Threading the free market with the social venture

Members of the non-profit group Thread came to speak to our class, and introduced a model of poverty mitigation in the developing world that I had previously not considered.  Most social ventures targeting poverty begin by addressing specific needs of the poor.  They might require food security, better access to healthcare, more robust educational opportunities, etc.

However, several significant problems may result from this approach.  Isolating a cause of poverty and a potential solution may the most difficult task a non-profit may face.  The task becomes even more challenging when the members of the organization have little familiarity with the region they are operating in, or understand the mechanizations of poverty, which may have deep and entrenched roots.  Local insight may prove to be invaluable when formulating the problem and potential solution, but is too often ignored by those enamored with their own ideas, which might poorly reflect reality. 

Another obstacle to this approach is making the operation sustainable.  If an organization is serving the poor, their customers will likely be poor and would have difficulty paying for it.  Therefore, the organizations that pursue this approach will have to rely heavily on sizable and continuing donations to sustain their operations.

By approaching the problem in the reverse direction from the mainstream, Thread is able to sidestep several of the obstacles that prevent their competitors from becoming successful operations.  Thread is a business that does not make its primary goal to eliminate poverty, they are attempting to sell flake and fiber to U.S. companies.  Their business model much more closely resembles a for-profit corporation.  The venture has the benefit of providing employment for 1,620 Haitians.  Not only are these Haitians gaining employment, but they are gaining all of the secondary benefits that come employment.  They are more likely to know how to spend their money than outsiders do.  Their spending bolsters their local economy, which would benefit further from a multiplier effect.  Furthermore, rather than the poor being their customers, Thread is selling their profit to large Western corporations.  Their model for sustainability is not dependent on those who have no money, but on corporations that are willing to spend enormously for good public relations.

I find the free market approach pursued by Thread to be an innovation in itself.  They are exploiting a resource (trash), hiring locals, and selling it to market to create value.  There are no pitfalls of paternalism, and each actor is engaging in the system in a voluntary manner, and coming out richer for it.