How to Invest in a Moral Revolution with Jacqueline Novogratz

Featuring Jacqueline Novogratz, Founder and CEO of Acumen

Jeff: [00:00:01] We can't fix the world alone. But collaborating isn't easy. And systems are allergic to change. So how do we do it without losing our damn minds? [00:00:10][9.5]

English: [00:00:11] That is what we're here to find out. [00:00:13][1.4]

Jeff: [00:00:14] I'm Jeff Walker. [00:00:15][0.5]

English: [00:00:15] I'm English Saul. Welcome to System Catalysts, the podcast that cracked the code for making the world a better place. Hey, Jeff. [00:00:31][15.8]

Jeff: [00:00:32] Hey. English. How are you? [00:00:33][1.4]

English: [00:00:34] You know, I'm. I'm doing okay. I, I got to be honest, I was having kind of a moment yesterday. I just was kind of, like, feeling pretty unmotivated and kind of frustrated. And then I was, like, telling this to my husband. I was like, yeah, I just like feeling kind of super down. And then guess what showed up at my door? A huge box of Girl Scout cookies that I had ordered two weeks ago. [00:01:00][26.3]

Jeff: [00:01:01] Nice. [00:01:01][0.0]

English: [00:01:01] And immediately I ate an entire box of Thin Mints and felt better. [00:01:05][3.2]

Jeff: [00:01:06] Thin Mints, my favorite. Yeah, Samoas are good too. [00:01:08][2.6]

English: [00:01:09] Yeah, Samoas are good. What about you? How are you doing? [00:01:11][2.5]

Jeff: [00:01:12] I'm doing good. I'm doing good. You know, when talking to, you know, some of the individuals we've been interviewing, you know, I'm getting this feeling there's so many people that are doing some great work, but they're kind of down a little bit because there's so much going on in the world that's kind of depressing at times, and they want to have a positive impact, and I do too. And so looking at all of them being able to kind of take the breath, focus on what we can do and doing it with others is important to me and useful. And doing this with you is such a joy. So, getting through these times, it's got to be hard for everybody. [00:01:47][35.0]

English: [00:01:48] Absolutely. [00:01:48][0.0]

Jeff: [00:01:49] Well, our guest today, Jacqueline Novogratz, is the founder and CEO of Acumen, which is a global organization that's doing impact investing. And she's been in this business for almost 30 years. And so she's seen it all. And she talks about a lot of those things. And she has grown to become our true systems catalyst. You know, really looking at system change but doing an approximate level, kind of looking at what we do on the ground and supporting small up and coming companies that hopefully grow large that have an impact on things like workforce, health, the climate. So it's a fun story talking about her evolution over time and hopefully, one that'll be instructive to people listening about how to get involved and who to get involved with. [00:02:37][48.5]

English: [00:02:38] That's awesome. She is, you know, a veteran in this space. So I'm really excited to hear about any tips she has for longevity. And it'll be a great a great addition to our philanthropy 101 toolkit. [00:02:50][12.1]

Jeff: [00:02:51] Well let's listen. So go back and maybe define the original definition of impact investing, because I think it has changed over time. So just for audience, you know, give me a little bit of education on that side. [00:03:07][15.8]

Jacqueline: [00:03:08] Sure. When I came in started, we had this one big idea, to your point, Jeff, which was that charity alone was too often subscale and didn't often enough focus on low income people as customers and understand their needs, and then structure goods and services to meet those needs. On the other hand, for profit companies too often overlooked and sometimes exploited the poor and the patient capital would try to do the best of both. We would take philanthropy. We would invest mostly equity, but sometimes long term debt for 10 to 15 years. Any money that came back would be reinvested in innovation for the poor. The average length of time our investments take is about eight years. As our companies grew, we realized that we needed to access more capital that wasn't available in the philanthropic sector. These were for profit companies. It was time for us to start our first impact fund. And so we started to develop new tools, realizing that we could access philanthropy and investment vehicles more creatively if our end game was actually solving problems of poverty. Then, of course, you have to hold yourself to the financial viability of those companies, and to showing that the subsidy that you also brought in is having the intended form of impact, or else it's a lot of words. I see investing as a means, as a tool, not as a ending of itself. [00:04:51][103.0]

Jeff: [00:04:55] For those who don't know, patient capital is a kind of long term investment that prioritizes a company's social impact over its financial gains. That means when you invest in something, it's committed to it, even if it takes a long time to become profitable. Now, how exactly does acumen use the market in entrepreneurship to trigger wide systematic change? Well, check out this example from their work in sub-Saharan Africa. [00:05:20][25.2]

Jacqueline: [00:05:22] This is actually a story that starts at 2007. So it's for social entrepreneurs. I do think it's a story of systems change when 1.5 billion people had no access to electricity. We invested in one company, two co-founders, delight, who had an idea that they would bring solar to try and eradicate currency, which is dirty, expensive, highly polluting. It took a I would say for the first seven years we weren't sure if they would go bankrupt or not. But over time, we watched this company start to understand what it actually means to build a market, and we understood that with them. And so we started investing in other off grid solar lighting and electricity companies. We got to a point where we have about 40 companies that have reached more than 230 million low income people with light and electricity. And so a few years ago, when I realized that this fairly modest portfolio, 40 companies had moved the needle on electrification on a global level, I started to ask my team of what would it take to accomplish what the world has set out to accomplish that SDG seven or universal electrification? After a few sort of heads and hands moments, we started thinking about analyzing the larger system. And if you look at where we are today, 700 million people have no access to electricity. That 220 million of those will not be reached by traditional markets. About 500 million now. Well, those 220 million live in about two dozen sub-Saharan African nations, where the electrification rate is under 46%. But some countries, like Chad, have a 6% electrification rate, or Burkina Faso 20%. But in the rural areas, much lower, Malawi 14%. You cannot develop a country with a 6% electrification rate, and this is a continent that is going to double in population. It will represent 25% of all humanity by 2050. And so we've learned a lot, Jeff, about finding a problem and then structuring the right kind of capital to solve it, rather than just starting with the capital that we have and letting that be our only tool. And so based on all of that learning. Is structured a $250 million initiative that's unapologetically part market creation, philanthropy that gives us the ability to take super early stage equity and debt risk, as well as make grants to companies that are willing to go into some of these very challenging markets and also provide affordable debt with, a kicker, if you will, again, using philanthropy so that if a company pays, it not only pays us back, but does so in a way that delivers on its promise, say, to reach a million people with electricity, they can reduce the interest that they owe to the facility to zero. [00:08:37][194.6]

Jeff: [00:08:38] It's a great story, and you guys are gonna to. Great. And, you partnered with the Green Climate Fund as well, right? [00:08:44][6.1]

Jacqueline: [00:08:45] Yeah, it's quite an extraordinary collaboration, actually, because we've got the Green Climate Fund, which is the largest climate financial institution in the world, Shinhan Bank, which is the largest commercial bank out of Asia, and USAID and other government assistance organizations. And so it also, for me, is what I dreamed of long, long ago, that we would move out of this bifurcated way of thinking about business, that on one side, you had maximizing returns for shareholders and then on the other side giving it away as charity. This is much more. It took 20 years, but a much more nuanced and blended approach, which isolates the philanthropy and the subsidy where it's needed, uses the capital from markets in ways that allow for efficiencies, and holds that all of us accountable to actually solving a problem. [00:09:44][59.6]

Jeff: [00:09:47] Basically, Acumen helped create this new middle ground between charity and business, one where investors can support good causes and where social entrepreneurs grow their own wealth instead of being fully dependent on donors. Jacqueline has been doing this for nearly 25 years. Her book manifesto for More Revolution lays out the lessons she has learned along the way. I was reading your, your book the other night, and I want to quote stood out for me. It said, solving humanity's toughest problems requires no single hero, but a system of people, companies, organizations and governments. Can you talk about that? And was that the way you always thought about it, or did that evolve over time? [00:10:31][44.4]

Jacqueline: [00:10:32] Oh, totally evolved over time. My early background, having built a bank with co-founders in Rwanda when I was in my 20s, made me very gun shy of government programs, subsidy programs, and complex partnerships. And yet what we saw over time was that if you're going to deliver goods and services using market forces, and you were you were solving a market failure. Often the only way to do it was in partnership with government. It's something I see and what it actually takes to move from a single company to systems change that. You only do it when you learn how to push the different levers of a system. That has often stayed in place for many generations and is the status quo. You often don't understand what that means until the entrepreneur has the courage to just start and build that company, and then at one point recognize that scaling or growing that company will only happen in partnership. And it's probably one of the most important lessons that I've taken away. And in this generation, when we're so interdependent, when these global forces are impacting all of us, I think that the ability to partner across sector is a skill that we need to do more teaching us in all of our schools and especially in our business schools. [00:12:07][94.9]

Jeff: [00:12:10] Hear, hear. A big reason why actualmente has been able to have such a massive societal impact to their ability to collaborate across sectors with philanthropists, nonprofit leaders, governments and even banks. There's a sea change going on in Africa, where many of the efforts that were the Western world coming into Africa are now being subsumed by African driven change, which is awesome, and leaders developing there. And the government is taking even more control. And while we're all helping and hopefully find ways to facilitate their success. Can you talk about that and maybe around climate change, how do we support Africa but not try to come in and tell them the answers? [00:12:54][44.0]

Jacqueline: [00:12:56] Well, first of all, I think we get rid of the word help. Yeah, that and I learned this way back in the 80s. Very painful, because I went to save the world and learned that nobody wants saving and even way back that they certainly didn't want saving by a American woman who didn't know anything about the continent. And so early on, I learned I cannot be here if I'm not willing to immerse the in relationship and realize that this is about investment and partnership. It is not about saving, helping, extracting. And it goes in some ways to the adage of give more than you take and commit, not just for today, but until the problem solved, be there. And so when I look at some of the long term investors who came into the continent, so not local Africans and what their energy they're releasing, they have a number of similar characteristics. I think of Dave Ellis, a young guy who grew up in Chicago, went to Uganda to join a nonprofit 15 years ago. South, disappointed at the NGO, wasn't really changing very much and decided that he would start a company at the time, just happened to be in Ethiopia, and heard that government was looking for someone to take over the chicken industry. He'd never had the chicken in his life, but he had that entrepreneurial curiosity, verve, and the humility to realize that he had to make a long term commitment. He had to immerse, and he had to always consider himself a guest and behave that way until the point where people started to see him more as a local, you know, follows the same pattern that many of our basic capital investments took, which is first five, seven years teetering at the edge of bankruptcy. They've learned fluent Amharic. He lived in Tigray, which is still the center of war, and he and his partners ultimately built a company in Ethiopia that represents about 80% of the chicken market. They've been credited with reducing childhood malnutrition with one of our for profit funds. We've helped them expand to another six African nations. This year, they will employ 16,000 agents. Those agents, sell chicks to smallholder farmers. And those chicks will produce five and sell 5 billion eggs. But it's been a 15 year journey. He is there as somebody who committed, who invested himself as well as capital, and who created a couple of thousands of jobs in addition to the 16,000 very good agent jobs. And so for the people coming in, I think that is a real model. You earn your way in and you see part of your responsibility as enabling a new generation to take the mantle forward. And what's exciting to me is also to see the incredible array of African entrepreneurs. I am watching a new generation with the level of creativity and innovation that almost can only happen at the edges. And my hope, Jeff, is that we start to see more and more of those entrepreneurs influencing American entrepreneurs to bring these sort of radical, a creative new economy models into a nation that also needs a lot of work. [00:16:37][221.1]

Jeff: [00:16:39] Well, there's a lot of potential entrepreneurs, that's for sure. And I think that's the right, the proximate change. Right. Those that are local to the problem are going to have better solutions than those that are looking down. [00:16:49][10.4]

Jacqueline: [00:16:50] Yeah, or those who make themselves proximate to the problem. [00:16:52][2.6]

Jeff: [00:16:53] And that may be a suggestion for our listeners as to when you're going to start. Go proximate, right. [00:16:59][5.4]

Jacqueline: [00:16:59] When you're going to start, go proximate. And if you don't want to go proximate, don't go. If we don't invest any longer in those CEOs who. In Atlanta and have a cup of tea and take your place. It better be in Atlanta itself. [00:17:16][16.5]

Jeff: [00:17:18] Right? You've got a lot of people located locally around the world. How do you keep them connected? How do you unify them? What's the. Is there a common culture that you're trying to make sure that people when people come in, you are okay, you know, you're not going to work unless you kind of feel the following way or kind of operate in the following way. What do you how do you do that? [00:17:40][21.6]

Jacqueline: [00:17:41] I literally just got off a call before you and I spoke with my head of development partnerships, who's been with me for 22 years, and we talked about culture being the most important thing. And yesterday at my board meeting, I said to the board that as acumen becomes more of a constellation, how can we make sure that no matter if you're walking into Acumen Academy Malaysia, the Acumen Resilient Agriculture Fund or Acumen in San Francisco, you're walking into a community that shares the same ethos that may use slightly different tools, but does it in service of low income people and does it in a way that respects all of our humanity, that operates from a place of dignity that's work in and of itself? And, probably not at this point. Ten years ago, we wrote a manifesto for acumen. It's on the wall of every office that starts by standing with the poor, seeing a potential where others see despair, daring to go, where markets and aides have have fallen short. And and it goes from there. There are lines like. It takes patience and kindness, resilience and grit. A hard edged hope. It makes capital work for us, not control us. And Jeff, that manifesto, those words and people gravitate to different parts of it. They are repeated throughout the acumen universe. Most meetings, including investment meetings where we have people from Goldman Sachs and other very, very respected financial institutions will look at an investment and say, well, what percentage of people impacted by this were far below the poverty line? Oh too low. Not going to do this investment and so on. It doesn't mean that we're soft. In fact, we've written off about 25% of the investments that we have made. And you have to know when to walk away. But it does mean we're committed to trying to live up to these values, because we've proven with 230 million people served, that entrepreneurs know how to do this. We have the technology. What we need is the courage to construct the right kind of capital, and not just talk in big numbers and feel good about ourselves, but to hold ourselves to account, to do what's needed so that we're not going to go into another ten years where a quarter billion people have no chance of getting access to light. After all these more than a century and a half since Edison invented the light bulb, we're not going to let that happen on our watch. And so, I think constantly moving from there with great humility because that means we'll fail. And we have failed many times, but also with this sense of possibility that you never let go of. But you're tethered by standing with impact and poor first. And as you know, in our generation, that was not such a popular idea. That was seen as a naive idea. Making money and then doing good things for the world was seen as the strong idea. I think the world is starting to acknowledge our strengths, comes in solving these problems and doing so with all of ourselves, not with just a part of ourselves. [00:21:22][221.2]

Jeff: [00:21:25] Really inspiring stuff. But of course, unless you've lived under a rock for the last few years, we still have a lot of problems around the world. And in a recent interview, Jacqueline said that 2023 was one of the hardest years for me. So I thought I'd ask her why. You talked about. It's been a really hard year, but you keep going. Tell me about why it's been hard. [00:21:46][21.3]

Jacqueline: [00:21:47] It's been one of those years shift that has been the best of times and the worst of times. It's been the best year in terms of achievements, own growth and impacts. We crossed half a billion people impacted. We also have about 150 million under management and for profit impact funds, and right now are in process of building another 450 million in initiatives. And we had never had this expectation of managing $1 billion portfolio. But it seems that we will soon be there. And so in one sense, we've just seen enormous change and impact with our companies, with the funds and initiatives that we do. And on the other hand, we've been seeing this in the context of worsening climate crisis, our energy companies dealing with massive macro economic headwinds, the whole war in the Middle East, and what that has done to a sense of helplessness, division, divisiveness, confusion across the world, I think has also impacted and made us question who are we, where do we where we are and how to lead in this moment? So it's been a time of great, I think, a great sense of gratitude, my team would say, and pride and also humility at what we're all up against. [00:23:20][93.0]

Jeff: [00:23:22] How do you stay working in this area for so long without burning out, without, you know, getting frustrated? You've been one of the longest committed. I remember, you know, sitting in your offices so long ago, early 2000, and hearing about what your ideas were and bringing people together. How do you keep it going? What keeps you on the path? [00:23:44][22.4]

Jacqueline: [00:23:45] It's funny that you ask, because I just had a celebration with the team that most directly supports me, and so it's been such a year that I asked them, how are you all doing? Any signs of burnout here? Because we've pushed so hard. And one of them said, you know, what you've really imprinted on me is that when you have something that you deeply care about and you see that you're making a difference within it, there's not really a place for burnout. And I think that that is not inconsistent with also needing replenishment and renewal. But I think there's real wisdom in that, that for me anyway, I feel so privileged that I get to work on solving a problem that clearly I won't solve fully in my lifetime. But I have seen over these now, 40 years since I first started, that change is possible, and that ultimately it's people who make the change. And so I have been frustrated at times and I have been tired at times, but I've never I've never had burnout. I've felt a deep privilege that I get to do this work. [00:25:02][76.9]

Jeff: [00:25:05] Jacqueline's response reminded me of my conversation earlier this season with Jean Puig, the president of the National Domestic Workers Alliance. You can find the link to that episode in the show notes. I interviewed I shampoo, and she was talking about a similar kind of frustration with the world while trying to keep focused on what she's doing, and it's hard to kind of separate it but not care. And it takes a different kind of personal strength to do that. You have advice to people of how to thread that needle. [00:25:39][34.0]

Jacqueline: [00:25:40] Hmhm such a great question. I do think that it's one of the modern challenges that we face as a world. And in the 80s when I lived in Kigali, Rwanda, and there were no telephone telephones in my neighborhood, no internet. The only radio was shortwave BBC. 730 at the morning, 730 at night. You could really stay focused on your local. And sure, you'd hear through the BBC what was happening elsewhere in the world, but it didn't dominate your own body mind. And I think now about how many young people I know are getting degrees in psychology for climate anxiety, social media and the divisiveness, all the wars, everything that's happening in the world. And so to be aware of it, but also to recognize each of us has to be used in the ways that we can most useful. It's who we are, what we have and where we are. And I think that the more me at least the way I deal with it, the more I focus on making the kind of change that I'm capable of making, the more I'm actually contributing in a positive way to these other issues that are happening around the world. And if I let myself just get overwhelmed with what's swirling around me, it will ultimately lead to inaction and reduce my ability to actually make the kind of change that I can make. And it's always been a practice that I've been lucky to have, but I see it in a new generation that I think it's become more challenging and maybe more important then to develop those practices whereby we ask ourselves, what is it that I can do? And it can be very small or it can be much larger. But to focus on the work and the action beyond just sort of screaming into the void, I think is really, really important. [00:27:52][131.9]

Jeff: [00:27:53] You know, each of those small actions reverberates into much larger waves. [00:27:57][3.9]

Jacqueline: [00:27:58] In ways we never even may know. Right. [00:28:01][2.6]

Jeff: [00:28:02] Is there anything that you want to make sure people hear? Is the message as to, if they want to be like, you. [00:28:08][5.9]

Jacqueline: [00:28:09] Know, what do you want? I think I would like. [00:28:11][2.1]

Jeff: [00:28:14] Or be System Catalyst or people that can help unify and think of the larger we. Where would you go. [00:28:19][5.0]

Jacqueline: [00:28:20] When we first started Acumen Academy, which, as I said, is both a fellowship program and we have fellowship program is running in ten countries and an online learning platform that we are. Right now, renewing and taking to another level. So hopefully over this next year you'll see real growth in short term resources. [00:28:43][22.8]

Jeff: [00:28:44] But it has amazing people on it. By the way, I'm Adam Grant and Chris Anderson and Krista Tippett and Daniel Pink in front of others. So love the cast. [00:28:53][8.3]

Jacqueline: [00:28:53] Well, it's a great cast. And in our next chapter it will be of buy in for builders. So people who've actually built in kinds of communities that innovators come from and want to impact. And so, as I said, we're just getting started with that next chapter. But I'm so excited. And when I first started to think about Acumen Academy, I was talking to, Nico Kanter as an amazing advisor about what we were trying to do. And he drew three circles on the wall, and they were intersecting operational skills, financial skills. And then one we never talk about in our business schools, the moral imagination, which is something that has always been very important to me in terms of solving problems of poverty across lines of difference, particularly with low income people. And I think for this generation of people who want to innovate and to solve problems at systems level, the moral imagination is fundamental. It starts with curiosity and with empathy, whereby you you see a problem and want to be part of solving it. You may not have any idea how to do it. So next step, follow the spread of your curiosity. Get proximate. Immerse. Get close. Understand the people who are impacted. What is the system? Hold them back and where might they hold themselves? Back, which requires deep listening. From there, start to look at the different pieces of the system so that you understand what the status quo actually is. It might surprise you and then figure out what piece of it do you want to take on, and you figure that out by starting and letting the work teacher who also figure out by acknowledging what resources, what strengths or personality traits you have right here, right now and move from that place. Don't wait till you have acquired all of these idealized versions of yourself. Start with who you are right now. Take a step. If you fall down, get up and take another step. And be willing to stay that path. And that's when 15 years looking forward can seem like a long time. As you know, Jeff, the 15 years looking back goes like that. And the amount of change that is possible might really surprise. [00:31:29][155.6]

Jeff: [00:31:41] That's it for today's show. Please don't forget to subscribe to System Catalyst so you don't miss out on the new episodes. Also, do us a huge favor by reading our podcast it leaving us a review. Thank you so much for joining us, and we'll catch you all in the next episode. Before we go, I'd like to thank our producers at human Group media. We'd also like to thank our incredible network of partners who are supporting our mission the School Foundation, the Aspen Institute's Aspen Global Leadership Network, Echoing Green, DRK Foundation, Maverick Collective, Virgin Unite, Charlize Theron Africa outreach project, Boldly Go philanthropy, Synergos Global, Nexus and New Profit. If you're interested in becoming a system catalyst, you'd like to learn more about our partners, please visit System catalyst.com. [00:31:41][0.0]

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