{"id":15186,"date":"2014-10-09T05:00:33","date_gmt":"2014-10-09T11:00:33","guid":{"rendered":"https:\/\/tested-neuron.flywheelsites.com\/?p=15186"},"modified":"2015-02-17T13:28:33","modified_gmt":"2015-02-17T20:28:33","slug":"impact-investing-social-networking","status":"publish","type":"post","link":"https:\/\/unreasonablegroup.com\/articles\/impact-investing-social-networking\/","title":{"rendered":"Why Social Impact (Not Social Media) Builds Wealth"},"content":{"rendered":"

Last week, the US Government reported<\/strong> the creation of 248,000 new jobs in September. Good news? The bad news is that many folks that got new jobs are being paid less than they were making before the financial crisis. So how do we resolve this? We see all of the new technology startups in the media getting funded, but where are all of the jobs? It seems that social media\u2014all of this sharing and caring\u2014is not creating the next economy that we want.<\/p>\n

Like Tyler Cowen, author of The Great Stagnation<\/a>, I argue that instead of historical game-changing innovations truly driving economic growth for the poor and the middle class, online social networking and sharing services permanently displace low-skill workers. The foundation of the next great economy will be created by impact investors deploying sustainable infrastructure\u2014not VC\u2019s looking for the next social media app.<\/p>\n

Social media\u2014all of this sharing and caring\u2014is not creating the next economy that we want.<\/i> Tweet This Quote<\/a><\/span><\/p><\/blockquote>\n

History shows that economic growth comes from job growth across the education spectrum. The most recent impact investment was the Internet in 1969, which resulted in significant IT investment and economic growth through the late 1990s. Before the Internet, in energy, the electrical grid was a game changer. In transportation, there was the advent of highway construction, the affordable car, and\u2014more importantly\u2014automobile financing, even for low-income families. These infrastructure innovations were game changers because they made everyday life easier and cheaper.<\/p>\n

Each of these inventions did not create one industry; they created dozens of industries. Each created a new economy powerful and pervasive enough to employ millions of people\u2014even high school dropouts and those without a college degree. And the people not working in these industries benefited through a lower cost of living.<\/p>\n

The truth is that real game-changing investments, or impact investments, are harder to come by\u2014this is the premise of Cowen\u2019s book. Our economy’s “low-hanging fruit” is scarce.<\/p>\n

The new brilliant business leaders in social media want people to think that what they do actually matters to the overall economy. A week after Thrive Capital\u2019s investment in Instagram, Facebook bought Instagram for $1 billion in cash and stock. Paybacks like this are a dream to investors. They get a handsome return-on-investment and social media buffs get a cool new app. But do we end up with businesses that drive a new economy?<\/p>\n

How do we shift the center of gravity away from Silicon Valley and investors interested in hype returns and into steady, infrastructure returns?<\/p><\/blockquote>\n

Instagram had about a dozen employees at the time of its sale. In theory, the acquired employees could be filling unnecessary or duplicated jobs at Facebook, contributing to a jobless economic recovery.<\/p>\n

How do we shift the center of gravity away from Silicon Valley and investors interested in hype returns and into steady, infrastructure returns? Cowen suggests that we come up with innovations that look like infrastructure and that put people to work\u2014lowering the cost of living in America.<\/p>\n

This looks like scaling up technologies we invented in the 1970s that improve water, sanitation, transportation, electricity, and other core expenses of every household. Most importantly, they provide meaningful employment to the poor and the middle class\u2014versus eliminating jobs by increasing efficiency. The opportunity and challenge with this area is that progress is measured in trillions of dollars of investment, not millions.<\/p>\n

While folks like the International Energy Agency and others have identified $10 trillion in global infrastructure investments that pay for themselves with energy savings, the investments have to be pursued in a financially compelling way to inspire other mainstream investors. First moving, impact investors need to prove to other investors that they can provide:<\/p>\n