Gone are the days when major donor governments and multilateral agencies poured large sums into international development projects that were evaluated mainly by the level of the donors' generosity. As Raj Kumar explains in The Business of Changing the World: How Billionaires, Tech Disrupters, and Social Entrepreneurs Are Transforming the Global Aid Industry, the foreign aid industry, in the United States and elsewhere, is undergoing a huge transformation: once dominated by a handful of players, the sector is being reinvented as a dynamic marketplace hungry for cost-efficient, evidence-based solutions.
As the co-founder of Devex, a social enterprise and media platform for the global development community, Kumar has a unique perspective on the emerging trends, key players, and new frameworks and philosophies that are shaping the development sector. And as he sees it, the sector is undergoing three fundamental changes: first, an opening up to diverse participants; second, a shift from a wholesale to a retail model of aid; and third, a growing focus on results-oriented, evidence-based strategies.
According to Kumar, the diversification of participants and, consequently, of strategies, both characterizes and is contributing to the growing success of this new era of aid. Prior to the twenty-first century, the sector was dominated by large agencies such as USAID (U.S. Agency for International Development) and the World Bank functioning as an oligopsony, in that they followed relatively homogeneous strategies and allowed little latitude for flexibility to innovate. Thanks in part, however, to the wealth accumulated by tech billionaires such as Bill Gates and Mark Zuckerberg, that is changing and the sector today operates and is informed by a much broader range of perspectives.
One result of the influx of tech dollars and expertise into the sector has been a demand for results, often in the form of a measurable return on those investments. But despite the broader diversity of approaches, failure is still part and parcel of the field, and Kumar offers some insights into why various high-profile initiatives have fallen short. An example he cites repeatedly is Massachusetts Institute of Technology professor Nicholas Negroponte's One Laptop Per Child (OLPC) Initiative, which never fully delivered on its claim that providing laptops to children in the developing world would go a long way to closing education gaps. As Kumar notes, past evaluations of the program found that the laptops did not do much to improve children's learning — in part because the initiative failed to adequately train teachers or develop curricula tailored to computer-based learning. Kumar uses the example to highlight the importance of pilot-testing projects to determine their efficacy before implementing them at scale and further argues that project managers should have been tasked to define desired outcomes (e.g., improved literacy rates), conducted studies to test whether the program met those goals, and rolled out the project iteratively, adjusting goals and its implementation as needed.
While veteran development hands may have commended Negroponte for his ambition and good intentions, a new generation of development professionals is more interested in setting goals by which a project's success (or failure) can be measured and conducting rigorous evaluation to determine whether it meets those goals. In a resource-constrained world, Kumar argues, such an approach is the best way for aid groups and their funders to avoid the opportunity costs of a failed project and harness their limited funds for maximum impact.
Another important change in the sector is the shift away from the traditional decision-making model in which decisions were made by well-compensated individuals embedded in institutions at a significant remove from the people in need of help. In the new world of aid, writes Kumar, donors and aid experts have to let go of the mindset that they know best, step back, and listen to the intended beneficiaries about how that aid should be put to use. "Only by asking...questions, listening carefully, watching how people actually behave and react in the real world, and then designing programs to address those realities will we be able to get the kind of results we want."
That also means that aid programs need to incorporate behavioral science- and human psychology-based approaches to ensure that the funded intervention will be both widely adopted and effective. In support of his argument, Kumar cites the example of an insecticide-treated mosquito net distribution effort. While a standard cost-benefit analysis most likely would conclude that such nets are a reasonable and cost-effective intervention, aid groups that took the time to interview the intended beneficiaries would soon learn that mosquito nets distributed through previous campaigns were hardly ever used because they are too hot to sleep under and are not easy to set up. By doing a better job of focusing on "people, not widgets," Kumar writes, aid groups stand a much better chance of ensuring that projects are executed efficiently and goals are met.
In addition to these broad trends and themes, Kumar looks at the ways in which the emerging aid industry has embraced a more diverse cast of players — including so-called social enterprises, which he defines as businesses "established with the sole purpose of meeting an important social need [that create] shared value for all those involved — the producers, the organization, customers, and the broader society." From Hello Tractor, an app modeled on Uber that connects Nigerian farmers who are not fully utilizing their tractors to farmers in need of a tractor, to microfinance platform Kiva, Kumar illustrates how social entrepreneurs are transforming the aid sector with technology and, crucially, a behavioral-science mindset, creating solutions that address the specific needs of a specific target population in real time.
While it's perhaps unrealistic to expect all businesses to operate with the sole intention of meeting a social need, Kumar argues that such enterprises could pave the way for more businesses to adopt the idea of shared value, creating what the World Economic Forum has called a "fourth sector." Another way for corporations to become more socially responsible is to ignore the notion that people at the "bottom of the pyramid" (a phrase coined by C.K. Prahalad in his 2004 book The Fortune at the Bottom of the Pyramid) can never function as a market and, instead, create products and services specifically for the BoP, knowing that the vast number of people who fall into that category are more than enough to create aggregate demand — and a profit — for any corporation that pursues such a course.
Kumar also examines the emergence of "retail" aid, as seen in the growing popularity of crowdfunding sites like Kiva and direct cash transfers, which have the added benefit of generating real-time feedback from the people served. Indeed, "frictionless" digital technologies are putting increasing pressure on "wholesale" models of aid to incorporate local input, monitor results continually and make course corrections as needed, and ensure that projects are self-sustaining over time. Such changes go hand-in-hand, writes Kumar, with "a new ethos" of what he calls "open source aid" — organizational cultures that embrace the humility required to share results (including failures), openly and in the spirit of collective learning.
Something else to be embraced, Kumar writes, is complexity. Despite the credit he gives social entrepreneurs and businesses for embracing market solutions, he recognizes that systemic problems do not always lend themselves to a quick market or technological fix. One organization that understands this is Teach for All, a global network of independent, locally led and governed partner organizations that has trained more than sixty-five hundred individuals to serve as educators in their communities. As Kumar explains, if Teach for All's progress in transforming local educational systems has been slower and less quantifiable than a more disruptive Silicon Valley solution might promise, its approach is better suited to the "complex, emotionally fraught, politicized [education] system" in most countries. In other words, a market solution might very well succeed in reducing such complexities even as it failed to address many of fundamental issues responsible for the system's failure.
Like education, extreme poverty is a challenge far too complex to be solved by a simple market-based solution. Today, seven hundred and forty-six million people around the world live in extreme poverty (defined as living on less than $2 a day), and, from conflict situations to "extractive institutions," Kumar points to the many systemic factors perpetuating the problem. So, if market-based solutions are unlikely to solve the problem, what will? Kumar thinks the answer lies in embracing a results-based approach to aid delivery, including the collection of real-time data that enables aid groups to track and disseminate the successes (and failures) of their interventions and drive awareness of and support to those deserving of more attention; and demanding that billionaire donors be held accountable for the support they provide. Good intentions and "giving pledges" are not enough in the twenty-first century, he writes; rather, we must do everything in our power to ensure that the resources provided by billionaire philanthropists produce real, meaningful results.
Kumar notes that even if foreign aid succeeded in eradicating extreme poverty in a given country, in most cases it would still leave 3 percent of that country's population living below the poverty line. While some readers might find this to be an oddly pessimistic note on which to end the book (coming as it does on the book's second-to-last page), it's more a case of Kumar wanting to highlight the urgent need for efficiency and effectiveness in aid delivery. Simply put, we cannot afford to waste resources on "best" guesses, insufficiently evaluated initiatives, and serial failures. Instead, the aid community, donors as well as those on the front lines, must listen to and engage with those they seek to serve so as to better understand the problem, think outside the box, and harness the power of data to produce desperately needed results. As Kumar reminds us, It is not enough to do good; it needs to be done well.
Avi Bond is a Knowledge Services intern at Candid.