meal or a place to sleep — or both.” Michael looked confused. Curtis explained further. “People who got places to sleep will let you stay a night. But you have to pay $10. And I don’t have money, so I clean up, fix things. That woman you saw — she probably will clean for a good night’s sleep. Maybe a store needs mopping, maybe your uncle needs his garage cleaned.”

“Why not stay at a shelter?” Michael asked.

“Not enough of them around,” Curtis replied. “And you have to be out by 6 a.m. If you got kids, you can’t take them out in the cold. So you stay in a store, or you stay in a vacant building. And no more food kitchens since the projects went down. Not a lot for poor people.”

Curtis then took out a cigarette. “See this? Always have a loose cigarette. You can always use a bathroom in somebody’s house — maybe even get a shower — for one. Maybe your kid took a dump in his pants. Maybe you need some toilet tissue. Always keep a cigarette for emergencies.”

Now that strikes me as true entrepreneurship.  See a need, and fulfill it to supply your own needs.

Thanks again Soriak for pointing out this wonderful series.

-Kerry-