1. Social Investment: You've of course seen many stories about the US college admissions bribery scandal. And if you pay any attention to the world of impact investment you likely have seen that Bill McGlashan, the very public face of one of the world's largest impact investment funds, was one of the people arrested for participating in the scheme. Anand Giridharadas, who has become the very public face of criticism of modern philanthropy and social investment, discusses why McGlashan is "the most important fish" in the story. Here's the Twitter thread versionif you prefer that over a 4 minute video. Trevor Neilson, co-founder of the Global Philanthropy Group, says that McGlashan's behavior should not be seen as a reflection on impact investing as a whole, because...well apparently because he wrote a Medium post saying that it shouldn't. There's really no argument there other than "Our goals are too important to be worried about means!" if you consider that an argument. Here's Jed Emerson, who may have an argument, but I just don't understand what is happening in this piece. Lauren Cochran, managing director of an impact investing firm, actually has a few arguments attempting to make the same point, including that McGlashan himself was a figurehead chosen to attract investors, but who wasn't involved in actual investment decisions. She has a nice line about Giridharadas: "using one man’s ethical failings to grab the mic is characteristically self-serving, but as usual, he forgot that there might be a baby in the bath water." It's catchy but wrong. Giridharadas whole point is that there may be a baby in the bath water, but the bathwater is toxic and everyone will be better off, even the baby, if you toss the whole thing. Moreover, the fund that Cochran administers uses this language: "dual expectation of best-in-class financial returns and maximum positive social and environmental impact." And that, to me, is a big part of the toxic nature of the current impact investment environment. On reflection, that statement illuminates what is really happening in Neilson's piece--the fear that if the myth of "no tradeoffs" is exposed then the money will dry up. To be clear, I'm not in Giridhradas' camp but I certainly appreciate how his perspective keeps putting the "no tradeoffs" crowd on the defensive, and illustrates the inconsistency if not hypocrisy hidden there. Kristin Gillis Moyer of Mulago points to a terrific example of the inherent tension: the new Catalytic Capital Consortium funded by MacArthur, Rockefeller and Omidyar. It aims to invest in businesses with low profit potential and/or high risk. I find it an incredibly refreshing approach--it explicitly acknowledges that the no tradeoff myth is leaving many social enterprises in the lurch. But as Gillis Moyer points out, it's not clear how catalytic it can be since there are unlikely to be that many other investors chomping at the bit to invest in low-profit, risky businesses. I'd like to think the catalytic part will be creating space for more funds and investors to say that they prioritize impact over financial returns, and that's OK.
2. Our Algorithmic Overlords: Because the faiV was so full I'd been holding on to a few things on this topic, and events have made them all the more relevant. Platforms for open sharing seemed like such a good idea for a long time. But the cost of open sharing is so so much higher than most anticipated. Not only does it enable evil, but attempting to stop evil exacts a huge toll on human beings. This is a story about the Facebook contractors whose job it is to stop the New Zealand murderer's live stream. And a Twitter thread from someone in a similar position at Google. I'm guessing many of those folks are inching toward Calvinism. Evgeny Morozov has a different take on the costs that open platforms and big tech exact, and why the global white nationalist movement has very different views on that front. It is a helpful reminder of the costs of the old system and the structures that the liberal order created to try to limit those costs, structures that seem to not work so well in this age, and are under attack from many directions. That's in part the theme of a new book reviewed by Noah Smith, The Revolt of the Public by Martin Gurri. I haven't read the book but the review is certainly influencing my thinking on the above. Oh, and Chinese firms are working on facial recognition of pigs, while US police forces are using bad data to train their facial recognition and other AI systems. Andwhat about "behavioral recognition"? Note that this has quite obvious connections to the use of psychometrics and other "alternative data" for creditworthiness evaluations.
3. Household Finance: There's a huge amount of new stuff here, so I'm going to be particularly eccentric this week. There's a lot more coming in the following weeks that will be more serious. One of the questions that fascinates me these days is what is good financial advice for households that face a lot of income volatility. The foundation of virtually everything in the financial advice world is the lifecycle model--and we know that doesn't apply to a very large proportion of households. That doesn't stop the financial advice industry from thriving--but like so many other things, the internet has disrupted that world a great deal. And that disruption creates perverse incentives. Here's the story of the "Fall of America's Money Answers Man", a once-respectable financial advice columnist who turned into a con artist.