The Great Near & Far
5 things to close out your week: the hidden cost of prosperity, choosing good quests, finding the impact in impact investing, a curious finding about inequality, and medicine marvels.
Hey there, thanks for reading The Great Near, a publication about solving problems worth solving. Read on for hot takes, interviews and roundups about social impact, finance, philanthropy, and impact investing. If you’re new here, check out my re-introduction.
I’ll be testing newsletter styles (and new voices 👀) over the coming months and I’d love to hear what you think. Today I’m sharing a roundup of five interesting things to close out your week.
Walk away or stay and fight
“The Ones Who Walk Away from Omelas” is a classic short story by the great sci-fi writer Ursula K. Le Guin. I saw it performed at an event hosted by another idol, N.K. Jemison, and I’ve thought about it many times since.
Tl;dr: the story is about an idyllic city called Omelas. It’s a peaceful place where the people have all that they need. But there’s a dark side to Omelas; the good fortune of the city depends on a single, unfortunate child locked in a basement. No one can claim to be ignorant to the child’s suffering as all are introduced to the truth at a young age. The anger and outrage that all feel initially eventually subsides as they remember that the prosperity of Omelas is dependent on the child. “…to throw away the happiness of thousands for the chance of the happiness of one: that would be to let guilt within the walls indeed.” Their only choice is to stay or go. Some leave Omelas forever, choosing the unknown over perpetual guilt. Most stay.
I’ve been thinking about the compromises we routinely make in modern society; purchasing cheap products with unknown labor violations; entrusting our money to banks that repeatedly violate public trust. It raises so many questions, is walking away to preserve our conscience meaningful if it changes nothing? Does collective action absolve individual blame? Who has the privilege to opt out? N.K. Jemison offers a response to Le Guin in her story, The Ones Who Stay and Fight, suggesting an obligation to “stay and fight” even when that fight is futile or beyond a single lifetime.
These philosophical exercises are constantly playing out in the real world. I can’t help but think of Le Guin’s story in the context of Matthew Desmond’s excellent book, Poverty, by America, which is a damning exploration of how “affluent Americans unknowingly or knowingly keep poor people poor…Some lives are made small so that others may grow.”
Speaking of the ones who stay and fight…
I came across a piece called, Choose Good Quests. It makes the case for choosing a life quest to make the world better over one that tinkers at the margins. The authors point their argument specifically at former founders capable of solving our biggest problems, who instead, go on to be investor/thought-leaders talking about solutions instead of leading them. Look, I don’t believe that entrepreneurs have a moral obligation to build startups forever, but I agree that “unless you are a truly generational thinker, proselytizing is far less impactful than building a specific, better version of the future.”
I digress. This is the point I appreciated: “future-defining problems are hard to recruit for, difficult to raise money for, and nearly impossible to build near-term businesses around, which is why they are exactly the types of problems we need the most well-resourced players pursuing.” It’s not always sexy or profitable to solve problems worth solving, which is the uncomfortable truth of impact investing. I think the people we should celebrate (and aggressively resource) are the entrepreneurs working in service of things that matter, even though they could just as easily gain success by building another silly app. Here are some of the people on “good quests” who have inspired me recently.
Oath: A platform founded by Brian Derrick for progressive donors that uses data analytics to direct your donation to the races that matter. I’m impressed that 70% of their donations in 2022 went to races with a <5% margin of victory.
Economic Security Project’s Public Options for America Fund: Their new fund brings partners together across the U.S. investing in promising public options models. (Public options are goods and services provided, authorized, or procured by the government, like insulin or broadband, that coexist with private options)
Farmhand Ventures: Connie Bowen is the GP of Farmhand Ventures, a venture firm building and backing startups shaping the future of work in specialty crop agriculture. Farming is backbreaking work, and workers are frequently left out of the conversation about how we solve the labor/climate crises. Connie is one of the sharpest thinkers exploring how to develop solutions that include the folks who work to feed us.
Allison Taylor: For all the doom and gloom about ESG and corporate sustainability efforts, Alison Taylor’s work is a breath of fresh air. Her new book, Higher Ground, argues that companies can’t treat ethics as a legal and reputational defense mechanism; that we need a new paradigm for corporate responsibility.
What do impact investors do differently?
This is the name of a recent paper from Harvard Business School that seeks to understand the non-financial qualities of impact investments: the ever-elusive impact. I have thoughts.
First, the question of additionality. Many impact investors argue that their value is “investing where others won’t,” which means that they invest in social enterprises that can’t attract traditional capital because they’re seen as too risky. Strangely, the study found that only 12% of impact investors are actually additional, evidenced by the fact that the vast majority of impact investors co-invest in deals with traditional investors (i.e. those seeking to maximize a financial return).
The presence of traditional investors in a deal could mean that an impact investor was not “additive,” or it could mean the opposite—impact investors often incentivize other investors by being the first ones in a deal. The authors acknowledge this question but have a strange method for dismissing it IMO. (They examine the investing behavior of traditional investors who had co-invested with an impact investor on past deals. They argue if the impact investor raises a new fund, those co-investors should “shift in a more impactful direction” due to the influence of the impact investor, which would prove additionality. I assume this means that they would invest in this new fund or continue to co-invest? I just don’t think investors operate by this logic. The argument is flimsy to me.)
Second, it’s a shame that 30 years after the “birth of impact investing,” only 2% of VC and growth equity rounds be classified as impact investment. Within that 2%, the authors argue that the vast majority of companies would have attracted capital on their financial merits alone. It’s great when social enterprises are profitable, but I argue there’s a whole world of risky deals in need of impact investors to step up to the plate, accept the risk, and invest because the impact potential is so great. I know the vast majority of investors won’t do this, I’m just saying: if you’re going to claim the impact title, invest for the impact.
Third, the authors claim that “employee satisfaction drops about twice as much when a company raises capital from impact investors,” based on data from Revelio, LinkedIn, and GlassDoor. I don’t know if you’ve ever perused GlassDoor (or any internal culture survey) but these data don’t always paint the most accurate picture. I'd look at Tideline’s new report for examples of how impact investors actually contribute to employee wellbeing initiatives.
You could read this paper as damning to the impact investment industry, but the way I see it, there is a small subset of real-deal impact investors, while many others claim this title and muddy the waters. On the bright side, the study finds that impact investors as a whole are still more likely to be among the first few investors in a new industry, be comfortable with investments that take longer to reach successful exits, and disproportionately invest in disadvantaged areas.
While I appreciate this study as a step in the right direction, here’s my big gripe: this dataset only captures venture and growth investors which leaves out a huge swath of impact finance! Foundations and CDFIs are completely absent from the data, and I can think of a dozen funds or deals that wouldn’t have made it into this study, for one reason or another. As with so many questions about the efficacy of impact investing, the answer is usually: it depends.
Economics vs. common sense
Rogé Karma wrote a fascinating piece in The Atlantic exploring new research that tries to debunk the work of three famous economists, Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, who have documented the alarming rise of inequality in the U.S. It boils down to how these sparring economists interpret the data, and to be honest, it’s pretty weird. Karma explains, ”The deeper you get into how GDP is actually calculated and allocated, the more you feel as though you’ve fallen through a wormhole into an alternate dimension.”
If you’re curious how it’s possible that rising costs of healthcare appear in the data as if Americans, on average now have higher incomes. This piece showcases the technical debate at the heart of the feud, with one side seeming to deny that the rich are getting richer.
While these studies show that it’s debatable how much inequality has risen, common sense seems more helpful here. The top billionaire in 1982 had a net worth of $6 billion, which pales in comparison to Elon Musk’s $251 billion today. We don’t need a study to understand that many Americans struggle to meet basic needs, and if that collective experience doesn’t match the data, it begs the question: are we measuring the right things? As Karma and other economists like Denise Hearn suggest, economics is less objective than we believe it to be. It’s time we understood it as such.
The marvel of modern medicine
If, like me, your last contact with the scientific field was in high school, it may bear repeating this well-known story! Bill Bryon’s book, The Body, has gifted me new gratitude about my fragile, fleeting life. I’m now hyper-aware of the thousands of things that could kill me at any moment, especially things that have been a death sentence for much of human history.
Here’s the abridged version of the story of penicillin. Scottish microbiologist, Alexander Fleming, was away from his lab on holiday in 1928. Upon return, he found a petri dish that he had forgotten to clean was oddly devoid of bacterial growth. It was later discovered that penicillin-producing mold spores (fairly common, but not yet discovered) had drifted into the lab. Fleming noted their antibacterial properties though stopped short of developing a usable medicine.
It took another decade until scientists around the world mobilized during World War II to produce penicillin, though it took immense resources to grow the mold to extract tiny amounts of it. The first person they trialed penicillin on was a policeman experiencing a severe infection from a simple rose thorn scratch. He quickly began to recover upon receiving the drug, but he died when they ran out of supply.
On a mission to mass-produce penicillin, scientists from around the world began sending in soil and mold samples to a facility in Illinois. Almost two years after testing had begun, a lab assistant brought in a moldy cantaloupe from a local grocery store. Testing revealed that it was 200x more potent than anything yet discovered—today all penicillin we produce descends from that single cantaloupe. Marvelous.
— What I’m reading & listening to
I know I talked about tiny love stories last time but this is even better // Motaz Azaiza on photographing Palestine // A collection of essays about building wealth equality // Embarrassed that I missed this song cover // How stories build soft power // A story of murder and memory in Northern Ireland // The ESG Mirage, still the best explanation of what’s what // Impact investing for regular people! A great list of options // Went to the ABBA museum and I can’t stop