>>Andrew Ross Sorkin: In a world when we think about where there's
been a real shift about how we think about capitalism, in the past four years, and both
of your enterprises at some level are about -- either making a profit or -- or using the
profit incentive, to make your businesses grow or to make your enterprises grow, how
do you think about that?
How do you go to countries that have looked at our version of capitalism here in the U.S.
and say, you know what, we just watched what happened here and this may not work the way
we thought.
I am going to start with you, Linda.
>>Linda Rottenberg: Well, your question, also about patience, really gets to the heart of
Endeavor's model.
So in the mid 1990s, I was living in Latin America, I had fled from Yale law school knowing
only that I was never practicing the law.
I was struck by how many young people aspired to government jobs.
I didn't understand this.
And how many taxi drivers had Ph.D.'s in engineering.
So I kept asking why is no one starting a business?
And it was explained to me that in Latin America and other emerging markets, if you weren't
from one of the top 10 families, there was no way that you could start a company.
No one would give you support, there were no role models, no venture capitalists, no
mentors, and then also they were seen as greedy and corrupt.
Why would you aspire to do that, anyway?
I said no, no, no, I'm talking about entrepreneurs, people who innovate, create jobs.
And I used the story about the computer.
And people would say, "Nice story, but guys like me, we don't even have a garage."
So Endeavor was really set up to address this issue.
What we said was just like you said, if we wanted to be impatient, we would start a venture
fund and invest in three of these companies.
But we wanted to build an ecosystem.
We said we are going to do something non-traditional.
We're going to set up as a non-profit, of by and for entrepreneurs.
Not just any entrepreneurs, the high impact ones.
The ones with the greatest potential to scale, create job, create revenues.
We said if we do our job right, these entrepreneurs will not only change the way business is done
in their societies, but they will give back and make us self sustaining.
Everyone said I was crazy.
I was literally the chica loca in Latin America.
And here's where we are today.
15 years later, Endeavor operates in 17 countries, in Latin America, the Middle East, Europe,
Asia, and Africa.
We have screened 30,000 entrepreneurs.
Certified 722 -- 450 companies.
Once they become Endeavor entrepreneurs, we help them build business plans, build advice
reports, access capital, in some cases fire their mother-in-law.
Last year they generated $5 billion in revenue and 200,000 jobs, but here's the more important
thing.
They are now becoming the mentors.
They are now becoming the angel investors.
So in fact one of my favorite days at Endeavor was we were down in Brazil, the editor of
the Portuguese dictionary came to us and said because of our work, they were going to add
the term "empreendedor" into the language.
So now there's something that people can aspire to that has a positive connotation.
>>Andrew Ross Sorkin: And your investment -- one of the things that's so interesting
to me is you are now investing in businesses that you hope will turn a profit.
>>Linda Rottenberg: We are, yeah.
>>Andrew Ross Sorkin: You are hoping they will become an NPO and take that profit turn
around and invest in other emerging businesses.
>>Linda Rottenberg: Yes, my colleague Bailey Kempner is here.
We started something called Endeavor Catalyst.
It's actually acting as an endowment, so it's taking donor capital and we talk about return
on donated capital, RODC.
And the idea is we are co-investing in our entrepreneurs, raising $5 million from venture
capitalists and we will use the returns to make Endeavor sustainable and to go to the
next countries where they don't yet have an entrepreneurial ecosystem.
>>Andrew Ross Sorkin: Okay.
Leila take us through what you do, because it's pretty crazy and pretty interesting.
>>Leila Janah: Sure.
Just to tell you how I got started.
When I was 17, I got a scholarship from a tobacco company, from the Lorelei Tobacco
Company.
And I decided to use it and volunteer in Africa.
So I went to Ghana, in West Africa.
I was assigned to a small school in a little village.
And I thought that I was going to go there and save the world.
And yet my students were incredibly bright.
They spoke beautiful English.
They could tell me the name of U.S. senators, which by the way some of my high school classmates
couldn't tell me.
And I thought this was the great untold story of poverty and development.
There is a mass of untapped human potential.
I think this organization does a great job of addressing that.
So I studied development.
I wasn't really thrilled with what I saw in the traditional aid model, which is essentially
that we view poor people as these passive recipients of handouts and we don't really
give them any credit.
So I formed an organization called Samasource.
Sama means equal in Sanskrit.
And we connect some of the world's poorest people, people living on less than three dollars
a day, to work via the Internet.
This is a really interesting business model that's only made possible by some of the recent
advancements in the last five years, Internet connectivity and thanks to Moore's law, really
cheap computing devices all over the world.
There's one that launched last year, the $25, Raspberry Pie.
So we've taken advantage of this new infrastructure and this new connectivity to take people who
are living at the bottom, 4 billion on less than three dollars a day and connect them
to what we call microwork.
We divide up big digital products, which are typically outsourced like image tagging, like
transcription, like captioning, captioning videos, and we send that work to people living
in slums and villages in poor parts of East Africa, South Asia and Haiti.
And today -- we started four years ago, we paid out 3,000 people, so 3,000 women and
youth who had never had formal work experience before, have actually made this money doing
real work for companies like eBay.
We've paid out 3,000 women and youth and we've also paid them over $2.5 million in real revenue
from for-profit companies.
And I think what's so interesting about this new world that we live in is that people are
starting to realize that capitalism and charity don't have to -- be this dichotomy that's
existed for so long.
People really want to embed the meaning that they find in their charitable work on weekends
and evenings and in the latter half of their lives into their businesses.
>>Andrew Ross Sorkin: So, for example, if I am living I don't know where, you come to
me and you say you're going to train me to tag photos; is that how this works?
>>Leila Janah: It's a little different than that.
If we did that, probably no one would want to work with us.
[ Laughter ] >>Leila Janah: So we work with local recruiting
partners.
The work can be a little bit boring.
But here's how we do.
So we work with local NGOs that operate in slums and villages that do things like training
people in leadership skills or teaching them how to save money.
And those organizations become feeders for us and they send people to our local partners.
We have a network of 16, some for profit, some non-profit entrepreneurs that operate
existing computer businesses, internet cafes, computer centers, in developing countries.
These people then, as an agreement with Samasource, hire poor people to do the work in exchange
for us sending them the contracts that they wouldn't be able to have access to in developed
countries.
>>Andrew Ross Sorkin: So here's the question.
Google is a client, if you will, or a partner, right?
Microsoft is a partner.
Do they work with you so they can check off a box that says social responsibility or social
mission or something?
Or do they work with you because ultimately they're getting a good value for what you
are actually doing?
>>Leila Janah: So this is a great question.
At the beginning, my hypothesis was that businesses would behave like consumers do.
Consumers in many cases are willing to pay a premium for socially labeled goods.
Businesses, as I learned after starting my business, are not.
Businesses pay us to deliver good quality services, with competitive costs and competitive
turnaround times and we're competing with for-profit outsourcing firms.
So what we have found is that the social mission is really the icing on the cake.
The good quality services have to be there first and then all other things being equal,
of course people would love to work with us, they know that we're a non-profit.
>>Andrew Ross Sorkin: If you succeed, what happens when an entire village is tagging
photos and doing all sorts of things, realizes I can be an entrepreneur, and they get involved
with you.
The price by the way all of a sudden goes up for you, so Google says, "I don't know
can I use you" or do I -- or do you consider that success?
>>Linda Rottenberg: But success is a good thing.
Look in our case.
We are seeing these tech and other entrepreneurial ecosystems spawn up in Buenos Aires, in Amman,
places you would never -- Egypt after the revolution.
In Greece now.
These are places that you wouldn't expect business to be happening and --
>>Andrew Ross Sorkin: You just started in Greece.
>>Linda Rottenberg: We just started in Greece.
>>Andrew Ross Sorkin: Very strange place to start.
>>Linda Rottenberg: I know.
You call me crazy again.
And I said when the economy looks down, entrepreneurs look up.
It's the best time to be in an entrepreneur in Greece.
Chaos is a catalyst.
Chaos is your friend.
But what's interesting is we looked -- we went to Argentina, Jordan, Turkey, Brazil,
we said all right.
We want to investigate all of these start-ups that are happening, why?
We looked to the 200 start-up companies, too early for Endeavor.
We take companies, you know, one to $20 million in revenue.
We said we -- we asked them four questions.
Number one, who inspired you?
Number two, who mentored you?
Number three, who if anybody actually invested in you?
Number four, did you ever work for an entrepreneurial firm before?
5 years ago, there was no word, there was no company, there were no role models.
What happened is they started referring back to the companies.
We started seeing patterns.
Three or four companies, some of our ex-entrepreneurs, have become the angel investors, the mentors,
the venture capitalists.
When you take them away, the ecosystem disappears.
So what happens is it's like the PayPal Mafia effect or the Googlers, you can have a few
entrepreneurs paying it forward, it creates the next generation of a multiplier effect
that happens very rapidly.
What you are doing at Samasource, we hope they will be the one that entrepreneurs would
help.
Ours become the VCs.
That's success -- >>Leila Janah: I have a great story.
I just wanted to show you an actual worker if we can bring up the slide.
Just to show you how this ecosystem works.
So this is a woman named Jacquelyn (saying name).
She's 25 years old, she's from rural Kenya.
She's from a country where the vast majority of people make less than two dollars a day.
That's, by the way, adjusted for purchasing power.
That's what two dollars would buy you in the U.S. in 2005.
That's where they she lives.
And yet 95% of people under 30 in Kenya can read and write in English.
She's one of them.
So Jacquelyn came to us, then this next slide, shows you what she's doing now.
She came to us, she had never had formal work experience before.
She had to drop out of school because she didn't have enough money to afford the school
fees.
And she got this job at one of our computer centers in Nairobi about a year and a half
ago.
She made enough money to pay her rent, her single mom's rent herself and put herself
and her sister through school.
That's how much more money you can make doing computer-based work than doing basic formal
employment.
And then she left and actually the ideal scenario is -- for us is for our workers to leave after
six months or a year and earn higher paying work in the for-profit private sector, because
then we're not using non-profit funds to subsidize people forever.
And so I hope that some day she becomes an entrepreneur and works with Endeavor.
>>Linda Rottenberg: Actually one of my favorite stories also grew up in the favela, slums
of Rio, and her mom was a maid and her father was a janitor and she got a job at McDonald's.
She said, "You know what?
Why can't I do this franchising thing, but for poor people?
Why can't poor people feel beautiful."
So she and her cousin Ziga started something called the Beleza Natural Hair Salon.
We found her when she had two salons.
You think oh, that's a nice story.
They had actually concocted this product in their kitchen.
Tested it on their husbands.
The husbands' hair fell out.
We found them and there were like four hour and six hour waits at the salon, so we helped
them understand franchise and get mentors.
And today Beleza Natural, it's a $75 million business.
They employ 1500 mainly women who grew up in the poor areas of Brazil, and she wants
to take on Loreal and starting a new hair clinic in Harlem.
These are the stories that if you tell them it's amazing, young kids sitting in these
places today think, I can do it, too.
>>Andrew Ross Sorkin: When you think about investing in these businesses now, you talked
about not return on equity, you said return on donated capital.
>>Linda Rottenberg: Yeah.
>>Andrew Ross Sorkin: What's the threshold?
Especially when you are doing it, I assume, side-by-side with -- I don't want to say real
venture capitalists, but venture capitalists who want to make a profit.
>>Linda Rottenberg: Yeah.
Although we hopefully get the terms better.
Entrepreneurs are still getting unfair terms.
We are being of, for and by entrepreneurs.
We are neutral.
We don't set the valuation.
We actually did a notional fund.
We said okay, what would have happened if looking back over 15 years we had done this
type of endowment that would invest in our entrepreneurs.
The ROIC would have been 3x, 48% IRR.
These are for an emerging market venture fund, that's great.
The difference is that when we hopefully become profitable, we can move on to the harder places.
We can actually create these ecosystems where we eventually we hope the venture capitalists
come.
We hope one day we are not needed in Brazil, but we need an organization that kind of creates
the ecosystem in neutral way.
>>Andrew Ross Sorkin: Hardest country so far?
What's the country you would like to conquer?
>>Linda Rottenberg: We have Google.
Let's do Egypt, let's say Egypt.
>>Andrew Ross Sorkin: I'm curious on your end, in terms of most of the things that we
talked about are low-skilled work.
Is the goal ultimately to raise the skill level?
Meaning is that something that you want to do or is that a different business?
>>Leila Janah: I think that would be a different business.
Our goal is to tackle poverty.
Right now there are so many people who can read and write in English, who can do our
work but just don't have access to it.
And so many companies have this work that's just sitting there that we could do.
So our first goal is to expand the number of people doing this low-skilled type of work.
And to Linda's earlier point, we look at a similar measure.
We look at how many people we are able to move over the poverty line and for much donor
capital.
What's so exciting about businesses like ours, now you can track that.
In the digital age, I can tell you for a very limited amount of your funds, we can actually
move somebody over the poverty line and all of the evidence suggests that they don't go
back to it once they've had formal work and training.
So our goal is to dramatically expand Samasource, and then I have a broader vision for my organization,
which is to become like the virgin of social enterprise.
I think that Sama could eventually become an incubator for various other social businesses
that all use technology to address problems related to poverty.
>>Linda Rottenberg: One interesting point that gets to your point about how we do business
and capitalism.
I think you are hearing today these two non-profits who are using the tools of the private sector,
right?
And we're aiming for profit, both with our businesses and ultimately we want to be self-sustaining.
And we're generating profits, just turning it back into ourselves.
But here's what businesses can learn from the non-profit world.
It's something that I call psychic equity.
I think that so many times when you think that you have all of these financial equity
to give, you don't take -- you don't take the care to think about the -- the ownership
structure.
When people are waking up every day, are they feeling like they're making a contribution?
I think these young people, these millennials, are actually telling people they will take
a tradeoff in salary, in the -- in the power they have, to actually make a difference.
And I think that comes -- >>Andrew Ross Sorkin: You think that's true?
You think that's not just a good sound bite?
>>Linda Rottenberg: Yeah, I think they care about making an impact.
I think companies that tap into that, and actually make their profits but give people
the sense of ownership and psychic equity and un-silo things, I absolutely think if
you want to retain young people today, you have to.
I do.
>>Andrew Ross Sorkin: We're going to be talking to some people after this, who have done something
like that and have some interesting stories to tell.
On your side, after our lunch today, we were talking before this session, you were saying
that -- that you end up actually competing against for profits.
How does that work?
>>Leila Janah: Well, it's tough, but we're in a space that some people call it crowdsourcing
that's now filling up with new companies that are finding ways to create marketplaces for
these basic what are called human intelligence tasks.
Amazon runs one called Mechanical Turk, we used to share office space with a firm called
CrowdFlower, which also does what we do.
So we're in a competitive industry.
Actually many non-profits are in a competitive industry.
>>Andrew Ross Sorkin: What's the most advanced thing that I could come to you for right now?
>>Leila Janah: Writing content.
Writing content for your website.
Maybe not the kind of content that you write, but --
[ Laughter ] >>Andrew Ross Sorkin: What kind of content
are you talking about?
>>Leila Janah: So, you know, Captioning an image or a video.
We do -- we do a lot of really short form content, so answering questions that, you
know, communities online don't want to answer.
Maybe fact checking for news stories.
So all sorts of content writing and basic tasks that are in this category of basic human
intelligence work.
So requiring literacy and a little human ingenuity.
>>Andrew Ross Sorkin: Do you buy this assertion, Linda's assertion on sort of social mission
in this generation?
I think we're all part of the same generation, and I have to admit I'm a little skeptical.
>>Linda Rottenberg: It's not social mission.
We actually did a study and in fact, companies that are aiming for profits scale faster.
I'm not saying that companies should become Ben & Jerry's with that mission or talk with
their social.
In fact, people who see trade-offs who say they're going for social profits oftentimes
have a hard time scaling.
That's all I'm saying.
Psychic equity, I think it's about making people feel that everything they do has an
impact and that your business is making a difference in the world.
>>Leila Janah: I buy it and here's why.
The Internet has dramatically broadened our circle of empathy.
No longer is a woman in a slum in Kenya someone who doesn't deserve the basic human dignity
that we can afford to provide her.
And I think that as the world shrinks more and more people who graduate from college
are looking for meaning in their jobs and they don't want to relegate meaning to weekends
and after hours nonprofit work.
They want meaning to be central to what they spend the majority of their time doing.
That's certainly why I started my organization.
It's why we run what I call an investment banker reform program.
We get a lot of consultants -- not to insult any investment bankers in the room.
We have a lot of people who used to work at McKenzie and Goldman and they said, you know,
I've spent my time the last three years making lots of money for the man and now I want to
do something for mankind.
And I see that as a broad trend that is shaping my industry and many others.
>>Linda Rottenberg: Can I say one more thing about your original question and about the
patience?
When we started out no one believed there were any of these entrepreneurs in emerging
markets.
So what I used to say when people, including my parents, didn't know what I had done, I
had gone to law school and gone into retirement, they thought.
I said, you know, what we're doing is bottling up the magic of silicon valley and putting
it in places where there's ideas, but there's no support.
That's what I'd say.
And today I'm asked so many times on college campuses to do the inverse.
I say now that people in Jakarta and Rio and Istanbul may believe in the American dream
more than our own kids do.
And people are saying, Look, there's no stability.
I can't become an entrepreneur.
IT's too scary out there.
What will happen?
And I think if we bottle up this energy that half the Fortune 500 companies today were
founded in periods of downturn and this idea that in fact when the world is a bit chaotic,
you have to think in the longer term, you have to be more patient, and it's the best
time to start something up.
Because the idea that we're creating this risk averse generation I think can be overturned
with examples of people in the for-profit and nonprofit worlds that are trying to make
change.
>>Andrew Ross Sorkin: On that very promising note we're going to leave it there.
Thank you to both of you, Linda and Leila.
This was tremendous.
Thank you, thank you.