The Stories We Can Tell Without Data

A few weeks ago, Bloomberg published two scathing articles about the microfinance industry. The articles asserted that major investors—both public and private—are making massive profits through their investments in microfinance, while the industry systematically hurts borrowers. The article begins:

Suicides, debtors’ prisons and delinquent borrowers forced to sell their land—the grim social costs linked to microfinance a decade ago were supposed to be a relic of the past. But efforts to clean up the industry lost momentum, and today billions of dollars are flooding into a system that promises the world’s poor a better life while often compounding their misery.

As I shared in an article I posted on LinkedIn yesterday, the claims in this article are not supported by the data.

Most Impact Reports Are Nothing More Than Stories

How could this be?

It’s because this article falls into an all-too-common trap: relying on robust, objective data sets to profile the financial returns to microfinance investors; and resorting to a handful of interviews and case studies of borrowers, plus a number of expert interviews, to paint the story of social impact.

The question we must ask is: how can it possibly be that, in 2022, the social impact of an industry that reaches more than 140 million clients can credibly be assessed from a few dozen client interviews?

And the answer is: because this is common, accepted practice for assessing most social impact.

For most investors, even those who have a stated intention to create social impact, the “assessment” of this impact is a storytelling exercise. These stories are often based on a handful of anecdotes or case studies, which might include conversations with a small number of customers.

Indeed, if you pick up an annual social impact report from most investors or companies, what you’ll have in your hands is, most likely, a narrative exercise devoid of first-hand data.

So, it is no great surprise that microfinance—a well-established, well-respected sector in social investment—has fallen victim to this same sort of storytelling exercise…only this time, the individual case studies paint a particularly troubling picture of the industry.

Better Social Data is Available in Microfinance

My response to the Bloomberg article points out that there is, in fact, a massive dataset that captures the lived experience of nearly 18,000 microfinance clients who represent 25 million microfinance customers.

This dataset, gathered by the company I run, 60 Decibels, shows that microfinance is creating positive outcomes for the vast majority of borrowers:

Nearly three in four of the clients we spoke to said that their loan repayments are “not a problem”…. Seven in 10 of these clients credit their microfinance institution with helping them strengthen their financial resilience, meaning that they are better able to face a major expense. Four in five clients told us their lives are improved thanks to access to microfinance, with a subset of these, one in three, saying their lives are ’very much improved.’ Similarly, four in five clients say they are better able to reach their financial goals thanks to microfinance.

The dataset also shows that, for a small subset of microfinance customers, their microfinance loans are indeed a burden, that their repayments are causing major strain on their well-being, and that their lives are worse, not better, because of their microfinance loans.

The point is: like most financial products, microfinance has the potential to create both benefit and harm. How the service is delivered, and, in particular, product design and client protection practices, play major roles in determining the impact of this product on the lives of millions of customers.

Of course, this more nuanced version of the story doesn’t make for flashy headlines. Then again, we shouldn’t be surprised that the microfinance industry, or any industry that aims to create social impact, would be vulnerable to such a story being written.

Until we set a new standard, one in which regularly collected, objective, comparable, quantifiable social impact data is expected for anyone claiming to create social impact, we will remain an industry that relies on storytelling.

You can read my full article here.

Better Data Doesn’t Give You the Answers

I run a data company, and I’m often asked, when speaking to a new client, what our customers do differently because of the data.

The implication often seems to be:

Before they didn’t have the data, so they were doing one thing.

Now, they have the data, so presumably they’re doing another thing.

Of course, we have plenty of examples of concrete changes that clients have made when they get our data, as in:

A solar home system company learned that a huge proportion of customers were experiencing product defects and poor after-sales support…so the company reinvented after-sales support and addressed the issue, and saw massive improvements in both customer satisfaction and social impact metrics.

But the more nuanced answer is this: the immediate actions companies and funds take, when we get them new data, are largely focused on the biggest, most surprising, or most troubling findings—the headlines.

Beyond that, what the data allow them to do is to ask a new and better set of questions.

The Path from Ignorance to Clarity is Not Flat

Our misconception is that we think we can go directly from ignorance to clarity (the drawing on the left).

In reality, for any topic that matters, as we learn more we embark on a journey. Over time, we will climb a mountain of increased complexity—with new insight, new inquiry, new investigation—until ultimately, after a great deal of focused attention, we begin seeing the world more clearly and, ultimately, arrive at deeper understanding and the simplicity that we seek.

Social and Environmental Impact Measurement Isn’t Simple, Yet

I often hear the concern, in conversations about social impact measurement and ESG, that “this social and environmental stuff is all awfully complex, isn’t it?”

This effective defense mechanism communicates, “I’m all for measuring my social impact, it’s just that it’s too much right now. Once it’s simplified, I’ll get on board and take it seriously.”

And yet, the person finding social impact measurement or ESG too complex is the same person who undoubtedly manages tremendous complexity in other areas of their professional life. Why, even the most simplified presentation of an income statement, cashflow and balance sheet is mystifying to most folks. Just look at this:

So the question isn’t whether something is simple or complex. The question is whether a domain is important enough to merit sustained time, effort, and spirit of inquiry to scale the Peaks of Complexity.

Coming back to social and environmental impact, my take is that the trillions of dollars flowing into ESG, and the pressure on brands to differentiate themselves for their social and environmental stewardship, speak for themselves.

The question isn’t whether sophisticated data and a nuanced understanding are needed.

The question is who will start on this journey first, thereby establishing an insurmountable lead on those who are happy to dawdle at the base of the mountain, in search of a way around or through.

It also helps to remember that a desire for quick and easy answers is nothing new. If anything, it is a normal and natural outgrowth of the beginning of every journey. If we’ve never walked a path before, we’ve no idea what it’s going to be like: we don’t know how high the mountain goes, how much jungle we’ll have to hack through, whether bad weather will come our way.

But the unavoidable, optimistic truth is that, should we walk this path we will, inevitably, arrive at better questions, deeper insight and, ultimately, the simplicity we are seeking.


Why We Need Impact Performance Data

Last week, I published an article in Stanford Social Innovation Review (SSIR) together with Tom, Lindsay and Devin from the 60 Decibels team.

Here it is: This is Not an Impact Performance Report.

The article explains why we think it’s so important to listen to customers, beneficiaries and producers if we aim to create and understand social impact. And it argues that we must have a performance mindset when it comes to social impact – differentiating between best and worst performers, and always looking to learn and improve.

It’s hard to overstate the accelerated focus and energy around social impact and ESG investing these days. A investor friend of mine just sent me the special report that Pensions and Investments Magazine did on impact investing. This report profiles everything from what “impact investing” means to how to measure impact. This work is going mainstream in a big way.

While the issue of what and how to measure might seem esoteric or even complex, it needn’t be. Indeed, what we argue for is blindingly simple: if the well-being of human beings is part of your social impact thesis, you can’t know if you’re having social impact without hearing directly from those human beings.

That may seem obvious, but it is far from standard practice.

In fact, most impact investors rely on “triangulation” of their social impact: find a study of a business or intervention that looks similar to your business / investment. Then assume that its impact can be applied to your business / investment. This approach often misstates the impact created and it, by definition, makes it impossible to distinguish impact performance of different businesses.

Here’s the opening of our SSIR article. I hope you jump over to their site and read the whole thing.

In a world of increasing transparency, we expect that what’s on the label will reflect what’s inside the package. This is as true for an “organic, cage-free” label on a carton of eggs as it is for a B Corporation Certification or a fund categorized as “ESG.” These terms communicate something specific to the buyer. Their credibility rests on whether what’s on the label is consistent with the product itself.

(Keep reading)

Looking for a U.S. sales lead for 60 Decibels

Hello blog readers, I’d like to ask for your help.

I’m looking to hire someone to work directly with me to lead up U.S. sales for 60 Decibels.

As a regular reader of this blog, you’ll know that 60 Decibels is the company Tom Adams and I co-founded last year to make social impact measurement fast, nimble and useful to the people working to create social change. Our goal is to put the voice of the customer back where it belongs: at the heart of social impact measurement.

We’ve had a great first year. We are working with some of the most dynamic, forward-thinking investors, companies and nonprofits around the world. In 2019 we spoke to more than 50,000 customers in more than 30 countries, delivering more than 200 Lean Data projects. We have a 30+ person team based in four countries. We work hard and we believe in what we’re doing.

The real secret to our success is a handful of loyal customers who show up as true partners. They push us to do our best work. They have high standards and ask us to keep raising the bar. And, quietly but consistently, they support our success by spreading the word to others about the good work that we do.

The salesperson I’d like to work with understands that this is the only approach to build something that lasts: client by client, day by day, doing work worth talking about.

The person we’re looking for has personal experience with social impact measurement. She might have gained this experience working as an impact investor, a philanthropic funder, or a social entrepreneur; or maybe she’s worked to provide impact measurement solutions to those sorts of organizations. Regardless of her specific path, she has significant first-hand experience with the problem we’re trying to solve. She’ll also understand that great selling starts with passionately believing in an idea. She’ll be an effective storyteller, always be looking to learn, and demonstrates all the hustle, resilience, and sense of humor that are the hallmarks of any great professional.

As a regular reader of this blog, I’m guessing you have a sense of the kind of person I’m looking for. Above all, I hope it’s clear how personally I take my work, the values I try to bring to it every day (reflected in our 60 Decibels values), and my willingness to share when I’ve gotten things right and when I’ve fallen short.

I believe that this sort of grounded authenticity is what ultimately empowers us to enlist others in our shared mission of making the world a better place.

The full job spec is here, and people can apply directly for the job here.

Applications close on February 15th, but I’ll start reviewing applications immediately, so don’t delay.

Should We Boil Social Impact Down to One Number?

Kenya clinic blood pressure
Image source: The Kenyan Experience in Combating Non-Communicable Diseases, 2013

No, we should not.

Let me tell you why, with a story about how we keep track of our health.

Last week I attended the Financial Times Investing for Good USA Conference in New York. If you haven’t noticed, the FT is taking seriously the shift towards using money as a force for good. Their Moral Money reporting is getting a lot of column space and resources—they even have a newsletter (part of a paid FT subscription) with lots of great content.

During Q&A at the social impact measurement panel at this conference, a woman in the audience, sounding exasperated, asked whether social impact is like health: is it something so nuanced and complex that we can never fully understand it in a simple, clear and comparable fashion?

The implication seemed to be that until we can boil social impact down to a single number, like IRR, we can never really understand it.

I love the health analogy, but I disagree wholeheartedly with the conclusion.

How Do We Measure Health?

Let’s think for a moment about how we measure health. While a person’s health is complex, there are some basic, universal measures that indicate well-being: blood pressure, resting heart rate, BMI, cholesterol levels, respiratory function, and so on.

Think about the characteristics of these measures: they are easy to gather, we collect them directly from patients, and they can easily be compared.

We gather this data annually in a physical (and gather a subset of them every time we visit the doctor), and doctors and nurses use these data to get an overall sense patient well-being. If these measures are way off, a patient might be unwell and in need of further testing.

Some Core Principles of an Effective Measurement System

Let’s think about the core principles that are in evidence here, because they give us good guidelines for how to think about social impact measurement:

  • Find measures that apply broadly
  • Determine what good and bad ranges look like
  • Regularly gather primary data to understand how individual patients are faring
  • When those indicators are off target, go deeper with specialized measures

It feels obvious that doctors have a core set of things they can measure to understand well-being. At the same time, we are not scared off by the complexity underneath. Indeed, we recognize that we must master that complexity to truly help patients: the human body is complex, so we must be comfortable with complexity to understand it fully.

And so, in patient care, simplicity and complexity happily coexist.

The Core, Comparable Metrics of Social Impact

Similarly, for social impact measurement, there are broad indicators that can be easily compared (many of which align with the Impact Management Project and for which we’ve developed questions and benchmarks at 60 Decibels):

  • WHO is being served: income levels, access levels, gender, members of excluded groups, etc.
  • WHAT is their experience of the product: Net Promoter Score, customer effort score, etc.
  • HOW MUCH does the product or service improve their lives: meaningfulness of impact, other indicators of changes in well-being (income, confidence, safety, empowerment, etc.)

All of these data can be easily gathered directly from the people experiencing (or not experiencing) social impact. And, just like blood pressure, gathering this data from the actual people being served is a prerequisite to understanding whether a specific product or service is making a difference.

From the People Being Served

“From the actual people being served” bears underlining: if my doctor wants to understand my health, she wouldn’t be satisfied knowing the BMI or blood pressure data of people like me. Instead, she would use population data to understand what the healthy range was and compare that range to what she reads on her dial when I’m standing right in front of her.

That might seem obvious, but in social impact measurement we seem too easily convinced that studying similar interventions is good enough—that we can simply extrapolate that data to our investment and be done. The fact is, as in medicine, studying other, similar interventions is the starting line, not the finish line. When I arm myself with that desk research, and then couple it with what I learn about the lived experience of the people my impact investment is serving, then (and only then) am I in a position to understand the impact performance of my investment.

Conversely, if we never listen to the customers being served by our investment, we’re saying the equivalent of (at my hypothetical doctor’s appointment), “typically, 46 year old white men have a blood pressure of 125 / 85.” That’s good to know, but it tells me nothing about whether I’m eating too much salt or at risk of heart disease.

Even more obvious, we would never expect that a blood pressure reading or BMI, alone, would tell us everything we need to know a person’s health. So why are we so obsessed with finding a single, one-number measure of social impact? These simplifying measures are, at best, directional indicators of a deeper reality that lies beneath. Importantly, that is not the same thing as saying that all that complexity must can and should boil up to that single number.

Finally, let’s not be frustrated that we can’t compare everything to everything. After all, we can only compare lungs to other lungs, not to livers or kidneys. Despite this limitation, we are not powerless to deduce whether one person is healthier than another.

Embracing Simplicity and Complexity

That’s good news.

It tells us that, in human health, we are comfortable with embracing both simplicity and complexity. We understand that the human body is itself a system with countless underlying organs and sub-systems. We recognize the need to understand these systems at a micro and a macro level. When we do so, we are in a position to successfully manage human health.

We can and should be just as comfortable with the notion that social impact happens as part of complex systems; and we should be optimistic that a core set of simple, easy-to-measure, comparable indicators can give us an enormous amount of insight about actual, on-ground social impact. Like in human health, we should also embrace the need to understand this deeper complexity if we are serious about managing social impact performance. That means deep, specific data about my specific intervention, coupled with cross-cutting, universal measures that apply to all interventions.

A Glimpse of the Future

This is all well within our grasp.

The first step is to stop telling ourselves that there’s some magical shortcut between here and there. Our work, and the people we aim to serve, are too important, and the amount of capital coming towards social impact is too big, for us to aim to skip steps.

Most important, let us never forget is that this work is about real, actual, living people. These people are the locus of change. It is a core part of our job to listen to them so that we can truly understand their perspective and their lived experience.

This is the only way we can manage social impact performance to achieve meaningful better outcomes.

And someday soon, doing all of this will be as normal and as natural as taking someone’s pulse or their blood pressure.

GIIN 2019 Impact Investor Survey

The Global Impact Investing Network (GIIN) has just published its survey of the impact investing market. Each year at this time, I head straight for a chart that’s been, until now, buried in the back.

It’s the chart that talks about impact performance for the estimated $502 billion of impact investing assets. In my view, it’s the most important chart in the report: since “impact” investing exists to create impact, we should care most about whether we’re pulling that off.

Unfortunately, data on impact performance is hard to come by in this report. The only chart that speaks to it directly, the one that I flip to immediately, doesn’t have performance data. Instead, it asks impact investors to self-report their performance relative to their own expectations. It’s a start.

Our Performance, Relative to Expectations

So, how do we think we’re doing? Pretty great, it turns out.

This year, 98% of the impact investors who responded to the survey said their impact performance was in line with or exceeded their expectations. Put another way, just 5 of the 266 impact investors surveyed were brave enough to say that they were under-performing on impact (or, maybe only five have clear enough impact goals and data to make it possible to under-perform).

How to make sense of this? Mathew Weatherly-White proposed on Twitter that perhaps the sector is exclusively doing place-based impact investing in Lake Wobegon (which would lead to the next question: would our version of Garrison Keillor’s famous closing line be, “Well, that’s the news from Impact Investing, where all the women are strong, all the men are good-looking, and all the funds’ impact performance is above average.”)

What happened in 2019 that makes us feel we’re doing so exceptionally well? Nothing much, it turns out, as this is not a new development. In fact, the numbers in this chart have been essentially unchanged over the last three years. Here’s a composite chart based on the data in the 2017 to 2019 GIIN reports:

GIIN 2019 impact performance

Perhaps this is our sector’s version of “too big to fail”–if you’re a self-styled impact investor, you cannot, by definition, fail at meeting expectations for impact. This isn’t for cynical reasons: most impact investors don’t yet have transparent, concrete targets around the impact their capital is meant to create; they don’t have benchmarks of impact performance; and they don’t feel they have a useful, repeatable way to measure that impact in a way that works for them and their investees.

Our Opportunity

While these results could be seen as discouraging, there’s an opportunity here as well. The GIIN, for one, describes their own rising expectations of impact investors in the opening of the report: “Growth [of dollars invested] without impact is pointless…[we believe] impact investors should have specific impact intentions; consider evidence and impact data in the design of their investment strategies; [and] manage their impact performance.”

I’d underline the phrase “manage their impact performance” and add to it “and set and share impact targets and performance for their funds.”

Setting targets, and managing to those targets, isn’t an end in itself. It’s a beginning.

The act of setting goals, and then taking them seriously, is a leverage point that is hiding in plain sight. It has the potential to jump-start a meaningful cycle of learning and improvement. We all know that there’s no way for performance to reach its full potential without knowing what excellence means, without having a bar to strive for. Nor can we improve without useful data—the kind of data that tells us both how we’re doing today and how much separates us from the best performers in our field.

How do we get from here to there?

With something as important as “impact”–the conditions of people’s lives, the fate of our ecosystems and the planet –we cannot miss our opportunity to become great at what we do.

Becoming great at anything feels daunting at the outset, but, as always, our only job is to start at the beginning: by taking one small step, and then taking the next one.

In this case, we starts by setting real targets, taking them seriously, and doing what we can to gather meaningful data about how we’re doing relative to our goals. If we do this with intention and follow through with integrity, then, bit by bit, we will get better. Once we choose to walk this path, we will discover that our small steps take us far: in a year, and then in five years, and then in 10, we’ll be at a different level in our capacity to invest to create positive change, just as we are experts, today, at deploying capital.

This need not be burdensome, heavy or expensive. The best way to start is by going directly to the source—for example, if you’re making investments designed to help people, then talk to those people. Better yet, do it in a way that is respectful, fast, and light touch, one that gives comparable performance results for impact, just like we have for financial results.

Let’s aim higher, not because we have to, but because we can.


[PS if you’re wondering what this looks like in practice, our recent 60 Decibels whitepaper might help].

Announcing the Launch of 60 Decibels

I have exciting news to share.

Today marks the start of a next chapter for me professionally: I’m launching a new social enterprise, called 60 Decibels, that I’ve co-founded with Tom Adams. Our goal is to reboot social impact measurement, to make it useful for people who are doing the work of building social businesses and NGOs. We want to help them serve customers better and, in so doing, create more social impact.

Our thesis is simple: understanding social impact should be based on listening directly to people.

60 Decibels will take forward the Lean Data approach, which was first built at Acumen to solve our own impact measurement challenge and has already been used by more than 200 non-profits and social businesses in 34 countries.

Imagine if we truly held ourselves accountable to the people that impact capital and philanthropy are meant to help, by systematically including their voices in how we assess impact.

(And, for those of you who don’t work in this sector, it’s worth articulating the counter-factual: yes, it’s true, today, when we ‘measure’ impact in impact investing, most of the time we don’t actually talk to the people whose lives we aim to improve. Crazy, huh?).

My belief is that if we can get this right, we have the potential to make a massive shift in the world.

Everywhere, the cracks in capitalism are being exposed. That’s leading to backlash against “plutocrats,” it’s creating waves of populism, and it’s generating calls, in some circles, for a new model of capitalism: one that creates wealth without being so extractive, one that balances the needs of shareholders, customers, suppliers, employees, and the planet.

But how are we going to put the needs of customers, suppliers, employees and the planet on more equal footing?

Our bet, with 60 Decibels, is that it starts with voice: that by listening better, and by amplifying voices that are currently left at the margins, we can create a system that’s more in balance.

The in’s and out’s of how I think we get from here to there is a longer conversation. (You can get a sneak peek here at the 60 Decibels website, where we’ve written a white paper that’s equal parts manifesto and social impact data). The short version is that 60 Decibels helps companies that are in the business of creating social change listen to their customers. We leverage the power of technology and mobile phones to make it easy to listen to anyone, anywhere, and hear from them about their lived experience. And we move fast, getting results in weeks (not months or years), because that’s the only way we’ll be relevant to the people doing the real work.

So, if you’re in the business of social change and have found social impact measurement to be challenging, burdensome, complex, or frustrating, let me know, maybe we can help.

And, if you’re wondering, 60 Decibels is the volume of human conversation.

So far, it’s been a lot of fun, it’s really challenging, and we’re just getting started. We have a team of 30 amazing people in the US, UK, Kenya and India and we’re working with customers all over the world.

And, in terms of this blog, I’ll still be here every week sharing what’s on my mind. I expect that, gradually, the content of the posts I write will shift slightly. That’s nothing new—it’s been happening since I started blogging in 2008, as my bullseye has moved from fundraising and sales, to generosity, to leadership and the work we all need to do to be grounded, effective agents of change.

A closing thought: in many ways, this blog is a chance for me to think out loud about the issues I find most important, most challenging and most meaningful. That exploration is an important part of my own evolution and growth. To the extent that I’m ready to take on this next challenge, that is due in no small part to what I’ve been able to figure out, week in and week out, through the dialogue that unfolds here on this blog.

None of that would be possible without you showing up and continuing to read and respond. So thank you.

Here’s to the next chapter. Thanks for continuing this journey with me.