The upside of outsourcing

To match Insight INDIA-OUTSOURCING/I heard an excellent, in-depth interview this week with William Easterly, the development economist and author of a new book called The Tyranny of Experts: Economists, Dictators and the Forgotten Rights of the Poor. Easterly, a controversial figure, is critical of top-down development experts — he names Jeffrey Sachs and Bill Gates, among others — who push technocratic, centralized approaches to alleviating poverty. Instead, he argues that the best way to promote economic development is for westerners to push for democracy, human rights and free markets in the world’s poorest countries.

Easterly cites, among others, the Nobel laureate Amartya Sen, who has said: “No famine has ever taken place in the history of the world in a functioning democracy.” Others disagree, noting that parts of India came perilously close to famine just a decade ago. What’s more, China has lifted hundreds of millions of people out of poverty while suppressing human rights, but allowing economic freedom.

I’m in no position to try to adjudicate the debate about how poor countries become rich, but I was thinking about Easterly’s faith in markets and global trade as I wrote my story this week for Guardian Sustainable Business. The story looks at an idea called “socially-responsible outsourcing” or simple “impact sourcing,” and a nonprofit called DDD that tries to put that idea into practice. (DDD stands for Digital Divide Data.) DDD operates businesses in Cambodia, Kenya and Laos that employ young people, typically high school age, to provide information technology and web research, mostly to clients in the US. The goal of the enterprise is to provide economic opportunity to the poor, DDD’s founders told me.

Here’s how my story begins:

So much attention is paid to deplorable factory conditions in poor countries that it’s easy to forget that global supply chains for electronics, apparel and toys have helped lift masses of people out of poverty. Since 1980, 680 million people have risen out of poverty in China which has seen its extreme-poverty rate fall from 84% to about 10%, largely because of trade, reports The Economist.

Now, a small number of companies, nonprofits and foundations want to see if the rapidly growing global supply chains that process data and operate call centers — an industry usually described as business processing outsourcing, or BPO — can be deployed to help alleviate poverty in Africa and South Asia. Can outsourcing, a business driven by the search for cheap labor, reconfigure itself to do good?

“By responsibly and ethically employing hundreds of thousands of people, BPOs have a role to play in shifting the social landscape in emerging economies around the world,” says a report called Outsourcing for Social Good from Telus International, a Canadian outsourcing firm, and Impakt, a social responsibility consultancy.

Others agree. The Rockefeller Foundation has committed $100m to a project called Digital Jobs Africa that aims to improve one million lives in six African nations. A nonprofit called Samasource organizes poor women and youth in Africa and Asia to deliver data services to such businesses as Microsoft and Google. And a company called Cloud Factory that operates in Kenya and Nepal says digital outsourcing can “flatten the world, connect people into the global economy and raise up leaders to fight poverty and change their communities.”

The pioneer of what is called socially-responsible outsourcing or simply impact sourcing is DDD (Digital Divide Data), a New York-based nonprofit that operates for-profit data centers in Cambodia, Laos and Kenya. DDD and its impact-oriented peers set themselves apart from outsourcing giants such as Tata, Accenture and Infosys because, they says, they deliberately seeks out workers in the some of the world’s poorest places and provides them not just with jobs, but with the education, training and career counseling they need to rise into the middle class.

“Our ultimate mission is to alleviate poverty,” says Jeremy Hockenstein, 42, the founder and CEO of DDD. “We focus on students who are finishing high school, who are very motivated and very smart and who come from low-income homes.”

Having met Jeremy Hockenstein (via Skype) and his co-founder Michael Chertok (face to face), I have no doubt of their good intentions. Both gave up more lucrative careers to start the nonprofit. DDD is about helping its global employees, not exploiting them.

But their work raises an intriguing question about how much intentions matter when it comes to infotech outsourcing, or all of global trade, for that matter. Despite all the the abuses in the global manufacturing supply chain, it seems inarguable that the factory jobs created in China, Mexico, India and Bangladesh have benefited the poor in those countries. Is it possible the Walmart and Apple have done more to alleviate poverty than Bill Gates and Jeffrey Sachs?

You can read the rest of my story here.

Egg-cellent news: Hampton Creek raises $23M

BeyondEggs-logo-300x300Eggs from caged hens are the cruelest of all factory-farmed products, animal welfare advocates say. So if you care about animal welfare, you should be rooting for Hampton Creek Foods, a San Francisco-based technology company that says it aims to “enable the production of healthier food at a lower cost, starting with the displacement of the conventional chicken egg.”

Today, Hampton Creek is announcing that it has raised another $23 million in venture capital money in a Series B round led by Horizons Ventures, a technology fund overseen by Hong Kong-based billionaire Li Ka-shing, one of Asia’s richest men. He joins investors and partners of Hampton Creek that include Jerry Yang, the former CEO of Yahoo!; Vinod Khosla of Khosla Ventures; and Eagle Cliff, the investment fund of billionaire climate activist Tom Steyer and his wife Kat Taylor, the CEO of OnePacificCoast Bank. Bill Gates, who wrote about Hampton Creek here, has also invested, through Khosla.

I met Josh Tetrick, Hampton Creek’s founder, last year at the Fortune Brainstorm Green conference, after writing about the company. (See What’s for breakfast? Time to get Beyond Eggs) Josh is a very personable guy, a vegan, a former college football player and a Fulbright Scholar who worked in South Africa, Nigeria and Liberia before focusing on the food system, and how to improve it.

Josh believes that the plant-based egg substitutes being developed by Hampton Creek will deliver health benefits (they’re lower in fat and have no cholesterol) and environmental benefits (they require less energy to produce, generate fewer greenhouse gases and less waste) over conventional eggs from caged hens.

Nor will they cost more than conventional eggs. In fact, Tetrick believes that his team of food scientists can outcompete the chicken. In the press release announcing the new round of funding, he is quoted as saying: “Solving a problem means actually solving the problem for most people – not just the folks that can afford to pay $5.99 for organic eggs.”

JustMayo-600x450Hampton Creek has made a lot of progress in the last year. It now has a product called Just Mayo on the shelves at Whole Foods. It’s described as a plant-based, egg-free, dairy-free mayo-style condiment. Up next is egg-free cookie dough and an a liquid plant-based product that could substitute for scrambled eggs.

Meantime, the company says that in the last 90 days it has “signed partnership agreements with 6 Fortune 500 companies, including some of the largest food manufactures and retailers in the world.” It won’t name the companies or talk about the scale of the agreements, so it’s hard to know how meaningful they are.

Still, this new round of fundraising means that Hampton Creek has now raised $30 million in venture money. That’s a sign that the company is moving in the right direction.

An update: Early this morning, Josh Tetrick sent me the picture below from China where he had just met with Li Ka-Shing. That’s Josh T. in the middle, and on the left is his longtime friend Josh Balk, an animal-welfare activist with the Humane Society of the U.S. who works with businesses like Smithfield to improve their treatment of animals.

Picture with Mr. Li

The future

9780300176483The bet between the biologist Paul Ehrlich and the economist Julian Simon, which was described as  “the scholarly wager of the decade” by the Chronicle of Higher Education, was settled without drama–or graciousness. As Paul Sabin writes in The Bet: Paul Ehrlich, Julian Simon and Our Gamble over Earth’s Future:

One day in October 1990, Julian Simon picked up his mail at his house in suburban Chevy Chase, Maryland. In a small envelope sent from Palo Alto, California, Simon found a sheet of metal prices along with a check from Paul Ehrlich for $576.07. There was no note.

It was a victory not just for Simon but for optimists everywhere, and so a fitting way to start the year of 2014. The two men–who did not like one another–had in 1980, at Simon’s urging, placed a $1,000 bet on the price of five metals ten years hence. Ehrlich, whose book The Population Bomb warning of a coming global catastrophe had made him a celebrity, as well as one of the most influential environmentalists of all time, believed that food, energy and commodities would all grow scarce, and thus more expensive over the decade. Simon, a free-market economist, had enormous faith in the power of markets, prices and innovation to solve problems. (Before the bet, Simon was best known as the inventor of the auction system used by airlines to pay passengers not to take overbooked flights.) Between 1980 and 1990, the prices of the five minerals–chromium, copper, nickel, tin and tungsten–had fallen by an average of almost 50 percent.

Simon was lucky as well as smart. A global recession in the early 1980s depressed the prices of metals, and they never recovered. As Sabin reports in his first-rate and very readable book, economists who ran simulations of the bet during every 10-year period between 1900 and 2008 found that Ehrlich would have won the bet 63 percent of the time. Yet the history of the past 45 years, since Ehrlich published The Population Bomb, weighs heavily in favor of Simon’s worldview. Market signals, human ingenuity and technological progress have solved problems that Ehrlich said would doom us all. [click to continue…]

Reinventing meat

beyondmeat_seasoned_nutritional_9-28Nine billion people are expected to live on earth by 2050. What’s everyone going to eat?

Venture capitalists are investing in startups that are engineering new foods for a hungry planet–alternatives to chicken, beef, eggs and salt that deliver environmental or health benefits. The food industry, they say, desperately needs reinvention.

“The way we generate protein today is just not sustainable,” says Samir Kaul of Khosla Ventures, which has invested in a half-dozen food startups. “We’re running out of fertile land. There are water issues. Health issues.”

“Our population is growing, and agriculture just hasn’t kept pace,” says Amol Deshpande, a chemical engineer who worked in the seed business before joining Kleiner Perkins.

One company that’s getting lots of attention: Beyond Meat, a startup that has developed a vegan alternative to chicken. Kleiner invested. So has Bill Gates, and the founders of Twitter, Biz Stone and Evan Williams.

I’ve written a long story about Beyond Meat that was posted today at fortune.com. It was originally destined for the print edition of the magazine, but Wired has just run an excellent story about Beyond Meat, so my editors chose to post my story on the web. Here’s how it begins:

FORTUNE — Most people consume protein in what vegetarians call “the secondhand form,” that is, after it has been digested and converted into meat by chickens, cows, and pigs. This is inefficient, as Winston Churchill noted In “Fifty Years Hence,” an essay published in 1931. Churchill wrote: “We shall escape the absurdity of growing a whole chicken in order to eat the breast or wing, by growing these parts separately under a suitable medium. Synthetic food will … from the outset be practically indistinguishable from natural products, and any changes will be so gradual as to escape observation.”

Then again, predictions are hard — especially about the future. Food scientists and entrepreneurs have tried to reinvent meat for decades, with little to show for it. Last summer, Dr. Mark Post, a Dutch scientist and medical doctor, unveiled a five-ounce hamburger that was grown in a laboratory from cow muscle, at a cost of $325,000. (Google (GOOG) founder Sergey Brin picked up the tab.) Closer to home, mock meats from companies like Kellogg (K) and Kraft (KRFT) can be found in supermarket freezers, branded as “Chik’n Nuggets,” an “All-American Flame Grilled Meatless Burger,” and “Classic Meatless Meatballs.” Soy-based, mushy, and more expensive than the real thing, they remain niche products.

And yet, the need for alternatives to meat has never been greater. Global demand for meat has tripled in the last 40 years, driven by population growth and a doubling of per-capita meat consumption, according to the Worldwatch Insitute. That has intensified pressures on land, water, feed, fertilizer, and fuel. Meat is a climate change problem, too: Animal agriculture is said to be responsible for about 18% of human-induced greenhouse gas emissions, more than the transportation sector.

This presents a big opportunity for someone who can devise a tasty and affordable plant-based substitute for meat. That is exactly what Ethan Brown, the founder and chief executive of a California-based startup called Beyond Meat, aims to do, and he has persuaded some smart people to put their money behind him. Beyond Meat makes vegan “chicken-free” strips that it says are better for people’s health (low-fat, no cholesterol), better for the environment (requiring less land and water), and better for animals (obviously) than real chicken; most important, if all goes according to plan, they will cost less to produce than chicken. Fortune has learned that Bill Gates is an investor; he sampled the product and said he couldn’t tell the difference between Beyond Meat and real chicken. “The meat market is ripe for invention,” Gates wrote in a blog post about the future of food. Kleiner Perkins, the Silicon Valley venture capital firm, made Beyond Meat its first investment in a food startup. “KP is looking for big ideas, and this qualifies as a big idea,” says Amol Deshpande, a former Cargill executive and a partner at the venture firm. “The single biggest inefficiency in agriculture is how we get our protein.” Other investors include Evan Williams and Biz Stone, the founders of Twitter; Morgan Creek Capital Management; and the Humane Society of the United States, an animal-welfare group.

You can read the rest here.  The story goes on to explain that one advantage that Beyond Meat should enjoy over “real” chicken is that its product will use less feed than chicken. As I write:

It takes four-tenths of a pound of feed, mostly soy and pea protein, to make a pound of Beyond Meat. (A chicken breast is more than 60% water.) By comparison, even after decades of selective breeding and production efficiencies, broilers require nearly three pounds of feed, mostly corn and soy, to yield a pound of ready-to-cook chicken. Feed accounts for about 35% of the costs of chicken, so when corn prices spiked last year, the prices for whole chickens rose by 21%. As the costs of feed increase over time — and they likely will, as the costs of energy and fertilizer rise — Beyond Meat’s competitive advantage should emerge. “A chicken is just a bioreactor raised for the purpose of delivering protein to humans,” says Kleiner’s Amol Deshpande. “If you can do that more efficiently another way, that’s good for everyone.”

I’ve tried Beyond Meat, and it’s good, especially when chopped into a “chicken” salad or used with a sauce. In his Wired story, Food Network celeb Alton Brown writes that Beyond Meat’s “Chicken-Free Strips could replace chicken in at least 30 percent of the existing chicken recipes floating around out there,” to no ill effect. Brown is also pursuing a b-to-b strategy for his product.

I don’t know if Beyond Meat will grow into a big company. But I’m pretty sure that the way we produce and consume meat today is unsustainable. One way or another, we need to figure how to produce meat more sustainably or, better, eat a lot less of it.

What Warren Buffett could learn from Bill Gates

Buffett and GatesBill Gates and Warren Buffett have been billionaire buddies for decades. There’s a lot to admire about both men. They have promised to give away most of their vast fortunes and, even better, created The Giving Pledge to persuade many of the world’s richest people to do the same.

But on the issue of climate change, Gates has been a leader and Buffett a laggard. That’s the topic of my column this week for Guardian Sustainable Business.

Here’s how it begins:

Last week, Bill Gates wrote an essay for LinkedIn called Three Things I’ve Learned from Warren Buffett.

Gates and Buffett have been friends for decades. They play contract bridge together, they travel together and together they launched theGiving Pledge, an estimable campaign that has persuaded dozens of billionaires to commit half their wealth to good causes. Buffett sits on the board of the Gates Foundation; Gates is a director of Berkshire Hathaway, Buffett’s holding company.

In the essay, Gates wrote that he is “very lucky” to be able to ask the 82-year-old Buffett for advice on a regular basis. One of the lessons he cited is: use your platform. That got me thinking that Gates has an important lesson of his own to teach to Buffett: that climate change matters.

The story goes on to describe how Gates invited some of the world’s leading climate scientists and economists to teach him about the issue, how he has spoken out in Washington and elsewhere about climate change and clean energy, and how he has invested his own money in energy and climate research, as well as a nuclear power startup and an algae company. Gates has also taken an interest in geoengineering research, which I wrote about in my e-book, Suck it up: How capturing carbon from the air can help solve the climate crisis.

Buffett’s track record is mixed. Berkshire Hathaway’s utility company, MidAmerican Energy Holdings, has invested in solar and wind power, but Berkshire’s BNSF Railway has lobbied on behalf of the coal export facilities in the Pacific Northwest and on behalf of the coal industry in Washington. BNSF is also trying to build a coal-carrying railroad in eastern Montana, a story I reported on for Sierra Magazine, under the headline, Warren Buffett’s Coal Problem.

As a director of Berkshire Hathaway, isn’t it time for Bill Gates to have a talk with his friend Warren Buffett about climate? Imagine the difference that Buffett could make if he spoke out on the issue.

What’s for breakfast? Time to get Beyond Eggs.

Next time you dig into a breakfast of fried eggs, or enjoy a cupcake from your favorite bakery, or boil some egg noodles, don’t stop and think about the chicken that laid those eggs. You may lose your appetite.

According to the Animal Welfare Institute:

More than 95% of the approximately 280 million egg-laying hens in the United States are confined to barren battery cages where they are crowded and deprived of the ability to perform natural behaviors such as exploring, nesting, perching, dust bathing, or simply stretching their wings. Birds endure painful beak trimming, stand on wire floors that cripple their legs, breathe toxic air, and live their entire lives under unnatural, dim lighting.

A chicken lives its life on a footprint no bigger than an iPad. Imagine living the rest of your life just where you are sitting right now, crowded on every side by other humans, unable to move. You’d go insane, as Bruce Friedrich of Farm Sanctuary argues in this excellent essay. He calls eggs from caged hens “the cruelest of all factory farm products.

If you’re indifferent to the suffering of animals, consider that factory-farmed chickens have a big environmental footprint, albeit not as big as beef or pork. I couldn’t find any peer-reviewed life cycle analyses of eggs but, according to Slate, egg-laying hens are fed lots of grain, they’re pumped with antibiotics and they generate a lot of waste.

(And, if you want to get really grossed-out, read this long story that the Washington Post published just last week about the use of toxic chemicals to kill bacteria in plants that process chickens for meat.)

Josh Tetrick

Josh Tetrick

Josh Tetrick, the CEO and founder of Hampton Creek Foods, is convinced that there’s a better way. He wants to take America Beyond Eggs.

Beyond Eggs, according to Josh, is a healthier, safer, environmentally-friendly, plant-based ingredient for egg-based food products. And unlike the pricey, all natural, organic, free range eggs on sale at Whole Foods, Hampton Creek’s egg substitutes cost less than most of the eggs on the supermarket shelf. [click to continue…]

Corporate America embraces gays. But what about gay marriage?

Gay rights hasn’t been an issue in the presidential campaign, and that’s good. “On gay issues, silence is golden,” says Jonathan Capehart, a Washington Post editorial writer. As recently as during the 2004 election, you may recall, Republicans put gay-rights measures on state ballots to draw out voters who would favor George W. Bush over  John Kerry. “We’re not the punching bags we were two elections ago,” Capehart says. The tide is turning.

Some credit for this belongs to corporate America, which has over the last two decades embraced the gay community.  Capehart made his remarks during a panel discussion at the 2012 Out & Equal Workplace Summit, a gathering of LGBT people in the business world. Out & Equal, an advocacy group, champions workplace equality, in part because changes in the workplace become a catalyst for broader cultural changes. [click to continue…]

Here comes the sun….not

Germany, once the world’s leading market for solar power, is pulling back its subsidies.

Q Cells, once the world’s largest solar company, just went bankrupt.

This isn’t happy news. If the country that birthed the Green Party cannot sustain its support for solar, what does that tell the rest of us?

It should tell us that it’s time (actually way past time) to get serious about energy and climate policy.

This week, as I followed the news from Germany, I talked with a couple of energy-policy experts who I respect–Jesse Jenkins of the Breakthrough Institute and Gernot Wagner of the Environmental Defense Fund. I also watched an interview (below) with Bill Gates from the Wall Street Journal’s Eco-nomics conference. They disagree about some specifics, but they all agree that the US needs to get a lot smarter about how to drive a transition to low-carbon energy. So let’s try to see what we can learn from Germany, and the rest of Europe.

Perhaps the most obvious takeaway is that we should not place expensive bets on any one solution. That’s what the Germans did, with generous subsidies in the form of a feed-in tariff for solar. Even though the costs of solar have dropped dramatically, the subsidies were not sustainable. Remember when people said nuclear was too cheap to meter. Solar PV is too costly to subsidize on a scale that matters. [click to continue…]

My No. 1 best-selling book

It’s not just Republicans who ignore or deny the reality of climate change. Yesterday in Cushing, OK, President Obama spoke about an oil pipeline and said, according to The Times:

As long as I’m president, we’re going to keep on encouraging oil development and infrastructure, and we’re going to do it in a way that protects the health and safety of the American people.

Uh, no. There’s no way to safely burn coal, oil and natural gas — unless we find a way to remove carbon dioxide from the atmosphere.

That’s why I wrote my ebook, Suck It Up: How capturing carbon from the air can help solve the climate crisis. Eventually, we need to stop burning fossil fuels. But there’s no evidence that we’re going to do so anytime soon. So we need to think differently about the climate crisis, and to explore alternative solutions. Part of the answer will be to find ways to capture, recycle and reuse CO2.

In Suck It Up, you’ll meet the pioneering  scientist-entrepreneurs and the well-to-do investors, including Bill Gates, who are developing technology to capture CO2 from the air. Published as an Amazon Kindle Single, the book takes about an hour to read and costs $1.99. It’s free if you are an Amazon Prime member and you own a Kindle.

Some people have asked whether they can read the book if they don’t own a Kindle. The answer? Yes! Suck It Up can be read on a variety of platforms including on a PC, on a Mac, on an Android phone, on a Windows phone, on a BlackBerry, or even on the Web.  If you can read this blog you can read the book.

As for my claim about hitting best-seller status, it’s true, although misleading. Here’s the proof:

The “trick” here is that Amazon publishes dozens, if not hundreds, of best-seller lists. This one lists best-sellers in Environmental Economics. The truth is, sales of the book have been disappointing, perhaps because the climate issue is so far from the center of the political agenda. Fortunately, I didn’t write this book to make money. I wrote it to spread an idea that matters and to provoke conversation.

That conversation has begun.Matt Wald, the veteran energy reporter at The New York Times, wrote about the book on the paper’s Green blog. It was excerpted by YaleEnvironment360, by GE’s Ecomagination website and on Grist. In  a blogpost at Forbes, writer Greg Unruh called it “a must-read for sustainability professionals.” Other reviews have been good.

But like most authors, I’m not satisfied. I’d like more readers and more conversation. So please check out the book, tell me what you think and help spread the word. Are you listening, Planet Money or Ira Flatow?

Biotech crops are winning over farmers

Bill Gates with farmers in India

The debate over biotech crops has become predictable.

In his 2012 annual letter from the Gates Foundation, Bill Gates, who has a near-religious faith in technology and innovation, argues that an “extremely important revolution” in plant science, i.e., genetically-engineered crops, can help farmers in poor countries by giving them access to new varieties of crops that will better resist disease and adapt to climate change.

Days later, the Center for Food Safety, a Washington watchdog group and persistent critic of Big Ag, pushed back, saying that biotech crops had failed to deliver on their promise to alleviate hunger, and that Gates would do better to support low-cost “agroecological techniques” that don’t depend on patented, genetically-engineered seeds.

The conflicting claims and supporting data are hard to sift through. Will disease-resistant biotech cassava answer the prayers of Christina Mwinjipe, a farmer in Tanzania, whose crops are threatened by diseases, as Gates writes? Or will patented genetically engineered crops prove disastrous for the 1.4 billion farmers in  the global south who now save seeds from one season to the next, as Andrew Kimbrell, executive director for the Center for Food Safety, argues?

The voices of farmers are rarely heard in these debates. (They’re probably working too hard.) But data released this week indicates  farmers, through their actions, are voting for biotech crops.

Last year, farmers planted an additional 12 million hectares of biotech crops, an increase of 8 percent over 2010, according to the annual biotech crop report of the ISAAA (International Service for the Acquisition of Agri-biotech Applications).

Most of that growth — 8.2 million hectares — came from the developing world, lead by Brazil and  India, the report says. The growth rate for biotech crops in developing countries was 11 percent, twice as fast and twice as large as industrial countries at 5 percent or 3.8 million hectares.

“Unprecedented adoption rates are testimony to overwhelming trust and confidence in biotech crops by millions of farmers worldwide,” said Clive James, the report’s author, in a statement. It must be said that James is an unabashed supporter of biotech crops but as best I can tell, his numbers haven’t been challenged. [click to continue…]