Urban Studies 132 - Concepts and Analytic Skills for the Social Sector

Contents

• Social Entrepreneurship and Intro
• The Social Sector
• The Ecosystem
• Organizational Logic
• Strategy
• Needs Finding
• Messaging
• Pricing
• Fund Raising Models
• Measuring Performance
• Scaling
• Legal Structure
• Finances
• Persuasion Project
• Guest Lectures

 

Social Entrepreneurship + Intro

An acquaintance said that Urban Studies 132 was the best class that he had taken at Stanford, so I had to take it.  It lived up to expectations.  It taught a lot of valuable skills.  Professor Litvak is the former CFO of CREDO Mobile, a social justice oriented cell phone company.  He also has plenty of other qualifications in the social sector.

It has been described as all of business school compressed into one quarter (that could be a good name for a band... all of X in one quarter.  For some values of X, at least).  The class is about social enterprises.  A social enterprise is an organization (for-profit or non-profit) that tries to help the world and that thinks big.  I think of social entrepreneurship as scalable social good.  In other words, it combines the business skills of the for-profit sector with the values of the non-profit sector. 

People in social entrepreneurship were often idealists in college, worked in traditional for profit jobs for a few years, and started an organization doing something cool.  They usually see "social entrepreneur" as something that they identify with after the fact rather than as something that they studied or read about beforehand.  It is a new (and thus poorly defined) space, but it has some good players.  Echoing Green and Draper Richards support early stage social entrepreneurs (they're like the venture capitalists).  Ashoka supports middle-stage social entrepreneurs.  Skoll helps late-stage social entrepreneurs scale up.  Now, there are also other organizations involved in supporting social entrepreneurs.  Plus the entrepreneurs themselves. 

 

The Social Sector

There are many causes of market failure, but what is common about them is that a profit motive won't solve them.  The social sector exists to provide solutions to some of those problems.  Social sector organizations are primarily oriented towards social values (things like justice and shaving the whales) rather than private value (money). 

 

The Ecosystem

The theory of social impact is our value proposition.  The operating model is how we produce value.  The resource strategy is how we get resources to do what we need to.  The operating environment is everything else. 

The business model connects the operating model and the resource strategy.  A personal fit connects the business model with the social impact.  Everything is in the operating environment.

Regular organizations without people or the environment at their hearts also play a part in this ecosystem.  That's why "social intrapreneurship," or going into an organization and helping to bring out social impact from within its other activities, can be good.  This can include encouraging an organization to be more philanthropic, helping the organization to make its business practices better for the world (ie, Wal Mart using lighter packing materials or Pepsi locally sourcing its ingredients), or investing skills into the world (ie, Google.org or Salesforce). 

 

Organizational Logic

The "why" of the organization consists of the core purpose (mission and vision) and core values.  The purpose should be short and sweet.  It should fit on a bumper sticker ("honk if you like justice" doesn't count).  Having a clear mission and vision helps decision-making in the organization because a person can if a policy or project is in line with them. 

Google's mission is "to organize the world's information and make it universally accessible and useful."  Witness' vision is "a just and equitable world where all individuals are able to defend and uphold their human rights."  Values are things that are important for the organizational culture but might not be specific to the organization.  For instance, one of Facebook's values is "Move fast; break things" (though some may argue that broken things is inseparable from the Facebook experience).  All of these help keep the organization on track with the big picture rather than getting bogged down in the details.

The "what" of the organization consists of Big, Hairy, Audacious Goals (BHAGs -- actually a term of art with its own Wikipedia page!) and a vivid description. 

This is what the world will look like as a result your organization's existence.  For Microsoft, this goal might be "a personal computer on every desk and in every home."  A BHAG is a concrete vision of what you're working for during the next 10 or 30 years.  A mission and vision should stay the same, but a BHAG or vivid description can change every once in a while.

The "how" of the organization consists of an intended impact and theory of change. 

The theory of change can inform organizational strategy and keep things in perspective by helping an organization realize who it needs to partner with to meet its goals and what early outputs it needs to measure for its outcomes and impacts.  It also provides a sanity check -- putting how an organization is supposed to work on paper lets you verify that your organizational model is plausible (if not feasible and tested). 

Some archetypal theories of change include diffusion of innovation, gradual change, people in the streets, enlightened elites, setting a good example or proof of concept, system shock, consciousness raising, democracy, and randomness. 

 

Strategy

Business Model Generation has a template (http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf) for organizational strategy that identifies 9 components of an organization.

The "value proposition" (the cool thing that you do that makes your organization valuable) is at the middle.  What is its scope?  What is its competitive advantage?  What is the logic that goes into it?

To achieve your value, you need to do "key activities," which require "key resources" and "key partnerships."  All of that has a price, which you account for in your "cost structure."

On the people side of things, you have "customer segments."  You have "customer relationships" to keep them satisfied and "channels" of communication to reach them.  If our customers are satisfied, then they might pay the organization, which figures into the "revenue streams." 

Inside this ecosystem, there are also competitors, new entrants, suppliers, substitutes, and customers.

 

Needs Finding

There was a lecture on needs finding.  For more on that subject, Engineering 231 in spring quarter was basically a whole class on needs finding (and user centered design).

The basic idea is to identify your stakeholders and customer segments, figure out what they need, and create a value proposition for them (how you uniquely bring value to that group). 

Also, test early, and test often (it's like voting!).  That way, you can avoid investing resources into something that isn't useful.  You can use focus groups to figure out the issues.  You can ask people to sign a 'letter of intent' to get an idea of whether or not they'll actually use your service.  You can survey to get numbers.  You can observe customers, look at competitors, and do market testing.

Even for international development, going to the target community is important.  It helps show respect, helps incorporate the local community, and it helps you know how much of the money is going to the beneficiaries rather than everyone else on the supply line.

 

Messaging

Cialdini found 6 principles of persuasion, and they apply to nonprofits and fundraising also.

1. Reciprocity - point out how your service helps them, or give them something small so they give you a donation in return (ie, Hari Krishnas give you their book and don't accept it back; many people mail trinkets).  Alternately, make a concession, so they make a concession in return. 
2. Scarcity - how are we unique?  If we're the only ones who can do something, we're scarce, and thus valuable.  Also, saying 'by not donating, you'll lose X' rather than 'by donating, you'll gain X' makes it seem more scarce -- but people eventually realize that the implied threat won't happen.
3. Authority - people defer to experts or people who seem powerful.  Wear a suit and tie (if someone with a suit and tie jaywalks into dangerous traffic that no sane person would walk into, people are 6 times more likely to follow them in than if they weren't wearing a suit and tie).  Mention credentials.  You should also be trustworthy -- say something that seems contrary to your interests (ie, mention a competitor has a good product).
4. Consistency - people feel pressured to behave consistently with their previous actions.  If you get a public commitment, then people might follow through.  Un-coerced, public, and put in ink commitments are best.  If I call and ask people whether or not they would volunteer (without asking them to volunteer), most people say yes.  Then, if someone else calls 3 days later, people are 700% more likely to volunteer than if they weren't primed earlier.
5. Social Proof - monkey see, monkey do.  A behavior is correct if others do it (so yes, if everyone else jumped off a cliff, I would too, thank you very much).  If you hear 20 other people pledge donations, you might.  Or, if someone on the phone tells you that the last person they called donated a large amount, you're likely to donate more.
6. Liking - if I know and like someone, I'll say yes to them.  Be charismatic and likable.  Easy, right?

 

SUCCES principles from "Made to Stick: Why Some Ideas Survive and Others Die (Lessons from Urban Legends)":

• Simple - Use analogies.  People can only remember 7 pieces of information.  Like a phone number.  Avoid having 70 pages of information.
• Unexpected - Unexpected things create a short circuit between two mental frames.  For instance, my shirt that declares, "I'm a vegetarian because I HATE VEGETABLES" (http://breadpig.com/2010/06/11/new-shirt-vegetarian-because-i-hate-vegetables/) is fairly memorable.
• Concrete - People can visualize specific language, details, and concrete nouns (avocado) more easily than abstract principles (justice). 
• Credible - People will believe something more if there is a credible authority or, better yet, if they can do something to verify for themselves.  Thus, a lot of urban legends will mention an easily verifiable truth as justification for the (unrelated) conclusion to make it more believable.  For instance, "The Secret" says "athletes visualize, and then they perform better" which is true and easily verifiable to justify mumbo jumbo about thinking good thoughts reshaping the world (yes, good thoughts have numerous psychological benefits.  No, thinking good thoughts does not directly affect the outside world).
• Emotion-Evoking - "Don't Mess with Texas" was an anti-littering campaign in Texas.  It evoked people's pride in their state, so it is a slogan that has stuck.  And it reduced litter. 
• Story (tell one) - When 200 MBAs make a short presentation, one out of ten tells a story (the rest use statistics).  When people are asked to  remember stories, two out of every three remember the stories and one out of every twenty remembers the statistics.  Did you notice that I told a story there instead of just cutting to the punch line that stories are 118 times as memorable as statistics?

 

"Why Bad Ads Happen to Good Causes" is an excellent reading (free online: http://www.agoodmanonline.com/bad_ads_good_causes/index.html) on basic graphic design.  It also has funny quotes: "Half of my advertising dollars are wasted -- I just can't figure out which half!"

1. Capture the reader's attention like a stop sign and direct it like a road map.
   • People start at the most interesting part of a picture.  If nothing directs them elsewhere, they go down until they go off the page or hit a border.  Then, they don't go back.
   • Thus, don't use borders unless you want people to stop at one.
   • Don't put something important above or to the right of the most interesting point unless you have something to direct attention at it.
   • A good template is a picture at the top, a headline below it, text below that, and the contact information at the bottom right.
2. Make an emotional connection before attempting to convey information.
   • Leave the reader room to insert their own emotion by asking a question rather than stating your emotions.
   • Stories and pictures can evoke emotions.
   • Fear and shame are overused.  Try joy and love (or sorrow and hate... it's not that negative emotions are bad, just that fear and shame are overused)
3. Write headlines that offer a reason to read more.
   • Don't split the headline up between two places.
   • Include a call to action or ask a question.
   • Do one of three things:
     1. Appeal to self interest by offering a clear benefit
     2. Arouse curiosity that will be satisfied by reading more
     3. Break news that will spur the reader to delve into text
   • 5/6 readers only read the headline.  That means you need a headline.
   • 9 words or fewer (unless it needs to be more)
   • Interact with the picture.  If the picture follows from the headline, put the headline above the picture; if the headline follows from the picture, put the headline below the picture.
   • If the picture contains the information, it should take up 80% of the page.  If the headline contains the information, the picture should only take up 25% of the page.
4. Use pictures to attract and convince.
   • Color pulls.  Black and white explains.  Monochrome (ie, a color picture printed in blue ink) does neither.  That said, people like blue and green, so you should feature them.  If cost isn't an issue, use color.
   • Don't cut off part of a person's face.  This is especially true if you use kids or babies: babies are eye magnets, but you can't cut off any of the baby (the baby also must be happy and healthy.  Negative baby imagery is a big no no).
   • The picture needs to have an apparent meaning.
   • Eye contact is good.
   • Avoid placing text over pictures.  Readable text is important.
   • The picture can direct the eyes to an action
5. If you want people to read your text, then make it readable.
   • Different font sizes are bad.
   • You can only use long text (more than 100 words) if the headline and photo get people interested.
   • Columns and segments and borders are bad.  When you hit a border, you turn the page.
   • Sans serif fonts are bad in printed copy text (headlines are okay).
   • Copy text should use regular sentence capitalization, not all caps. 
   • The left margin should be justified.  Otherwise, the text is unreadable.
   • The right margin should not be justified.  I have heard different justifications (get it?) for this (the jagged edge on the right makes things more readable and the rivers of whitespace that go through text are either good or bad).
   • Short paragraphs are good.
   • Subheadings are good.
   • There should be several points of entry into the text.
   • Interesting is good.  If "May we send you $700" aren't the first five words, they won't read word six.   
   • Black on white is better than white on black for printed text.
6. Test before; measure after.
   • Low budget: ask your friends
   • You can test concepts, messages, or ads.
   • Ask the art department of the organization that's publishing you.
   • You can use unique phone extensions, web pages, or coupon codes to measure the result of a particular ad.
7. When everyone zigs, it's time to zag.

 

Pricing

Traditionally, a for-profit company will price something to maximize profit.  They will identify customer segments and charge different amounts and examine customer prices. Thus, even when something costs nothing to reproduce, such as a 50 year old book or song, it might cost a lot.  A social impact based organization might not want to do this because the most profitable price for bed nets might not be the price that saves the most people from getting malaria.

Zero pricing is stereotypically nonprofit, but not necessarily.  For instance, Google gives away most of their products for free.  It just means that the company needs another way to get money.  When a nonprofit does this, they need a non-price way to allocate their goods such as an eligibility requirement or a waiting list.

Social pricing is a hybrid model that prices to maximize the social impact.  You might price below market rates for some segments and above for others.  I have seen a lot of social entrepreneurs that use this model, typically with three different cost tiers (one tier to make money, one tier to help poor people, and one tier so that there's a nice three tiers). 

There are reasons why a nonprofit, even one that can afford to give something away for free, might want to put a price on it (and not for greed, either!). 

Giving stuff away can negatively impact the supply chain.  The US gives food aid to parts of Africa.  Even though this food aid is very low quality, it still prevents African farmers from selling their goods, which leads to sustainable economic development, reduces costs, and does a host of other good things. 

If you pay money for something, you value it more, and you try to get your money's worth.  Similarly, when I go in and build wells for free, those wells will probably break in a few months, and the community won't know how to fix them.  If I put in 70% of the funds and help the community raise money for the rest, then they'll be able to buy replacement parts and will make sure that while we build the wells the first time, they know how to maintain them.  I know a lot of successful social entrepreneurs that charge money (even if it's only a little and they work with the beneficiaries to raise the rest) for this reason.

There are a lot of different effects on future demand from giving something away.  The entitlement effect: if I get something free, I feel entitled to it, so I won't pay in the future.  On the other hand is the positive experience effect: if I see how amazing the free trial is, then I'll pay to get the full version ("I love gmail, but I have 13GB worth of emails, so even though it's free, I'll pay for storage!").  There is the effect of social learning: if all of my friends are using something, then I'll want to use it whether or not it's free.  Also, there's the income effect: if a (free) product helps me earn money, then I'll have more money to buy the product (or donate) in the future ("I made my millions thanks to Stanford, so I'll donate a building"). 

There are also signaling effects.  Charging money might signal to a donor that an organization is sustainable (and thus effective) or that it's successful (and thus doesn't need money).  It can signal to the staff that they should relate to beneficiaries as customers, which means that if we don't serve all of their needs, we won't be in business (instead of thinking of beneficiaries in a paternalistic manner where, even if we aren't giving out a great service, it's free and it might be useful).  It can also signal to the customer that the service is valuable and that they shouldn't treat it as free (and waste the organization's time by putting a halfhearted effort into it). 

 

Fund Raising Models

There are 10 nonprofit funding models that empirically work.  Check out http://www.opportunitycollaboration.net/userimages/file/Fellowship%20Ten%20Nonprofit%20Funding%20Models.pdf

1. Heartfelt Connector - broad, simple social appeal (ie, Save the Children)
2. Beneficiary Builder - give people a service, and they give back (ie, universities)
3. Member Motivator - get money from community - (ie, churches or NPR)
4. Big Bettor - solve a big problem; get a few big donors (ie, Stanley Medical Research Institute)
5. Public Provider - solve government contracts.  From administrative agencies (ie, Family Health International).
6. Policy Innovator - solve government projects.  Use policymaker earmarks or appropriations (ie, HELP USA).
7. Beneficiary Broker - get reimbursement from the government for providing a service (ie, Metropolitan Boston Housing Partnership)
8. Resource Recycler - use goods that for profits don't care about (ie, SIRUM - https://sirum.org/)
9. Market Maker - some entity could go into for profit, but it would be unseemly or illegal (ie, organ donations)
10. Local Nationalizer - solve a little problem in a gazillion places (ie, Teach for America)

 

There are 6 behavioral donor segments.  Know who you are targeting before you make your pitch.  Check out http://www.hopeconsulting.us/pdf/Money%20for%20Good_Final.pdf

1. Repayer (I donate to Stanford because they gave me an education and big scholarships for 4 years)
2. Casual Giver (I donate to established, well respected organizations through a payroll deduction)
3. Faith Based (I donate to my church)
4. See the Difference (I donate to a local charity because they're small, and my small donation will make a difference that I can see)
5. High Impact (I donate to Oxfam because they have data proving that they prevent people from starving to death and lift people out of poverty for only a few dollars)
6. Personal Ties (I donate to Code the Change because I know Sam and want to support him or because one of my friends asked me to)

 

Measuring Performance

A first step in measuring performance is knowing what you are measuring (the alternative is knowing everything, but not every organization can pull that off).  Having a theory of change can help with this.  By examining the big picture, you can figure out which of your direct actions might lead to which positive impacts and measure actions and impacts accordingly.

It was suggested that we further annotate a theory of change with a "logic model," which has inputs that the organization uses as resources, outputs that are the direct, tangible results of organizational activities, outcomes that are the less tangible effects, and impacts that are the end goals. 

Another thing to think about is how much effort is being put in to creating effective measurements.  Between assuming that something works and having rigorous proof that it works is: cherished theory, apparent effectiveness, demonstrated effectiveness, and proven effectiveness. 

 

Scaling

Scaling means increasing the effectiveness of an organization to better match the extent or nature of the problem that it's trying to address.  That is, if there is a problem with education across America, scaling might mean growing to be a national organization.  Or, if you're Nike, scaling might mean paving the way for sweatshops across the world in order to maximize profits on swooshes.

There are three general schemes for scaling: dissemination, affiliation, and branching.  Dissemination means giving organizational or technical assistance to bring innovation.  Affiliation means a formal relationship.  Branching means local sites of a larger organization (franchises). 

There are also three things that you might want to scale: ideas and principles, a program, or an organizational model.  Principles are guidelines on how to serve a purpose.  Programs are actions on how to serve a purpose.  An organizational model is a model to serve that purpose. 

The spread of ideas on how to have a nonviolent revolution was an example of dissemination of principles from Gene Sharp to Tunisia to Egypt.  Teach for America is an example of sharing its program with affiliate schools.  BRAC (http://www.brac.net/) has tight control over its satellite programs, so it branches its organizational model.

To think about a scaling approach, think about the five Rs: readiness (are you ready to scale?), resources (can you get resources to scale?), receptivity (are other communities receptive to you scaling?), risk (what if your scaling doesn't work?), and return (what do you gain from scaling?). 

 

Legal Structure

Some social enterprises are for profit corporations.  Some are nonprofit corporations.  Some have a hybrid model (ie, a for-profit arm that feeds money or goods into a nonprofit arm).  Being a for-profit or a nonprofit doesn't make a whole lot of difference (but tell that to the IRS!). 

Profit is not the same thing as money.  You get revenue (grants, membership fees, service fees, selling goods, smiling for photos...) and you spend it on expenses (salary, office space, stuff to perform services, stuff to make into goods, stuff to keep the company dog happy).  Whatever is left over can either be invested back into the company or can be called "profit."  If it is profit, then it is split between the shareholders. 

For-profit corporations are allowed to sell shares of their company and distribute profits to shareholders.  Nonprofit corporations are not allowed to do that. 

Being for-profit can make it easier to raise capital (capital is not the same as money either.  Capital is more like an investment -- something that you need in order to get work done.  People are human capital.  A tractor is another form of capital.  Fertilizer is a less attractive form of capital, but capital nonetheless) because you can sell a large part of your company to a venture capitalist.  Then, they will help you succeed by giving you money and advice, and they will make money when your organization succeeds.  Nonprofits can't do this because they don't have profits or shares -- they aren't allowed to sell their company.  If you're a private corporation, then you have very little regulation.  If you're a publicly traded corporation (shares of your stock are traded at a place like the New York Stock Exchange), then you have some regulations (ie, posting your finances openly).

Being a nonprofit makes it easier to get donations.  If you're a 501c3 nonprofit (a charitable organization recognized by the IRS), then donations to you are tax deductible.  If you're a 501c4 nonprofit (a political or lobbying organization), then donations aren't tax deductible, but you still get other benefits.  Also, many foundations will only give grants to nonprofits, and being a nonprofit can give more legitimacy to you when you assert that you are charitable.  Nonprofits are regulated by a board of directors.

In other words, being a privately traded corporation gives you the most freedom, you might have to become publicly traded if you want venture capital, and it's easier to get donations and grants if you're a non-profit.  There isn't much of a difference otherwise.  Nonprofits still make money and pay salaries just like everyone else.

Thus, I'm of the "legal shmegal" school of thought (once again, that is a term of art discussed in the readings) -- a good social enterprise can probably succeed as either a for-profit or nonprofit organization.

Some considerations in whether to be a for-profit or a nonprofit: are you primarily in it for the money or the social good?  Is the organization profitable?  Do the stake holders in the project or the founders care one way or another?  Do the people running the organization have more skills in the for-profit or nonprofit sector?  How fast can you scale up as a for-profit or a nonprofit, and what types of investment do you want in order to do that?  Might you want to switch later (it's easy to switch from a privately traded for-profit corporation to a nonprofit corporation, but it's hard to change from a nonprofit or publicly traded corporation.  A related question: are you afraid of commitment?)?  Is the business model in line with the legal structure?

We got a guest lecture from Ben Binswanger at the Skoll Foundation, and he talked about the differences between the for-profit, nonprofit, and government (and he said that social movements are completely different) sectors.  When he worked at a for-profit, he did work to help people, but even though he was in charge of philanthropy, he still always had to think about profit rather than social good.  When he worked for a politician that did good work, he could see the massive change that a good policy can make, but it was slow: he had to spend so much time fundraising and campaigning, and even then, he had to spend years convincing people just to get one policy through, but that was a very good policy.  He's happy working at a non-profit because social good is all that he has to worry about.  That made sense to me and reinforced my desire to go into the non-profit sector.

 

Finances

Cash Flow Statement: I need to know how much money I have available to pay the bills.  The cash flow statement is a measure of liquidity.  It will have inflows (deposits into the bank) and outflows (checks that you write).  The cash flow statement is over a period of time -- it not only answers the question "how much money is in the bank?" but "how has that number changed in the past year?"

Income Statement: I need to know how well my company is doing.  An income statement is a measure of net income (also called net earnings or net profit, depending on the context), which is revenue minus expenses.  For nonprofits, the income statement is sometimes called the "statement of activities."  The income statement also is over a period, and it can include non-cash revenue

Gross Profit = Revenue - Cost of Goods Sold

Earnings Before Interest, Taxes, Depreciation, and Amortization = Gross Profit - Selling, General, and Administrative Expenses

EBIT = EBITDA - Depreciation and Amortization

EBT = EBIT - Interest Expenses

Net Income = EBT - Tax Expenses

Balance Sheet: I need to know how much equity I have.  A balance sheet compares assets to liabilities.  Instead of just looking at cash and liquid assets, a balance sheet looks at everything that you have that is worth money.  In other words, if I spend $5000 on raw materials, then that would make the cash flow statement go down, but it would have no effect on the balance sheet.  If I make those raw materials into doodads that are worth $6000, then my balance sheet went up.  If I sell those doodads and get $6000 of cash, then my balance sheet stayed the same.

Equity: Equity = Net Assets - Liability.  Equity is the amount of ownership that you have of the company.

Time Value of Money: I can earn interest, so money is worth more to me now than later.  It's good to take out a 5% loan if I can make 6% on that money.

Future Value = Present Value * (1 + Interest Rate) ^ (Number of Years in the Future)

Present Value = SUM from t=0 to n of Future Value at Year T / (1 + Interest Rate) ^ T

Break Even: In order to break even, my revenue has to at least equal my costs.  This can help me figure out how much I'll have to sell (at given prices and given costs) in order to stay in business.

Fixed Costs + Cost / Unit * Units = Fixed Revenue + Revenue / Unit * Units

Current: a current asset is an asset that can be converted to cash within a year (leave it to finance to call next year's assets "current"!).  A current liability is a liability that has to be paid within a year.  The current ratio is current assets / current liabilities.  Current liabilities are similar to accounts payable and current assets are similar to accounts receivable. 

Solvency: do current assets exceed current liabilities?  In other words, is the current ratio greater than 1?  If so, then you can pay the bills. 

Leverage: If assets are greater than liabilities, you gain equity.  Financial Leverage = Total Assets / Owner's Equity.  Financial Leverage is a measure of how in debt you are.  A lower number for financial leverage is better because you are able to take on more debt if you need to. 

You can leverage equity by borrowing money to get capital rather than selling equity, which means you get more of the profits.  You can leverage revenue by buying fixed assets (assets that don't cost more the more you sell), so if revenue increases, expenses won't increase as much. 

Profit: profit margin = net profit before tax / revenue.  Net profit before tax is EBT in the income statement.  A high profit margin means represents a stable company.  A low profit margin means that a small decrease in revenue or increase in expenses could make the company unprofitable.

Financing: for a startup, equity is often best.  For other companies, debt is generally best.  Short term debt is better for short term investments like inventory and current assets.  Long term debt is better for long term investments.  Secured debt is good if you're using the debt to buy something that you can put up as collateral. 

Stock: there are different types of stock -- common and preferred.  If a company goes bankrupt, they pay out to preferred stockholders before common stockholders.  Common stock often lets you vote on company policy and pays even better (outside of bankruptcy). 

 

Persuasion Project

One important part of any organization is getting a message out.  Thus, we had a 'persuasion project' where we made a print advertisement for something with a social theme.  I worked with Ana Diaz-Hernandez, my roommate in Terra for spring quarter of last year, on my persuasion project.

Ana and I noticed that we both wore bike helmets, so we decided to do a bicycle helmet campaign flier.  We brainstormed ideas.  I thought of shampoo commercials: "We could have someone wearing a bike helmet in the shower!"  Then, once we were thinking about sex, we thought about condom commercials -- it's interesting that it's normal to wear a condom to protect yourself but weird to wear a bike helmet to protect yourself.

Our top two slogans: "Helmets.  Get some." (like the double entendre?) and "it ain't rubber... but it still protects your head" 

We had a photo shoot of two shirtless guys wearing bright helmets spooning.  Needless to say, this was intended for a liberal college context. 

We wanted to make it provocative (both making it about sex and making it two guys) because countless people have made the pragmatic appeal to wear helmets and there is no compelling reason not to aside from the geekiness factor.  Thus, while sex sells just about anything, getting two attractive people to make helmets look sexy is exactly what the campus needs to get more people to wear helmets.

 

Guest Lectures

We had a guest lecture from Elizabeth Scharpf, the Chief Instigating Officer of SHE, Sustainable Health Enterprises. SHE makes affordable menstrual pads for women in developing country.  The motivation was that women who can't afford pads use rags, bark, and mud and miss 50 days of work or school per year.

Scharpf talked about a lot of things that she learned along the way.  The team is important.  Play to people's strengths.  Know how to tailor your message to different people.  Do what you're passionate about.  Make sure that your goal is solid but your theory of change is flexible.  Always be in a place where you're learning and doing cool things.

Ben Binswanger from the Skoll Foundation also talked with us.  The biggest thing that I got from his talk was his discussion of different work cultures (see the Legal Structure section).  He also advised that, while it's easy to spend 14 hours working every day, you'll probably still get a lot done if you only spend 11 hours every day, and then you'll have some time to spend with your family.