Building our impact intuition

I was speaking to an impact investor recently, and he was saying that investment decisions are ultimately based on an intuitive sense the investor has about the company: the deal, the team, the market opportunity. And shouldn’t we just use our intuition to assess impact?

This is the most common unspoken premise used by impact investors to justify not collecting impact data.

So, where does this intuition come from? And is there such a thing as good and bad impact intuition?

Intuition is subconscious pattern recognition. And patterns are the sum total of the information we’ve taken in. If that information, and our ability to understand and process it, is of high quality, then we develop good intuition. If not, not.

A good investor is awash in quantitative and qualitative data that inform her investment intuition. For example, on the quantitative side, she’ll know what she expected gross margins to be, the predicted length of a company’s working capital cycle, and how many years she forecasted it would take for the company to get to profitability.

But that original financial model will have a very short shelf life: after the investment, she’ll get reams of data to show whether her predictions were right or wrong.

But in the world of impact, she’ll handle things differently.

She’ll look at research and benchmarks to develop a thesis. And she’ll stop there and multiply products sold by those benchmarks [e.g. 10 lights sold * X predicted impact/light = 10x impact].

This is like creating a pre-investment financial model of a company and then, two years later, when asked how the company is performing, using the model’s original variables to answer that question.

Not only would this answer not be any good, but her impact intuition would never improve.

Why do we accept the idea that we can understand the impact we are creating in people’s lives by looking at comparables? Why do we nod when told that it’s hard to get better data (it’s not)? How can we say that “we know impact when we see it” if we don’t gather data to understand actual performance?

The only explanation is this: we are not the people whose lives are, or are not, improved by a given intervention; we are not personally affected by a positive or negative ROI on a “better” solution; and the difference between potential and actual impact doesn’t land on our doorstep, or in our pocketbooks, or in our child’s cough or the quality of the education he receives.

The only way we’ll create better impact intuition is if we apply ourselves seriously to the question of learning what does and doesn’t improve people’s lives.

We don’t settle for “it’s too hard” anywhere else but here.

Cogito Ergo Sum Ego Creo Impulsum

Of all the charts in the GIIN’s 2017 Annual Impact Investor Survey report, the one that struck me the most was this one.

Of 200 impact investors surveyed, 98% say their impact is in line with or outperforming their expectations.

This in a sector in which almost no one actually measures impact, a sector that still debates whether having the intention to create impact is an important description of an “impact” investor.

It’s like we have our own version of cogito ergo sum: “I call myself an impact investor, therefore, ipso facto, I create impact.”

 

 

Akil and Sciryl

A guy’s on the subway car with a guitar, ready to sing.  New guy for today, but really he’s just another guy with a guitar…the same old story.

But then a passenger yells out, “YOU KNOW ‘MONEY MONEY MONEY BY THE O’JAYS?  I WILL GIVE YOU TEN DOLLARS…TEN DOLLARS…IF YOU CAN GET THREE PASSENGERS TO SING ALONG TO THE CHORUS WHILE YOU SING!”

The guitarist says he’s game.

The passenger stands up, starts goading the guitarist, starts goading the other passengers – “C’MON NOW, THE BRAVE ONES ARE SINGING.  HOW ABOUT THE REST OF YOU?”

And then, ten seconds later, the trouble-making passenger starts bee-bopping.  He’s part of the band, he’s the front man, in fact.

“IT’S TRUE,” he says, “NO ONE ON THE TRAIN WOULD EVER BE THIS NICE TO A STREET PERFORMER!”

And the riffs continue.  “WE’RE NOT HOMELESS, WE’RE NOT HUNGRY.  IN FACT, WE SMELL BETTER THAN YOU….Just kidding…WE’RE JUST DOING WHAT WE LOVE, SHARING WHAT WE DO.  BUY A CD, GIVE A DONATION, WE TAKE CREDIT CARDS…JUST GIVE US YOUR PIN NUMBER…AND GO TO ISAWYOUGUYS.COM…THAT’S ISAWYOUGUYS.COM….ISAWYOUGUYS.COM.  HAVE A NICE DAY.”

These guys call themselves Akil and Sciryl (“lyrics” spelled backwards).  And you can indeed find them at isawyouguys.com.

Here’s the deal: you’re facing the same choices as these guys.  Your can choose to be a regular old street performer by showing up in the way you’re supposed to show up – you look appropriate, you act appropriate, you pitch in an appropriate way – in which case the only way you win is by being the single best street performer they’re looking for that day (and happening to sing the song they love).

Or, you can put on a show, a show they’ve never seen before, a show a lot of people won’t like but a few will stand up and say, “Finally, I’m sick of all these crappy performers, what I was dying for was a little entertainment!!  Let’s talk.”

It’s safe to be a street performer, and you won’t make any enemies.  But artists put on shows.  That’s what makes them artists.

The O’Jays certainly knew that.  Look at those outfits, look at those moves.  A SHOW.