Jacqueline Novogratz on impact investing, social entrepreneurship and moral imagination

Impact investing, social entrepreneurship and philanthropy have gained significant momentum in the wake of the Covid-19 crisis. But what does success really look like in these spheres? Jacqueline Novogratz built Acumen by investing ‘patient capital’ into companies using the tools of business to solve some of the world’s most pressing problems. She is optimistic about the potential for Covid to usher in a positive reset, citing recent collaboration, creativity and coordination as hopeful signs for the future. This 20 minute podcast touches on her own personal inspirations, lessons learned, and advice for the next generation of changemakers.

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Opening Quote:
The opposite of poverty isn't income. The opposite of poverty is dignity. What I meant by that was the ability to have choice, opportunity, the freedom to decide how you can live your life.

Sheryl Fofaria:
A warm welcome to Philanthropy Bites, where you get to deep dive into the lives of inspiring leaders – all of whom are working to change minds and move money to address some of the most critical issues of our time. 

I’m Sheryl Fofaria from J.P. Morgan’s Philanthropy Centre and this podcast is brought to you by us, and the Marshall Institute at the London School of Economics, whose Director, Professor Stephan Chambers, is our host today.

I’m super excited to introduce Jacqueline Novogratz as our guest.  Jacqueline is widely known as a pioneer of impact investing and social entrepreneurship, having founded Acumen 20 years ago.  She’s been featured on countless lists of Top100 Global Thinkers, Smartest People of the Decade and Greatest Living Business Minds.  And she’s a New York Times best-selling author of The Blue Sweater and Manifesto for a Moral Revolution.  Let’s dive right in and hear from Stephan and Jacqueline for more… 

Stephan Chambers:
Welcome Jacqueline. It's very, very nice to see you. Can we start a little bit with where the book starts, which is how you got to be the person you are and how that led to you, as it were, not following the normal trajectory of a banker, but founding Acumen I think 20 years ago now?

Jacqueline Novogratz:
It's good to see you, Stephan.  It's interesting, in speaking to David Bornstein, the journalist who has talked to so many social entrepreneurs, he told me that people often start with when they were six and he doesn't know why it's a magic year, but I do think there's something about being a child and the context in which you're raised and the people around you. So I was raised in a military family, an immigrant family, a Catholic family. When I was six, my father was in Vietnam and I think from very early, almost the guide rails, if you will, of those three influences had enormous impact. Thinking of my father overseas made me curious about the world. The immigrant family was certainly about duty and the importance of showing up, a family of community.

Then my first grade nun, Sister Mary Theofein, had a real focus on to whom much is given, much is expected. I think as a child, those forces continue to swirl through me and surround me and very much made me want to love the world, to know it and have a real sense of duty to something bigger than myself.

Stephan Chambers:
I wanted to ask if you could just unpack a little bit the Acumen manifesto that I always take to be headed with this notion of ‘it starts by standing with the poor’. Can you tell us a little bit about that?

Jacqueline Novogratz:
Absolutely. Particularly as an investor, Stephan, what we learned is that it is so tempting in the systems as we have them that incentivize us - around being the best, being the wealthiest, having the highest returns, being the most famous - to focus on self, to focus on the abundance that is there for us. It's only when you start the design by focusing on including those who've been excluded, overlooked, underestimated that you actually build the structures that allow for problem-solving and inclusivity.

Stephan Chambers:
I wonder if there's a kind of trajectory here as well that says: it may be that we should move from standing with the poor, which is clearly an advance on the old way of doing investment or the old way of doing development or the old way of doing aid or philanthropy. There are some people who would argue we should get out of their way now and just remove ourselves from the conversation. Do you have any sympathy with that view?

Jacqueline Novogratz:
I have sympathy with all views, but I don't agree with it. I've also learned that we truly are each other's destiny and we are so interdependent and there is a lot of knowledge to be shared. There are a lot of resources to be utilized in smart ways. At the end of the day, we really need each other. So I sometimes even worry when I hear the phrase ‘check your privilege’, because what I see often is very privileged people, who have so much to give the world, diminish themselves, opt out of the conversation because it's easier. Instead, I wish that we could start with how are you going to extend the platform of your privilege to those who do not have access? I think that's been very much a part of my own life journey, particularly as I've come to reckon with and acknowledge not only that I've always had privilege, but that I've gained an unprecedented level of privilege over the course of my lifetime. That the more I have, I feel a greater responsibility to try to not hide it, but rather use it on behalf of people who want to be part of the conversation, they want to be part of the opportunities.

Stephan Chambers:
Yeah. So use it carefully and use it well, rather than checking it.

Jacqueline Novogratz:
Use it with humility, but don't throw audacity out, either. See each other as equals, neither above, nor below. It doesn't matter where you sit within the world. Some of my greatest teachers, who are a part of our community, are truly, by many material measures, some of the least advantaged, lowest-income people on the planet. Yet what they have taught me is immeasurable, and I don't say that in a romantic way.

Stephan Chambers:
I love this idea that you have to combine humility and audacity.  And this leads very nicely to Acumen.  Can you tell us a little bit about the original thinking at Acumen and the last 20 years of its development?

Jacqueline Novogratz:
I had already created four different organizations prior to Acumen, and so I'd learned a lot. I'd also worked in the private sector. I'd learned in the private sector how markets often can overlook or exploit low income people. I'd seen the perils of top-down aid and development through my history. I'd also gone through ... In Rwanda, I'd seen the genocide and the impact that it had on people I knew and loved and an institution I had helped build. My conclusion was that even focusing only on income as our metric for poverty is a false conceit and that the opposite of poverty isn't income. The opposite of poverty is dignity. What I meant by that was the ability to have choice, opportunity, the freedom to decide how you can live your life.

To do that, we needed a mix of markets and of a humanitarian ethos, if you will. So Acumen was born, like you said, by flipping the model. We would start with philanthropy. We would invest patient capital. 10 to 15 year equity and debt in entrepreneurs who were going where others wouldn't to build markets that in many cases did not exist. We would support them with management assistance, with the use of our networks, and we would measure the impact, the social impact, not just the financial returns and any money that we made, we would reinvest in innovation for the poor. That model, of course, like all of the models that we invested, has maintained many parts of its essence and it also has expanded since then. But that was the beginning.

Stephan Chambers:
You must follow the rise and rise of impact investing as an idea. How much of what you see do you think is inspired by the work you did at Acumen and how much of it do you think is heading in a different direction?

Jacqueline Novogratz:
I think we're probably, as a sector, in that messy, chaotic period of growth, where I think a lot of people were inspired by the ideas of using markets to do good things. Then often we stick with the instrument that we have and forget the starting point. So we started really to revolutionize philanthropy and use it to build companies that longer term would bring in more traditional forms of capital. What ended up happening was a lot of that more traditional capital started to search for these opportunities and where it went haywire and still does sometimes is when I'll sit with people who want to end hunger for the extreme poor and make a 20% financial return. I think, or say more likely, think about what you've just said. Does that really make sense?

So I think we're at a point right now where you see a whole spectrum. There are certainly many well-intended impact investors that maybe looking at ESG - often forget the S, the social impact, but are taking a step toward doing better. There's a whole middle ground with impact investors who use impact as a screen, and yet don't want to take a risk unless they're looking at already proven commercially viable opportunities. Then quite frankly, there's still a too small part of the spectrum that is more akin to Acumen taking outsized risks in early stage ventures that are deliberately and specifically focused on solving problems of poverty and are willing to actually measure our own accountability. That sector has to grow, Stephan, because the other sectors won't have pipeline if we don't find this early stage patient investing, particularly at this moment where our systems are so broken open and we see what the world looks like when we don't include the poor.

Stephan Chambers:
I couldn't agree more. You're also well-known for believing in the power of partnerships and cooperation. What does it take to do that well? Because it's famously difficult. I mean, everyone says it should be done and very few people do it well, and you are well-known for doing it well. So tell us a little bit about that.

Jacqueline Novogratz:
What I have learned along the way, and I feel that increasingly, indeed that our problems are now too big, they're too complex for any one individual or organization to solve them. We will only solve them through collective leadership. As you said, collective leadership is hard. It is incredibly messy and it, in some ways, asks us to go against many of our own ego-driven traits, which we all have. In a way, it requires that same level of humility and audacity that we were talking about before. 

Stephan Chambers:
I wanted to turn to the future now, and just to anchor your younger self when reading about Mohammed Yunus and reading about Grameen and how that, as it were, reoriented your view about your own future. When you were doing that, there weren't many people like you around. Do you think it's easier for a young person now to find models to follow or to admire or to inspire this kind of change-making career?

Jacqueline Novogratz:
Absolutely. When you and I were growing up, the role models we had were far and few between. Certainly these kinds of role models, and for the most part, they were historic figures. But today we have access not only to the famous individuals who have gained real reputation for doing that work that we've been doing, but in almost every community we can find people who can serve as role models.

One of the great opportunities for the media and for all of us is to find more creative ways to share with young people these role models. Because so often we still show Bill Gates and Steve Jobs, and thank God they exist, but they're too far away from a young person growing up in Northern Pakistan who really wants to change her country. So I've been thinking a lot about what if every school taught our children that you don't just have to grow up to be a doctor, an engineer, a fireman, or a policeman or woman, but that there are these other people out there that have made a commitment in their lives to things bigger than themselves in a more entrepreneurial way that's highly localized, and how do we continue to release that energy?

Stephan Chambers:
Yeah. You and I have spoken before about COVID. I wonder if you have a view, and you must have been asked this a hundred times, about whether COVID will usher in a positive resetting or legitimize, as it were, a negative reaction, or some complicated mixture of both.

Jacqueline Novogratz:
I feel and say a lot to the team that we are sitting in a moment, almost balanced on a precipice, between peril and possibility. In this moment, we are seeing a pulling inward by too many of our leaders, not just of our nations, but also of our institutions. COVID is an example of that, where this is a global problem, and there was too much hoarding by the wealthy nations for themselves, rather than thinking right from the beginning if we were designing the manufacturing processes, the patent processes, the distribution processes, recognizing that we had to get the whole world vaccinated. What would we have designed?

On the other hand? Never have I felt more possibility in my entire lifetime.  And what I saw during COVID, and still see, is a level of collaboration, creativity, coordination that gives me incredible hope for the future. I feel like I'm watching in real time new models of capitalism that are more sustainable and more inclusive unfold.

Stephan Chambers:
Jacqueline, your latest book, Manifesto for a Moral Revolution, covers a number of the things that we've been talking about. But I wonder if you could tell our listeners a little bit about the Manifesto, why you think it's necessary and quite what you imagine this moral revolution to be.

Jacqueline Novogratz:
Stephan, when I was first sitting down to write a book, given that many people associate our work with the pioneering impact investing, I focused a lot on the technicalities of it. What I realized as I was writing was, number one, the technicalities are really about tools. What's needed are those individuals who are willing to reimagine and use a set of practices or principles by which they will build. What I mean by that is I began to recognize, like so many of us have, that almost all of the institutions we've taken for granted are broken. They've served their time. They need re-imagining and yet we have not yet figured out with what to re-imagine them. There isn't a roadmap for doing that. There isn't an easy how-to guide. At this stage of my life, I felt because I've learned so much from thousands of changemakers around the world, what I could offer was a compass, but it decidedly had to be a moral compass.

Because if we want to move the world away from systems that have put money, power, and fame, the individual and profit at the center of all of our systems and replace them with systems that put our shared humanity and the sustainability of the earth, then we need a new set of institutions. They may be the current set re-imagined and rebuilt, but that will require a lot of hard work, a new set of skills that we build within ourselves and a north star from which where we are all unwavering. Ultimately, I realized I was writing a book not for impact investors, but I was writing a book for anyone who wants to build a world in which we truly move away from simply being consumers to being citizens, where we see workers and low-income people as full human beings, equal of dignity and respect, where we build institutions that do more than they take.

So I finally would end by saying if there's one golden rule I think sits and goes through this book, it is that the revolution is neither above nor below. It comes from inside. If all of us gave more to the world than we took from it, the world would be a very different place.

Stephan Chambers:
Sign me up. I completely agree. Thank you so much.

Jacqueline Novogratz:
You've been in it. You've been a leader, not just a foot soldier.

Stephan Chambers:
We're all of us working the fields we're in, but we're all working in the direction that your manifesto suggests. We, at the Marshall Institute, you at Acumen, and all the other work you do. So thank you so much, Jacqueline.

Jacqueline Novogratz:
Thank you, Stephan. 

Sheryl Fofaria:
So, there we have it, folks, a story of moral revolutions, of audacity and humility.  Join us next time to hear from Professor Johan Rockström, leading climate scientist and the force behind the new Netflix documentary, Breaking Boundaries.