goodtech 02: good ideas, bad execution, and real disruption

Welcome, friends! It was a big few weeks in politics which I thankfully missed because I was on a much-needed vacation…in the middle of Tropical Storm Elsa. 🤦‍♀️ I discovered I’m going to have to a) take vacations after vacations with kids, and b) add a section, which I’m calling, somewhat ironically, speed dating: where private and public meet, for better or for worse.

Scroll on for more, don’t forget to RSVP to this month’s tech salon, and as always, please hit reply and let me know what you think! Thank you for reading, and feel free to share with a friend.

💡Big Ideas

This week’s deep dive is on something you may have never heard of: block grants.

TL;DR: What would happen if we focused on disrupting the really big things? I’m not talking about mattresses; I’m talking about disruption on the scale of $8 billion annually in block grants and over half a trillion annually in total federal funding.

When I first started in local government, it was as an assistant town clerk in a town of 198 people. I’d taken the job because, as a fledgling reporter in a small county, I had already been sitting through their board meetings trying to dredge up stories from the minutiae on the agenda each month: parking fines, sign restrictions, not-very-neighborly complaints, the cost of holiday decorations. (They paid better than the paper, and I would only have to go to night meetings twice a month, instead of twice a week.)

My first job was to administer a Community Development Block Grant that was intended to help rebuild housing and public park spaces for the community.

They handed me a three-ring binder that was about five inches thick. The state rep had mailed it to the town staff – which at the time consisted of one full-time clerk, age 75; a five-member volunteer board; and a part-time maintenance position.

The state rep set up a phone call with me, read me the first two pages of the binder over the phone, and then said, you have all the paperwork. Call me if you have questions.

I was 21 years old, had a two year old at home, and had no idea what I was doing.

The principle is great, right? Federal dollars to help underfunded communities create better housing, better community facilities, better access to water and sewer and jobs?

Founded in 1974, the grants aim to do the good work of social government: helping cities, states, and counties address major issues in housing, economic and community development, and providing access to fundamental services like water and wastewater no matter what a local government’s tax base looks like.

Some places (just over 1,100 of them) are called entitlement areas, and they get the money automatically. They’re mostly metros in and around large cities, or places with larger populations.

Other places, like the small town I worked for, compete for state pools of money set aside for everyone else (30% of the annual allocation for the whole country – and yes, they call it the ‘Small Cities’ program).

We’re talking real dollars here: CDBG funded over $8 billion in 2020 and over $3 billion to date in 2021. It’s one of the only federal or state programs that will fund acquisition of real estate, construction of housing, and rehabilitation of existing housing.

CDBG is a great example of a good idea with shitty execution.

That five-inch binder hasn’t changed much except to grow, and grow, and grow over time.

Like for all federal programs, the rules accumulate the way that barnacles grow on ships. They accrete slowly over time and add onto themselves until no one working today could actually tell you why you need that particular form signed, notarized, and overnighted in. They’re built on old paper systems that haven’t transitioned over to digital fully, and the pieces that have gone digital are really good examples you could use to train people how not to do UI.

It’s also a really, really, really long process – awards sometimes don’t make it to the town until eight to twelve months after application.

The end result is that, by the time the community has filled out six paper copies of a 200-page application with supporting files and boxes checked, and by the time that money makes it through fifty years of regulatory tweaking to be actually awarded, it’s often impossible for the poorer communities who need it most to use it well.

What’s worse, the process results in a shadow industry similar to what forms around the US tax code: only experts understand it, there are only a few of them, and you have to pay through the nose to get them – which means only cities with some money can access these funds.

Since your administration of the grant impacts whether you receive money in the future, poorer places can’t always perform well enough to keep accessing the funds each year. Since you can only apply to have administration funds included if you get the grant, if you can’t find a staff member to navigate the grant process successfully, you’ll never get funds in the first place. And if you do, you then have to find someone who can navigate five-inch binders full of regulations and processes – which usually means paying a consulting firm, since it’s doubtful you have people in-house on such a small staff.

The winners in this scenario are governments that can afford to hire full-time in-house staff to manage grants, or to pay consultants to provide the same service. At the 5% rate you’re allowed to use for administering CDBG funds for each grant, taken by the $8.3 billion total – that’s administrative funds of over $416 million. Every. Single. Year. And that’s only CDBG funds, not all federal grant funds.

The end result is a decades-old imbalance in what was intended to be a program specifically benefiting poor and low-income households in the US with better housing – arguably the single biggest economic barrier to these magical bootstraps everyone in America keeps talking about.

Instead of reaching those communities directly, as was intended, we’ve built a system that rewards those with more resources instead of less – not through some nefarious conspiracy to keep the poor down, or through bad government, but because of the accumulation of rules, over decades, without any modernization.

This type of problem isn’t political, it’s administrative.

It’s a process problem with a clearly defined marketplace and massive demand. And we can solve it. But it will take real disruption – not the kind we’re all focused on now.

What if, instead of thinking about adding yet another mattress company or food subscription box to the market, founders were thinking about how to disrupt the system by which we provide equal access to grant funds?

What if we were thinking about disrupting something where the societal impact could be massive and the financial impact could be, too?

What if we built a product that streamlined all the regulations and processes into a beautiful, simple, easy-to-use interface for block grants that leveled the playing field for poorer places, empowered cities with access to the resources they need no matter what zip code they’re in, and reduced the burden on taxpayers by reducing the administrative overhead?

What if that software service could charge less than what small towns are currently paying to navigate the process on their own? What if you could find a way to prove it worked well enough to enable people to use part of their 5% admin funds to purchase it?

Could you then prove it and sell it to the government for all grant programs (which hand out over half a trillion each year across all departments)? What if it worked so well we could move all grant programs there and level the playing field for everyone in America – not just those with larger populations or deeper tax bases?

I hear a lot of tech people talk about building in public. What about reasoning in public for problems like this?

What about disrupting, in public, for the public good?

chart showing that larger cities receive more funding from grant programs because they have more resources to manage a complex, unwieldy and difficult grant process — image by author

We’ve been talking about it since at least 2016 in grant management circles and on Medium. Bloomberg has been funding innovative cities’ work for the past decade. Open Philanthropy has been learning in public about effective philanthropy in some really cool ways.

But there is, as ever, a disconnect between the public sectors working on these problems and the tech sectors that could be helping. There are real reasons behind that disconnection, too, not just the old, tired arguments about public and private. Disrupting for the public good requires a lot more than just building – it requires a whole new way of thinking about how we organize, fund, and create solutions to public problems.

With that said, our manifesto for the next few editions is to explore the biggest barriers to innovating in public for the public good. In order to solve public problems effectively, at the scale and speed of tech today, we need disruptions in:

The way we organize companies to do this work;
The people who do this work;
The structures through which we build public-private partnerships; and
The way we think about profit, pay, and public knowledge.

Here’s the way I’m generally thinking about those four barriers – I’d really love for you to hit reply and tell me what you’d add or change:

💼 Companies: The structure of the nonprofit vs. for-profit hasn’t changed significantly in five decades, but the world certainly has. This is a place that won’t pass the eighties test (read more on that, here) – and a place where we have a chance to ideate new ways of thinking about profit, what belongs in public spaces, how to generate public goods, and how to compensate people fairly for that.

🤝 People: We’ve existed in the false distinction between a career that serves the world and a career that makes you money for entirely too many decades now. I hear this so many times from so many people – if you’d like to share your story, anonymously or otherwise, please reply to this email and let me know!)

🏛 Structures: Right now, most public-private partnerships are strictly in economic development (ie, a government offers incentives to a company to locate in their jurisdiction and provide jobs, or a company offers to develop or support programming in order to receive certain benefits). Sometimes companies sponsor programs or services, and sometimes government partners with companies to receive or leverage grant funding to achieve an aim.

For the rest, there’s what passes for corporate social responsibility these days on the private side, and badly designed RFP processes on the public side. What if we fundamentally rewrote the idea of true public-private partnerships, based on the needs in both sectors and the shared goal of making our communities better places to live, work, go to school, and play?

💲 Profit, Pay, and Public Knowledge: All our legal and regulatory structures for the way people can make profit from solving these problems are ripe for disruption, as we discussed in several of the sections above. But there’s a more ideological side to this question, too: how to make sure that the people, companies, and tech working to serve the public good are rewarded for doing so, both in pay and in profit, without making public goods subject to private control – a fundamental distinction in democratic models. (If you need a good example of what happens when this happens, see broadband access everywhere, for one.)

I hope many of you will contribute ideas – either by attending our next event or by replying to this email and sharing your ideas and questions.

🥑 Holy guacamole, that might actually work

Someone way smarter than me wrote a piece about fintech + housing disruption that echoes some of what I wrote on Medium last month. Per Scott Galloway in Marker: “It’s hard to imagine an industry more ripe for disruption than the business of money.” Read the rest here.
There’s a new female founders fund in town focused on VC for female and BIPOC founders. Read more at TechCrunch.
Serena Williams continues to be amazing. Read about her investment in startup Esusu, which aims to change the way we manage and handle rent reporting in a way that would benefit millions of underserved households.
…or not: We’ve been testing smart cities for at least fifteen years in North America, Europe, and the Middle East. They’re…underwhelming. Read more in WIRED about how this US smart city didn’t get much smarter.

💜 NEW: Speed Dating

Where public and private meet, sometimes sparks fly, sometimes bad things happen, – sometimes it’s for better, and sometimes it’s for worse.

Our example this week comes to you from North Dakota, which has allowed a private citizen to pay the state to have their National Guard units sent to the Mexico border.

No, an AI did not write that sentence.

The recent decision by South Dakota Governor Kristi Noem to accept private funding from Willis Johnson, a major Republican donor, to send her state’s National Guard to the Mexican border has been called unprecedented, a conflict of interest, an abuse of public power for personal political gain, an outsourcing and privatization of national security, an assault on the authority and legitimacy of the federal government, and a reflection of, as the journalist Paul Waldman put it in The Washington Post, “some people’s rejection of the idea that existing rules and structures have to be considered legitimate at all.”

It is all of those things. And it may be one other thing too: the future.

Leave a Reply Cancel reply