Exclusive | Interview with Douglas Miller on Venture Philanthropy Development

“After all, there has to be a systematic objective approach to measuring the returns whether social returns reflect in the financial returns.”

Founder of AVPN

Douglas Miller

Editor’s Note:

It is hard to image that the tranquil old man setting in front of you has joined Vietnam War about half a century ago. At that time 22-year-old Douglas Miller made a pledge that if he comes back safe and sound, he would do something more positive to live his life.

In 2005, Miller and his four colleagues at a private equity institution jointly founded the European Venture Philanthropy Association (EVPA) to promote venture philanthropy in Europe. In 2011, he came to Asia and founded the Asian Venture Philanthropy Network (AVPN), which now has members of more than 570 institutions worldwide, including 37 in China. He resigned his position as president of AVPN in 2018 and now establishing venture philanthropy networks in Africa and Latin America.

Douglas Miller, now in his 70s, has been a legendary figure in the global sustainable development finance arena. However, he said, he is still on the road.

“Just do what you can do until that time comes.” He said in an interview with Angela Bai, Secretary General of China Alliance of Social Value Investment (CASVI) on July 1, 2019, talking about his commitment to promoting global venture philanthropy.

From Vietnam War to Private Equity, Doug’s Motivation of Founding AVPN

Angela: In my opinion, you are a hero in impact investment and responsible investment. We really want to know more about you. What drives you? How do you balance your work and life?

Douglas: My wife sometimes asks me that, too. (Laughter)

Talking about “legendary hero”, I try not to make this about me. I am just lucky enough to be able to attract good people who are committed in that area.

Firstly, with regard to China, I first came to Hong Kong in 1969 for Chinese New Year, and I first came to Shenzhen in 1990. Obviously, there are huge fantastic development, I would say 1000%, over the last 29 years, or 10000% and whatever. What I was doing is to invest commercial company at that time. So my engagement in China in particular has been for 51 years if you count Hong Kong and 29 years if you count Shenzhen.

But in terms of my own motivation, in 1966 I graduated from my university and the US government signed me up as a military officer in Vietnam, so I made a pledge that if I got out a life, I would do something more positive to live my life.

Back from Vietnam I went to a business school at the university, which is in Kansas. After graduation, I joined the largest bank in Chicago. I was fortunate enough to be in the private equity industry, which is a very lucrative industry. That’s what was about achieving financial independence and enough influence.

Then in 2002, I organized a group of 27 private equity professionals to go to Vietnam for mine-clearing operations, because after new wars in the world including the brief war between Vietnam and China over Cambodia, there were a lot of unexploded bombs. So we went there to raise money to help the clean-up because people who were getting killed were grandsons and granddaughters of people who were fighting the wars 15 years ago.

We also went to private equity to find money, so we decided to roll out the “venture philanthropy” idea globally. I lived in London for 35 years, so I was a very “European”. We decided to roll that out on the global basis by continent and continent, because people in Europe knew more about the issues of the Europe and they have more stake in that. So we started with European.

Later I retired as Chairman and I’d come back to Asia since 1968. We launched our Asian Venture Philanthropy Network (AVPN) in February 2011. Now we have 570 members roughly in 34 countries across Asia. Now I am working on with teams of three in Africa. We’ve been done the operations in Africa for two and a half, close to three years. Last September, 10 months ago, we opened up operations in Latin America, headquarters in Bogata, Columbia with several line offices in Mexico cities and San Palo, Brazil.

Actively Seeking Solutions for Social and Environmental Issues

Angela: You were in 22 to 24 when you were in the Vietnam War. So after almost half a century, what has remained the same and what has been changed dramatically? And what remains the same and what have been changed to yourself? What’s your perceptions to the whole world? How do you see the world, the values, the relationships you have with yourself, with other people and with the planet?

Douglas: I was born in 1944, and there were 1.7 billion people in the world. Today there are 7 billion. It would be interesting if you look back to China in 1944, I don’t know whether you have a sense of that time, but the world is got 4 times as many people (as when I was born). And if you listen to the United Nations data, they say that the present rate is going to get someone a neighbourhood of 9 or 10 billion. And if we look at the same time, the need and the use of labour, computer has produced a huge amount of efficiency which has reduced the need for a lot of labour.

And I read maybe couple of years ago about the use of robots in China. Foxconn, one of the biggest employers in China, would going to replace workers with robots, because robots can do work every day, and they don’t need pensions, health insurance, sick leaves and they actually can produce better products. So I think one of the biggest challenge in the world is going to be that we have a lot of people and the need for labour per (item) unit of GDP is actually going down. So I think that’s the problem that needs to be solved.

Environmentally, the production of electricity through the coal or other has reasonably negative impact on the environment. And this is with 250% because the awareness of the environmental damage, not in China but in India and everywhere else, was so high.

Huge progress has been made in compliment to China because whether 400 or 500 million people are now above the poverty line in China. That's a fantastic achievement. Interestingly, I'm not going to say I personally helped but if it hadn't been for continnum shipping, that wouldn't have happened, because in the old days when you shipped in cargo ships and took days to unload and unload, but now with continnum ships that's all possible.

I've got two grandchildren now, and their ages are 5 and 7. I think well what kind of world in which they are going to grow up.

Actually I am not a religious person. I don’t go to the church, but I do, when I wake up in the morning, I say, Lord, give me the energy and the willpower to keep charging. I want to keep charging. When people say slow down, I say I want to hit the brick wall at 100 miles an hour and I am interested in it. That is actually the benefits of the world, right?

I thought I would be dead at the age of 24 and so I have another 50 years. We all gonna die. Just do what you can do until that time comes. We should seize the opportunities what separate you from a dog, have the ability to have a choice, and actually make things happen. Let nothing stop, right?

Angela: Are you optimistic to future? Why?

Douglas: I think you have to be optimistic and you have room for solutions. You've also got to be very realistic as to where you are today. And so if you're navigating towards a solution, you have to know where you're starting from, right?

My wife and I were just in Antarctica, the seventh continent. I didn't even know that actually until I was there, but a lot of icebergs were floating around. Icebergs only float around when they break off, and they break off because it's warmer. If all the water is in the ice now melts, we're going to have a lot of difficulties. But I think that technology is putting a role. That's a reason to be more optimistic.

I think the awareness by the population in general it is another possibility. I think the idea around gender and the engagement of women, which represents 51 percent of the global population. That’s another reason to be positive. I think the next generations are another reason. The fact that we've gotten 40 global universities as members is positive, including Wharton, and I think Kellogg is actually a member. But all of those are reasons to be positive.

The awareness of the problems is good, and it is a matter of whether you can find solutions there.

Industry Development Needs Leaders and Young People

Angela: So it seems you started up this industry, if we can call it an industry, or as you know as venture philanthropy and impact investment or responsible investment. So if you review the past, are you satisfied with the speed, and how fast we have gone so far?

Douglas: Well I am never satisfied. When we started it out, we thought it was a 25-year effort. We're now in the year of 15. So EVPA this November will celebrate its 15th year. And you know we've come a long way. But if you were talking about how long the road it is, it seems like we've gone 3 miles down the 100-mile path. But now the path that you have been through is 110 miles.

But the positive news is that if you get leaders in China, including yourselves, we have 37 members. So you need to get thought leaders and you need to get influential people in. AVPN also runs a government engagement. It's called the Asia Policy Forum. And we started that really just to see what would happen. It got three governments initially which was Singapore, Thailand and Hong Kong. In Hong Kong, within 6 months they launched SIE Fund.

Angela: Just now you mentioned that you are not very satisfied with the speed. As an eco-system builder, particular as a global eco-system builder, how can we effectively leverage our limited resources to make a breakthrough and quickly scale up, what’s your idea? Are there any tipping points that can effectively change the world? What would it like?

Douglas: I don’t think there is one magic bullet. There are multiple things that we have to do.

One is to find leaders and role models not only in individual country but in individual cities. Shenzhen is considered to be very progressive. Some Shenzhen charities or federations are discussing how they can influence what is happening and move on. In other cities of 10-15 million people, this is one thing we need to do.

There is the education of the youth to get engaged. University is not our original plan, but Oxford came to us, and as we looked at it we found that there is actually a 25 to 50 year, and we can catch these people when they are 18-25 years old. They actually should not be forming social enterprises, charities because you need to go out and engage some personal experience as well.

It’s government engagement and getting youth engaged that is improving the cross-border knowledge flow. That’s why we formed the new organization called the International Venture Philanthropy Centre (IVPC). That is because we have these individual continent-wide organizations in Asia, in Europe and in Latin America. These can make sure these organizations are talking to each other.

Global Experience in Sustainable Development Finance

Angela: What will we learn from the global experiences, and which kind of lessons we need to remember?

Douglas: Social problems in terms of environment, health, education and almost all issues are presented in every country in the world. Now they might have different cultures, different government regulations, so they might adjust those issues a little bit differently. But issues are out there globally, and we feel that solutions that have been used in China or solutions that have been used in Germany. That’s one key element.

Another key element is when you look at the underlying business, some organizations seek to grasp problems in education, health or environment (that) don’t have any source of earning incomes. So they’re non-profit organizations and they rely on grants. Some are social enterprises and in fact can generate incomes, and you can fund those with different forms of capital, soft loans or often with equity. Some organizations you can apply impact investment to, because they have more upside potential in terms of generating cash flows and also being able to scale.

You know Ronald Cohen (Chairman, Global Steering Group for Impact Investment), Ronald and I went back to 1983, and I was on the advisory board of his social enterprise impact investment group in London. So he and I were interfaced with each other in that regards.

I actually feel that, I am going to use the word “hype”, their enthusiasm for impact investment is little bit overstated at the moment, you have to build up the pipeline and the knowledge. It is so attractive that everybody wants to do that, but you have to find organization that is suitable for.

Everything we are trying to do is to leverage, so the initial money to all of this came from my money, like in Africa, Latin America and in Asia. The reason why I do that is where the leverage is. This type of network can deepen investors’ understanding on impact, help them further discuss the potential of impact investment.

In private equity, we were the investors in Apple’s computer. We put in USD 600,000 and we get 200 times of money in 3 years. The bad news is if we kept it we would have USD 12 billion. (Laughter)

If you know about the continnum of capital, which is something we actually came up with three or two years ago and we developed, but that’s basically it’s a symbiotic way of looking at it, because if you are doing early-stage support for social enterprises, you have to do that with philanthropic money because it is too risky for people who are doing impact investment to do. On the other hand, when you get to a certain stage, if you can use impact investment, that’s better than philanthropic money, because the capital market is a lot bigger.

I know that you worked for the bank. So I mean that bank are bigger that the philanthropic capitals. Not all they would put the capitals in impact investment. The commercial markets, public markets and debt markets are hundreds of thousands of times bigger than the philanthropic market.

Engage Mainstream Financial Players to Sustainable Development Finance

Angela: How can we engage these mainstream financial players to sustainable development finance?

Douglas: Everybody talks about money. If we look at the car, the money is the gasoline in a car, but if you don’t have human capital to drive, navigate and fix the car, the car will lose its gasoline, right? And then look at what a 1890 Ford car or Mercedes car looks like and what our cars look like today, we refer to that as intellectual capital.

You’ve got keep moving things ahead from both technological standpoint but from philosophical standpoint. So we talk about human, intellectual and financial capital. It’s not just about the money. We actually think that a lot of money haven’t been spent very effectively. It is not about how much but how well it was used. Because there’s not going to just be a number.

The grand money of continuum of capital is always going to come from foundations and high net-worth. Maybe a cooperate has a foundation, but it’s not a huge money, right? In a corporate foundation, corporate has CSR activities which are very important because they can provide human capitals. Those people can help with the accounting, with the strategy and with marketing. The question is how effective is that money being used. So we talk about having a strategy, we talk about focusing on a particular sector so you can gain expertise.

On the impact investment side, there is more money available for mainstream investors. If there is a deal flow for them to invest in, and you need intermediary. But the transaction sizes are small in the social sector, and so intermediary need to operate strategically. That’s what AVPN and EVPA do. And creating intermediaries who can help both philanthropic market but also impact investment market, it is probably more important on the impact investment market.

Angela: I heard some of the comments from the mainstream players, they do see the financial performance as well as impact performance as a trade-off game. They sacrifice efficiency particularly in risk and return to get more impact. How do you think about that? What do you think of the relationship among risk, return and impact? Is it doing good can eventually financially be paid off?

Douglas: I will say what I think but I might have it modified as we go through. There is a trade-off in many cases between the financial return and social return.

Let me give you an example. If we have private schools in countries where the school system does not function very effectively, and if you have a private school, and you are working with low-income people, you are only charged with only 5 dollars a week to go. Ultimately, you not only want the children to go to school, you want the outcome for those children to be substantially better than they otherwise be. So if you are only charged only 5 dollars a week, how many students do you have in a class? You put more students in class because you can get more money. You can easily get an optimum number of people.

This is just an example. You are depending upon the fund manager when they are raising the money to have very specific criteria for the social impact that they are making. And I have a quick question actually. My question is from somebody who came to me with an impact financially. What kind of return do you expect? And they always tell you 5% or 8% or 12% whatever, but this question is very much related to the dynamic relationship between social and financial return of investors.

There are areas in terms of clean energy, social housing, and certainly there is in terms of high-tech where the dynamic between social and financial return probably not to impact that much. There are other areas when you are serving the base of pyramid where you might sacrifice some of the social return to achieve the financial return. I think it’s up to the stores. People are putting up the money to insist there are specific social returns that they agree to and there are measurements of these social returns, and somebody enforce that.

I think the last point is an important point. After all, there has to be a systematic objective approach to measure the returns whether social returns reflect in the financial returns.

I think without what currently has been established, there are different ways as you can see this trade-off. Some people don’t see a trade-off, and they take a long-term view, because ultimately being able to invest is something that is sustainable can only be better for the financial return in the long run. But others see a trade-off depending on the business model that they use in investing, the business horizons, and their sector. When they make investment, they would point out whether some sectors are naturally alignment on financial or social returns.

The positive that we are seeing increasingly number of members who are interested in this place are developing more sophisticated approaches to understand quantitatively what is the impact and what is the financial return. And that is a good sign because it means that they assume that they are trying to understand the relationship.

Investors are serious enough because they are the people who get quarterly reports and audit the financial return. Facing the impact investment and impact created by investment, they naturally measure reports based on social impact.

It’s intentionality of investment that really counts. I would like to also mention something positive, which is the SDGs. When they first came out by UN, it’s a really cut-on, and I think that’s positive which we will go beyond the 2030 deadline. There will be a new program.