Reimagining Capitalism through Social Entrepreneurship

Geoff Davis is a multi-time entrepreneur, CEO, and board member, and a pioneering leader in impact investing. His teams have invested in over 200 high-impact companies globally and lent over $3.5 billion to 14 million small businesses worldwide. Currently, Geoff serves as the CEO of the Sorenson Impact Institute at the University of Utah, a Board Member of Arctaris Impact Investors and Common Ground Kauai, and an Investment Committee member of the MIT Solve investment vehicle. 

Sho Links:

https://sorensonimpact.com/

https://socapglobal.com/

Geoff’s LinkedIn

https://impactalpha.com/

https://www.ft.com/moral-money

Imperfect Show Notes

While these notes are not perfect (AI translation is still improving), they give you the gist of the conversation. Enjoy!

My conversation with Geoff:

Morgan Bailey 0:02

Hello, and welcome to the profit meets impact Podcast where we explore the intersection of doing well and doing good in the world. I'm your host Morgan Bailey and I'm excited to bring you the wisdom of entrepreneurs and thought leaders that are using business to create sustainable and meaningful change across the globe. I've been anticipating this conversation for a while today we are talking with Jeff Davis. He is a multi time entrepreneur, CEO and board member and a pioneering leader in impact investing. His team has invested in over 200 High Impact companies globally, and lent over 3.5 billion to 14 million small businesses worldwide. Currently, Jeff serves as a CEO as a Sorenson impact Institute at the University of Utah. He is also a board member of The Arc terrace impact investors and common ground kawaii as an investment committee member of the MIT salt investment vehicle. Jeff, man, I've been looking forward this conversation with a little bit of trepidation just knowing your background, you have so much experience such an honor to have this conversation with you.

Geoff Davis 1:08

Thanks, Morgan. Thanks, me too, since we met at SOCAP. And you probably remember had that fantastic conversation walking back to the hotel this I'd been really excited for this. Awesome to have me on? Of course, it's an honor, it's an honor. So you've the first thing that I'm just so curious about is you've done so much in the impact space. And you also have such an impact a business focus mind. So what are the experiences that drove you pursue pursue profession, and building and supporting social impact businesses?

Yeah, it's, it's and you've hit it on the head, it's really two things that I almost didn't have a choice. My grandfather was helped basically helped start the Peace Corps, and oversaw Asia. And my mom, so my mom grew up in Malaysia and the Philippines and things like that, as he was overseeing Asia. And so I heard a lot of stories there. And, and then my mom, I'm the oldest of eight kids. And

sometimes, this is gonna seem strange to your listeners. But sometimes our house got messy, growing up, and my mom would always say, she'd say, leave the room better than you found it, leave the room better than you found it, just find some way to do something, straighten something up, put something away, do something to make it a little more beautiful. And she was meaning that practically, for keeping the house in order, but she was also teaching us I think, a worldview and a way of orienting ourselves towards the world and just leave things a little better make the world better for having you haven't been here.

And so there's that kind of that, that line, and then I was always an entrepreneur. Growing up, I started little, I started a little businesses one time I when I was maybe 10, I saved up through a mail order catalog. This is either before Costco, or before I knew about it before it was where I lived. And I ordered a big tub of Red Vines, and, you know, kind of a wholesale thing. And then I took it to school, and I sold them retail for four times more than each one cost or something like that. And I was so excited, you know. And then I joke I was called into the office and kindly asked by the principal to stop doing that. And, and I joke that I've been a libertarian ever since. So then then, you know, organize, I started mowing lawns, and then realized, Oh, I could just get the business and have kids, other kids mow the lawns, and I could take, you know, out half the money basically. So I started doing that. And then when I by the time I got into college, I started three businesses as an undergraduate. And, and some of them did well, and one of them did really well. And I ended up selling it. And along the way, I was I was wanting to do something that somehow helped people as well. And I, you know, like most people, I, I kind of thought I'm gonna make a bunch of money. And then I'll figure out how to help people with that money when I'm older later. And but I heard about microfinance, microcredit microenterprise development, that there are all these small businesses around the world are a large percentage of the population, you know, do little small doesn't call it a necessity entrepreneurship, they sell water on the street corner or they, you know, raise goats and sell the goat milk or whatever. And I learned that there that you could actually lend to these small entrepreneurs, and they would grow their business and pay the money back and get a bigger loan and grow their business and pay the money back and in the process work their way out of poverty. Oh my gosh, that's it. That's it's helping people helping people help themselves. It's entrepreneurship. It's, you know, it's giving them a hand up instead of a handout. I've given a chance and all these things. And so I actually, I sold that business end up selling that business after I graduated, and I went to Mexico to try this out to see if I could actually do this. And at the time, I know you want to talk about some of the evolutions I've seen, at the time, almost all microfinance was done not on a nonprofit basis, it was viewed as a development activity. And it was Grant driven and donation driven, etc. And I designed this I designed the thing I was working on to recover its costs basically, to break even so that it, you didn't have to keep putting money into it the whole time. And maybe that can I tell one more story. This is really impactful for me. So when I was down there, we were doing market research to figure out kind of what size loans people would want, what we thought they would use it on, etc, poverty levels, and things like that. And, and I had seen a woman a few times doing this market research, and we talked to her and whatnot. And so when it came time for the first loan, she we thought we were going to give about probably on average $120 equate us to, you know, equivalent us for at the average loans. And she came and asked for $47. And I was confused. And, and so I said, Well, what are you going to do with that? And she said, Well, I sell goat cheese in the market and pasteurized cheese. And so last longer, pasteurized cheese sells for almost twice the prices on pasteurized cheese in the market. And there's a special thermometer that that I can get an I already know where I can get it in this special pot that I can use to heat the milk up to pasture pasteurization temperature, etc. And so with the combination of these things, which costs whatever, $47 I think I can just about double my income. Oh my gosh, okay, here you go. And I started a few weeks later after she'd been making their payments. And I said, How how's it going? She said, It's going fantastic. So what do you mean, she said, I used to make 65 cents a day. I'm now making $1.20 a day. And you know, it's changed our lives. And I had seen her as I mentioned, I'd seen her enough that I noticed she always wore the same outfit. Same blue blouse, the same skirt, the same. The jelly shoes, you remember kind of the 80s 90s those jelly shirts, with things torn and missing. It's so so much that I wondered, I wonder how she what she wears, if she ever washes those, like it was that obvious that she was wearing the same thing. Her home had a dirt floor, she cooked over a an open fire in the corner of her home, nowhere for the smoke to go. The doors were kind of like barn doors that just swing both ways. And pigs would walk in and out of the home. You know, latrine kind of far away from the home. It's it's I mean, you know, I'm thinking, Wow, your life totally changed. They said, so what are you going to do with that extra money to get all these things, you know that that could be done? And? And she looked at me like it was a silly question. And she said, I'm going to pay for my child to go to school, my 10 year old to go to school, a first person in our family to go to school ever. So Holy cow. Why? Why did why did it take extra money? This is part of my learning process. You know, why did it take why'd you need extra money to send to school in school for free? She said, Well, theoretically, it's free. But I have to pay for the bus fare because it's not, you know, public passage or MOBAs. I have to buy the school uniform. And I have to pay for the school supplies, the paper, the pencils and things like that, which we could never afford. So now my child would go to school, holy cow, that was enormous for me. And I had been wondering, I had been thinking philosophically intellectually, what is development? What is you know, what are we trying to accomplish when we're doing these things. And I realized through that experience, that development, or now we call it impact impact is an expanded choice that expanded opportunity, access to opportunity, so that she I didn't tell her what to do with that extra money and NGO didn't tell her what to do with the money. The government didn't tell her what to do with the money. She decided what was best for her family in that situation. And she invested in you know, the the future of the family. So that was really, really impactful for me. And then I should mention earlier that part of the reason I got into all of this, I served a mission for our church and France and worked with a lot of refugees from Africa and saw their lives with their lives had been what their lives were there, etc. And that was part of my motivation to say okay, I've got to use somehow combine business with this doing good. So I'll pause there and see where you want to go.

Morgan Bailey 9:52

Yeah, absolutely. No, I'm just appreciating it. The your, your your journey there. And just a quick comment on that. Last piece around, you know, the fact that you just create the opportunity for the woman and she chose what to do with it. Right which is, which goes against a paradigm that development's had for a long time, which is you need, you know, you don't have water, latrines, electricity, you health, you need these things, as opposed to allowing people to decide. And I think it's one of the I don't know, if you're familiar with the program give directly who's kind of up in Azure that, that paradigm over the past couple of decades to say, Well, what happens if we just give people money, and let them figure out what to do with it. And the outcomes, the, you know, in the factors contributing to like socio economic development actually look better when you just give people money, as opposed to try to tell them you need X, Y, or Z, or get them to participate in certain services or trainings. So fascinating on that. And I think that's what we love, I love about this business piece that you're bringing up is that business creates that opportunity for people to be able to choose, it gives people options, so they can choose. And I'm curious, one thing that like kind of struck me from your stories, is from a fairly early age, you've had a strong commitment to the Prophet peace, like it was important for you to be able to make it profitable and sustainable. Like when you went to Mexico, you're like, I see all this good that we can do. But I want to, you know, I wanted to break even here, $47. And first thing comes in my mind, like, Oh, I just want to just give you that money, right? Yes, something really specific about the Prophet peace has kind of been ingrained, kind of in the way you do things. And it sounds impactful. Can you just spend a second on that?

Geoff Davis 11:30

Yeah, yeah. There are a couple of reasons why. One is, well, even starting with what you demand, you mentioned earlier about this change in our view of development. You know, it is incredibly paternalistic to think that we, whoever we are, we no better than somebody who's living something. And there are, of course, there are times when people don't know about malaria, or they don't know about, you know, whatever, you need to kind of help them understand things. But for the most part, you know, people know what they would they need to make their lives better. And so if you just extrapolate a little bit farther out from that, we don't they don't need a handout, you know, they just need an opportunity to act on what they already know, or they can do to improve their lives. And so that that's just one, one little thread of the you know, why not just give a donation when we make money on it? Second, is, I'm going to make three points, and then see where else you want to go. The second point is, this is hyper practical. Well, there's Okay, four points. Second point, I'll do this one. First, the profit incentive drives the efficiency, theoretically, and if we're efficient, we can do more with the same amount. Or we can do the same amount with less or you know, whatever. And so theoretically, if you can help, you know, if you can help two people for $100 instead of one people $400 You're doing more good. Now, let's get hyper practical. You know, just think about yourself, do you just think about your, your, the way your life is organized? And I don't know the details, but do you donate more money? Or do you spend more money on goods, services, etc?

Morgan Bailey 13:25

I probably like most goods and services, yeah, yeah,

Geoff Davis 13:29

exactly. Exactly. And do you donate more money? Or do you invest more money? To invest? Absolutely. Okay. Right. So so that's the way people are, you know, maybe, maybe minus the Bill Gates or the top 100, or whatever. But even they invest more than they donate. So just purely factually, practically, people's donation checkbook is smaller than their investment checkbook. And so if you're trying to solve a system level problem at scale, and that requires a lot of capital, there's a lot more capital in the investment bucket than the donation bucket. And so if you can, if you can design and architect systems that can capture investment capital, that unlocks massive amounts of money, to allow the things to flow forward. So we came at it really practically, we calculated when we started microfinance, we calculated that about 13% of the total demand, total global demand for microfinance was being met through the current system, which was philanthropic and they're just they're just, you couldn't simply you couldn't scale that it was in the billions that were needed to you know, we estimated $50 billion to close the supply demand gap. You know, there's people aren't given that kind of money away for donations. But there are $2 trillion that flow around the world every day in investment capital. So if we could tap into a little bit of that and pull it in, you know, So that's basically how we unmarked the floodgates just creating a model that was investable, still helping the poor still while serving the social purpose, that able to provide financial returns,

Morgan Bailey 15:12

by you so eloquently, kind of describe that that paradigm of you know, what the extreme difference between what we what we might send into into or donate to, ultimately, like, the financial model, our lives circulate around, right. And so, you know, it's come, yeah, it's like, you know, you're, we're trying to, like, push this penny along over here and expecting it to, you know, to make millions. Meanwhile, like, we're, you know, we're wheeling dealing on this other side. And it's like, well, what if, what if it's not an either or, you know, right, what if the other side actually gets brought in or helps funnel? So I think it's a really important point. So I'm curious, you know, as we start to think about this on maybe at a broader scale, it is shifting currently, the manner in which we're investing, we're thinking about business. Talk to me just a little bit. Where did that when you first started doing impact investing, focus on impact businesses? Where is it? Where was that? Where's it at now? And then, what's the future? I know, that's a big question, but we'll spend a little

Geoff Davis 16:17

is a big question and starting historically, I'll give a couple of different perspectives. One is that when I started doing this, and we didn't talk too much about it, but people can you kind of Google me or look on LinkedIn, or whatever, more of the background. But when we started doing this, and I started doing this work, and we started doing microfinance, commercially, globally, that's how we got to those billions of dollars lent that you mentioned in the intro. We we had done it, I had done it in Mexico. And then I was part of a group that we started a company doing this globally, trying to commercialize microfinance globally so that we could reach the, you know, the billions that needed it. And we had done it a couple of times, and it was working. And our whole, we took a systems level approach. So we knew the work we were doing on the ground with our investments and working with the microfinance companies was impact important and impactful. But we knew that that was basically that was just the first order impact, that the real impact we're going to have. The second and third order impact was as we provided a demonstration effect and shouted from the rooftops what, what we were doing, and basically said to the you know, the investment side of the of the checkbook, hey, there's money to be made over here, you know, helping helping poor people in emerging markets grow their businesses, that we knew that that was where the real impact would come. And so I was speaking at hedge fund conferences, private equity conferences, speaking, you know, investment banking, or gatherings and things like this, you know, not the normal places that somebody's trying to change the world for the you know, the poorest of the poor, hangs out. And then I would also talk in development circles and things like that. Well, when I first started, literally, this happened, Morgan, literally, people would stand up, sometimes in the middle of my speech, or sometimes questions at the end. And they would shout, they would shout things like how dare you make money on the pork, you rapacious, capitalist, you're, you're taking advantage of their situation, just to make more money? I mean, just, I don't know how many times people said that, to me in person, you know, the equivalent of social, there wasn't a lot of social media back then when it first started in the 2000s. But, you know, but it was, it was pretty, pretty strong. Now, why is that? I think, at least in the US, in other places, it's similar, but at least in the US, we have an artificial distinction down the I don't know if that's the exact middle of our brain, but somewhere on doing good, and doing well, making money helping people. And it's mostly because of the IRS structure. I think we just it just this has become our worldview, that, that, you know, that's so strictly regulated what you can and can't do with, with, you know, donations, and we get a tax write off. And I mean, just the way that IRS structure has structured things, we tend to think that those are separate activities. If you look back at the history of corporations, some of the initial the first corporations that were founded, were founded for social reasons for sort to build a bridge to build a school to build a, you know, a something, some kind of social good project where they needed lots of money together, pull it together, accomplish something. And then over time, we lost that perspective. Now, that is changing, is very much changing. But even back when we started, there was something since before we started, there's something called a PRI a program related investment, which is again, a tax designation, IRS tax designation, and that has to do with how foundations can part with their money, I'll say, because it used to be foundations, public foundations that were receiving some kind of public of benefit in terms of the tax break, they had to get rid of 5% of their money every year, basically. And that was big by giving it. But I can't remember when this happened in the 70s, or 80s, there was a designation changed to allow program related investments, which meant you could do an investment that advanced the social mission, or the purpose of the foundation, that was almost entirely not done, when we started. Now, it's been done a lot more. And all of the major foundations have program related investment teams and things like that, you come up with some kind of investment structure to a bit and whether it's investing in water, or early childhood education or whatever. And so that's the first thing. Second thing that's changed has been more and more when we first started doing this was right around, people started talking about venture philanthropy. And even social entrepreneurship is this idea, or people are starting to think, well, this, this artificial distinction can be blurred the lines or think, can we break the lines down, etc. And a lot of it started with nonprofits of some sort, trying to do some kind of cost recovery with the program they were doing. And once they were able to start to do that, then they realized, oh, cost recovery. And then others realized, Oh, well, that means instead of giving you a donation, I could give you a loan, and you could pay me back from some of that cost recovery. So kind of evolves over time. And then eventually, instead of nonprofits trying to generate some cost recovery, entrepreneurs started coming along, saying, Hey, I'm gonna solve this problem. But I'm gonna make money in the process. I'm gonna design it to make money from the start. And then the next evolution, or I don't know if this is kind of is not sequential or linear. The next, but another perspective was businesses realizing, oh, I can make money by solving a social problem. If that, you know, if that nuanced distinction makes sense. And so and then once those start happening, then investors realize, oh, I can invest in companies that are solving a social problem, and make money and making money in the process, and then I can get my investment back. So it's, it's start, then, you know, this, the flywheel starts to move, then. So I'll pause there, and we can we can zoom out and talk a little bit bigger picture if you want. Yeah, no, absolutely huge perspective. Yeah, no,

Morgan Bailey 22:33

think I think what's coming to mind right now, right now is we're talking about this is like, I think one it's a practical shift. You know, there weren't necessarily the avenues are there weren't necessarily the the investment strategies or structures to be able to, to make money while also doing social and environmental good, right like that. Those mechanisms weren't necessarily in place. Right? What I think what I'm also kind of sitting with I'm curious about is like, how has our mentality shifted? Right has have have we now are here? And maybe this is a deeply philosophical question of like, are we inherently good and want to do good? Like, is it simply that and now we're seeing ways to do it? Or is it that there is this hey, you know, what, we need to be more socially responsible as a society? So I'm kind of curious my spin. I'm kind of curious to hear your thoughts on that.

Geoff Davis 23:25

I think it's both. I think it's both I think, and you know, the way these things work, it's a chicken and egg thing. What usually happens is somebody decides there's a better way, there's got to be a better way. Either they set out to solve it to solve some better way, or in the process of doing something else that they realized there's a better way. And so they start to create new structures, different ways of doing things, you know, microfinance was one of these, oh, oh, well, this is actually a business that helps people, initially, they thought, Oh, this is helping people. And now people realize, oh, this is a business. It's a finance business that happens to do a lot of good for people. And then once that happens, and people see so they're, you know, the Clayton Christensen kind of change model and innovation model, you know, the, the the innovators who are out there who are thinking differently, thinking different, to quote apple and, and changing things, they show what can be done. Then the early early adopters, other people say, Oh, that's cool. I'm going to do some of that. And then it kind of moves into the into the mainstream. So I think it's both I think it's opportunities, structures, etc, that you can show a different way. And then a mindset and you know, one leads the other usually somebody figured out and then the mindset follows you asked earlier, I don't know if you want me to go here, but some things that didn't work with what what So what failures that I can make? make a quick comment in there if you want. Yeah, absolutely illustrate this point. So when I first started doing this, I ended up working with somebody named Muhammad Yunus, who won the Nobel Prize for basically inventing micro microcredit microfinance, even though it wasn't invented or discovered in several parts of the world. At the same time, he won the Nobel Prize for doing that I worked with him to help create something called the Grameen Foundation in Washington DC. And which basically coordinated Grameen like efforts around the world outside of Bangladesh and helped to replicate Grameen in a lot of places. And I was talking with him one time, and I said, what needs to happen for this to really go to scale? And he said, we need more money. This was after I'd done the Mexico thing. And that's what got me thinking, Well, if we can run them like a business, why can't we finance him like a business? He said, we need we need more, you know, we need more capital to flow. There just isn't enough in the donation checkbook. And so that got me thinking about what we could do and and I partnered with, are we at the Grameen Foundation partnered with a group called Calvary, which is still around covered social investments. And we created what was one what was probably one of the first impact investments without really fully realizing it covered had been doing this for a while. But the first one in microfinance, we created something called Grameen investments. And it allowed retail investors to invest in microfinance for the first time ever, ever, ever. You know, now it's super easy, you can do it through Kiva, you can do it through your your investment advisor. There are lots of ways to do it. But back then you couldn't do it. And we were super excited. And we launched it with a big fanfare and Ted Turner put in, I can't remember 10, either $10,000, or maybe $100,000, or something as the first one. Some other people did, we got some media and whatnot. And it just fizzled. I thought this was the start of, you know, the change of the world. But it fizzled. And partially because of what I described, you know, we were these innovators way out there. But the mindset, people's mindset hadn't totally caught up yet. And they didn't know can we trust this as if there's an investment? I kind of have a different criteria? Is it really gonna work? Kind of all of that. So it didn't, it didn't take off as much as we hoped. Things later did, of course, but anyway, How's that for an exam?

Morgan Bailey 27:29

Yeah, no, I mean, that's really fascinating. It brings me stories like that always brings me to the idea of the palm pilot, you know, the Palm Pilot, you know, yeah, right. Exactly. And it was like, people were just not ready for that. And then the iPhone came out, and it was like, this isn't this is amazing. It's like, well, this is just, you know, iteration of that for the Palm Pilot. But yeah, and we can see that now. You know, one thing I'm curious to hear your opinion on? Is that, yeah, a lot of focus now is on ESG. Investing. And I know, I was, you know, one of the things that caught my eyes reading through the the Sorensen impact center, or Institute's 2022, Global Impact leader survey, and one of the things that caught my eye in there is this quote, as ESG investing may Eclipse impact work, replacing it with something less substantial? And I'm kind of curious, where is where is that balance? Where's it headed?

Geoff Davis 28:23

Yeah, well, there's a lot in there. So we have another two hours. There's a lot in there. First of all, I'll just say this is the I'm gonna this is gonna be Jeff speaking for Jeff not necessarily representing any anyone else that you know, ESG is great. But it's pretty superficial. ESG is not impact. I took a picture once in I think this movie, Geneva airport, or Zurich airport or something, there was a big sign and said, how, how impactful is your portfolio? And I said, you know, contact us for our about our ESG offerings and some bank offering their ESG offerings, because that's how people's mind in people's mind they think, oh, it's ESG it's doing good. ESG is a screening tool, and it's a risk analysis tool. It's not a proactive, do good change the world tool. It's just really a way of screening things out. A evaluating for risk on three met three factors, you know, environmental, social, and governance thing, and what kind of risks do you have there? And if it doesn't meet a threshold, you screen that thing out if there's too much risk. It doesn't necessarily mean it's going to be doing good, per se. I remember at one point, I think it was, I think shell had a higher ESG rating than Tesla at one point, for example. So and so that's the first thing, just the public perception, which we should circle back to the importance of public opinion and public perception in terms of systems change. But the public perception is oh, this is a way to do good, great there, you know, ESG tracking funds and everything else. So just just put my money there and it's it's doing great. So it's in terms of eat glimpsing did Eclipse far more money went into ESG than went into impact because it was easier. It was systematized it was streamlined, it was institutional, etc. But I think your deeper question is, you know, what, what more is there, an impact is defined a bunch of different ways impact investing. One of the most common ways it's is that it's, it's an investment made, expecting a return, and seeking to create intentional, social or environmental good. So it's intentional creation of social or environmental value, while receiving some form of financial return at the same time. So that's much more proactive, and and a bit harder. Y'all pause there and see where else you want to go? No, absolutely.

Morgan Bailey 30:51

I mean, that's, I'm appreciating the Yeah, I guess, your stance on that. And that it, it's difficult to know right now. And I've definitely had my own reservations around the ESG piece, because it is, it is a it is a metric, it is a tool, it is not all the end all be all. And right now, we're almost, it's almost become the frontline, albeit an arbitrary frontline between between, you know, those who are very pro purpose driven business, and those who are very against, you know, these practices being put into business from, you know, anti dei legislation, to, you know, anti es es ESG. And, you know, over the past, and I think 2023, there were 25 bills that were passed, and states that were anti ESG bills, as you know, kind of prohibiting these things from Indian business. And one of the areas that's particularly, I guess, it for me that's particularly sensitive, is around actually is around my 401k portfolio. And there's a lot of pushback on where our money goes towards here. I'm saying, hey, you know, I want to be, you know, I want to be conscious where I'm investing my money. Meanwhile, you know, government, you know, the organization I work for all this are saying, well, hold on, we're gonna we're gonna limit, we're also going to expose these these values that say, you know, we are for X, Y, and Z, but we're not gonna allow you to put your money there. Right, which is, which is a big challenge. So I'm curious now, because one of the other things that was in that global impact leader survey, was when you interview these leaders, you ask them the question, like, what institution is going to be most critical, and hitting the sustained development goals in 2030? And, and the overwhelming response over 50% was government. And so right now, it seems like there's this, this kind of like this, you know, pull this, you know, tug and pull here of, of, you know, the government, but the government's kind of experiencing? And I'm kind of curious, like, so how does that get resolved, like what is needed in order for us to kind of be able to move forward with some form of like, unification on what it means for business? To exist to do good? And to ultimately not destroy the world? Yeah, yeah.

Geoff Davis 33:10

So there's a lot in there, again, great, great questions. And I think maybe we can take this in a couple of parts, I think we can talk about, you know, ESG. Within that context that you just described, let's talk about, let's talk about the evolution of capitalism, and where capitalism is going and how it's not a static concept. And let's talk about what I referenced earlier, the the interaction between different parts of society for systems change, maybe I'll start there, that's okay. Just theoretically, construct a framework. In my experience, in my, in my opinion, my analysis, there are three, kind of like a triangle, three key parts of system that make up our system, at least Western, industrialized, democratic capitalist systems. Make Western eyes is probably not the right term to use anymore, but, you know, just basically industrialized capitalist systems. The first is government, that's public policy. The second is public opinion. And the third is capital allocation. And oftentimes, if I talked about this, people say, Well, what about business? We're really businesses where the locus of action is, right, and those three things impact on business. So public policy, public opinion, and capital allocation or investment decisions. And you in your, if you listen to this, again, you hit on all three when you were just describing this. You talked about your investment portfolio. You talked about, you know, public what the public's perception of, of ESG and other things are, and you talked about government issues. and they all interact with each other. And by the way, if it's not too complicated, there's a derivative to each of those as well. So public public public policy, as public spending, and in most countries, public spending is quite large public opinion leads to consumer behavior, right. And then and capital allocation, then drives investment decisions, both both at the meta level and from within businesses. And but again, if we view the the business as the locus of action here, those things impact what business does. And so public opinion influences business, but it also influences public policy. It also influences investment behavior, and you can so you can see how all these things play together. Public Policy influences all of those things as well, right? If the if the SEC makes a change, then all of a sudden investment decisions are made differently. And over time, that influences how people think about things just like we talked about with the IRS earlier. So they really interact. And there are different ways they tend to be levered, if you will, to create change with change happens, sometimes changes led by government, by public policy, it's usually not, it's usually led by one of the other to where business itself. And and often, most often, I think it's it's public opinion and consumer behavior, that then influences business business starts getting out far ahead, and regulations to try to catch up think Uber, you know, illegal to illegal to carry your car with somebody and take them to the airport until recently. And some some places where the taxi taxi says taxi structure is very strong, it's still illegal that they're going over to the airport. And I mean, let me pause there, just see if you want to go deeper, and then we can keep going.

Morgan Bailey 36:51

No, no, no, continue on. That. I guess I want to appreciate that, I guess the clarity within kind of how those things work together. So I guess what are the near term? You know, maybe just spend a minute here, just say, what are the near term shifts that we're going to see driving these three different areas?

Geoff Davis 37:08

Yeah, yeah, good point. So and we can tie that into your question about ESG, the anti ESG and anti dei backlash and things like that. My. So there are legitimate critiques to ESG there are legitimate intellectual and practical critiques to ESG as we talked earlier, it's not the be all end all. It's not proactively creating good it's, it's trying to not do as much bad which is fantastic. However, most of the bills and most of the critiques by the by states with with, you know, right leaning or, or right? political leanings, it's really, those are really backlashes to what people felt went too far with the starting really affects me knows how long these things have been going on. But really the end of the George Floyd Black Lives Matter summer was the start of as far as my read finger on the pulse of these things, was the read of people feel, and it was in the middle of COVID. And so you know, people needed outlets, there were a whole bunch of things you can think about, while this happened, that started a strand that led to the DEI that led to every, you know, self respecting corporation to have a dei policy and a dei officer and, and then eventually, that made it into universities and kind of everywhere. And, and so people who felt like that was superficial, and you know, woke capitalism, or was just too woke ism, or whatever else, eventually said, Enough is enough. And many of these people do care about the fundamental issues, but they felt like the way they were being driven societally and the way that that choices were being reduced, and things like that are harmful. So that's my read that that it was more a it was not a fundamental reaction to what these were trying to do is more countermeasure or reaction to the the anti dei movement or anti ESG movement or whatever else saying, you know, don't, don't bring this stuff here. Therefore, I think, I hope that this is a moment in time. And if we want to go to kind of the evolution of capitalism, now we can but I think we're evolving this way anyway. And the system is changing the needs to change. And when that's happened when that has happened, and we have yet to your point earlier about our men, our mindsets haven't fully shifted. We don't have another mental model yet. It's a time of disequilibrium. And people are uncomfortable and sometimes people try to preserve what was and so I think this This time we'll move on not that either side is right or wrong. I think it's just a moment in time because of the shift that we're going through.

Morgan Bailey 40:08

Yeah, yeah. I mean, I, I hope you're right. And I would say, you know, if we look historically, I mean, we are on we are on a trend, broadly speaking to being more open and inclusive. Like, if you go back 1000s of years, right, we have our setbacks. You know, the overturn Roe v. Wade is is one of those setbacks, but on a large scale, so I think it just I guess, it's a matter of timing and the way the pieces are gonna fall into place. Now, we have just a couple of minutes here and again, earlier, like, I wish we had more hours I do as well, I'm just could you just spend maybe a minute or so talking about the, you know, the work you're doing with the Sorensen impact Institute, and kind of what role that plays at a broad level for our listeners?

Geoff Davis 40:53

Yeah, yeah, definitely. Let me make one other point before I do if I can, so that it makes sense. And that was about how capitalism is evolving. And first, capitalism is not a static idea. It has changed since the beginning, we've had different forms of it. We had something called mercantilism, we had something called laissez faire capitalism, we had status. And we had there are different forms of it. And basically, capitalism is a construct is an intellectual construct that makes its way into systems and policies and things like that, that's designed to solve some need solve Digital's to serve a purpose that we have, we societally have, at a point in time. And our societal needs change over time. And, and I won't go into all the history of capitalism, but basically, it's just a fluid thing. And so the fact that it is evolving now shouldn't surprise any of us, we've gotten really comfortable. And used to the the current version of it, the current version of it is, you know, kind of Milton Friedman doctrine where the business of business is business, it's supposed to make money. And it's not supposed to, you know, that's about all it's supposed to do. And we want free trade and open, open markets and you know, international trade and all of that, that is all changing, the whole world system in the whole world order is changing. Right now. It's breaking down everything we've had since the 50s. Basically, it really went to town in the 80s is changing, and so we should just recognize that, okay, it's a period of change. That's why things feel uncomfortable. That's why I feel unsettled. Because we haven't gotten to the new thing yet. So it's not necessarily Well, I will say, I was gonna say it's not necessarily good or bad, but it actually is good if it evolves to meet our societally defined broader needs. And, and there's a lot of evidence where that's going to continue people voting with their dollars that inherited, you know, there's going to be a massive wealth, we're in the middle of a massive wealth transfer to younger people and to women, and they vote and invest with their dollars, right? They want with their values. I mean, they want to align with their values. Millennials won't work for a corporation that they think doesn't solve social purposes, etc. So all of this is changing. Okay, now, what do we do about it? We do a couple of things at the Sorenson impact Institute. We're providing again, like I described earlier, with our work at Unitas and microfinance, we're providing a demonstration effect, we're trying to create new ways of doing things and show how it can be done. For example, a lot of the work we do at the Sorenson impact foundation is program related investments, we show how a foundation can make investments in social good, and then we talk about it wanting others to follow us. We take risks. So we do that we try to create innovations, and take some of the risk out or the perceived risk, take some of the perceived risk out of some of these transactions. We've done a lot of innovations, we helped create something called opportunity zones. You can people have opinions on those, but basically ways to invest truly invest in underrepresented areas. We helped create

the oh my gosh, I've just forgotten, wherever it was I going with that, oh,

Pay for Success or social impact bonds, we were at some of the pioneers in that. And that's a really innovative way to basically create societies that create public benefit. That saves municipalities money over time. And it's a way of basically investing in the savings so that you can do a lot more good. We are doing a lot on measurement. We think for this really to reach his potential we have to measure the impact that we're actually having better just like we accounting drives business now, so much so that people consider it boring and, and you know, don't think much about it. That's how measurement social impact measurement needs to become if this is really going to go to fruition. Two more points. One. One is that we do a lot of convening and talking about this getting people together so that that's where you and I met. So we will receive SOCAP and we do our own summit and a couple of other things. So that people like my Do people can get together, and then have non like minded people come in and learn about it. And then the last, and probably the most important long term thing is that we train the next generation of leaders to think this way and to act this way. And to be able to incorporate business principles with social and environmental value creation, seamlessly, instead of you know, some of us now are still there's still some some stickiness in the system. We're trying to create leaders that are able to combine them both, effortlessly. There we go. That was a quick one that

Morgan Bailey 45:30

was used to summarize pretty much everything I've read. Very, very quickly and succinctly. I appreciate that, you know, and in our last minute here, I'm wondering, for our listeners, you know, what, what asks, or offers do you have of those who are interested in or currently working in the social impact space?

Geoff Davis 45:55

Can that includes just advice or thoughts? Things? Absolutely. Yeah. Okay. I'd say one people, because people ask me all the time, how can I get into this space? How can I do this type of work? Gosh, you're so lucky, you get to live your values at work all the time? How can I get into this, and I pretty consistently say to them, get a hard skill, get a hard skill, it's much easier to teach an investment banker how to do this type of work than to teach a former Peace Corps volunteer to be an investment banker. Again, I said I've deep deep connection to the Peace Corps. So nothing against that, but it's just get a hard skill. And then come apply it here. So you know, what are those finance, policy, marketing, whatever it is strategy, whatever, whatever your you know, your interest is, go get some hard skill, practice with that, and then come bring it here. Second is read, read a lot about the space, read impact alpha, read Financial Times, that the Financial Times has something called more on money, read books on this, take a course on it, etc. And then go to conferences, and see what you can like SOCAP like you did, you know, come to come to socat come to other conferences, and start to learn that way. Cuz it is a different way of thinking. And it's totally learnable. How's that? That good enough?

Morgan Bailey 47:14

I mean, you know, I've, I've heard you mentioned this before, and I've already taken some stuff to read it one point you mentioned about just kind of reading random stuff, you know, just to get different ideas. You're like, oh, yeah, just like you're in the supermarket land, like pick up a random magazine, and like, expand your perspective on things. And I literally did that. When I was at the airport. I'm like, I'm gonna pick a magazine I don't normally read. Cool. And yeah, that's great. I do that all the time. Yeah. So it was great. So I appreciate that. So and just generally really appreciate this conversation, you do a lot of work. I know, when I first saw you speak at SOCAP. The way you showed up, I just really appreciate the level of leadership that you're bringing in the space and and the leaders that you're bringing together to be able to continue to further these efforts, and really kind of build whatever whatever this next new model is. So it's really appreciate all that greatly appreciate the time as well on this conversation. Yeah,

Geoff Davis 48:07

thank you. Thanks for the time, thanks for the opportunity to share this and thanks for what you're doing, bringing people together and helping people. So I should have said that, of course, listen to this podcast and other podcasts. But thanks for all your effort. I know it's not the easiest thing in the world. To do this. You were really thoughtful and careful and prepared. So thanks for everything you're doing to help move the space forward.

Morgan Bailey 48:26

Appreciate that. Until our next conversation. Thanks for listening to another episode of the profit meets impact podcast. If you enjoy this experience. Please subscribe wherever you find your podcasts and leave a positive review. You can also find out more about the podcast at www.profitmeetsimpact.com