NEWSSOCIAL MEDIA

(Ed. note: This is a guest post by Yury Lifshits. Yury is a Research Scientist at Yahoo who has done extensive research into market models. We're thrilled to republish this piece on the changing nature of public goods, which was originally published on his blog).

There is a new trend in the tech industry: making money on public goods. Until recently, public goods were viewed as an area of philanthropy. Now entrepreneurs, investors and corporate leaders see the business opportunity there. This essay gives a basic tour around the market of public goods. We cover the definition, core business models and future areas of growth.

What is a public good?

One can classify goods by the following two criteria: rivalry and excludability. A good is rival if its usage by one consumer reduces availability to others. In contrast, non-rival good can be used by every consumer in parallel. If a producer manages access for every user individually, the good is called excludable. Non-excludable goods are available for everyone interested. Thus, we get four groups of goods:

• Private good (rival and excludable): iPhone, Toyota Prius.
• Common-pool good (rival and non-excludable): Customer support, water in a river, conference rooms in an office building.
• Club good (non-rival and excludable): Cable television, Windows 7.
• Public good (non-rival and non-excludable): National defense, roads (excepting toll roads), GPS Satellites, Wikipedia.

In this essay we use the term public goods more broadly than in classic economics settings. Namely, we consider voluntarily non-excluded goods and nonrival-before-congestion goods to be public. Public goods are produced in a number of areas: city infrastructure, education, law enforcement, peace, safety/security, energy, environment, health, food safety, social security, employment, transportation, tourism, mass communications, and financial systems. In this essay we will have a look at the concept of public goods enterprise (PGE) - an organization that produces non-rival non-excludable goods at profit.

I just saw The Social Network and was struck by one moment in the movie that everyone in the theater loved: Mark Zuckerberg gets an idea so great that he runs outside in sandals through the snow. He hesitates for a second in the cold and then keeps going. I think it was so well received not just because it was funny but because people identified with it.

Everyone knows that moment where you say: “Oh crap, I shouldn’t have done that. Forget it, I’m doing it anyway.” Aaron Sorkin did a brilliant job of making sure every audience member identified with Zuckerberg and it happened the moment he became human; the moment they saw his passion, his risk-taking in a silly way that made them think of what would motivate them to do the same thing (unconsciously), and the story unfolded with everyone invested. Mark Zuckerberg’s level of entrepreneurial risk-taking and genius may be unattainable for most of us but we can resonate with passion so great that we do something that seems a little stupid.

I asked some of the social entrepreneurs in my social network: What makes you run through the snow in sandals? Here’s what they said:

• "The many people with autism desperately needing to be respected in society makes me run as I think I can provide hope and meaningful jobs." - Thorkil Sonne, Founder of Speciliasterne and Specialist People Foundation
  
• "The possibility of empowering and making a difference to other people." - Ashni Mohnot, Founder and CEO of Enzi

• "The prospect of a world-changing venture and everything that comes with it – the risk, the excitement, the potential… in many ways startups parallel love." - Cody Simmons, Founder and President of CO-Fund
  
• "The idea that a smart, hard-working young woman in Peru or Vietnam or somewhere else had to drop out of nursing school because she couldn't get $700.  In the grand scheme of things, it's not that much money.  It's just that, in most developing countries, no one believes students are worth a loan." - Kushal Chakrabarti. CO-Founder and CEO of Vittana
  
• "The awe of a great vision and the happiness of coming one step closer overshadow every physical restriction." - Bjorn Herrmann, Principal of Supercool School (and promoter of literally running through the snow in sandals)

• "I was ironing when I decided we were using the wrong bottle design to buy household products. Fear + excitement filled me. 4 years later, Replenish is a reality." - Jason Foster, Founder/CEO of Replenish

The journey may take years, and the idea might come to you while you're doing a mundane task but I think everyone can agree that it all starts with a step in the "right" direction, whatever that is for you. As for Zuckerberg, we may think we know what motivates him to follow his passion. But a young billionaire who drives an Acura, rents a modest house, and makes a $100M gift to a school to which he has no personal connection  is hard to predict. He is not a stereotype and neither are you.

Howard Thurman, spiritual adviser to Dr. Martin Luther King, Jr., phrases this blog’s title another way: “Don’t ask what the world needs. Ask what makes you come alive, and go do it. Because what the world needs is people who have come alive.” What makes you run through the snow in sandals? What makes you come alive? Go do it.

On Wednesday, news broke that the 26-year old founder of Facebook, Mark Zuckerberg, would be donating $100 million to the Newark school district in an attempt to help transform public education in one of the most hard-up parts of the country. The gift is a pretty remarkable entrance into the world of philanthropy for the young billionaire, and portends exciting things for the future.

The New York Times was the first to scoop the story. According to their article, the arrangement will see Newark's well known major, Cory Booker, will have a larger role in managing the school district than any Newark officials have since the state of New Jersey seized power from the district in 1995 due to the horrible performance of students and teachers. The gift is supposed to be the first for a foundation that Zuckerberg will set up to focus on education issues.

The news coverage since the announcement has been, if predictable, extremely disappointing. Most of it has written off the announcement as just some PR stunt in the face of the annual release of the Forbes 400, which suggests that Zuckerberg's stake in Facebook makes him the 35th wealthiest person in the country. Even more importantly, these pieces argue the donation is meant to counteract the portrayal of Zuckerberg in the forthcoming movie "The Social Network," which paints him as an arrogant, awkward, sex-crazed jerk, and is based on the largely-fictionalized book "The Accidental Billionaires."

First, I think this is stupid logic. If one thing is clear from Zuckerberg's tenure in the public eye, he is not the type who would spent a hundred million bucks just to look a bit better. You're talking about a guy who has continuously created new features on his product that make his users scream and holler and make the press call him every name in the book, without flinching. Beyond that, it's just patently obvious how stupid a strategy it would be to try to drop this news just to counter negative perception. A piece by the author of "The Facebook Effect" suggests the timing was actually driven by Booker and Chris Christie, the governor of New Jersey.

Second, I think this is sad. The only thing we seem to love as much as propping celebrities up is tearing them down. The fact that we're so obsessed with this cosmic fame game that the coverage is all about some armchair Freudian analysis of the gift's motivation is depressing. We're spending no time talking about the potential for the gift in terms of repairing one of America's worst examples of the failure of public education. The only major voice I've seen express this opinion is Arianna Huffington.

Here's what I think: It's a powerful, powerful symbol that a 26-year old just gave $100 million to a single school district in a place he doesn't have a personal history with to fight what will surely be one of his -- one of my -- generation's great fights. Can you think of a less sexy way to start giving?

Zuckerberg is going to be a billionaire for a long time. He just brought philanthropy into his life in a major way less than half a decade after starting his company. It took Gates decades to made that leap. That means something, and we should be damn excited about it.

Photo credit: deneyterrio

Catchafire, a new skills-based volunteering platform that could transform how professionals engage with nonprofits, has just launched in public beta. The company was started by 28-year old Rachael Chong, who left investment banking to found the company. She recruited Andrew Lin, former VP of Technology at Hulu, to work with her as her Chief Technical Officer. For more background about the platform, see our piece here.

I had the chance to ask Rachael and Andrew a few questions about starting the company, leaving the corporate space, and their long term business potential:

Change.org: Both of you have made the jump from a purely commercial business to the social enterprise space. Was that something you knew you wanted to do, or did it just sort of happen?

RC - It was definitely something that I wanted to do. I went into investment banking after college with a purpose, to learn as much as I could and then get out of it to do something in the social good sector where I could apply business skills. I left investment banking faster than I imagined I would, which was accelerated by the fact that I had a hard time trying to find opportunities to give back in a meaningful way while I was a busy banker. My transition into the nonprofit sector was deliberate. I was very passionate about microfinance so to get into the space, I did what it took at the time, which was volunteer my skills full time for six months for a microfinance institution called FINCA International that is headquartered out of DC. My time at FINCA gave me the experience to later score a great job to help start up BRAC USA, the US affiliate of the bigger BRAC, the largest poverty alleviation organization in the world. At BRAC USA, we relied on skilled volunteers to help us build our business, which was a very effective strategy that helped us raises tens of millions of dollars in our first year. After witnessing firsthand how powerful skills-based volunteering could be for nonprofits, I was propelled to investigate why a scalable skills-based volunteer didn't already exist, and it was after this careful research that I started Catchafire to fill this huge need.

AL - While working at Hulu, I knew I wanted my next job to be working in towards some socially benevolent cause. When I left, I was primarily looking to help charitable organizations, preserve the environment, or improve education, and that's what I focused my search on when I arrived in New York.

Change.org: Andrew, have you noticed a big difference in what it takes to get a startup like Hulu moving versus something like Catchafire that has an explicit social as well as financial mission, or is it a similar process?

Business can't solve every problem. Not even social business. Those of us who live in democracies sometimes have to recognize the necessary messiness of building consensus and role up our hands to participate in electing people we think will best represent our interests. A new tool from the Personal Democracy Forum is designed to make it easier for us to get real answers about real questions from our candidates.

The 10Questions project is a platform that is meant to update the civic debate using the tools of the era. The project is a collaboration with Google and YouTube and is supported by funding from the Knight Foundation.

Basically the way it works is that, over the next week, citizens will be able to upload the questions that matter most to them in the context of specific election campaigns. Anyone can vote for or against certain questions. For example, I just voted up a question in the CA governor race about how the candidates would handle the likely possibility of legalized marijuana. Hey, I live in San Francisco...this is (legitimately) a local economic issue.

At the end of the voting period, the 10 questions that the community has decided are most important are presented to the candidates, who then respond point-by-point via video. The same community who voted on which questions to ask then can vote about whether or not the candidate actually answered the questions. This creates an extremely public review process in which candidates are being judged not only on the quality of their answer but on their instinct towards obfuscation or truth telling.

The project is not meant to be a cure-all to the challenges that face political participation in this country. It is not a solution for low voter turnout or the relentless money machine that drives the political calendar. What it is is an attempt to make the technology of the era work better for average citizens.

Indeed, what's most interesting in some ways to me is that fact that the project is driven not by some novel technology, but instead by a clever combination of interface and intent. The interface weaves together video with crowdsourced voting, and makes the whole thing effortless by allowing you to sign in with your Google ID. The intent, of course, is where the real power lies, and the idea of getting direct responses to your pressing questions is what the Personal Democracy Forum is betting with bring people to the site.

The tool is a reminder that the point of communication technology tends to be more about amplifying the opportunity for real dialogue than it is about upending it. 10Questions is, if anything, a return to a stalwart element of Town Hall democracy that has been easy to lose in the television era.

Voting is open until Thursday. Check it out at 10Questions.com.

Photo credit: Screenshot from 10Questions.

Right now, tens of thousands of people are sitting around in meeting centers or at their home computers, watching a development statistician share surprising insights about the best ways to approach poverty reduction.

In the year and a half or so since the program's launch, the TEDx program has become one of the most powerful platforms for convening groups of change makers in the world. Today, they're taking it to a new level with the first ever TEDxChange program, a collaboration with the Bill & Melinda Gates Foundation that is live streaming at 11am EST.

The TEDxChange program marks the 10th anniversary of the Millennium Development Goals, a set of globally-agreed upon goals meant to end extreme poverty, turn the tide on climate change, and generally make the world the place that it could be. While the MDGs have been a benchmark for development programs outside the US, our policy makers have -- as they are wont to do with most global agreements -- viewed them with some skepticism. This program represents a chance to discuss the progress that has been made in the global effort.

The program features some incredible speakers. In addition to Melinda Gates who is hosting the event, TED curator Chris Anderson, child and women's rights advocate Graca Machel, Mechai Viravaidya -- Thailand's "Mr. Condom" who has revolutionized safe sex in the country, and TED's favorite statistician Hans Rosling will all speak in the 90 minute program.

Even cooler than the program itself is the fact that it will be simultaneously streamed at more than 80 independently-organized TEDx events, in places as far flung as Soweto, Tapei, and Tokyo. It is incredibly heart-warming that the group that is convening this massive platform is so powerfully committed to relentless smart.

Last year around this time I wrote a post called "Making the World Safe for Smart: Why TED Matters," in which I argued that anti-intellectualism, and particularly the way it trickles down to schools was an incredibly destructive force. I wrote:

We cannot continue to teach young people that being smart sucks - whatever type of smart they are. We cannot keep perpetuating the lie that "not caring" and "being cool" are the same thing. The challenges we face are too great for us to condition a whole generation to suppress what they're good at and what they care about. More than that, the beauty of the world that comes from discovering passion and talent is the single best force we have to counter a pessimistic, bleary view of things.

The year since I wrote that has seen TED grow into an even more powerful counterweight to that reality, and I believe that is largely attributable to the TEDx program that has allowed TED to be not just an aspirational model but a supportive home for the efforts of those who care about ideas and action.

Check out the TEDxChange homepage here.

Photo credit: TEDxBuenosAires

Supercool School Principal (as in a founder of the company and school administrator) Bjorn Lasse Herrmann believes: “If people learn enough they can solve any problem.” So he created a way for people to learn very easily and in a socially connected network. Supercool School makes it easy for anyone to start a school; in fact, you can “start a free school in 60 seconds.” The founders of Supercool School realized that people aren’t just looking for good content, but they want a community of people to connect with who are interested in the same topic. Bjorn says, “The social experience of Supercool School creates chemistry and leads to a lot of informal ways of learning."

The platform actually started as a facebook application and now stands on its own, retaining the social networking feel. As one of their first schools, Startup School reached more than 2100 entrepreneurs in 130 countries and attracted over 1400 people to “like” them on facebook. Joseph Nganga, a social entrepreneur from Kenya says “I have learnt a great deal from other entrepreneurs – both experienced and in the start up phase. Startup School has enabled me to network with a variety of professionals who have helped me think through my own business, plan for its needs and better pitch to investors and partners.”

LocaleMotive, another emerging informal education platform with a social component, aims to help students “Study Socially. Check-In Locally.” While it hasn’t launched yet, students can expect a free study tool that will have features of project management software and feel like social gaming. Parents, schools, and teachers can view the progress of one student or an entire classroom.

As someone who resonates with Henry David Thoreau’s statement: “I was not born to be forced; I will breathe after my own fashion,” I appreciate the innovation and informal nature of these startups. They bring more practicality to academia, which appeals to me. Some of us (all, I would argue) were not made to sit in a chair attached to a desk or the grown up version of that with our ankles shackled to cubicles. Socially networked, innovative—maybe even fun, dare I say—education makes sense.

To remain relevant, education has to embrace and integrate social networking and I think its best that those innovations come from the private sector. (As a side note, how in the world did “Government on facebook” get 19,000 people to like it?) I’m curious to see how the formal education sector and accreditation bureaucracy will challenge, embrace, and change these informal education resources. Maybe we can, like Bjorn believes, solve some bureaucratic problems with education—entrepreneur style.

Photo credit: Shaylor

Last week, we told you the story of Feelgoodz, an ethical flip flop startup whose major summer order had gotten stuck in BP oil spill-related madness in the Gulf of Mexico. The sales drop caused by the disaster had left them unable to repay a venture loan, the money from which was meant to go directly into another social venture. The story became our most shared ever, and I'm thrilled to report that less than a week later, with the help of the Change.org community and an assist from Groupon, FeelGoodz has sold almost its entire summer line, and will be able to repay the loan.

To quickly recap the story, Kyle Berner founded Feelgoodz a few years ago as a way to bring the joy he had experienced as a teacher and traveler in Thailand to the rest of the world. The company had generated an agreement with Whole Foods that would help them sell on the order of 10,000 pairs.

Participating in First Light Ventures' New Orleans "Village Capital" program, Feelgoodz had been given a $50,000 loan to help cover the cost of shipping the summer order. Unfortunately, as the BP oil rig started gushing into the Gulf of Mexico, the shipment got stuck in the Bahamas, eventually being delayed for two full prime flip flop-buying months. Whole Foods wasn't able to sell nearly the number of pairs that they had planned on, and Kyle was left unable to repay the loan, jeopardizing not only his company, but Drop the Chalk, the education software nonprofit who was supposed to get the next loan.

The story came to me through one of Feelgoodz investors, and my gut was that it would appeal to this community of social entrepreneurs and supporters. What I didn't anticipate is that the story "BP Oil Spill Claims Another Victim, An Aspiring Entrepreneur" would become our most shared ever, being posted to Facebook almost 700 times. Something about it hit a nerve, and the injustice of a promising young social venture shuttered by exactly the type of environmentally unsound old world company that requires our movement in the first place grabbed people's attention.

The community was not only sharing the story, but actually buying flip flops, as well. On the first day the story was up, thousands and thousands of dollars worth of flip flops were ordered. At the same time, I forwarded the story to the leaders of Groupon, a company that in the past two years has reinvented group buying and built an epic national distribution channel. Their roots are in social activism and I had a suspicion they'd be into the story.

They were, and almost immediately got on the phone with Kyle to craft a deal. On Friday, they started sending out a nationwide deal that was $12 for a pair of flops that normally cost $30. In the first few hours they sold 1,000. After a day it was closer to 3,000. By Sunday, they had reached 6,500 and shut the deal down to ensure that they could get everyone the sizes and colors they wanted.

This all means that Feelgoodz will be able to pay back their loan, and Drop the Chalk will have access to the resources they were promised. It's certainly a testament to the incredible distribution power of Groupon. Moreover, it is an amazing testament to the power of the internet to help people form rapid and spontaneous communities of support. Finally, it's a powerful demonstration that this community cares not just about rallying against companies doing bad, but about supporting companies out there trying to do good.

Photo credit: Kyle Berner

Chances are pretty good that in the last year, you've been forwarded at least one web coupon that offers major discounts for some local service or product, if and only if a certain number of people sign up in advance for the deal. The group buying space is white hot, with dozens of companies getting millions in venture capital. What might surprise you is that the company that launched it all was originally built as an offshoot of a platform for social good.

Labeling any startup "the world's hottest," is a dubious art, but by just about any metric it's hard not to look at Groupon and think it's worthy of the title. A little over two years old, the company was recently valued at around $1.3 billion dollars. It will have estimated revenue of $350m in 2010. It has a legion of competitors who have raised in excess of $100m to copy (and try to improve, presumably) its group buying model, known collectively as "Groupon Clones." A few months ago, it expanded into Europe by buying a clone of itself that had grown so quickly it already had more than 600 employees, and quickly followed that by snatching up two clone companies in Latin America. Not bad for a couple years work.

What people don't always know about this much imitated startup is that it started as an online action platform for social good called The Point. The Point was based on the premise that when it comes to advocacy causes or nonprofit donations, sometimes every little bit doesn't count. If you're raising money to dig a well that costs $10,000, and you raise $9,000, you can't build the well. The Point gave people to ability to create a campaign that would aggregate commitment that would be engaged only when a specific threshold or "tipping point" was achieved. A campaign would look something like "If 1,000 people commit to dance in front of Congressman X's office for immigration rights, I will as well."

The site inspired some excitement, but had a hard time getting traction. It was organized as a for-profit company, and after a while, they began to brainstorm what all the uses of group power might be. According to founder Andrew Mason, they had always been interested in group buying, but had seen companies try and fail to make a group buying model work in the first internet bubble, and it wasn't until they really needed to experiment that they decided to give it a shot. "Groupon" started as one daily Chicago deal embedded on a blog at groupon.thepoint.com. When it started to take off, they knew they had something significant on their hands.

Man, I love the internet. I've just started a new business overnight that I actually think has promise. Would you pay $1.99 a month to keep track of fields that you care about, but just don't have the time to be heavily involved in?

The last year has seen a resurgence in the email newsletter as a social medium. High profile tech leaders like Jason Calacanis have abandoned blogging in favor of a direct email list. Companies like Thrillist and Groupon have built million (or billion) dollar businesses on the backs of email. And people are starting to notice.

Last year, I started "NList," a personal mailing list designed to make it easier for me to share things I thought were important, enlightening and interesting with friends and acquaintances -- many of whom I don't regularly see or speak with. I've averaged about one NList every 4-6 weeks. It's been an amazing experiment and I hear all the time from people who love the personality and immediacy of the medium.

When I saw letter.ly, a new startup from Sam Lessin, I had to try it. The idea is simple: paid newsletter subscriptions. You sign up for an account, set any price you want, and you're off to the races.

While most of the early users are charging for their personal newsletters, I'm in a slightly different position. My NList is about the social experience of staying in touch, and I'm not going to add a pay wall to that. When it comes to my specific industry knowledge, I already have this blog which I update ~30x/month. Not to mention a constant stream of Posterous, Twitter, and Facebook shares.

I started thinking, however, about all the people I talk with who are interested in social entrepreneurship, but only tangentially connected to the field. They don't necessarily have time to follow the day-to-day rhythm and pulse of the field. For them, the quantity of content on blogs like this actually become a barrier to entry because they don't know what to focus their limited time and attention on.