You Gotta Plan...And You Gotta Believe

More Than A Plan, More Than a Dream: A Belief
Martin Luther King didn't just have a dream, he had a plan: marches, sit-ins, legislative advocacy.  But no amount of dreaming, and no amount of planning, could comfort him when the death threats rained upon him, when the Churches were bombed and the dogs set loose; no, in those all-too-frequent (if not constant) moments, he needed something else: belief.  Belief that was not always justifiable; belief that strained the bounds of credulity; belief that he almost certainly struggled to believe himself.  Yet that belief remained, and it resonated in the hearts and minds of the countless thousands that risked their lives for justice, and it resonated even in the hearts and minds of those who would prefer to look the other way--but couldn't, because the Civil Rights movement forced them to...forced them to believe that change was coming.

O, but it's so hard.  During the darkest days of the Cuban Missile Crisis, or the Battle of Britain, or the Civil War, or the American Revolution, or the myriad other events that shaped history, how many times did the way forward seem impossible, unthinkable?  How often were the best of plans laid to waste, the best thinkers proven wrong?  And yet sometimes, in the midst of strife--moments when all the roads to Justice have been washed away by a torrent of hopelessness--a path is forged.  It is a path that defies logic, that shouldn't work...and then somehow does.

What Do Our Customers Need?

I just finished reading a fantastic book titled Portfolios of the Poor: How The World's Poor Live on $2 a Day, a provocative look at how the poor actually related to and make use of financial services.  By meeting with hundreds of families every two weeks for a year, the authors were able to not only understand how much money they bring in per year--which is the number we usually hear of--but also what their cash flow looks like month-to-month.  As I've come to learn over the years, cash flow is king: it doesn't matter how much money you have, if the timing of inflows doesn't match the timing of outflows, you've got a problem!

Guest Blog Post: Mintaka Angell, Financial Coaching Fellow

While many students can attest to emphasizing service work on their college applications, it seems that this focus begins to slip soon after the "submit" button is clicked. The US Bureau of Labor Statistics, for example, recently found that overall levels of volunteerism were declining in America - with the lowest levels of service prevalent among 20-24 year olds. With raising college tuition and ever-increasing stress to conform to a specific set of criteria for the job market, it's easy to understand why fewer college students are finding the time to participate in social justice and change. However, there are several reasons that service is invaluable, no matter a student's situation.   Not only is it a personally enriching experience that deepens communal connections, fosters new friendships, and allows for each person to contribute towards positive change in their community, is also opens a series of perspectives vital for the next generation of leaders to understand. Here are five (5) reasons that service and social justice work are an irreplaceable component of every college student's education:

Applying The Business of Behavior Change…To CGF and Myself!

What Are We About?

I’ve thought long and hard about what Capital Good Fund is really about.  Yes, we provide financial services to low-income families and we often say that we are about financial empowerment.  But that’s about as imaginative as saying that Apple is about selling software and hardware. No, if you really want to explain why Apple is the most profitable company in the world, you have to understand that, in essence, they are in the business of delivering a magical experience to its customers.

Does that sound hyperbolic?  Like I’m just another Apple fanboy?  Maybe, but have you ever looked at the eyes of a child the first time she picks up an iPad and starts playing with it?  Have you ever considered why so many people spend so much money just to have a beautiful and functional object they can keep in their pocket or their backpack, even though there are equally good and cheaper alternatives out there?  Of course it’s because of advertising and consumerism—of course, but that’s missing the point.  And actually, irrespective of your opinion of the company and its products, the main point still remains: what Apple, or any other enterprise, produces and sells is not necessarily the same thing as what it’s about. As Simon Sinek puts it, people don’t buy what you do, they buy why you do it.

Financial Coaching Fellow Profile: Matt Hoisl

Matt Hoisl, a Junior at Providence College, is following in his father’s footsteps:  he too plans to enter the public accounting field, and he too is passionate about saving money. Given Matt’s interest in financial services in general, and empowering people in particular, the Financial Coaching Fellowship seemed like a perfect fit (it didn’t hurt that a friend of his had served as a Fellow and highly recommended it.)  That said, he had always been a numbers guy—more comfortable with data and spreadsheets than with people—so when he entered the Fellow training program he focused especially hard on the soft skills: interacting with clients, helping them set goals, being empathic, and leveraging the power of motivational interviewing techniques.

Mission and Revenue: A Balance

Money is King

Money is king, whether you are a for-profit, non-profit or government agency.  Without money you can't pay salaries, you can't pay the rent, and you certainly can't deliver products or services.  This is a truth that often masquerades as a dirty word in the social change sector...but it's still a truth.  Managing cash flow is the only way to keep the doors open at any organization.  I'd argue, however, that running a non-profit presents unique challenges, because not only do you need to meet payroll, you have to run programs for which it is inherently difficult to charge.

This creates a fundamental tension between the need to raise money and the need to change lives. How to maintain a balance between the two?  For me, it comes down to asking three questions every time we  make a decision: Will this have an impact on the client's life?  Will this make the client happy?  And will this bring in revenue?  These questions form a decision matrix: programs on which we lose money better have tremendous social impact; programs that don't have impact better make money; and regardless of what we do our customers better have a good experience.

Guest Post, Part 2: Muna Idriss, Coaching Fellow

This is part two of Muna's post.  You can read part 1 here.

Why Not Quit?

Now we’ve arrived at the $64,000 question: why doesn’t everyone just quit? There are certainly plenty of aids to help a person stop if they want to. Nicorette gum satisfies the oral fixation while also dosing the chewer with the nicotine equivalent of 1-2 cigarettes. NicoDerm uses a patch and a multi-week cessation program to wean smokers off the drug. Chantix and Wellbutrin act as agonists and antagonists to nicotine: they bind to nicotine receptors in the brain and are able to block nicotine from fully activating those receptors while also releasing small amounts of dopamine during the bind, similar to the effect nicotine has on the brain.

Regardless of the route, quitting smoking is an intense and personal experience. I, myself, thought the gum tasted foul and the patch was far too strong relative to the amount I smoked, causing dizziness, headaches and nausea. My ultimate issue with the Nico-product line most definitely was (and still is) the price. A week’s worth of patches costs around $40 and a 100-ct pack of Nicorette gum can cost upwards of $60. Considering the fact that NicoDerm advocates a cessation program that can take up to six weeks to complete and gum has a short “life span” in general, the immediate cost of these products far outweighed the cost of smoking. Ultimately, I was put on Wellbutrin (never tried Chantix), which worked out perfectly for me: I was able to quit after two or three cigarettes because smoking just didn’t feel the same.

There are caveats, however: Wellbutrin, like any antidepressant, has very serious and very real possible side effects; some of the ones I dealt with were heightened anxiety, suicidal ideation, and accelerated heart rate. Also, I am not technically prescribed Wellbutrin as a smoking cessation tool, and it is unlikely my provider would pay for it if I was (as most don’t), which would bump up the monthly cost from about $15 to as high as $250. Now, consider the 32.3% of smokers living below the poverty level and what their options are if they want to quit smoking: spend a month’s worth of groceries on smoking cessation tools or white-knuckle their way through quitting cold turkey.

Quitting cold turkey is an extremely unpleasant undertaking: there is a reason why only 3-10% of smokers are able to stop without help. As is often the case with any kind of substance withdrawal, the first 48 hours are the most harrowing. I was both fidgety and listless, as nicotine is chemically a stimulant but I had paradoxically conditioned myself to use cigarettes as a way to calm down. Now I was never calm, unless I was half-comatose. My every moment was either a mental fog or a splitting headache. I could barely be around people: I hated everything, snapped at everyone I came in contact with and the slightest whiff of cigarette smoke on my friends could incite a tidal wave of cravings. All the while, I knew that one cigarette would make it all go away. Just one. One can’t be that bad right? Only one, and then the rest of the pack will be for “emergencies”. Then, the “emergencies” started becoming more and more frequent, until I was back to my old routine. I don’t know if that’s how everyone backslides, but that’s how it generally happened for me.

Life After Smoking?

See, life is forever changed once you become a smoker. Putting down the pack is the easy part: the awfulness of withdrawal comes on with a vengeance but ebbs away eventually. It’s the challenge of living a life full of triggers that’s the hard part. The idyllic experience of watching a sunrise with a friend is accompanied by the wistful thought that, wow, a cigarette would make this experience all the more perfect. The soothing feeling of smoking is practically the stuff of daydreams during a hectic and stressful finals season. The awkwardness of being in a room full of smokers who are casually taking drags and gesturing with their smoking hands, all the while being more social than you, and thus making you feel all the more uncomfortable and left out.

The unfortunate truth about cigarette smoking is that the cigarettes are not the problem. The feelings of dissatisfaction, loneliness, and anxiety are. The reasons why smokers start are the same reasons why they can’t seem to quit. Of course it is unhealthy, but the human mind is myopic and melodramatic, prone to demanding satisfaction and comfort, no matter the cost. Smokers not only have to deal with this cognitive dissonance of the brain demanding something that ails the body, but also with an intense alienation from society. Smokers have to go outside and, in some places, designated areas a certain distance from doorways or buildings to smoke. People specify they do not want to date people who smoke. Even when I quit, I was a man without a country, so to speak: I could barely be around the group of people I related to and I still feel fundamentally misunderstood by the group that once ostracized me. When I talk to my parents about quitting, we might as well be having two different conversations: non-smokers do not understand the difference between being a non-smoker and being a smoker who stopped smoking.

My client and I were able to bond over this; our discussion about smoking cessation was not so much about the direct health or financial benefits, but rather about the psychic rewards of breaking a bad habit and shaking off a dependence which happened to be both expensive and unhealthy.  So rather than demonize smokers for behavior they are well aware is detrimental, let’s try to be compassionate and to understand that there must be deeper issues at play if a person is willfully paying hard-earned money to poison themselves. Tackling those deeper issues, examining what ails the human spirit rather than judging the behavior symptomatic of that ailment, is what will empower people to throw that pack in the trash and leave smoking in the past. 

Guest Post, Part 1: Muna Idriss, Coaching Fellow

Muna Idriss is a Financial Coaching Fellow at CGF and a Senior at Brown University studying Africana and Slavic Studies

My Name Is Muna Idriss, And I’m A Smoker

So, I have an interesting quirk. While I’m relatively inattentive to most aspects of my surroundings, there’s one thing I always notice: smoking. I can smell stale smoke on the clothes of smokers, I eye cigarettes in the hands of students as they walk to classes, I see advertisement collages wallpapered on the windows of convenience stores, and I always find a pack or two around on weekend nights when people are having a good time. I notice these things because I am a smoker.

I am also a Financial Coaching Fellow here at Capital Good Fund (CGF), providing one-on-one Financial and Health Coaching to low-income Rhode Islanders.  One of the things I’ve observed is that while what we cover may seem elementary to some, it is revelatory to many, and the strategies we use to work with our clients are so effective that I have yet to meet a fellow Coach who hasn’t personally put at least a few of them into practice.

Cynicism, Get Thee Gone!

I’ve been in the “social change business” for over five (5) years now, and one thing has become eminently clear: it’s hard work. Neither changing lives, nor raising the funds to do so, is easy.  In fact, these two facets of my business represent the greatest challenges to the success of Capital Good Fund in particular, and the social change sector, in general.  Hardly a month goes by without a grant denial, or an instance of a client whose life has taken a turn for the worse, or a failure of a system, policy or procedure.  And because it is so easy for the human mind to focus on the 1 out of 10 negative cases, instead of on the 9 positive ones, a pernicious pall of cynicism can begin to infect the attitudes of those doing this work.

We Musn't Let It Happen!
Unfortunately, I am starting to feel the tug, the allure of negativity and defeatism creeping up on me, which is why I am writing this post to announce to the world that it is time to banish cynicism from our hearts!  We must do so for several reasons:

Sharks in the Water: The Wild West Of Online Payday Lending

From 'Brick-and-Mortar' To 'Zeros and Ones'
Last week we launched a 'micro branch' in Woonsocket, RI out of which we will be offering an alternative to payday lending (you can see photos here and read, listen to or view some of the press we got from the ribbon cutting).  The reason?  In Rhode Island, payday loan branches can charge up to 260%, trapping low-income Rhode Islanders in a debt cycle from which it can take months or even years to escape.  Funded by United Way of Rhode Island, the goal of the new branch is to divert customers from the predatory lenders to us by:

• Offering a loan with a far lower interest rate
• Reporting loan payments to credit bureaus so that borrowers build their credit
• Delivering free financial coaching to further empower clients
• Offer a customer service experience--quick, convenient and friendly--comparable to that of the payday lenders

We are confident that the program will be a success: we did five (5) loans in our first week!  Obviously, we have a ways to go (the volume of payday lending in RI is around $70 million--an astronomical number for a small state), but as a recent NPR story makes clear, the predatory loan problem runs far deeper than the Brick-and-Mortar payday loan presence.

Would You Buy A Share In Capital Good Fund?

Here are are the lessons I've learned after 5 years of running a non-profit, illustrated in a simple formula:

 X(scale + innovation + implementation + luck) = social change, where X = money

Here are those lessons put another way: the math of social change should be algebraic but rather resembles a calculus problem

Why So Hard?

Let's consider the non-profit paradigm.  Non-profit begs for money from individuals, foundations, corporations and government.  Money dribbles in.  Money is predominantly spent on programs, because funders don't like their donations to go toward "overhead" (read that: infrastructure, personnel, marketing, etc.).  Programs result in some good stories that touch the hearstrings of funders.  Money dribbles in again.  Rinse and repeat.

Notice that scale and social impact were left out of that equation.  Now consider the for-profit paradigm. For-profit pitches the investment opportunity to investors.  For-profit knows how much it need to become profitable.  Investors evaluate for-profit for profit potential.  For-profit makes necessary investments: it probably loses money for several years as it builds up back-end systems, refines the business model, markets its products and services and grows its market share.  For-profit seeks new investment as needed.  Some for-profits return profit to investors; others go under.  Those that are profitable continue to grow and either go public or are purchased by a larger company.  

Notice that social impact is left out of the equation.

The Wrong Kind Of Budget?

What if one of our most fundamental assumptions--that the first step to financial stability is the creation of a personal budget--misses the point?  A recent article in FastCompany, 'Poverty Drains Mental Energy,' seems to imply just that.  Let's put it bluntly: being poor is exhausting and stressful.  You have to constantly make difficult decisions: Do I fall behind on the utilities so that I can buy school supplies for my daughter?  Who will babysit her while I spend 2.5 hours traveling by bus to and from an appointment to apply for food stamps?

If you look at the totality of these myriad decisions and trade offs that are made month after month, you start to realize that you are dealing with a budget--only instead of a financial one, it's a balance sheet that accounts for inflows and outflows of mental and physical energy.  And according to Sendhil Mullainathan and Eldar Shafir, this budget is the one that really counts.  In their new book, 'Scarcity: Why Having Too Little Means So Much,' they argue that when thinking about social programs, "We never ask, is this how we want poor people to use their bandwidth?...When we design poverty programs, we recognize that the poor are short on cash...But we do not think of bandwidth as being scarce as well."  At first, this sounds absurd: shouldn't the poor be thankful for the free and low-cost programs we offer them?  But if you step back for a moment, the answer becomes clear: of course they're thankful for them, but that doesn't mean they fit into their budget!

Event At The College Crusade

Through the Financial Coaching Corps (FCC), a program we run in partnership with Rhode Island General Treasurer Gina Raimondo, we are building some powerful partnerships.  As a case in point, we are working with The College Crusade--whose mission is to reduce high school dropout rates and increase educational and career success for low-income urban youth--to provide one-on-one Financial Coaching to the families they serve.  Last night we presented our products and services, as well as an overview of how credit works, to 80 families, of which 25 have signed up for free Coaching!

We are very excited to continue financially empowering low-income families by working with great leaders in the government, non-profit and for-profit sectors.  Special thanks to Lisa Gallant, who manages the FCC, The College Crusade, and to Treasurer Raimondo for having the vision to work with us to create and grow this program.

Treasurer Raimondo speaking to the families

A group photo of paricipating families

Girding For A Fight

As a financial services non-profit, it is natural for us to define our enemy--and more importantly, the enemy of the poor families we serve--as the predatory service companes that, taken together, represent a $100 billion / year industry (and growing).  This industry consists of payday lenders, check cashers, pawn shops, rent-to-own stores, refund anticipation lenders, and auto title lenders.  Before getting to the meat of this post, I'd like to quickly lay out why these companies are so damaging to our clients and the economy as a whole.  Let's take payday lenders, which are, according to a report by the Center for Community Economic Development (CCED), "...small, short-term, very expensive consumer loans...which [average] $375, plus the fee--which is typically in excess of 300% APR...the high fees and short-term lump-sum payment create a debt trap that causes consumer harm."  CCED found that, in 2011 alone, "The payday lending industry had a negative impact of $774 million...resulting in the estimated loss of more than 14,000 jobs.  U.S. households lost an additional $169 million as a result of an increase in Chapter 13 bankruptcies...bringing the total loss to nearly $1 billion."

I could continue to outline why the other services are equally damaging, but you get the point.  Now comes the question: what to do about it?  From our perspective, the answer lies in a three-pronged strategy: legislation to ban abusive practices; financial coaching to obviate the need for the services to begin with; and offering a more afordable and equitable product that out-competes what predatory companies can offer.  On the legislative side, for instance, we are part of a coalition that has been trying--unsuccessfully--in Rhode Island to cap at 36% APR the interest rate that payday lenders can charge (they can currently charge up to 260% APR).  Were that legislation to pass, the consumer would immediately be better protected from the most abusive practices.  On the financial coaching side, we are working one-on-one with hundreds of families to help them budget and build savings so that, when emergencies arise, they don't need a loan at all.  And finally, recognizing that access to credit is essential in our economy, we offer payday loan alternatives of up to $500 at 36% APR, and loans of $501 to $2,000 at 20% APR.

Financial Coaching Fellow Profile - Austin Mertz

When CGF Financial Coaching Fellow Austin Mertz first told his mom about the Fellowship, her response was less-than-enthusiastic: “Why would you be a Financial Coach when I’m still teaching you how to manage YOUR money?”  However, as an economics major at Brown University, Austin was seeking opportunities to apply his skills in the community, and he already felt comfortable in a one-on-one setting: in high school he served as a tutor, a role in which he thrived.

That said, he had a lot to learn about the curriculum content and he had never worked with people that are older.  Fortunately, his extensive training at CGF taught him how to establish his credibility in a way that would allay any such concerns.  Still, Austin notes that coaching “Is an interesting relationship and one that no amount of training can truly prepare you for.  Each client is different and [being successful] takes a lot of on-the-fly thinking.”

During the first term of the Fellowship, which began in January of 2013, he served three clients.  One of his favorite clients came to him bearing the burden of a seemingly insurmountable mountain of medical debt as well as the threat of foreclosure.  “It was a tough introduction to poverty in Providence,” he says. “My strategy was to refer him to Rhode Island Legal Services to advise him on both foreclosure and the possibility of filing for bankruptcy.”  The ability to know when to refer clients to community partners is something that was emphasized during his training, and it made a huge difference: the client was able to save his house and avoid the need for bankruptcy.  This was in part thanks to a new job he was able to secure, and in part because Austin helped him to face the fear of looking at his financial situation.  “With this client, it felt more like ‘Financial Therapy’ than Coaching.  He really came out of our sessions with a feeling of hope and a sense of confidence about his financial future.”

Austin is now beginning his second term as a Fellow, and he is excited to serve more families, pointing out that “The first term was a rude awakening to the nature of poverty, but it was very rewarding and I now feel more confident than ever in my ability to serve my clients.”  The impact of the Fellowship has gone beyond the lives he’s changed: when he first applied for the position he was unsure of what path he wanted to pursue after graduation.  “Now that I have had a chance to see how CGF operates, I have become interested in non-profit consulting and social impact investing.  I’ve been mentioning the Fellowship in cover letters for jobs, and this past summer I worked at a social innovation non-profit.”

In short, for Austin the Fellowship has given him the opportunity to expand his understanding of finance, crystallize his career path and, of course, empower families.  When thinking about his upbringing, he recalls that his parents were very financially conscious, which has translated to his own aversion to needless spending.  Nevertheless, Austin recognizes that every person’s experience is unique, which means that every Coaching session is unique.  As he likes to put it, “Sometimes Coaching is therapeutic, sometimes it’s educational, but regardless of one’s situation, it is always transformational.”

Financial Coaching Fellow Profile - Mike Casinelli

Mike Casinelli found himself in full business attire at a Starbucks in Providence, RI, waiting to meet with George, a CGF Financial Coaching Fellow.  His background as a finance major at Bryant University colored his expectations for the interview: leather stuffed chairs, mahogany desks, book cases filled with leather bound tomes, large windows overlooking a body of water or expanse of greenery.  So when George, wearing a t-shirt and shorts, shook Mike’s hand and sat across from him on a plastic chair, he immediately knew that this would be something different—finance related, yes, but with rather nontraditional goals.

Financial Coaching Fellow Profile - Jerome Thompson

CGF Financial Coaching Fellow Jerome Thompson grew up in a family that practiced what he likes to call “Survival Finance,” by which he means that financial issues were dealt with on an emergency basis.  As a result, debts piled up to the point that, as he half-jokingly asserts, caller ID was a godsend to his parents because it allowed them to screen the calls of creditors.  Lacking a bank account and plan for building savings, the family was always on the brink, and Jerome had no role model for how to manage money.

One day, while riding the bus to work, Jerome struck up a conversation with CGF’s first Head Financial Coach, Jon Erickson.  Having already heard about our work, Jerome was intrigued by the opportunity to become a Coaching Fellow: intrigued, but daunted by how little he knew coming in.

When Jerome started the Fellowship in September of 2012 he was part of the 2nd cohort of Coaches.  After receiving three weeks of intensive training, during which he was exposed to information that he quickly began to apply to his own life, he served his first low-income family.  Now, a year later, Jerome has served 12 clients, completed 25 free tax returns through the IRS VITA (Volunteer Income Tax Assistance) Program and mastered our Coaching curriculum.  He has also seen us grow from a small organization with only 4 employees and a handful of Coaches, to a rapidly growing non-profit with 12 employees and over 20 Fellows.

“Money is deeply connected to psychology,” Jerome said to me during our interview.  “A lot of financial issues are rooted in the environment in which people grew up.  If you aren’t given a positive example, it’s easy to fall into the same traps.  What I experienced is true of many people in my community.”  Leveraging his own experience, he often tells his clients to scrutinize offers they get: “It costs more to be poor,” he says, but an understanding of the system and one’s own motivations can lower that cost.

“One of my favorite clients,” he proudly notes, “Was able to consolidate debt from an interest rate of over 20% to 8% thanks to our sessions.  Now she has extra money to build savings and meet her and her family’s long-term goals.”  So what’s next for Jerome?  “Thanks to the network to which CGF introduced me, I am now training to be an agent with New York Life.  I also plan to continue helping CGF as a Coach and a tax preparer. I believe that income inequality is the civil rights issue of our time, and I want to do anything I can to further CGF’s mission of empowering families to move forward.”

Two Tremendous Opportunities for Impact

Here are two statistics that represent "low-hanging fruit" opportunities for social impact: 

1. "Nearly two-thirds of the 5.4 million legal immigrants from Mexico who are eligible to become citizens of the United States have not yet taken that step." (Pew Hispanic, The Path Not Taken February 2013)
2. "Roughly a quarter of Americans eligible for federal nutrition assistance don't sign up for it," and "The U.S. Department of Agriculture...says that in fiscal 2010 nearly 51 million Americans were poor enough to qualify [for food stamps] but only 38 million received benefits." (Huffington Post, Food Stamps Avoided By Million of Eligible Americans August 2013)

Being a U.S. Citizen confers numerous monetary and non-monetary benefits, from increased access to benefits such as student aid, to the ability to vote, petition family members to come to the U.S. and eliminate the fear of deportation.  In the same vein, food stamps not only can mean the difference being being hungry and eating three square meals a day, they also reduce one of the main stressors of being poor: the fear of not having enough income to meet expenses.  Clearly, then, given the induspitably high impact of becoming a citizen or qualifying for SNAP (Supplementary Nutrition Assistance Program), combined with the (relative) ease of taking either step, we are presented with an opportunity to change lives at low-cost.

An Idea For Sharing Ideas

As someone that comes up with ideas a mile a minute (of which a small percentage are worth pursuing), I've noticed a dynamic that I don't like: when I discuss the idea, I put myself in the position of defending it, even if the questions posed are valid!  Stepping back for a moment, it's obvious to me how pernicious this is: shouldn't the goal be to objectively evaluate the idea rather than take sides for the sake of it?  To take the actions that most effectively move us toward our mission?  And I'm the worst offender!

So here's an idea for sharing ideas.  Start by presenting the concept, and then take a moment to present the barriers to implementation, the reasons why it might make sense to wait, and so on. Next, listen to the other people in the room talk about what's good about the idea, as well as what concerns they have.  And once all of this is on the table, the best course of action can be taken.

Now I just have to put my money where my mouth is!

Make That Investment Now!

Your Dream Scenario
Imagine it is the day before Google officially incorporates and their co-founders, Larry Page and Sergey Brin, approach you to ask for an investment in the inchoate company.  And let's further suppose that, though you can't possibly imagine how profitable Google will eventually become, you do know a few things: the co-founders are geniuses and have a brilliant idea; the Internet is going to see exponential growth over the next decade; searching for content online is currently painstaking; and Google's search algorithm is so powerful that people are going to prefer it, use it frequently, and therefore enable the company to sell a lot of ads.

Knowing all this, you'd be insane not to make that investment right then and there, no?  After all, the return on your investment would be so large as to be a waste of time for me to calculate!

It Can't Be That Easy

No, change is not easy, but what never ceases to amaze me is the difference between the most and least effective programs--something well designed seems to unlock potential in a way that almost, kinda, sorta, makes thing look easy.  And often, the product or service that works best is counter-intuitive or so obvious as to be overlooked.

A recent NPR story, A Chat With the Doctor Can Help Kids Resist Smoking, illustrates the point.  We are all so familiar with the numerous, costly, and complicated initiatives to reduce teenage smoking--ad campaigns, taxes, rules and regulations, and so on--that simple interventions can seen inane.  For example, what would you say to the assertion that simply having a doctor talk to a teen about smoking can actually reduce the likelihood that they will pick up this addictive, dangerous and expensive habit?  I imagine your reaction would be similar to mine: 'isn't that going to be as ineffective as having teachers or parents lectures teens about the issue?  No, we need a more sophisticated approach!'

The Allure of Justice

The idea of romantic love, so pervasive in our lifes as to appear to be a fundamental part of the human existence, is actually just that: an idea.  According to the theologian C.S. Lewis, the notion of romantic love first appeared in the 12th and 13th centures among the troubadors, who were nomadic musicians and poets.  He says, "The troubadours effected a change which has left no corner of our ethics, our imagination, or our daily life untouched...Compared with this revolution, the Renaissance is a mere ripple on the surface of literature."

Can you imagine a time when romantic love was as alien as electricity to our ancestors?  Or that it came into existence in the Western world thanks to the voices and pens of a small group of people living centuries ago?  The answer, of course, is that you can't.  The reason for yoru inability to do so is best captured by Victor Hugo, who said "There is one thing stronger than all the armies of the world, and that is an idea whose time has come."

Poverty as a Disease

Apples and Oranges?

Dr. Muhammad Yunus, one of my heroes and the 2006 Nobel Peace Prize winner, describes poverty in stark and succinct words as "the absence of all human rights."  Poverty is also something we think of as endemic to the "third world," conjuring up images of malnourished children, war-torn countries and slums and shanty-towns.  Yet poverty in America is real and pernicious.  Just consider this: one out of three Americans is at 150% of the federal poverty line or below...for a family of four that's  just $35,325 or less.  Even then, I can almost guarantee that most of us, when we think about America, say something like this: "Well, there's poverty in America, but it's completely different...we don't have children starving in the streets.  Apples and oranges!"

Cooking Classes: The Where, the Why & the How

Community Cooking Class Instructor Dihara Quinones Showing Families How to Make Healthy Meals!

What it Is

A few days ago we started offering three Community Cooking classes to low-income Providence families.  The classes are being funded and hosted by Whole Foods Market on Waterman St. in Providence and the curriculum is one designed by the Rhode Island Community Food Bank. The 30 participating families will attend eight (8) weekly classes during which they will partake in a cooking demonstration, learn healthy eating concepts, and receive a free bag of groceries (donated by Whole Foods) with which they can perfect healthy recipes at home.  Part of the power of the classes is that, by including the entire family in a fun environment, the kids are more likely to be willing to eat healthy foods and, in turn, the parents are more likely to make them!

(Click here to see all of the fantastic photos from the classes)

The Fundamental Question

If you're reading this I think it's reasonable for me to assume that you are interested in social and/or environmental justice and that you contribute a least a few hundreds dollars a year to charitable causes.  Given that for four years I've run a non-profit and constantly though about social change, I'd like to pose to you what I've come to see as the fundamental question in this space: if someone gives you $100 with the instruction that the funds be used for maximum impact on the issue of your choice (education, climate change, crime, etc.), what should you do with the funds?  Until this question informs our charitable giving and social policy, we can't transform social businesses--be they for or not-for-profit--into a true force for societal transformation.

Now, the decision of how to spend those $100 is typically made in one or more of the following ways (this list is obviously not exhaustive):

1. Researching what percentage of the organization's funds go toward administration, as opposed to direct program support
2. Responding to a direct mailer, phone call or other direct solicitation
3. Affinity for the cause
4. Familiarity with the organization through a friend, celebrity, advertisement, etc.
5. A kind of unconscious appraisal of the extent to which the contribution will lead to the proverbial "Warm and fuzzy feeling."

So what's the problem?  Simply put, it's that none of the above decision points get at the fundamental question, which is what is the social impact per unit of money spent.  After all, if $100 to Agency A increases educational outcomes by, say, 10%, and Agency B increases them by 3%, then the funds should go to Agency A.  Note that this is true irrespective of the percentage of administration versus program or any other potential reason for making the donation.  Of course, we know that this is not how things work in actuality.  Why is this?  I can identify several reasons:

1. Very few organizations do the kind of analysis, such as a Randomized Control Trial (RCT), needed to quantify their social impact
2. Social impact isn't always easy to quantify to begin with
3. Most people don't have time to dig deeply into the efficacy of an organization

Obviously, endemic social issues are endemic for a reason; if there were easy to solve, they would have already been solved.  That said, I firmly believe that we have all the tools, resources, ideas and business models needed to eradicate global poverty, solve climate change, and so on.  What we lack are enough people to do the implementation and a smart approach to funding effective interventions.  

Because we don't ask the fundamental question--to repeat, 'What is the most impactful way of donating/investing a unit of money?'--we end up with a paradigm in which the vast majority of non-profits continually receive funding despite having little to no evidence of effectiveness.  A provocative statement, no?  Consider this: in 1965, when Lyndon Johnson launched the War on Poverty, the poverty rate was around 19%, there were 282,000 non-profits and $91 billion was donated to charity. Today, there are 1.6 million non-profits, the poverty rate is around 16% and $298 billion is donated to charity every year. Similarly miniscule improvements in educational outcomes, reductions in crime or prevention of homeless are also seen over the last six decades.  If non-profits were truly effective, we would expect that as charitable giving and the number of non-profits went up, there would be a concomitant reduction in the social issues they seek to solve.  Unfortunately, that is not the case.

The answer is not more non-profits, nor is it necessarily more donations.  If we ask the fundamental question, we will be forced to re-allocate funds in the most judicious manner.  What's more, the increasing popularity of social enterprise means that organizations are more and more likely to use earned-income strategies, thereby reducing the need for overall charitable giving (or at least meaning that it can stay constant while still significantly increasing impact).

I'm not saying that Capital Good Fund has the right model or is the best place to donate those $100.  But I do know that every night I ask myself that question, and we are one of the few organizations in America running an RCT to look for the statistically significant impact of our products and services.  Just some food for thought!

The Randomized Control Trial Begins!

After nearly a year of hard work developing and modifying the Financial Coaching + Schools model and planning to run a randomized control trial (RCT), we finally started signing parents up for the study.  The goal of the RCT is to determine if the FC + Schools program--which provides our products and services to low-income families of kids in grades 2-5--will have a statistically significant impact on the financial and health status of the parents, as well as on the educational outcomes of the children.  For the study, we will randomly assign 375 families to a treatment group (they will receive our Financial Coaching service) and another 375 families to a control group (they won't receive the service and we will track their outcomes as a comparison point).

One of the concerns was how we were going to recruit 750 families for the study.  In order to ensure strong parent recruitment, we have brought on six (6) full-time AmeriCorps VISTAs for the summer, and clearly the investment is bearing fruit: we already signed up 20 families!

This study is extremely exciting for us.  If we can show that, for $400 per family per year, we can improve educational outcomes by, say, 5%, then we believe that school districts across the country will hire us to deliver the Program at their schools.  We are also one of the smallest organizations in the US to run an RCT, something of which we are most proud: after all, it's one thing to tell feel-good stories about impact, but it's another to show statistically significant data on your impact.

Onward!

Our New Financial Coaching Fellows!

Today our fifth cohort of Financial Coaching Fellows completed our 3-day training institute.  The seven Fellows learned about banking, budgeting, credit, debt, goal setting, savings and taxes--a lot of material to cover!  Our Head Financial Coach, Cameron (top right of the photo), did an amazing job running the training.  We are excited to have such a great group of Fellows--they come from Bryant University, Providence College and Brown University, and are extremely motivated, passionate and eager to serve the community.  For the next three weeks Cameron will be working with them one-on-one--and they will also be practicing coaching with each other--before they beging providing coaching to clients.

When we started our Financial Coaching Program in 2011 and decided to use university students to serve as coaches, many people doubted the feasibility of the model. Now, two years and over 60 student coaches later, we have demonstrated that, when properly trained and well managed, students can deliver a life-changing service to the community.  During the coming months these Fellows will be serving dozens of clients and demonstrating what's possible when passion is married to strategy and diligence.