Political Correctness, My Mother’s Fur Coat and #Microfinance

I’ve been doing a lot of thinking as 2013 draws to a close, but most of the investment focused work isn’t quite ready for TMITM. Instead, I’d like to share a personal dilemma and note how these same values-based issues play out with regard to microfinance and impact investment. Let me also take this opportunity to wish everyone a healthy, happy and prosperous 2014 as well!

In New York City in the 1960s, one way that professionals showed the world that they were successful was by buying fur coats for their wives. A mink coat was the ultimate success statement, but fox, rabbit, nutria and others found their way into the closets of NY women.

My mother, as the (then) wife of a successful physician, was happy to join the trend and she enjoyed her beautiful mink coat for four decades before bequeathing it to me. As someone who has spent most of her life working in social finance, of late social and environmental finance, however, the gift of a mink coat posed moral, ethical and practical problems.

Here’s the catch. I have psoriatic arthritis, a chronic rheumatic condition that makes my joints — all of them — extremely painful when exposed to cold temperatures. My mother gave me her coat not just so I “could attract the right type of gentleman” (although this was certainly part of her agenda), but because she knew how warm it was and how good that would be for me. OK, by then she’d also been living in Miami for 20 years, so giving up the mink wasn’t a real sacrifice on her part, but it was nonetheless a lovely gesture. I must admit that the coat is the softest, warmest, cover up that my joints and I have ever had the privilege of wearing! Despite how wonderful it is to wear that fur coat on a cold day, it usually stays in the closet, deprived of utility but also immune to criticism.

Given that the minks that died to make Mom’s coat have been dead for at least 50 years now, scorning the fur coat on principal doesn’t make a lot of sense to me. Wouldn’t it be more correct to wear the coat, extending the use value of the minks’ short and reputedly nasty lives? Would it not be a form of sustainable consumption to continue to use this coat, rather than buy a new one and increase my personal carbon footprint?

If I choose to wear the coat, for warmth, sustainable consumption or convenience, how do I do so in good conscience, when the only thing the general public can see is the fur itself, but not the history behind it? I haven’t found a good answer to this dilemma. For the most part, I rarely wear the coat, despite its warmth and the lack of comparably warm alternatives in my closet. When I do wear the mink, I find myself explaining the story to all of my colleagues, so that they won’t think that I have been frivolous or unprincipled enough to buy a fur coat. If I think the mere sight of the mink might offend a client or colleague, I leave it in the closet and mutter under my breath as the cold makes my joints painful and achy.

If there is a moral to this story, it would go deeper than “don’t judge a book by its cover”. Instead, it suggests that seeking political correctness may produce socially acceptable but sub-optimal results. Why do we make the decisions we make and what values are explicit or implicit in the decision-making process? This type of dilemma plays out frequently in microfinance. We want to support productive enterprises, so it is tempting to look down on or prohibit consumer loans. But is all consumption bad? You might not want to help the poor buy an X-box to play games on, but a refrigerator (to prevent food spoilage and digestive problems), a solar lantern (to reduce kerosene fires and increase productive time) or a school uniform all represent forms of consumption that could be considered desirable. Does it make sense to exclude consumer lending, or should we instead focus on ways to do it right?

To call something politically correct is shorthand for saying that we’ve chosen a path that we believe will avoid criticism and controversy, but these should not be the only criteria we use in making decisions. As microfinance evolves and impact investment grows, philanthropists and investors alike face pressure to focus on innovation, on serving the poorest of the poor and of creating positive social returns. Reality suggests a broader approach would be helpful. Ventures that reduce social and/or environmental damage are potentially more important, relevant and feasible than those that seek only positive social or environmental impact. And yet, we’re still more excited about “disruptive” change as opposed to incremental improvement. Intuitively, we may prefer to support renewable energy than “sustainable oil and gas”, but we’re going to need oil and gas for decades to come. Wouldn’t better use of fossil fuel resources alongside development of alternative energy make more sense than only focusing on the latter? If a business model that serves low-income families as well as the poor is more scalable and sustainable, why wouldn’t you choose this investment over one that exclusively serves the poorest of the poor but has limited medium term prospects for sustainability? Is cross-subsidization inherently bad even if it enables achievement of a wider range of positive outcomes?

Most of the world is part of “the other 90%” – striving to maintain or improve quality of life not just for themselves, but for their children; struggling to find affordable housing, healthcare and education; and hoping that hard work and discipline will pay off some day. As we look at microfinance and impact investment, we should perhaps remember that none of us got into development work to make the poor a little less miserable. We chose development so that we could make the world a better place. How do we frame “the greater good”? How do we move away from zero sum outcomes to a longer-term “win-win” approach?

As 2014 rolls in, I find myself hoping that this will be a more thoughtful year for all; that we will consider the values that motivate us and look for financing and operating modalities that fully support these values. Innovation is important, but innovation isn’t just about using technology in new ways, it also means finding creative approaches to more efficiently and effectively working with the resources at hand. More importantly, innovation is often a lengthy, iterative process. We need to support research, field pilots and seed investments that test bold new ideas, but we also need better ways to identify and invest in ventures that improve rather than replace the status quo. I hope that “inclusive development” will come to mean supporting ventures that improve quality of life for the other 90% and not just reaching the poorest and most marginalized members of society. Both outcomes are important, but sustainability — and economic growth — require us to take the broad, long view of social change. Are you ready?