Turning Hustlers into Entrepreneurs

America can reduce poverty by enabling underground businesses
by Kai Wright, from The American Prospect

Excerpted from Utne Reader here;
http://www.utne.com/Politics/Turning-Hustlers-into-Entrepreneurs.aspx

Loretta Harrison is a born hustler.

“I been making and selling things since I was about 8 years old,” says the 45-year-old unemployed mom. She buys wholesale in Manhattan—balloons, socks, scarves, you name it—then loads up a pushcart and sells at retail prices on the streets of Jamaica, Queens. She’s peddled Icees off the back of a tricycle, teamed up with her teenage son to hawk bottled water for a dollar at stoplights, and organized “passion parties” where she brings together groups of women to gab about sex and buy erotic toys. “I love sales,” she says. “For me to have something that somebody else wants and for them to go in their pocket and bring out hard-earned money to get what I have is just—it’s like a high to me.”

Harrison hasn’t worked a traditional full-time job in nearly 14 years, since her eldest son, Malcolm, had a series of seizures in the second grade that resulted in brain damage. “After that, you know, he was a paranoid schizophrenic,” she says. “He’d think he didn’t have enough sugar in his cereal, and he’d run away and tell people we were bothering him. Punch out the windows and stuff.” So she quit her job delivering mail in the neighborhood to take care of him and her then-newborn daughter. “That whole year,” she says, “my Ready Teddy bags were the only thing that kept me going.”

Ready Teddy is Harrison’s pride and joy. It’s a crocheted teddy bear–and-tote combo that she’s been making since 1992. In the past, she’s sold the bags in a Brooklyn craft store for $35 a pop but now moves them herself for $20. “When I had people selling for me, I would charge them $15. They’d sell it for $20 and take out $5,” she explains, rattling off pricing and staffing schemes that have never been written down, let alone put into a business plan.

In fact, Harrison can’t so much as give a ballpark estimate of how much money she’s made or lost year to year on all of her little businesses. She figures that between her sales and her wage jobs—as a supermarket cashier, a newspaper carrier, a crossing guard—her income has probably peaked at $25,000 in a year. “As far as keeping records and whatnot—Loretta’s not so good at keeping records,” she jokes. “Especially when you get the money and you end up having to spend the money to live.”

Whether and how Harrison can actually live off her sales schemes are larger questions than she knows—and ones that may be getting more attention in coming years, as policy makers grope for solutions to the joblessness that’s strangling cities. Unemployment was at 10 percent at the end of 2009. More families went hungry in 2008 than at any time on record—an estimated 17 million households—and the poverty rate reached higher than it has been in more than a decade.

The conventional debate over how to help families who find themselves counted among those doleful statistics focuses on the social safety net—do we boost supports like welfare, provide low-skill job training, or just force folks to try harder to find work? The assumption lurking behind all of these answers is that poor people are broken and need to be fixed, or at least propped up. But a rarely noticed industry of small-business advocates and lenders say the problem is the other way around. What we need, they argue, is an economy that values the remarkable entrepreneurial instincts that people like Harrison already have. Their research suggests that with relatively small investments for training and with loans of as little as $500, small side hustles like Harrison’s could get neighborhoods like Jamaica churning with enterprise.

Microenterprise, as it’s called, has long been associated with the developing world. The Grameen Bank’s Muhammad Yunus pioneered the idea back in 1976 with a $27 loan to a group of Bangladeshi businesswomen following a famine. A global industry has since parceled out billions of dollars in microloans, and Yunus has won both a Nobel Peace Prize and a U.S. Presidential Medal of Freedom. But while the idea owes its fame to the developing world, it has also been slowly building in America since the mid-1980s—it’s just been ignored by an economic and political culture obsessed with the pursuit of large, rapid growth.

Now, with the U.S. economy in disarray, domestic microenterprise advocates believe this is finally their moment in the sun. Both Grameen and the celebrated peer-to-peer lending tool Kiva.org have announced new U.S. ventures since the recession began. And after years of hostility from Bush-era Washington, micro enterprise development has won the support of both the Obama administration and the Democratic Congress.

The effort is thus far relatively tiny: The Association for Enterprise Opportunity (AEO), a trade group, estimates that $100 million to $150 million is invested annually in U.S. microenterprise development. But industry researchers argue that Harrison is among an estimated 10 million low- to moderate-income people who could turn their ideas and hustles into thriving, job-creating businesses—and rescue inner-city economies in the process.



America’s roughly 6 million small businesses—defined as firms with fewer than 500 workers—employ about half the nation’s private-sector workforce. Another 21.7 million people ran their own businesses without employees in 2007. Politicians of all stripes love to laud these folks. In the American political narrative, small-business owners do everything from creating jobs to building communities. And they’re the people for whom Congress is still trying to pry open traditional credit markets. As President Barack Obama proclaimed in May 2009, “The entrepreneurial spirit lies at the core of our nation’s economy and identity.” Microenterprise-development advocates say politicians and bankers shouldn’t view people like Harrison any differently.

Microenterprise is defined, officially, as any business with fewer than five employees that takes less than $35,000 to get off the ground. According to the Aspen Institute’s Microenterprise Fund for Innovation, Effectiveness, Learning and Dissemination (FIELD), the vast majority of these ventures are both owned and staffed by an individual or a family. The AEO estimates that more than 24 million such businesses exist in the United States.

The idea of building upon tiny, family- run businesses has never caught on in U.S. economic-development circles. But according to Aspen’s most recent count, at least 500 organizations around the country either lend money or provide training to people who are trying to use small business to thwart poverty. The field started off providing capital largely to residents in black neighborhoods (particularly to black women) who had been walled off from banks for decades; it has since grown and splintered into both money lending and business training. Fifty-eight percent of the clients of today’s microenterprise-development groups are people of color, according to FIELD, and about 60 percent are women.

The changes driven by microenterprise programs are incremental but nonetheless meaningful. In 2008 Aspen surveyed about 1,400 clients served by micro enterprise-development groups. Over half of those who were living below the poverty line when they joined the programs had risen above it within a year. Average household income went from just under $30,000 to $36,000.

The programs have demonstrated a clear ability to help clients build sustainable businesses. In Aspen’s 2008 survey, nearly two-thirds of people who didn’t have businesses when they entered a program successfully got one started. Those new businesses split about evenly between full-time and part-time ventures; the full-time ones generated median revenues of $40,000 in 2007. That’s not Wall Street money, but it’s enough to move a family out of poverty-wage labor. And the biggest programs show even more potential. ACCION USA—the nation’s largest microlender—spokesperson Laura Kozien says, “For every microloan that ACCION approves, 2.7 jobs are created in low- to moderate-income neighborhoods.”



Tasha Stoudymire started working in department-store photo studios in high school when she took her newborn son for a portrait and ended up applying for a job. Over 11 years, she scraped her way up from $5.15 an hour to $16.70 an hour. “I couldn’t stand it,” she says of the sacrifice demanded by earning that money. “My son said to me, ‘Mama, you work more than you stay home. You go to work and you come home and sleep and shower.’ That hurt me.”

After a series of family and medical issues kept her away from the job, Stoudymire was let go. Now, at age 30, she has a new plan: opening a combination day-care and child-portrait business out of her Queens home. Skills aren’t the hard part. She just has to figure out how to make it all work as a proper business.

One night in the late fall, Stoudymire and a dozen other mothers and grandmothers attended a child-care business-development class conducted by the Business Outreach Center Network, a group that offers training and small loans to mostly immigrant clients. The women listened raptly as a trainer walked them through the impressive array of expertise they already have. “The word just—let’s eliminate that,” the trainer chided one woman, a gray-haired grandmother with a small, informal day care who introduced herself too humbly. “You’re not ‘just’ a child-care provider. You’re a child-care provider.”

Over the next two hours the women traded hard-won child-rearing and babysitting wisdom. Throughout, the trainer nudged the women toward a business owner’s mind-set, noting their legal responsibilities, marketing advantages, and money-saving opportunities. “Start looking at things in your house right now that could be used. Take off your adult cap and think as a child. What’s a toy?” She put a shoebox face down, propped the lid on its edge like a ramp, and sent a toy car sailing downward. “You don’t have to buy this! You’ve all got on shoes.”

Stoudymire and her classmates will go through 22 sessions like this, learn how to acquire free start-up supplies, and qualify to apply for a $1,000 grant. Since 2003, the BOC Network has put almost 800 New York City women through this training and given them more than $170,000 in grants. By BOC’s tally, the businesses those women later built created more than 275 jobs.

At the previous week’s orientation, Stoudymire burst into tears of joy as she listened to the talk about the market advantage of providers who understand kids’ developmental challenges and can help navigate city bureaucracy. She had that feeling all innovators get, that conviction that they know something nobody else does. And she embraced an emotion few have found in the recent economic downturn, declaring, “I’m excited.”



Excerpted from The American Prospect (Jan.-Feb. 2010), a perennial Utne Reader staff favorite for its smart, authoritative political reporting. A 2010 Utne Independent Press Award nominee for political coverage and general excellence.www.prospect.org
http://www.utne.com/Politics/Turning-Hustlers-into-Entrepreneurs.aspx

Save The World, Inc.

For Love or Money?
VIEWPOINT April 3, 2009, 3:00PM EST
For Love or Money
Is forming a nonprofit the way to solve social ills, or is it more efficient for business to do it?

TIM DELANEY
President and CEO
National Council of Nonprofits
Washington, D.C.

As a nonprofit you have an opportunity to get foundation dollars. Foundations are required to spend at least 5% of their assets every year on either internal operations or contributions to nonprofits. But with asset values down so much, it's becoming harder to get funding.

Sometimes there's no direct link between the issue and a sustainable business model. Take human rights in China, for example. I don't see a way to take that on through a for-profit model. Whereas I can see setting up a nonprofit where you get a foundation and some individuals to invest their dollars knowing they will not get a [monetary] return on it.

As a nonprofit you have the ability to wear the white hat. I started a nonprofit center on leadership ethics and public service. If it had been a for-profit consulting firm or law firm, there may have been pressure to give the client the answer they want instead of the right answer.

WILLIAM FULBRIGHT FOOTE
Founder and CEO
Root Capital, a nonprofit investment fund
Cambridge, Mass.

If you can use a for-profit model, you should. There's going to be a Darwinian flush on the nonprofit side as the financial meltdown causes funding to be reduced. So if you don't have to be out with your hat in hand, you are in a better position.

Business has the ability to scale. If you can bring the engine of business and real capital to bear, you can really move the needle. You can unlock billions and even trillions of dollars to address problems that are so huge. There just isn't that kind of money in the philanthropic world.

You have to be a starry-eyed romantic to think you won't have the dilemma of profit vs. the public good [if you use the for-profit model]. But the answer is to build awareness so that you have real consumer demand and shareholder pressure for ethical sourcing and environmentally responsible production.

—As told to Amy Barrett


SOCIAL ENTREPRENEURS April 3, 2009, 3:00PM EST
BusinessWeek Magazine
Making a Profit and a Difference aren't mutually exclusive. Five entrepreneurs show how it's done

As the economy reels, enterprising individuals who apply business practices to solving societal problems are gaining support from public and private sectors
By Stacy Perman

Social entrepreneurs—enterprising individuals who apply business practices to solving societal problems, such as pollution, poor nutrition, and poverty—are now 30,000 strong and growing, according to B Lab, a nonprofit organization that certifies these purpose-driven companies. Together, they represent some $40 billion in revenue.

The idea of blending a social mission with business is not new. One of the founding forces behind the movement, the Ashoka Foundation, since its inception 1981 has granted multiyear living stipends to support more than 2,000 fellows dedicated to finding answers to a host of social ills through business ventures. Indeed, the concept of building a profitable business model in which doing good is an intrinsic part of the business and not just a philanthropic sideline has been gaining ground in recent years. Sally Osberg, president and chief executive of the Skoll Foundation in Palo Alto, Calif., another guiding force within the social venture community, says the number of institutes, universities, and organizations that are now tapping into social entrepreneurship has mushroomed since former eBay (EBAY) President Jeff Skoll established the foundation in 1999.

Now, as the economy reels, both the government and the private sector are looking for inventive ways to bring back prosperity, and many are counting on these entrepreneurs as a powerful tool for change. "Social entrepreneurship correlates to this growing realization that entrepreneurs are the key to a vibrant economy and to solutions that are badly needed," says Osberg. It's not all pie in the sky, says Bo Fishback, vice-president for entrepreneurship at the Kauffman Foundation in Kansas City, Mo. "Many social entrepreneurs have shown they can accomplish their mission," he says. "They can deliver on the social good and report a cash flow."

Not surprising, then, that they've caught the attention of such venture capitalists as those at Acumen Fund, a nonprofit that invests in companies that try to alleviate poverty, and Bay Area Equity Fund, which backs businesses aiming to make social or environmental improvements to San Francisco's needier neighborhoods. (See these additional resources for entrepreneurs seeking funding sources that back social ventures.) President Obama has even suggested starting a new government agency to help socially conscious startups gain more access to venture capital.

WHO YOU LIKE BEST
In January, we asked readers, staffers, and members of the social venture community to nominate candidates whose trailblazing companies, in operation for at least a year, aimed to turn a profit while tackling social ills. The 200-plus nominations we received included such entrepreneurs as Alex Mittal, whose Philadelphia-based Innova Materials makes antimicrobial products for private industry, then uses revenues from these efforts to develop water purification systems for the developing world. Kirsten Tobey and Kristin Richmond, founders of Revolution Foods, deliver nutritious lunches to more than 100 schools (that's 20,000 meals a day) in low-income areas in San Francisco and Los Angeles. Rachel Sterne, another social entrepreneur, encourages those living under repressive regimes to post their own reportage at her profit-sharing Web site, Groundreport.com. You can take a look at each of the 25 ventures we profiled in our slide show, then vote for the business you feel holds the most promise.

Some attribute social models pioneered by small outfits to the social responsibility efforts espoused by large corporations. For instance, about three years ago, Wal-Mart Stores (WMT), the world's biggest retailer, launched a program to promote sustainability, urging its many vendors to produce ecofriendly products while encouraging its consumers to buy them. General Electric (GE) made its green mark manufacturing high-efficiency incandescent light bulbs, and such manufacturing giants as Clorox (CLX) have begun to roll out their own lines of "green" cleaning products. In March, Cadbury (CBY), manufacturer of England's top-selling chocolate bar, announced a deal to use 15,000 tons of Fair Trade certified cocoa from Ghana by the end of this summer for its popular Dairy Milk bar. The company said the move would improve the standard of living of thousands of Ghanaians by tripling the sales of cocoa farmers there.

One of this year's finalists, Daniel Lubetzky, founder of $25 million Peaceworks, which works as a catalyst for peace by encouraging joint snack-food ventures among people of different backgrounds in volatile regions around the world, says it is not enough to impose an artificial business model on a social issue. Lubetzky, who was awarded a $1 million grant from the Skoll Foundation in 2008, says that doing good alone will not ensure success. "I had an earlier company that totally tanked," he says. "I didn't understand the product line well, but I was passionate about the mission. The failure taught me that one can't advance a social mission if the business model doesn't sell. You can't just sell a social mission. You still have to come up with the best product with the best prices." Given the current economic climate, that rings particularly true.

For a look at all 25 businesses, flip through this slide show. More elements of this special report are available here.

Perman is a staff writer for BusinessWeek in New York.
http://www.businessweek.com/smallbiz/content/mar2009/sb20090330_541747.htm