Tag Archives: social enterprise

Introducing Edgeryders: the corporation without permission

While at the Council of Europe in 2011-2012 I directed a project called Edgeryders. The idea was this: use the Internet to let a policy community emerge by self-selection around an issue, then deploy that community as an engine of expert advice on the issue at the hand. We started to call this model open consulting. Its beauty is that:

Anyone can acquire the status of a “citizen expert” on that particular policy, simpy by signing up to a web platform and starting to collaborate. This makes it inclusive, and lends it democratic legitimacy.
The scalability of the mechanism (helped by technology to “harvest” the ensuing conversation) gives rise to collective intelligence dynamics. This makes expert advice delivered this way smarter, faster, cheaper and more diverse than vanilla consulting.

The approach worked. It worked so well that, at the end of the project, we decided the value to us of the community that had convened around Edgeryders was too high to waste. So, some of us invested our own personal time and money in spinning the Edgeryders website off the Council of Europe servers and into a newly developed platform. A UK-incorporated not-for-profit enterprise, Edgeryders LBG, was created to maintain the technical (the platform) and social (the community management legwork and yearly physical gathering, Living On The Edge) infrastructure necessary to support the community and keep it growing. In doing this, we created value in the public sphere right from the get go; as the Council of Europe turned off the Edgeryders server after the end of the project, we stepped in to keep that content – paid for by European taxpayers – online and accessible.

We are having some success in helping each other kickstarting cutting-edge social innovation projects, like the unMonastery and Economy App, but we are reluctant to try to monetize this peer-to-peer help for fear it will destroy the community’s ethics. On the other hand, we don’t believe in seeking public sector funding: too slow, too politically-driven, too unstable. So, we decided to seek sustainability of the Edgeryders operation by selling open consultancy on the market. Think of what we do as a big red “bring on the hackers” button: when you are dealing with wicked problems, entrenched stakeholders, cross-vetos and things look grim; or simply when you want some fresh thinking around what you do, you push the button. We will come in and help you to summon and deploy an ad-hoc network of hackers, citizen experts and radical thinkers around your problem.

We have a fighting chance where other consultants don’t, because we, as a company, are wired very differently from anyone else: we are a corporation without permission. Edgeryders LBG is a corporate shell exacty analogous to shells for computer software: an interface between the client and the collective intelligence engine of the system – which does not live in the shell, but in the community. Here’s how it works: anybody that has a project that might resonate with the Edgeryders ethos is encouraged to think of herself as being part of Edgeryders. Anyone can propose and discuss the project with others, but also look for a client for it without having to ask for permission. Anyone can claim to represent Edgeryders: people can ask for an edgeryders.eu email address and we will issue one without too many questions, provided the project is not in contrast with the community’s values. If the project does find a client (like it happened for the unMonastery) the person who leads it gets hired for the duration of the project. Edgeryders LBG provides the corporate infrastructure to deploy it: team building, technology, outreach and engagement, invoicing, banking, whatever. This is regulated by ad-hoc agreements between project leaders and the company, because every project is different. Once a contract is signed, the company’s board of directors takes on legal responsibility for delivering on it, just as with any other corporation.

This setup results in self-selection, lots of it. Each individual in Edgeryders does what she is best at and what she is most passionate about. Anyone can propose ideas and lines of work; any of these ideas can get picked up by the community and gain momentum ((but by no means all of them will). This much openness guarantees a very high rate of idea generation – and an equally high rate of idea rejection by lack of momentum. Anything that lives through this much natural selection has to be very, very good – and clients stand to benefit from it.

Extreme openness, while it brings us competitive edge, also defines Edgeryders as a social enterprise – an elegant move, and a beautiful thing to behold. Many of our citizen experts live on the edge of society: they are hackers, permaculturists, activists, artists. They are into crypto currencies, open source, sharing economy, nomadic lifestyles, new forms of learning, new familial constellations. Almost none is wealthy; many are young; many are parts of various minorities; most are struggling. You can never hire them – they would not get through your HR firewall, because your HR people don’t understand or recognize their qualifications. Even if they did get through HR, they would likely not want to work for you – many of them don’t function well in hierarchies and bureaucracy. We provide an interface for them to keep true to themselves while meeting your accountability requirements. It’s a bit like safe sex: it allows experimentation at minimum risk. Everyone wins.

This is also a novel thing for me personally. After almost ten years of working in or for the public sector, I have decided to take a step into social entrepreneurship. Partly, I do it because I have become convinced that civil service innovators and reformers don’t stand a chance if they don’t have help and legitimacy from outside, bringing agility, out-of-the-box thinking and, yes, outspokenness to the table. But mostly I do it because I like and trust the Edgeryders community and feel supported by it; and because I admire my business partners in Edgeryders LBG and don’t want to pass on the opportunity to work with them. Let me do an introduction here (though you can see them and hear their voices in the video above): ladies and gentlemen, I give you:

Matthias Ansorg, CTO: rock-solid German open source hacker. I have seen him do stuff with tech that borders on witchcraft to us Muggles. He is reconverting a 1968 firetruck to be his mobile home. Need I say more?
Arthur Doohan, CFO: an Irish apostate investment banker (“I was sick of being a professional gambler with other people’s money”) from an engineering background. He is the founder of the Irish Pirate Party.
Noemi Salantiu, Head of Community, a young social scientist from Romania with a knack for nurturing social dynamics conducive to collective intelligence.
I left the most special person for last: our Glorious Leader Nadia El-Imam, CEO, Sudanese- Swedish interaction designer, activist and changemaker, and one of the people with the most integrity I have ever met.

Ok, world. You are always complaining that you want more innovation, more diversity, more openness and more young leaders. Edgeryders scores exceptionally well on all four accounts (three of the five partners are under 35, with a 32-years old female CEO), has proven ability to deliver and is open for business. Let’s see if you put your money where your mouth is, or if, when it’s time to hire a consultant, you’ll go for the usual suspects after all. You can find us on Linkedin (more legible, client-facing) and on our own workspace (more creative, apparently more chaotic, community-facing).

OpenPompei: open data and the hacker economy vs. the mob

1 Reply

I’ve got a new task. I will run a new project called OpenPompei. It is part of the government’s new strategy in the Naples area, and in particular Pompeii.

Here’s the background: by the end of 2011 the government was convinced that the battle for the rule of law and a decent life for all in Italy’s Mezzogiorno would be won or lost in Pompeii, a symbol of the battle itself. In a very short time, three ministers – culture, interior and regional cohesion) set up a hundred-million euro project to restore the insulae damaged by the rain (a scourge of all open-air archaeological sites); got the European Commission’s seal of approval; wrapped it into an advanced security model that should keep mob-polluted companies to win any tenders. Thus was born the Great Pompeii Project.

As a very minor integration of this massive project, the government decided in 2012 to launch a small initiative for transparency, inquiry and mobilization. Spending on culture is great; protecting that spending against criminal infiltration is even better; but neither is enough. Public spending must be not just legitimate, but effective and efficient. It was decided that releasing the spending data from the Great Pompeii project must be a step in the right direction. Access to data and data-powered public debate can help to discover errors suggest improvements, drive administrations to perform better.

On this intuition, OpenPompei was born. Its remit has been kept broad on purpose, and includes:

promoting a culture of transparency and open data of a large area, of which Pompeii is the symbolic center. The idea is to have a small team ready to help southern administrations that wish to try their hand at open data policies. We shall start, obviously, from the data of the Great Pompeii Project.
reconnoitering and investigating the area’s hacker economy. As all densely populated places, the Naples area is full of co-working spaces, new digital companies, social enterprises, social innovators, sharing economy types. As everywhere, these initiatives are often fragile and isolated, but embody an idea of the future. Our ambition is to get to meet them, find out more about their goals, struggles and successes, and – if possibile – get their voice into the public policy debate, with no ambition to solve every problem.

The dream behind OpenPompei is to help build an alliance of civic hackers, non-compromised enterprises and State to maintain a high level of attention on public spending, so as to fight corruption and increase efficiency. It is unlikely for a small, peripheral project to achieve such a lofty goal, but we hope to give a contribution – at least one of knowledge.

To guarantee its independence, OpenPompai was set up as a European-funded project. Studiare Sviluppo, a in-house company of the ministry of the economy, was tasked with delivering. I worked with them before on Visioni Urbane e di Kublai. Wish me well, and be there for me when the going gets rough, ok?

Financial innovation for social business: what are the risks?

2 Replies

Antonella Noya all’OECD (grazie!) mi ha passato un loro rapporto, The Changing Boundaries of Social Enterprises, in cui si cerca di fare il punto sugli ultimi dieci anni di impresa sociale nei paesi industrializzati. Sono stati anni importanti per questo settore, da tutti i punti di vista: di crescita e strutturazione, legislativo e anche finanziario. Da quest’ultimo punto di vista un riassunto potrebbe essere questo: le imprese sociali sono sottocapitalizzate, e stentano in particolare ad accedere a strumenti finanziari diversi dal prestito (loan) e dal contributo (grant). Molta innovazione finanziaria ha cercato di risolvere questo problema. Antonella Noya at OECD (thanks!) pointed me to their report The Changing Boundaries of Social Enterprises, in which they attempt to render the past ten years of social enterprise in developed countries. It’s been an important ten years for this sector, from all points of view: growth, legislation and finance too. From a finance perspective, an executive summary could as follows: social enterprises are undercapitalized and find it difficult to access financial instruments other than traditional loans or grants. A lot of financial innovation was thrown at the problem.

Il rapporto OECD fa un elenco impressionante: venture philantropy, prestiti “pazienti”, piattaforme di crowdfunding à la Kickstarter, indici per misurare la performance sociale degli investimenti come i Dow Jones Sustainability Indices e così via. Tutto bene? Sì e no. Sì, perché il problema esiste e si sta cercando di affrontarlo. No, perché si stanno facendo cose che ricalcano un po’ troppo da vicino la precedente ondata di innovazione finanziaria — quella, tanto per capirci, che ha portato alla crisi globale del 2008. The OECD report has an impressive list: venture philantropy, “patient” loans, crowdfunding platforms à la Kickstarter, social performance assessment tools like the Dow Jones Sustainability Indices and so on. All’s well then? Yes and no. Yes, because the problem exists and is being looked into. No, because it is being addressed in a way which is a little too reminiscent of that other wave of financial innovation, the one that gave us the 2008 global meltdown.

Considerate Blue Orchard. La loro idea è semplice: mettere in comunicazione gli investitori istituzionali (per esempio i fondi pensione), che vogliono comprare prodotti finanziari etici, con il microcredito. E come si fa? Per cominciare si fanno molti microprestiti. Ciascun prestito corrisponde a un attivo nel bilancio del microcreditore. A questo punto il microcreditore prende tutti questi piccoli attivi di bilancio, e li usa per garantire l’emissione di un’obbligazione (cioè uno strumento finanziario derivato da quello primario, cioè il microprestito) che poi rivende all’investitore istituzionale. Fatto! Quest’ultimo ha fatto un investimento etico senza bisogno di imparare a distinguere tra loro i microprestiti e i microcreditori. Per contro, l’istituzione di microcredito ha reperito liquidità aggiuntiva, e può fare altro microcredito. Perfetto, no?Consider Blue Orchard. It’s a simple idea: connect institutional investors (say, pension funds) wanting to invest ethically with microlending. How does that work? It begins with some institution making microloans. Each of them creates an asset in the balance sheet of the microlending institutions. Now this microlender takes all of these assets, packages them up and uses them as collateral to back a bond (which is a derivative product, its primary being of course the microloans) which he then sells to the institutional investor. And it’s done! The latter has been enabled to invest ethically without actually having to be able to tell which microborrowers to lend to. At the same time, the microlending institution has gained extra liquidity, and can go on to make more microlending. Great!

Non necessariamente. Questo processo in finanza si chiama cartolarizzazione: il suo effetto ultimo è quello di allontanare il debitore dal creditore finale. Prima della cartolarizzazione i mutui casa venivano concessi da banche locali, che conoscevano il debitore ed erano ragionevolmente in grado di valutarne l’affidabilità. Se quest’ultimo si trovava in cattive acque, la banca locale faceva il possibile per consentirgli di ristrutturare il debito: in fondo si trattava di un cliente e di un membro di quella comunità, ed era interesse della banca che la comunità che serviva fosse il più prospera possibile. Con la cartolarizzazione, però, il mutuo del signor Rossi viene impacchettato con altri in uno strumento derivato, e rivenduto a un investitore non locale: se va bene un fondo, se va male un hedge fund molto aggressivo. Appena Rossi ritarda con un pagamento, questo investitore non ha nessuna ragione di essere comprensivo: farà la cosa che gli conviene nell’immediato, visto che non partecipa alla comunità locale in cui Rossi vive. Cosa faranno i fondi pensione che comprano i prodotti Blue Orchard se dovessero trovare che i rendimenti sono troppo bassi? Se decidono che devono rientrare immediatamente dei loro crediti, quale sarà l’effetto di questo rientro sul microcreditore? Può essere costretto a rientrare a sua volta, compromettendo il beneficio sociale di avere investito sul proprio lavoro?Or is it? The process described is called securitization. One of its effects is to separate the borrower from the final lender (in this example the pension fund). Before they got securitized, home mortgages were issued by local banks, that knew borrowers personally and could assess their creditworthiness reasonably well. If they got it wrong and the borrower found it difficult to repay the debt, the bank would do its best to get him back on track, possibly restructuring her debt: after all, she was a client, and lived in the same local community as the bank. The more prosperous the community, the better things were for the bank. After securitization, all this changed: now John Smith’s mortgage is repackaged and sold to a nonlocal lender — a pension fund at best, a very aggressive hedge fund at worst. As soon as Mr. Smith starts falling behind with his payments, this investor has no reason to be understanding: it will try to maximize its immediate gain, as he has no stake in Smith and his community’s long-run prosperity. What will the pension funds that purchase Blue Orchard’s products if they find that the returns are too low? If they decide to exit fast, what will the consequences be for the microborrowers? Could they be forced to pay their debit back or lose their assets too? Could this wipe out the social benefit of the poorest of the poor investing in themselves?

Discorsi simili si possono fare per i “mercati di capitale etico” in via di collaudo in diversi paesi, come ETHEX nel Regno Unito o la Bolsa des Valores Sociais in Brasile. Il mercato azionario che conosciamo ha portato molti capitali alle imprese for profit, al prezzo di indurle a una prospettiva di breve termine: un buon risultato trimestrale è fondamentale per non perdere la fiducia del mercato. Cosa succederebbe alle imprese sociali le cui azioni (sì, alcune emettono azioni) fossero scambiate alla borsa di Londra o New York?Similar questions can be asked for ethical capital markets being rolled out in some countries, like ETHEX in the UK or Bolsa des Valores Sociais in Brazil. The stock market as we know it brought a fresh stream of capital to for profit enterprises, but at the price of making them focus away from long term growth and onto quarterly results. What would happen to social enterprises once their shares (yes, some do issue shares) are traded in Wall Street or London?

Sono domande inquietanti. Ma fare finta di niente sarebbe peggio: non abbiamo scelta se non cercare le risposte.These are unsettling questions. But looking the other way would be much worse: we have no choice butlook fo the answers.