Last month, I wrote about the possibilities of FinTech to expand the spirit of the Community Reinvestment Act. Then, last week, I read a piece on inequality in The Atlantic, which stated:
“Despite advancements in technology, which should—in theory—increase efficiency and lower costs, consumers are paying more in fees for financial services…”
The article made me think about FinTech, but also about how we really need to invest in and incentivize the development of technology to improve the lives of low-income people. Technology not only expands possibilities for service and accessibility, but also has the lowest marginal costs of reaching the next person. If we can wholesale these technological solutions, we can achieve dramatically better results for low-income people. Period.
Funding and incentivizing technology is about investing in the future. In 2014, venture capitalists invested $48.3 Billion, with investments in technology dominating the tops spots in their portfolios. In fact, investments in Silicon Valley startups and other tech firms have long topped the charts. These firms have a long history of funding tomorrow’s solutions, channeling money where they see opportunity for the next great thing.
And Philanthropy? Technology barely makes the list of foundations’ grantmaking and investment areas. Of the Top 5 Philanthropies (whose combined assets totaled over $83 Billion in the last fiscal year), only The Ford Foundation and the Robert Wood Johnson Foundation have an explicit focus on technology, with their investments in Internet Freedom and Health Data and IT respectively. Yet if investments in Silicon Valley tell you anything, technology needs to be much a more explicit and prominent focus in Philanthropy’s solution sets across the board. Technology might bring about transformative change, but with philanthropic investment, we have the power to direct that change in ways that intentionally benefits low-income people and those most in need. Without philanthropy, we risk tech innovations that expand the divide between the “haves” and “have-nots,” rather than bridge the gap. Three things must happen to truly leverage the potential of technology to achieve dramatically better results for low-income people:
Invest More in Technology
The current level of funding for technology solutions that meet the needs of low-income people is modest. Too modest, in my opinion. In the last year, there’s been growth in funding for FinTech (from just over $3 billion in 2013 to over $12 billion in 2014) and EdTech (at $1.6 Billion in the first half of 2015). While I’m encouraged to see huge amounts of money going to these innovations, I’m aware that funding is not coming from philanthropy. Thus, the current funding is not going to have the explicit goal of improving the lives of low-income people, or benefiting those most in need. With billions of dollars in assets, philanthropy must do more to drive capital to tech solutions that benefit the people and the issues we care about. Philanthropy needs to reorient its investment strategies to accomplish that. We can do this through funds like RWJF’s Pioneer Fund which sets aside 1% of the foundation’s investment budget to support “Pioneering ideas” – innovations at the cutting edge. Imagine if all philanthropies set aside just 1% of their budget to fund cutting edge technological applications that can rationally articulate the potential of benefiting low-income people at scale.
At Living Cities, we recently created an Opportunities Fund, and through it have started to expand our technology portfolio. For example, we’ve invested in an emerging impact investing robo-advising platform so that we can experiment with new ways of attracting large scale impact investment dollars with the intent of helping them land in places we care about. We and everyone else in the social change field needs to do more.
Leverage Technology to Expand the Possible Solutions
Technology allows us to think bigger. In order to truly leverage the potential of tech solutions, we need to do two things. First, we have to tap the power of technology to augment existing solutions and make existing services more accessible. The potential is apparent in existing innovations like Boston’s Street Bump App or Philly 311. That’s one of the reasons we support the Civic Tech and Data Collaborative. In Boston, St. Louis and Washington D.C., cities are working with their local Code for America brigades and partners at the National Neighborhood Indicators Partnership to develop new, tech-based solutions, to solve problems that impact low-income residents.
But augmenting existing solutions will not be enough to solve today’s intractable problems. More importantly, we must start building, and funding, original tech innovation that may lead to breakthrough -solutions. This will require philanthropy to act more like Silicon Valley—taking bigger risks for the potential of bigger gains. We should more regularly and specifically seek proposals that propose ways of using technology to fundamentally disrupt broken legacy approaches to social change and/or deliver the much needed product or service to the next low-income person for a small, marginal cost.
Make Broadband a Public Utility
In order for tech to truly be a force that bridges gaps between the “haves” and “have-nots,” we need to finally put an end to the digital divide. The solution: universal, affordable broadband. We need to make broadband a public utility, like sewers and water. It needs to be ubiquitous so that all city residents, including kids who need the internet for school, can get online wherever they are.
It still shocks me that, 16 years after I founded One Economy, an organization dedicated to ensuring people have universal broadband at home, we’re not that much closer to that goal. But, it’s time. And, we need civic leaders from the public, private and social sectors to work together differently, to lead differently, putting personal agendas aside for the greater good. In practice, this likely means that we need more competition from more places.
For example, cities can follow the Chattanooga model , where the city partnered with the local electric company to manage its own high-speed fiber optic network, half a decade before Google Fiber was even an idea. Chattanooga’s network brought on a renaissance. The partnership has resulted in some of the highest-speed internet in the country, and has made it available to the masses. And, as its success has become apparent, businesses reliant on data and speed have relocated to Chattanooga – a huge boon for the local economy.
It’s hard to believe in 2017, we’re still having a conversation about low-income people being unable to access, use and benefit from technology, but it’s a reality. Not only does the digital divide still exist, but a gap in funding technological innovation for social good remains as well. Technology is a crucial tool for addressing America’s inequality and building a New Urban Practice. We simply won’t achieve the scale and pace change we need without fulling harnessing its power and potential.