Archive for Steven Ketchpel (author of "Giving Back")

Climate Change and Big Carbon

Bottom Line:  Climate change signs are coming through stronger now than ever before, and faster than scientists anticipated.  The droughts in India and the US bode ill for food prices later this year, early next.  The suffering in poorer countries may cause additional deaths, social upheaval.  The economic interests of Big Carbon are working against our need to change.

Hot Enough for You?

Anecdotally, it’s been a hot summer.  My parents in Connecticut have talked about the 5 heat waves (3+ days of 90 degree+ weather) before August.  Anudip Foundation talked about “faculty that braved 45 degree Celsius (113F)  temperatures in stifling humidity [in India] to conduct their classes in remote places. Several suffered heat strokes in the process.”  Bill McKibben, in his Rolling Stone article marvels at Saudis’ report of “rain in Mecca despite a temperature of 109 degrees, the hottest downpour in the planet’s history.”  And that’s just the tip of the iceberg.  The rest of the iceberg (Petermann Glacier) broke off from Greenland, a mass of ice twice the size of Manhattan.  But maybe it’s OK, because one bigger than that broke off two years ago…  If you want something that’s unprecedented in 150 years, you can turn to this month’s ice melt of of the Greenland ice sheet, which overshot it’s “typical” level of 55% melting to go from 40% to 97% in 4 days.   Heat records have been broken left and right in the US, and the heat and drought has caused serious crop failure in key farming regions in the US 

“Some stuff technically is not going to be worth the combine bill to harvest it,” he said. “This is my 49th crop, and I have never had a year like this.”

In India, the story is similar:

“The situation is quite bad, exceptionally bad, and very serious for farmers,”  said scientist Kirpal Singh Aulakh, former head of Punjab Agricultural University in Ludhiana.

The Geo-Political Landscape for Change

(What follows is a summary of Bill McKibben’s Rolling Stone article.)

The weak consensus of the Rio+20 Global Summit was to maintain a temperature increase of 2 degrees (Celsius) or less.  Scientists believe this increase will cause a host of problems, but not be an existential threat to humanity and our way of life.  We have already seen a 0.8 degree increase, with associated problems (ice melt, droughts, oceans 30% more acidic). So some question whether even 2 degrees is permissible.  But no binding actions were taken to commit the largest emitters (China just surpassed the US) to any definite course of reduction.

Scientists have further estimated the amount of CO2 that could be released while still remaining within the 2 degree limit:  565 Gigatons by 2050.  According to the research cited in the article, on our current path, that level will be reached in about 16 years (adding 32 Gigatons per year, growing 3%).

Big Carbon (Big Energy)

The greatest source of the CO2 emissions is the burning of fossil fuels for energy (coal, oil, and natural gas).  The biggest energy companies (and, in countries where the state controls petroleum reserves, the states themselves) are sitting on known reserves that will exceed the 565 Gigaton limit 5 times over.  Yet in their quest for more energy (and to increase the $1 Trillion in profits captured since 2000), exploration for new deposits of carbon-based fuel continues unabated.  Indeed, with the easiest “finds” already exploited, the new sources (like tar sands or shale) require much more energy to extract, thereby increasing the effective emissions (and cost) of the “useful” energy.

So, while humanity ponders our existence, (or gets distracted by the latest celebrity gossip), the oil companies will also be pondering their existence, recognizing that if we (as a human race) were to enforce the 565 Gigaton limit, nearly 80% of the existing known reserves, plus whatever additional finds are made, could not be burned, rendering it essentially worthless.  Since the companies’ market value is derived from these assets and future earnings stream, any such limit would savage the value of the industry, possibly driving some of them out of existence.

If it’s a race to see who can organize faster to protect their interests to avoid being driven out of existence, all the signs so far point to the oil companies winning.

Postscript:  The Silver Lining?

A friend shared Matthew Ridley’s The Rational Optimist a couple years ago–the central thesis is that our inventive capability is providing for huge gains, and things that look grim today will be solved by technology or discoveries in the future.  Linear extrapolation misses the “disruptive game-changers.”  He argues that given a choice between a dollar of mitigation effort today and one (inflation adjusted) a hundred years from now, we should delay, and pay later, because our wealth and standard of living will have increased so much from discoveries between now and then.

I found his argument partially persuasive, but am still troubled:

  1. These environmental changes are happening faster than forecasted, and the effects seem to be more extreme than forecasted.
  2. Inventions not only impact our ability to make a positive difference; they also increase our capability to make a negative difference.  We’re more capable of making large-scale changes to our environment.  Yes, that may bail us out, but we also may miss a fatal flaw in our plan.
  3. The Big Carbon companies seem to be sticking their heads in the (oil) sands.  McKibben cites the lack of investment, even the shuttering of the alternative energy projects undertaken by the reigning corporate leaders.

So, yes, let’s be looking at inventions that might enable us to capture and sequester carbon.  Let’s look at alternative energies.  But let’s agree that our course of charging ahead, ignoring the warning signs and continuing “business as usual” is a foolhardy recipe for disaster.

Seven Tips for Organizing a Fulfilling Volunteer Experience

Bottom Line:  Volunteer projects over the last two days were a study in contrasts.  One very mental, one more physical.  Both fulfilling.  Seven things that they both got right to make it a good experience for me, the volunteer.

Ecumenical Hunger Program

Yesterday, I stopped by Ecumenical Hunger Program in East Palo Alto to ask about potential volunteer opportunities for groups.  They had an information sheet detailing different options, but they also needed help right now.  They were preparing for their monthly food distribution, and needed help splitting the pallets of groceries into boxes for the 80-100 families that would be showing up in a little bit more than an hour.  I offered to stick around, and was soon at work packing boxes:  2 large cans of pear halves, 3 smaller ones of peaches, 2 packs of tortillas, 4 smaller cans of apple sauce, 2 pound bags each of rice and pinto beans, a 64-oz bottle of spiced cranberry juice,  a half-gallon of milk, a 2 pound bag of pre-washed salad, a watermelon and a cantaloupe.   Other groups were packing meats (not sure of all that went into it, but looked to be a dozen eggs, a one-pound pack of hot dogs, a one-pound tube of ground sausage, and 2 1-pound packs of cold cuts (baloney or ham).  A third group was packing fruits and vegetables.  This being summer in California, there was a nice selection of nectarines, oranges, broccoli, corn, onions and probably more that I didn’t see.

At 5 PM, not only was the distribution done, but the area had been restored to its prior, clean state.  Empty boxes were gone.  The leftovers were in the food pantry.  The tables were taken down and stored, and the parking lot had been swept.  It was a remarkable display of efficiency, taking the volunteer efforts of probably a dozen people, some of us first-timers, and getting a large task done in a short time.  Staff members Suliana and Jackie deserve credit for getting us all together to get everything done.

 Helping with a Grant Application

Monday afternoon, I spent about 2 hours helping out with the final submission of a grant application to the USAID.  The Principal Investigators for the submission had put together a nice response to a Request for Proposals, one that could have real impact for students and others in Africa.  They needed a fresh set of eyes to help them simplify the writing for people who weren’t already familiar with what they’re proposing.  So I helped cut some of the excess verbiage and clarify things a bit.  We used Google Docs, with two or three of us editing the same document at the same time, with the shared goal of clarifying it and squeezing the word count down to fit in the allotted number of pages for the proposal.   We were all at our own desks, miles apart, just communicating through the edits we were making to the document and the chat window alongside.  Yet here again, the process converged and we finished expediently, and had a chance to chat a bit before going our separate ways.


On the face of it, the two experiences were very different:  one very physical, the other totally mental; one where I was in the same place with the other volunteers, and even got to help the beneficiaries directly (e.g., loading a car) whereas in the other I interacted only through typing; in one case, just about anyone could have done what I was doing, in the other, it required a high skill level of writing, background knowledge, and a understanding of an “academic setting.”  But at the end of the day, each of the experiences was very satisfying.  I attribute that to:

  1. There was a clear objective.
  2. We managed to finish what we set out to accomplish.  (It was a manageable amount of work.)
  3. The project leaders were “in it together” with us, helping out in a visible way.
  4. The project leaders were appreciative.  Very much so.
  5. There was a sense of teamwork: we could see what other people were doing, how we were all contributing toward the goal.
  6. We had the tools we needed for the job:  we were able to use our time effectively, and weren’t forced to wait around much.
  7. There was space for a little off-task fun.  Kidding around a bit, cracking jokes in the chat window, taking a group break to re-hydrate.  We were definitely driven to finish things quickly, but it wasn’t “all work, all the time”.

Ultimately, I found the grant writing more fulfilling–the ability to use my skills in a way that not many others could do, plus the chance that it would have a very large impact (helping to win a grant that I thought will make a positive change, in a more enduring way).  But I was happy with my EHP experience, too.  By following the seven tips above, each project made me feel like a valuable and valued volunteer.

Cover letters that prove you’re not a flake

Yesterday, a friend asked for feedback on a cover letter she was preparing.  She’s a recent grad from Stanford, with an incredible passion for eliminating homelessness, and a track record of achieving impossible things.

That got me thinking about cover letters in general.

I’ve heard from several volunteers that they’ve offered their services to an organization they wanted to help, and then never heard back.  You’d think that should never happen, given the clear needs of nonprofits and the fact that people are offering something for free, but it can and does, most commonly because:

  • The offer went to the wrong person in the organization
  • The organization is not well set up to handle volunteers
  • The person you sent it to is too busy
  • Too many volunteers have been “flakes” and you’re lumped in with them

What goes into a good cover letter

A cover letter offering to volunteer isn’t that different from a cover letter applying for a job.  You need to:

  1. Convey your competence
  2. Convey your passion
  3. Outline the terms of the proposed engagement
  4. Give them a way to follow up

Busy, Busy!

Nonprofit people are, like the rest of us, busy people.  (Read “The ‘Busy’ Trap” Tim Kreider’s NY Times opinion piece if you haven’t…) So, help them out by:

  • Keeping the letter short, with everything they need in it (OK to attach a resume, but the letter should make your case on a stand-alone basis)
  • Proving you’re not a flake by showing you’ve done your homework on them

Excerpt from Giving Back on Approach Letters

Approaching the Organization as a Volunteer

Nonprofit staff members are busy people, and they may see your offer to help as more of a burden than blessing. Many cold calls that organizations receive result in their having to spend more time to assess, train, and coordinate the prospective volunteers than those volunteers give back before losing interest. You can help demonstrate you’re serious about your intended commitment by doing your homework first, and sending a well-written approach letter answering their key questions. If you can be introduced by someone who is already a friend to the organization, that’s even better. An impressive introductory letter will answer:

  • Why did you choose this cause and this organization?
  • What impressed you most about the organization?
  • What interactions have you had with the group so far?
  • How much time do you have? When?
  • What unique skills do you have?
  • What would you most like to do to help? Are there specific people or projects that sound most intriguing? (You may not get your first choice, or be able to work directly with the person whose biography you saw on the website, but these expressions of interest will help them match you up.)
  • Who does the organization know who knows you?
  • What’s the best way to reach you?
  • Do you intend to involve children in your volunteering? What are their ages?

Including a donation check along with your inquiry about volunteering is a sure way to be taken seriously.

A Sample Approach Letter

As if opening a time capsule, I was able to find an approach letter I wrote in 2004 to James Dailey, then the project manager for the Grameen Foundation’s project developing open-source software for microfinance. Although the URL to my background and interest is no longer active, the letter itself is a good example of an approach leading to a fruitful collaboration. I volunteered hundreds of hours that year for Grameen, using my technology background to help them write requirements documents and conduct an evaluation of software development firms.

From: Steve Ketchpel  
Sent: Friday, October 08, 2004 3:56 PM
To: James Dailey
Subject: MFI open-source software
Hello James,
 You’ve been recommended to me by a couple of different
 people: Peter Bladin and Robert Sassor. I’m starting a yearlong
 project at Stanford, and am interested in helping MFIs to scale through
 technology. From my research so far, it seems that back-office
 portfolio management software is a key step to increasing the capacity
 and attracting new capital (through securitization).
 I’ve seen the moap project (though haven’t had a lot of time to
 dive into all the details), and it looks like it hasn’t really attracted
 the critical mass of developers needed to make progress. I’d like to
 speak with you to see what your plans are relative to efforts in this
 Peter mentioned that you were going to be in Uganda for a couple
 weeks, so perhaps we can schedule some time when you return?
 A brief background on the project & on me can be found at
 If you have recommendations on people to speak with or resources
 that I should review in the meantime, I’d welcome the pointers.
Steven Ketchpel, Ph.D.
Reuters Digital Vision Fellow
Stanford University

Approach-Letter Exercise

Take the elements on the list preceding the sample letter, and craft an approach letter to your proposed organization. See if you can find the email address or direct phone number of the volunteer coordinator or executive director of the organization. If you’re ready, send your message and set events in motion for a fruitful giving-back partnership.

Book launch: T-1 month

Bottom Line:  I think the book should be out within a month.  I’m really excited–initial readers have been very positive.  I could use your help with a few decisions on the cover, and also with promotion.  If you could introduce me to journalists or others who could help spread the word, I’d definitely appreciate it.  I’m also considering whether to do a book launch tour, and would welcome suggestions for cities (better still, venues) I should come visit.

Things are coming together!

I got word today that my submission for cataloging to the Library of Congress had been approved.  I’d mentioned I was excited about the cover, so here it is!  The awesome pictures were taken by Jason Koenig of when he was on a trip with Construction for Change to visit their project in India building a Hospital for Hope, created by Stanford students and profiled in the book.  The picture of me was taken by my thesis advisor Hector Garcia Molina.

I have a few questions that I’d like your feedback on:

Title in Orange

Title in Blue

[polldaddy poll=6378084]
[polldaddy poll=6378088]

The quotes are still coming in, but so far:

Giving Back is exemplary in presenting solid how-to information that shows prospective volunteers and philanthropists how to chart a path that leads to personal satisfaction while doing good in the world.

— Bob Graham, Founder and CFO of Namaste Direct

Anyone who is serious about giving, or who wants to teach kids to be lifelong givers, should read Giving Back. I often find myself wanting to give, but I’m not always clear on how best to do it. Giving Back is a practical primer for moving from heart to hand. Not only does it provide great strategies and activities for effective giving; it also leads you through the process of creating a giving game plan. I came away from the book feeling both inspired and equipped to up my giving game.

— Paul Lamb, Nonprofit Consultant and Social Entrepreneur

Giving Back
starts families down the path of volunteering. The book is an invaluable guide for finding how you can contribute your time, unique skills, and money to effective organizations making a real difference. No matter what age your kids are, you’ll find excellent ideas for involving them in your giving or doing volunteering together. This book suggests ways to create great family experiences and memories by doing good together!

—Perla Ni, Founder and CEO, GreatNonprofits

Ketchpel’s Giving Back is the perfect guide for families who want to learn to volunteer and give together – with the details you’ll need to tailor expectations for any age level to engage in meaningful service. The magic of volunteering comes to life with captivating accounts of service and learning to inspire family conversations and plans. Giving Back models these Listening and Learning Conversations to help your family create the scaffolding for a family culture of reciprocity and connectedness – one that will nurture skill-building in children, and foster autonomy, responsibility and motivation in teens. Share this insightful book and change the world – one family at a time!

– Leif Erickson, Executive Director, Youth Community Service

Help with Promotion

After spending a year of my life writing it, I want to make sure that Giving Back doesn’t land with a thud, number 38,121,786 on the Amazon list.  So, yes, I’d love to get your help with promoting it.  A self-published work has an extra challenge (hard to get reviews published, e.g.) so I’d welcome your ideas and connections on how to break through.

  • Can you suggest / introduce journalists, bloggers, or other notable people who would be interested in learning about Giving Back and potentially sharing it with their audience?
  • What websites should I be sure to send the announcement to?
  • Both within and beyond the Bay Area, where should I go to do events (probably more like a 2 hour workshop/seminar than just a signing, but format still TBD)?  Do you know people who might like to help host/organize an event there?  Or have a suggestion for a venue I could contact?
  • How else should I prepare for the launch?
Add a comment or drop me an email to

Thank you!

LIBOR-fixing Scandal

Last Monday, I learned about the fraud around municipal bond dealings by major US banks and financial institutions (my blog entry about the original Rolling Stone article).  It was a pretty big deal, and left me disappointed with the state of ethics among the financial institutions, individual bankers who benefited personally and corporately and the management that permitted it.  I thought that it would be the  “once-in-a-decade” level misdeed, or perhaps even a “Watergate” moment that catalyzed the demand for punishment and reform.

I was wrong.

As I was praising Matt Taibbi for his work in uncovering and reporting on this, he (along with others) were digging up the details of a larger, more pervasive racket, whereby some (perhaps “many” or maybe “all”?) of the 16 largest banks charged with setting the LIBOR (London Interbank Offered Rate) were lying on their rates in order to make a greater profit or to appear to be in a stronger position than they actually were.  Barclays is the first bank to admit wrong-doing, and faces a $450 Million fine.  It is almost certain that other banks will be blamed as well.  The “misdeed of the decade” didn’t even hold the record for two weeks.

The LIBOR is a base rate upon which many financial products ($360 Trillion worth, according to the articles) are priced.  These include credit card rates and some mortgages–things that impact end consumers.  But beyond that, financial institutions have the responsibility to behave in accordance with law and regulations, and the type of manipulation carried out here is inconsistent with trust-worthiness.  What does it mean when banks cease to be trustworthy?

John Gapper, in an editorial in Financial Times called “Trading Floor Culture No Longer Acceptable”,  castigates the “if-you-don’t-get-caught-it-isn’t-wrong” mentality that seemed to have been rewarded in the banks’ trading operations, the breeding grounds for the current crop of chief executives.  He suggests:

An obvious start would be to clear out the investment bankers who now run universal banks… They may be honourable individuals but, as a group, they symbolise the relentless ascendancy of the securities trading floor.

“It would be a very good thing if an awful lot of people lost their jobs in a lot of banks,” says one former bank executive. “Not because I wish them ill but because only by making many examples will you get through to people that this is a very important business.”

He goes on to note that such an outcome is unlikely, given the entrenchment of such forces, their embedded nature in “too big to fail” institutions, and their being “remarkably immune to shame.”

Self-regulation appears not to be working.  The existing government regulation appears not to be working (in a timely fashion–these events appear to date back to 2005).  While $450 million sounds like a lot of money, Barclays made $9.1B in 2011, so the fine amounts to less than a nickel on each dollar of profit, for just one year, when it sounds like the larceny went on for five or six years.  We need greater accountability within the financial segment.  I favor a return of the Glass-Steagal act.  And maybe our legislators need a subscription to Rolling Stone to keep up with the latest financial investigative journalism.

Mission-Related Investing for the Rest of Us: Equity-like Assets (Part 5 of 5)

Bottom Line:  Investing for growth is much harder in the impact world.  Crowd-sourced equity investments are coming, but aren’t an adequate substitute for index mutual funds or ETF’s.  Local/social equity investments are best viewed as similar to private equity: a small fraction of a diversified portfolio, willingly taking  a higher risk to chase a higher return.  (Remembering here, that the “return” is a combination of financial and social.)

Mission Related Investing for the Rest of Us series:

  1. Part 1:  Motivation  (Using your investments to earn a “social,” values-based, return as well as a financial one)
  2. Part 2:  Background & Investing Theory (Where I’m coming from, and how I used to think about investing)
  3. Part 3:  Banking and Cash Alternatives
  4. Part 4:  Bond-like Alternatives
  5. Part 5:  Stock-like Alternatives

How I currently invest in equities (mostly)

As I mentioned in Part 2, my belief in the Efficient Market Hypothesis means that I’m not trying to “beat the market” with my stock picks, and instead, I choose the cheapest way I can get the very broadest exposure possible, (the Vanguard Total Market Index ETF, (VTI)).  That’s about as far from favoring my local community as possible.

Socially Responsible Investing

The basic level of making sure that your stock investments line up with your values is ensuring that you aren’t invested in companies whose business or business practices you find objectionable.  Advisors tend to talk about “screens” for alcohol and tobacco, but other industries like military/defense, mining, or companies that have engaged in questionable financial practices or exploitation of their customers (pay day loans, e.g. or the “too big to fail” banks that steered minorities into mortgages that were not the best fit/rate for which they were eligible.)

There are mutual funds that perform this research and ensure that their holdings meet the criteria described in the prospectus.  See, for example, the list maintained at

Going beyond the “negative screens”, you can proactively choose to invest in sectors that you feel will pay off for society if they succeed.  Alternative energy investments are an example here, and the socialfunds list includes them as well.  The returns over the recent history have not been pretty–make sure you are comfortable that the money you are investing can be subject to the risk that is inherent in these investments.

“HIP” Investing

R. Paul Herman has coined the term “HIP” investing to talk about “Human Impact + Profit” investments.  While his writings cover the whole spectrum of this 5-part series, (he’s excerpted his book in a 25(!) part series on Triple Pundit), the focus is on equity investing, and finding companies that will excel based on their commitment to key values:

  • Health
  • Wealth (generating it for the customers)
  • Earth
  • Equality
  • Trust

Within each of these values, he lists demonstrable metrics, and provides a scorecard for rating companies and benchmarking industries.  (A lighter-weight “HIP Check” is available for free on their site.)  Herman’s thesis is that abiding by these values offers a competitive advantage, and therefore, companies that score well on the HIP metrics will also outperform financially.  He connects the dots for some of the examples, showing how the savings in reduction of waste accrue to the bottom line, and compares the return of the HIP fund against two others (a “vice” fund and a socially responsible fund) for a 5-year period ending June 2009, and shows that it has the highest return of the 3.  This was an especially volatile period, so is perhaps not the best to extrapolate from, but worth noting his results.


Since equity  investments tend to be riskier and harder to evaluate, the government tries to protect prospective investors.  The laws requiring security registration and prohibiting the advertising of unregistered securities do provide protection, but they also greatly limit the opportunity for smaller companies to raise equity capital.  Generally, a company can sell unregistered securities only to “accredited” investors (those with a net worth of $1M+, not counting their primary home, or annual income of $200K+ individual, $300K+ married), or a small number of “friends and family.”  But here again, the combination of risk and low-deal flow makes investing in these types of deals (often called “angel investing”) are appropriate only for a small portion of your portfolio, more akin to lottery tickets than the average growth upward over time of an investment in the broad market indices (and re-investment of dividends, which makes a big difference when compounded over the years.)


One aspect of the investing landscape that is changing with the passage of President Obama’s JOBS acts is the permission of companies to raise a moderate amount of capital (up to $1 million) without registering the security.  There will be limits on the amount that individuals can invest per year, and it remains to be seen how it will be implemented (the SEC is supposed to propose rules by January 2013), but there is some chance that it will transform equity raising for small companies in the way that Kiva has transformed fund raising for microcredit.  There are certainly plenty of companies that would like to be the platform upon which such investments are made.  Realistically, though, with the limits and uncertainty, crowdfunding isn’t a feasible investment vehicle today, and won’t be for some time to come.

Update:  Here’s a nice blog status report on the SEC process by Crowd Check:

Mission-Related Investing for the Rest of Us: Bond-like Assets (Part 4 of 5)

Bottom Line:  With a little extra effort, you can lend your money to organizations or people for housing, creating new businesses or education.  You can pick your cause, your geography, and in some cases, even the borrower him/herself.  You may get additional information about the social impact that your loan has, and you can still earn interest.  Some of these loans have a higher risk of default, so understand what the issuers are doing to protect you from a loss.  It won’t be the same as an FDIC-guaranteed investment.

Mission Related Investing for the Rest of Us series:

  1. Part 1:  Motivation  (Using your investments to earn a “social,” values-based, return as well as a financial one)
  2. Part 2:  Background & Investing Theory (Where I’m coming from, and how I used to think about investing)
  3. Part 3:  Banking and Cash Alternatives
  4. Part 4:  Bond-like Alternatives
  5. Part 5:  Stock-like Alternatives
[See bottom of post for a brief intro to bonds.]
Also, Paul Herman of HIP Investor has a related post (“Loaning your Money For Impact Can Also Generate Income”) well worth reading.

Bond Mutual Funds

For most people, probably the easiest way to invest in bonds is through a bond mutual fund.  I’d followed the path of least resistance, and ended up choosing the tax-free bond fund for California residents, offered by Fidelity (FCTFX).  Not that much thought had gone into the choice, but I was steadily earning and reinvesting the dividends, growing at a tax-equivalent rate of 4.3%.  The money was ultimately funding California municipal projects.  Not bad, but perhaps opportunities to do better.

Andy Loving of Just Money Advisors prepared a list of socially responsible investments which included Community Capital Management’s Reinvestment Act Qualified Investment Fund (CRATX).  In an article in Financial Advisor Magazine, he said “If you want something that’s earning a good return with safety and going good here in the U.S., you’d be hard-pressed to find something better…” It was something I could easily purchase in my existing Fidelity brokerage account, and I did.  Here most of the money goes into GNMA and FNMA mortgages, although only ones that are Community Redevelopment Act (CRA) eligible.  Interestingly, because of this higher level of due diligence, the fund actually had fewer of the “toxic assets” when the mortgage market melted down.

But even here, I question the impact that my investment has:  if I’m just buying bonds of already existing mortgages, does that really get more people into houses?  Perhaps, if that then means that GNMA has more money to lend.  But there is a level of indirection, and there’s the question of whether home ownership is really the right step for moving people out of poverty.  The F.B. Heron Foundation recently made some waves when it issued a new strategic plan including the statement: “We have also concluded that owning fixed assets is important to an individual’s longer-term prosperity only insofar as jobs and income are steady and reliable.” (Italics added)  In other words, a house might be a good investment and avenue to long term wealth generation, but only if you have a job that lets you pay the mortgage.

Community Notes

Where else can you put money to get a favorable return while doing good?  The Calvert Foundation offers Community Investment Notes, in $1,000 increments for periods of 1-5 years.  The longer the time, the higher the rate, up to a  maximum of 2% (current, 6/30/2012).  The money is loaned (100% of it) to approved community groups that have different geographic and cause focuses (microcredit, jobs creation, home ownership, etc.).  Calvert has reserves set aside to cover (some of) the risk, and their site states that no investor has lost money in the community notes.  The notes can be purchased either directly from Calvert or through a broker (or Microplace, see below).

Oikocredit has Global Community Notes, similar in concept, which may be purchased directly through Oikocredit in increments of $250 (or Microplace for smaller amounts, see below).  The bulk (79% at the time the prospectus was written) of these notes are invested in global microcredit funds.  The notes pay 0-2% depending on the term.

For members of the United Church of Christ, the Cornerstone Fund is an investment that loans money out to church construction projects (which can have a hard time finding traditional funding, since banks generally don’t loan to places they wouldn’t be willing to foreclose on…) Interest rates are fairly attractive, starting off higher than the other community notes, though not rising as quickly into the longer maturities.  These funds are not federally insured, and while they do have reserves against losses similar to those of Oikocredit or Calvert, the concentration risk is greater (e.g., a scandal in the UCC that caused a “run” on funds, or steep drop in church membership that impacted the borrowing churches’ ability to re-pay.)

Social Impact Bonds

After philanthropic organizations have invested the risk-capital to prove that an idea works, and even saves money in the long run, where does the capital come from to invest in that idea today?  In general, foundations need to preserve their “risk” capital to try other fresh ideas, and don’t have enough to reach scale with these programs anyway.  The government is already over-committed to existing programs.  Social investors  can step in to the gap with a Social Impact Bond, with the returns being based on achieved savings.  This Forbes interview with Laura Callahan summarizes her longer report from McKinsey.  Although Bridgespan partner Daniel Stid remains a skeptic, based on the challenges.

Local Co-ops

Did you know that .coop is a top-level domain (like .com or .edu)?  There are some 29,000 co-ops in the US with $654 Billion in revenue, and 2 million jobs (stats from Amy Cortese’s book  which  features a chapter on Cooperatives).  Some business cooperatives raise capital from members, offering a return in the form of dividends.  In this limited case (only from members, typically within one state) securities do not need to be registered as they would more broadly.  The examples she gives of the largest co-ops are from Europe, while the ones that you might invest in are generally much smaller, local affairs such as groceries, farms, or pubs.

Searching out investment opportunities can be a challenge, but if you want to support co-ops, there is a Community Development Financial Institution (see Part 3) that invests in co-ops.  The Cooperative Fund of New England offers you the chance to name your own return between 0-2%, provided you’re investing at least $1,000 for at least 1 year.  Although the securities are not federally insured, the Fund says that several of the co-op investors have agreed to take the first losses as a way to protect other (retail) investors.


Most of finance has been about aggregating individuals to diversify risk.  If one fails to repay, it’s a small loss that, shared among many investors, isn’t too painful.  One interesting trend in social investing, is to bring back the individual.  Websites like Microplace, Kiva,  and Prosper feature the profiles of individuals, and an investor chooses one (or more) to invest in.  Of course, the investor can choose to diversify herself by investing a small amount in several individuals.  Choosing at the individual level lets the investor make a strong personal connection (especially rewarding in an “impact”-focused rather than financially-focused investment).   Although similar in concept, with each site listing borrowers along with their intended usage of loan proceeds, the three sites fill distinct niches:

  • Kiva does not pay interest.  This removes the need to be treated as a security.  You loan money to one of the borrowers profiled (through one of Kiva’s partner microfinance institutions–Kiva does not manage the loans themselves.)  When (if) the loan is paid back, you have the option of getting your money back or loaning it to someone else in the system.  You are not donating the money to the borrowers (many of whom are inspiring micro-entrepreneurs in very needy parts of the world), but you are loaning it to them.  They are obligated to pay you back, and a very high majority do.  (98.97% of dollars are repaid, as of 6/30/2012)
  • Microplace does pay interest (typically in the 2-3% range).  With each borrower profile is the amount of interest he or she is offering (really, the MFI is offering on his or her behalf).  Here again, you have the opportunity to either pull your money out or roll it over with another borrower when the first loan is repaid.  Also, both Calvert and Oikocredit offer versions of their Community Investment Notes for sale through Microplace.  With PayPal handling all of the transactions digitally, they are able to offer lower minimum buy-ins of just $20, instead of the $1,000 and $250 minimums required for direct purchase through Calvert or Oikocredit.
  • Prosper is less concerned with the social impact aspect, and is just a marketplace for peer-to-peer lending.  The borrowers put up their own descriptions, along with some credit history information that Prosper turns into a risk rating.  Interest rates can be very high (30%+) for risky borrowers.  You can find listings to help start or grow businesses here, but there are also loan consolidation, wedding loans, home improvement loans, etc.  Substantial risks of default, but high potential return compensating for the risks.

Bonds, A primer

A bond is an investment where you have loaned money (to a company or government) and you are entitled to a stream of interest payments for a certain duration, after which  your loan is returned.  This right to receive income and return of principal may be sold, so there is also the notion that the bond has a price, which may be fluctuating over time as demand for the secure payment goes up (typically in an environment where the other investment alternatives look too risky) or down (when investments in stocks look to bring good returns).  There is some risk that the company or government that took the loan can’t make the contractual payments, and defaults instead.  If investors believe that there is default risk, they will demand a higher interest payment when the bond is issued, or trade it at a discount to face value after it is issued. Certain government bonds are tax free at national or state level or both.

Overall, bonds tend to be more stable than stocks, with a predictable income stream, so are recommended for investors with a lower risk tolerance.  Bonds blended with stocks provide added stability for a portfolio, at a slight reduction in expected return.

A Statement of Purpose and Your Giving Style

I got a remarkable gift today.

In an email exchange with a good friend I’ve known for nearly 30 years, Dave Minifie.  He described his personal purpose statement “to make the people around [him] better,” a credo he put into practice through coaching, being a Scouting leader, being part of a community of practice writing about marketing, acting as a mentor in corporate settings, and also “Peer Mentoring” in more informal settings.

I was forced to admit that I couldn’t clearly articulate my own Personal Statement of Purpose.  I’d certainly thought about what causes and organizations were important to me (for example, with the Three Questions exercise) but translating that into a Personal Statement of Purpose was something I’d been fuzzy about.  As I was debating whether to write the book Giving Back, another friend helped me focus, and probably got as close as I had to a Statement of Purpose.

So, today, after my wishy-washy first attempt, my peer-mentoring friend stepped in.  He offered his branding expertise from Procter and Gamble and beyond, and suggested:

Steve nurtures people with good ideas, so they can improve the world.”

That definitely struck home for me:

  • It’s about the end goal:  improving the world.
  • It’s about what other people can do, not me directly: “so they can improve…”
  • It’s about ideas: “people with good ideas”
  • It’s a somewhat indirect relationship:  “nurturing” (not assisting, or helping)

I believe that this gives me a leveraged way to have a larger impact:  providing encouragement, a sounding board, analysis and connections for motivated people who already have the desire to do something big.

He summed it up in one word:


This felt like a great description of what I aim to do, and I was grateful for this long association that provided the context for my friend to reach this description.

Giving Back is clearly an important part of my Statement of Purpose, and so it seemed appropriate to learn more about my giving style.

provides a simple tool (an 8-question survey) to assess your WiserGiving style with respect to six different approaches:

  1. Building Movements
  2. Direct Services
  3. Making Changes Stick
  4. Increasing Effectiveness
  5. Public Policy
  6. Research and Big Ideas

My results came back showing I favor a diversity of approaches (1 primary, 3 secondary out of 6 types total…)

My primary type was the last one:  Research and Big Ideas.

While I know that these “self-discovery” quizzes are popular on the internet, I also know that many of them are vacuous, with the result being not much better than a horoscope, vague enough that you see some aspect of yourself in them, and some portion of the prediction is bound to come true.

Here, I give kudos to the WiserGiving team, I think they did a good job of creating distinct giving archetypes and providing assessments that were not just descriptive, but also prescriptive:  what should people predisposed to this Giving Style do in order to be true to their type (and more likely to feel fulfilled by the giving they do?)

So, I was impressed with my GivingStyle results.  My friend of 30 years was able to come up with a spot-on statement of purpose and an accurate summary, but for a 8-question, 5 minute survey to come up with:

  • Primary:  Research and Big Ideas
  • Secondary:  Increasing Effectiveness
  • Secondary:  Direct Giving
  • Secondary:  Making change stick
which strikes me as not bad at all…

“Your dominant WiserGiving Style is Research and Big Ideas, which focuses on increasing knowledge and applying resulting insights to innovative strategies and solutions. You have three secondary WiserGiving Styles: Direct Services, which focuses on the individual as the agent of social change; Making Change Stick, which protects hard-won gains achieved in the legal and public opinion arenas; andIncreasing Effectiveness of organizations, which strives to strengthen an organization so that it can better perform its mission, exert greater impact, and be increasingly sustainable over the long term. This combination of strategies reflects a diverse, multifaceted approach that addresses the short-term needs of individuals while creating long-term sustainable change by investing in organizational capacity, awareness, education, advocacy, and public policy.”

For each of these styles, WiserGiving offers a longer description and implications–make sure you click the “more” link to see these suggestions, which provide the most value of the quiz.

The Giving Style tool is the first feature of the web site.  I got a chance to meet with the team as they were starting to build out their vision, and know that they have more great things in store.  Congratulations to Liz, Karen, Peggy, Eugene, Amanda, Eric, and the rest of you I haven’t met (yet)!  I look forward to seeing the site and community develop.

So, I encourage you to give some thought to your own personal statement of purpose, think about the causes and organizations you are passionate about, and learn your Giving Style to align all of them into a fulfilling practice of giving back.

The Bond Market, Rolling Stone, and Feeling Let Down

Bottom Line:  Matt Taibbi of The Rolling Stone has broken a powerful story about fraud (“fixing” auctions in the municipal bond market) by big investment banks stealing from municipalities.  It also implicates politicians accepting bribes.   It’s worth a read, and also asking “Why are we hearing about this through an entertainment magazine and not the financial press?”

[I’m still working on the “Alternatives with a Social Return for your Bond Investments” post as part of my Mission Related Investing for the Rest of Us series, but this post preempted that one.]

Image from the original article

Image from the original article

The Rolling Stone has a powerful financial investigative journalism piece in the July 5, 2012 issue called “The Scam Wall Street Learned From the Mafia.”  It details a trial in New York with the conviction of 3 “bit players” in what appears to be a routine practice among the larger investment banks (“not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more”) of fixing the bids on the interest rates that the banks offered cities and states across the country for the bonds they sold on the cities’ behalf.  Instead of letting the highest bidder win, the banks conducting the auction would provide guidance to the bidders, telling them the minimum bid they would need to win the auction, and in other cases, asking potential bidders not to submit real bids (in exchange for the opportunity to win an uncontested auction elsewhere).  The winning bidders would provide kickbacks to the banks on unrelated transactions.

Given the size of these dollar amounts, even a small rate difference (the examples in the article were about .04%) makes a huge dollar difference, money taken straight from the depressed city coffers, fattening the profits of these banks.  The article makes the point that it was so common that the bankers had even stopped remembering it was wrong.  They carried on discussions on phone calls they knew to be taped.  Even the defense at the trial was something along the lines of “Hey, maybe this was the fair price.  How do you know?”

So, today I’m feeling let down:

  • Let down that the banks would resort to this level of criminality.  (Here, I especially include GE, in which I am a shareholder.)
  • Let down by the financial press and mainstream media.  Why am I hearing about this through The Rolling Stone?  Can the entertainment press really do a better job of covering financial investigative stories?  Maybe they can.  Author Matt Taibbi’s previous article on “The Real Housewives of Wall Street” was another memorable expose on people with dubious credentials claiming TARP funds.
  • Let down by Bill Richardson, former Governor of New Mexico and Democratic Presidential candidate.  He is cited in the article as taking $100,000 in campaign contributions (to his PAC) and subsequently awarding $1M contract to the firm  (“Tell the big guy I’m going to hire you guys,”) while paying a second firm to actually do the work.  I’d met Gov. Richardson on the campaign trail, and been impressed enough to make a contribution to his campaign.  Guess I am not the best judge of character.

Changes to make things better

  1. Public funding of campaigns (whoa, subliminal slip there….  I’d originally typed “auctions”).  The Richardson example is yet another of how the need for campaign fund raising is corrupting the business of government.
  2. Stronger enforcement of these laws, with greater penalties to the banks (and potentially splitting them up so that if we needed to wind down a bank because of its criminal behavior it can’t claim that doing so would pull the economy down with it.)  Personal liability needs to be increased somehow as well, though I’m not sure how.
  3. Moving to a different/more transparent auction format.  “Sealed bid, highest bidder wins” auctions can be subject to strategic bidding with companies understating their real value in order to try to minimize the price they pay for a winning bid.  If they understate it by too much, they can end up losing to a firm that values it lower.  Google uses a second price bid system for their Adwords.  Under that scheme, each bidder has the incentive to bid his or her true value for the good, knowing that whether they win depends on that, but the price paid depends on the competitive bidders’ values.  Ironically, the bid shaving described in the article is almost the same effect that moving to a second price auction would have (the winning bidder would pay the price of the second highest bidder).  EXCEPT:  1)  The firms need to know the rules of the auction so that they submit their real values as bids and 2)  NO WAY should some priviliged bidders be permitted to see the bids of others prior to the close of the auction.

Mission-Related Investing for the Rest of Us: Banking (Part 3 of 5)

Bottom Line:  The money you have sitting at your bank (savings, checking, CD’s) is being loaned out as mortgages, business loans, etc., and is generating interest from those loans, some of which is paid to you, some of which is profit to the shareholders.  When you consider where you want to bank, in addition to security, convenience, and service, also think about where you would like to see your bank lend out your money, and who you would like to profit from it.

  • If you’d rather have the money available as loans to your own community, consider a local community bank or credit union.   Try looking here, though this list really stretches the definition of “community” (under $65 billion, Amy Cortese defines it as < $1B in Locavesting)
  •  If you’d like to benefit a historically disadvantaged community, consider a Community Development Fund Institution in those communities.  Find one here.
  • If you would like to have the profits of your financial institution’s operations shared with you and other members by way of better rates, consider a credit union.  Find one here.
  • If convenience is your top value, then maybe one of the national “Too Big To Fail” banks is your best bet.

Mission Related Investing for the Rest of Us series:

  1. Part 1:  Motivation  (Using your investments to earn a “social,” values-based, return as well as a financial one)
  2. Part 2:  Background & Investing Theory (Where I’m coming from, and how I used to think about investing)
  3. Part 3:  Banking and Cash Alternatives
  4. Part 4:  Bond-like Alternatives
  5. Part 5:  Stock-like Alternatives


I have been a customer of long-standing with Wells Fargo.  Nearly 20 years ago, when I moved to Stanford, I opened an account with them, mainly for the convenience.  They had a branch on campus, a wide ATM network, provided free checking and credit card with decent perks.  Over the years, I’ve stuck with them, based mostly on inertia.  Sure, they pay almost nothing in interest today, but changing to a different bank for a slightly higher rate would be a hassle.  I haven’t required much in the way of additional services, and the few things I have needed (safe deposit box, wiring money internationally) they’ve been able to provide.  Their customer service has been all right, and I think has gotten better in the last couple years as they’ve implemented a new CRM system so that each person you deal with sees the full picture of your Wells Fargo relationship.

Not long after signing on with Wells Fargo, I opted to open a brokerage account with Fidelity.  Again, convenience, breadth of offerings, and reputation entered into my consideration, and they have continued to earn my business over the years, with nice online tools, a great Donor Advised Fund account, and ATM fee rebates.

Current Banking Selection Criteria:

  • Convenience / Access (distance to closest branches, online presence, number of branches/ATMs)
  • Breadth of offerings
  • Service
  • Reputation

The Challenge

Recent discussions and readings have led me to ask myself whether my investments match my values.  Paul Herman’s article “Where does your cash sleep at night?” was one that not only raised the questions, but offered some specific alternatives.  “Your money can be your voice,” he writes.  Do I want my deposits going to a bank that is practicing investment banking and buying investments rather than making loans?

Chapter 5 of Amy Cortese’s Locavesting also talks about the advantages of credit unions and local banks.   Institute for Local Self-Reliance’s “Top 5 reasons to choose a local bank or credit union” added fuel to the fire.  While some of the other financial moves potential expose you to greater risk, this one doesn’t:  you have the same or equivalent insurance, and you can actually expect higher interest.  These credit unions and local banks are not top of mind, because they aren’t spending millions on marketing, but with a bit of research, you can find some very attractive alternatives.


Community Banks:

A community bank is just a smaller, local version of your “Too Big To Fail” national bank.  Deposits are FDIC insured, and they are likely to offer the same basic services:  checking and savings accounts, credit cards, safe deposit boxes, mortgages, personal or auto loans, and CD’s.  They will probably have a smaller number of branches, and few of their own ATM’s, though you will likely be part of a network that gives you access to ATMs across the country for a modest fee.

The main advantage of a community bank is that your money stays within the community (your deposits are more likely to be loaned out to someone locally, and the bank’s profit is more likely to accrue to local investors).  Community banks are more likely to emphasize friendly customer service.  Compared to a national bank, the rates are likely to be comparable or slightly better.  They are less likely to have more arcane services, but you may be surprised:  my hometown bank offers health savings accounts.

Credit Unions:

A credit union is a not-for-profit financial institution which is owned by its members (you become a member when you open your first account).  Credit unions typically have some criterion for membership:  they might be open to employees of a certain company, students/alumni of a certain school, professionals in a certain occupation, or people living in a certain county.   Credit union accounts are not FDIC-insured.  Instead, there’s a different government agency, the National Credit Union Administration ( that provides a comparable level of deposit insurance.

Since credit unions are not out to make a profit, their rates are typically more favorable to the customer.  They offer higher interest rates paid for deposits that the customer makes, and charge lower rates when the customer borrows money.  A comparison provided by SNL Datatrac for December 2011 (the most recent readily available at shows that Credit Unions pay about 25% more interest:  a regular savings account at a bank paid 0.16%, compared to a credit union where it paid 0.21%.  A 60-month loan for a new car would cost 4.98% at the average national bank, but only 3.55% at a credit union.  The exception was home mortgages, where national banks’ interest rates came in slightly cheaper than credit unions (though it would be interesting to see if that comparison holds when points/fees are added to the picture.)

Community Development Fund Institutions (CDFI’s):

Not to be confused with a community bank, a CDFI explicitly trades off profit motivation for the social return of improving the community.  A CDFI could be a bank or a credit union (subject to the regulations of either type).  They are typically chartered for communities that have been “historically denied access to capital by traditional financial institutions” (definition from Forum for Sustainable and Responsible Investing) and offer basic financial services to the community.  The advent of online banking means that you don’t need to be physically in the community in order to conduct your banking business with the institution.

CDFI banks are FDIC-insured, which was relevant recently, when the poster-child of CDFI banks, ShoreBank, became insolvent due to over-extension in questionable real estate loans.  A group of investors re-capitalized the bank as Urban Partnership Bank, and covered 20% of the losses, with the FDIC covering the rest, so depositors didn’t lose money (up to the limits of FDIC insurance).   This bankruptcy does highlight the risk of banking with a CDFI, but on the other hand, plenty of regular banks ran into equivalent trouble.

Making the Move

If you do decide to switch your primary banking affiliation (or even create a secondary one that holds a portion of your assets for a social return), the “Move Your Money Project” (an outgrowth of the Occupy Movement) offers a checklist to help you plan your move.  I’ll have to admit that I’m still in the planning stages, but will likely switch to the Stanford Credit Union.