Daniel's blog

A really good nudge to show you the effect of your daily actions by the WWF.

Do not know whether they ever did such experiment or not but I like the moral of it!

>I had the pleasure to spend two and half month as an intern in the Waste Venture’s Dehi office. One of my main tasks was conducting a series of interviews with organizations already operating in India’s solid waste management (SWM) sector and producing a report summarizing their experiences. While SWM related, most findings can be extrapolated into general principles applicable to social enterprises active in developing countries. I will share some of them with you in this blog post, adding my thoughts and observations.

Most organizations were happy to schedule a call or a meeting and to answer our long list of questions. We talked mainly with founders or directors (often the same person) and their passion for the cause was very clear. This was the first learning point. People running social enterprises truly believe in what they are doing and social mission, the other element of a double bottom line, is central to all their activities.

This is important for two reasons. Firstly, it is not an easy job. Most of them went through tough times when they were starting up and growing the businesses further is not a piece of cake as well. Their unflattering belief and dedication were often the key to survival of their organizations. Secondly, it helps in ensuring that improving lives does not get sidetracked to increasing profits as there are often ways of making a social business more profitable at expense of some of the beneficiaries. A SWM example would be hiring physically stronger male day labourers for waste collection as opposed to female rag pickers not used to regular working hours.

Demand wallah’s perspective

That is not to say however, that social enterprises should be run like charities with deep pocket donors behind them. On contrary, the major learning point for me was that in terms of interaction with customers, they are business entities as any other. They are offering a certain service and should be supplying the service only if there is demand for it and people are willing to pay for it. Abhijit Banerjee and Esther Duflo in their book Poor Economics talk about supply and demand wallah (wallah is an Indian word for a man doing certain occupation – e.g. chai wallah is a tea vendor) approaches to helping people escape from poverty. While supply wallahs advocate donating goods and provision of services to poor people mostly for free, regardless on whether they want them or not, demand wallahs propose to treat poor people as consumers and let the market cater for their needs. Taking deman wallahs’ perspective, social enterprises are an integral part of this market and should therefore treat poor people as customers.

One of the most successful organizations we interviewed accepts the fact that not everybody is interested in its product – paid door to door household waste collection. If after a reasonable trial period a substantial majority of people in a street is not paying collection fees, it simply stops servicing the whole street, letting the community make a decision. Another organization applies this concept to its recruitment strategy. It does not actively approach informal waste pickers to join the enterprise (i.e. to stop working whenever and wherever they want to and to enter into a semi-formal contract with fixed working hours and determined collection route, a significant lifestyle change) but rather relies only on world of mouth within the waste pickers community. Those that joined the business tell others what it is like and people interested in pursuing this opportunity then approach the company while others are free to decide that this is not something for them.

Changing behaviours

But is leaving everything up to the invisible hand of the market really the best way to achieve social change? The answer is not entirely, and supply wallahs would be quick (and often correct) to point out that the poor can be in a poverty trap which does not allow them to make choices they want. Being poor also sometimes means that people do not have sufficient education and general overview to know what they can aspire for. Finally, they have been living their lives in a certain way and in an extremely unpredictable environment without any cushion to fall back on they might be reluctant to risk any changes to their income generating activities or well established consumptions patterns. It is then up to social enterprises to make use of various nudges, stimuli, to help poor people make decisions which would ultimately improve their lives.

Our interviews gave us two good examples. As mentioned earlier, one organization does not carry out the service unless significant majority of households sign up and pay collection fees. It is then enough if only some households recognize the benefits of hygienic way of waste disposal because these create a peer pressure on the unaware households to pay for the service as well. In this way, the whole neighbourhood benefits from clean streets and the SWM organization achieves 95% fees collection rates enabling it to further expand its services. Another organization has found out how to persuade people to separate organic and inorganic waste. It does not ask the households to ‘segregate’ waste because that creates a perception of being asked to do extra work. Instead, it simply encourages them not to mix man-made and natural waste. While both mean effectively the same, the latter has proved to be a much more successful approach.

On balance, my internship with Waste Ventures has certainly been a very enlightening experience. It has assured me of my belief that social businesses can indeed change lives of poor people in a way that is self-sustainable, scalable and most importantly, it treats people with dignity by making them empowered to be in charge of their own futures as opposed to putting them in a position of mere aid recipients, dependant on external donors.

This post will be featured on Waste Venture’s blog Talking Trash on http://www.socialedge.org/blogs/talking-trash

>(written in 2011)

I would like to elaborate in this post on my previous entry about emerging markets and their ability to deal with ambiguity. On reflection, the tone of that article sounds to me little too carefree. It is not meant to be entirely so. While I still believe that it is very important to have some hubris it is also essential to possess a plan, a road map for where we are going.

Last year, during my presidency of AIESEC UK, myself and my team were often presented with lot of ambiguity regarding the future. We could not have answers to all the questions we had, all the information we wanted and we could not always anticipate what exactly is going to happen. Relying in such situations purely on hubris would equal to a suicide but we had to be moving on as well. Designing a process of putting together the missing pieces and trusting it subsequently is what we would do on such occasions.

It is OK not to know exactly what is going to happen in the future and to not know how we are going to react to it as long as three things are in place. Firstly we need to be crystal clear about what we are trying to achieve. What does a ‘mission accomplished’ look like. Secondly, we need to be all on the same page with what the next several immediate steps are. And finally, we need to have a process in place to establish what else we need to do to achieve our goal. This can be a call with an external consultant or a mentor, interviews with key stakeholders or appointing a steering team and consulting it regularly.

At any point all these three conditions have to be fulfilled and if they are, you, your team or your organisation should have the necessary confidence to trust the process and to move ahead. And that is all the hubris one should need.

>(written in 2011)

Following up on my previous article about the emerging world, I am now going to comment on my second main observation, one that I am personally very passionate about. I call it ability to deal with ambiguity. In a nutshell, it is an exciting mixture of carelessness about the future combined with a healthy portion of hubris that things will end up well.

India can be a great example. People here often give the impression that they are unorganised. That they do not seem to give much attention to planning and preparation about what lies ahead. Yet most of the times, when under pressure to deliver, they somehow manage to do what they promised.

I admire this quality of theirs. It is something so many people in the West miss. I do not mean now that people should stop caring about the future, no. One should always have a plan about what to do next. But sometimes, you cannot do your research as extensively as you would like to and you cannot wait for all the information to come in. Sometimes you have to act now otherwise the opportunity is gone. In such moments we have so much to learn from the emerging world.

So next time, when faced with an ambiguous situation and no more time to spare, throw a bit of hubris into the decision making process and trust yourselves that things will end up well. If you believe so, they usually will.

PS: On retrospective, I find this article advocating the idea in a little too careless way. Please article called Trust the Process for more thoughts on the topic.

>(written in 2011)

I am now working in Delhi and usually take local rickshaws, or autos as they call them here, to commute to work. I was once going in one of them back home and was quite afraid as the driver was navigating it on Delhi’s congested roads really fast. But I am getting used to it slowly. Having spent some time Mexico and the Middle East earlier this year, September in East Africa and now two weeks in India I came to realise that people in the emerging economies have in general lower levels of risk aversion compared to the western world.

Driving habits in all these counties are horrific for a westerner. Lanes are generally not respected and nor are the speeding limits, drink driving is a norm and you overtake whenever there is at least a slight chance of making it back to your lane without crashing into a car going in the opposite direction.

The same goes for utilisation of space or usable lifetime of things. More people fit into a single bus and more goods are loaded onto a single truck. A van that would have been deemed unusable in the West is still carrying passengers and old wooden scaffoldings can be seen at most construction sites. This drives down capital expenditure and operational costs but in turn it increases the risk of running those processes.

Lower levels of risk aversion are reflected also in living habits. People in Mexico or East Africa live in neighbourhoods where it is not safe to carry your watch during a day and where walking after dawn is almost equal to being in trouble. Some townships in Israel have concrete shields built every 200 meters on a street so that when sirens signal rockets being launched from Gaza people can seek shelter instantaneously regardless on where they are.

But why do people behave in such way? My colleague and friend from Kenya gave me a very simple answer. Because they have to, they have no other choice. If my auto driver was taking too much time to take me from A to B, he would miss out on monies he could have earned by another passenger somewhere else in the meantime. Companies have to innovate in a disruptive way because people would not be able to afford products at their usual costs.

But while the external environment is forcing my driver to be taking risks, I am telling him as a customer to be more careful. Western firms are under pressure to start making bolder moves and companies from emerging markets are learning very well that safety cannot be compromised. It will be interesting to see who learns faster and whether higher aversion to risk is actually an advantage or an disadvantage.

One of my friends had this status after the 2010 Haiti earthquake. AA managed to help and launch a really successful viral PR campaign at the same time.

>I have recently read a very interesting book called Nudge by Thaler and Sunstein. It explores our decision making processes and extends it to application in choice architecture. The authors argue that while people are able to think rationally (economically) they not always do so. Here is why, what it means for us and how we can at least partially overcome this problem.

It is either impossible or impractical to precisely calculate the trade offs between our options most of the times. Our previous experiences (intuition) and emotions then come in play and influence what decisions we make. Our rational and emotional selves are pulling us in opposite directions; the right, emotional, side of our brain often being the more dominant one (you know that you should choose A but end up choosing B because your feelings are telling you so). This is how we make sub-optimal choices.

Behavioural economics deals with this phenomena and, unlike rest of the field, it does not pretend that people always make rational choices. If applied, we can then speak of choice architecture. Since we always make our decisions in a certain context, it is possible to influence our choices by designing our decision making circumstances. It is important to say that choice architecture is not about tricking people into certain choices which might not be in their interest. It is about making decision processes easier for people by giving people so called nudges.

Nudges are small and deliberate changes to one’s decision making context. They are designed to influence one’s emotional decision making process in a direction that the rational system would take. They help people make better judgements while leaving them with the ultimate option to choose. Bellow are six examples of nudges that help ensure people’s rational and intuitive/emotional sides are not in conflict.

Defaults
As mentioned earlier, people do not always think about choices they are making. If there are multiple options, we tend to choose the default one (e.i. we do not switch to a different one). When designing a choice context, select the default option carefully as it is likely to end up being the most popular one. If you want people to make an active choice, do not offer an default one but force people to make a decision (e.g. by not allowing them to proceed before they make a selection).

Example: Much higher percentage of people agree to donate organs after their death if the organ donor form has ‘Yes I agree to be a donor’ as a default option.

Expect error
People can make bad decisions. Moreover, we tend to make the same mistakes over and over again. Try to guess therefore or, if possible, test on a sample of people what decisions they usually make in a situation you are putting them into. When designing a choice context you can then guide people away from making those mistake.

Example: People were forgetting their cards in ATM’s when taking cash. A nudge to counter this ensures that a machine does not give us money unless we take our card first. Another great example is a gmail functionality that gives you a warning message if you mentioned word attach(ment) in your email but did not attach anything.

Give feedback
Design a system that tells people if the decisions they are making are good or not. Receiving a feedback is one of the best ways to learn.

Example: Laptops warn us when the battery is low and we need to plug in the charger (e.i. if we make a decision to ignore the decreasing percentage count in the bottom corner of our display and we do not plug in the cord).

Understand mappings
This rather mysteriously called nudge suggests that you should make it as easy as possible for people to understand and evaluate potential outcomes of their decisions before they make them.

Example: Mobile operators having simple tables telling users how much it costs to use their services. This allows us to make a better choice when deciding if we should browse the internet from our mobile phone while abroad or not.

Structure complex choices
When the number of options is too big to evaluate each one individually, we need to apply certain filters. By allowing us to narrow down our domain of selection according to various criteria they make the selection simplier. Think therefore what are the most important criteria for the people you are presenting a decision with and offer them relevant filters.

Example
Amazon allows us to search for books by genre, price or date of publication.

Incentives
Let people know in as far as possible the real costs of their choices and hope it will improve their ability/willingness to think rationally. This nudge is the one closest to conventional economic theory.

Example
Thermostats showing us the cost of energy consumption in real time hence giving us a disincentive to keep the air condition on or treadmills telling how many calories we have burned as we run in a gym.

Happy nudging!

>I recently discovered the podcasts section in iTunes and started downloading all sorts of talks and lectures. One of the best ones I have heard so far is a talk called What Great Leaders do by Bob Sutton as part of the Stanford Technology Lectures – Entrepreneurial Though Leaders podcast.

Bob summarises there his book called Good Boss, Bad Boss and in just over half an hour talks us through qualities of both kind of bosses. It is great for anybody thinking about moving into leadership roles or as a call for reflection for those already being bosses. I could certainly relate to a lot of his points from my experience of leading AIESEC UK.

I will let you listen to it yourselves but the three points I liked the most were:

- Good boss acts on his/her intuition as if it was a fact but is open to listening and when new piece of information comes in that proves he is wrong he is willing to change his/her position.

- Good bosses allow and foster what he calls a loving conflict. That seems to be taken a bit from Good to Great by Jim Collins but what it is basically about is that it is all right to have conflicts as long as they are open, do not get personal and finish up constructively for benefit of the team/organization.

- The final one I want to mention is when he actually builds on Good to Great’s concept of great organisations having a BHAG (a Big Hairy Audacious Goal – that is a statement which sets an ambition for the company for the next 20-30 years and which looks almost impossible to achieve without strong determination and a bit of hubris). Bob says that BHAGs freak people out and suggest that the best way to overcome this feeling is to break it into small and tangible steps which can be achieved quickly and create a sense of success to get the organisation moving towards achieving it’s BHAG.

All in all, you would have probably heard most of the things Bob talks about before (and he himself acknowledges that this book is his take on the topics having read lots of various journal articles) but he summarises them very well and they are so important that you should hear them again anyways if you want to be/are managing others.

You can find it here: http://itunes.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?id=80867514

>Solving problems is lot of fun. It gives us chances to be creative, implement new strategies or engage in new activities. But as I have recently realized that is only the easy bit in problem solving and on its own it would not take us too far.

What is far more important (and sometimes less fun) is to understand what has caused the problem in the first place. Think and ask about all possible reasons why someyhing went wrong. And it is important not to get comfortable with first couple reasons that spring up but to dig deeper and deeper until we get a reasonable understanding of all domains that could be potentially be related to a problem.

Some time ago I heard an interesting story. One of the problems they had in Washington DC was very high costs for cleaning memorials from bird faeces. The problem we have is dirty memorials which are very expensive to clean. For possible solutions, you can start thinking about introducing new cheaper cleaning techniques or about turning to various bird scarers and that is what some were proposing. But when they looked at what had really been causing the problem, they saw that there was much simpler solution at hand. The memorials were dirty, because there were lot of birds around. There were lot birds, because there was lot of insect. There was lot of insect, because there were many lights pointing at the memorials in the evening and at night. So the solution was to simply turn the lights on two hours later every day.

The thought process was following:
1) What is causing the problem? – answer – A.
2) What is causing A? – answer – X.
3) What is causing X? – answer – M.
4) The final solution is than preventing M.

What I have realised lately is that preventing M is often much cheaper and easier that preventing A.

So next you will be facing a problem, do not get immediately excited about coming up with possible solutions, try to understand the real causes first. It might take more time in the short run, but it will definitely pay off in the long run!