In 2004, eBay founder Pierre Omidyar and his wife, Pam, set aside some of the wealth they acquired after the online marketplace went public and created Omidyar Network, a philanthropic investment firm “dedicated to harnessing the power of markets,” according to an official overview.
Since then, the firm — which operates a 501(c)(3) nonprofit and an LLC — has committed $839 million in nonprofit grants and $735 million in for-profit investments. Today, 60 employees in Mumbai, London, Washington D.C. and Redwood City look for opportunities to invest and contribute across four main areas: Reimagining Capitalism, Beneficial Technology, Discovering Emergent Issues, and Expanding Human Capability.
In 2018, coinciding with a strategic shift that saw Omidyar Network spin out several of its initiatives, the firm elevated to CEO Mike Kubzansky, who had started the firm’s Intellectual Capital arm. In a wide-ranging discussion, Scott Bade spoke to Kubzansky about Omidyar Network’s origins and evolution, and his approach to venture philanthropy.
(This interview has been edited for length and clarity.)
Scott Bade: Omidyar Network has stood out because of its unique structure as both a grant-making institution and as an investor. Could you describe how Omidyar Network got started and how it evolved over the last decade and a half?
Mike Kubzansky: Pierre [Omidyar] originally started the Family Foundation. But having looked at the experience of eBay, he became frustrated that he couldn’t [achieve] the same scale of impact [that eBay had] in a conventional grant-making structure. So we converted Omidyar Family Foundation to Omidyar Network in 2004 with the fundamental insight to add to the classic 501(c)(3) structure of a foundation an LLC to enable us to invest in companies.
Great, and by investment, how does that work? Are you a typical LP or is there a different investment thesis?
Yeah, so historically first it’s worth saying, being influenced by Silicon Valley DNA, we have typically taken a venture lens on things and typically have invested at the seed or Series A round. Again, that comes straight out of the Silicon Valley experience.
Within that, we’ve had this notion of investing across the returns continuum. In some cases, we feel you can get a fully risk-adjusted market rate return. In some cases you might be ahead of the market, or looking at a firm that’s actually having a market-level impact, in addition to a firm-level impact. In those cases we’ve been willing to take a lower rate of return, at least at entry, in terms of what we would invest in. Typically it’s been venture, part of it syndicate; we have never taken a majority share in a company.
Before we dig deeper into the programmatic work, I want to dig deeper on your methodology. Clearly when it comes to both defining impact and figuring out how to measure it and maximize it, ON has been different from traditional philanthropy. But how do you define whether a given objective warrants either a grant or an investment or an advocacy approach?
You’ve hit on a question that we’ve spent a lot of time discussing internally. Having this flexible capital structure enables you to range across a lot of different forms of engagement in the world. So our thinking currently is – and this gets into our strategy shift – focus less on things that are easy to measure, like service delivery and financial inclusion and how many people are reached, and focus much more on upstream structural power, rules of the game, mindsets and beliefs about the underlying systems, which we think actually are at the root cause of a lot of the distress and income inequality we see in the world today.
Thinking like venture capitalists
You talked about thinking like a venture capitalist. Does that mean that that even with your philanthropy or advocacy you take on greater risks that are a long shot at achieving, but perhaps have a high-expected value return?
Yeah, so you’ve hit on exactly an issue that’s really important to us, which is the ability to take risk. Philanthropic money is the most risk-tolerant capital out there, whether it’s deployed for-profit or not-for-profit or on advocacy. And we view part of our role, in terms of social impact, as being risk capital for very difficult issues that society needs to take on. That mindset pervades how we think about approaching a problem.
We think about risk in a bunch of different ways: one, the ability to take on long-term issues which others may not be able to take on because they’re trying to make quarterly profits or that sort of thing. So there’s where we can take a run at some of the upstream rules of the game and checks on power, which might take time to accomplish. We [also] take it as an ability to take on difficult issues as well, not just time consuming, not just ones that have long-time horizons.
So what is your theory of change? Is your goal to be a think or do tank, is it to be an advocacy group, is it to shape norms, is it to fund pilots or some combination of that?
Yeah, I think we are, it’s fair to say we are still working through that, but we are in the process of putting out our points of view on what we think needs to change under capitalism and under technology. So for instance, we’ve published a point of view on what we think good digital ID looks like and ought to be.
Under the Reimagining Capitalism banner, our take is that it is going to take a mix of things. One [part is] about rebalancing structural power. For instance, working people have not typically seen any of the gains over the last 40 years where profits and productivity have gone up very dramatically but wages have stayed stagnant. So how do you rebalance power between working people and the companies or the capital sources that are working in the economy?
And so our theory of change includes some level of, how do you change the way people understand economics – everything from how you teach economics to how you measure to result of our economy, not in GDP but perhaps in wellbeing or other formats [like] by income decile – all the way straight through to ideas about who the economy is for.
We would argue that neoliberalism is a version of capitalism, it is not capitalism itself, and that we can get to a better version of capitalism if we change some of these underlying beliefs and mindsets about the economy.
… The original ethos of the Valley has tracked through to our notion that we want to see power redistributed back to people and away from concentrated sources of power.
How has being in Silicon Valley, the mindset of being in the tech world, influenced that thesis on capitalism?
I think, at one level, it had a bunch of effect in terms of our consideration of who has power. Silicon Valley has often had this streak about distributing power to the people through the Internet – on the original internet information was meant to be free and was supposed to empower people to be able to act in different ways.
And so, the original ethos of the Valley has tracked through to our notion that we want to see power redistributed back to people and away from concentrated sources of power.
It sounds like your agendas around rethinking both capitalism and tech are very similar, in some respects?
Yeah, I think they overlap heavily and we have a lot of concerns over on the Reimagining Capitalism side that show up on the technology side. Concentration of power – whether it’s a government or whether it’s a tech platform – is a problem, from our point of view. And so enabling workers to have a voice and say is important in the economy in general, and in the tech economy in particular.
We funded a study by doteveryone in the UK surveying tech workers on what are their attitudes towards AI and automation and ethics. And there were surprisingly large proportions of workers who were quite concerned about that. And they have the ability, to exert pressure on their companies to do the right thing and behave the right way.
Have tech companies been cooperative or do they see you as an adversary?
I can’t speak for what’s going on in the halls of some tech companies, but we’ve had extensive conversations with [companies like] Mozilla. We know a lot of folks over at Salesforce. Obviously in the startup community as well, there are plenty of people who are onboard with this vision.
There’s a lot of people who do want to do the right thing. But the question is, what are the rules of the game? That’s why we think system change is so important. If their incentives are to send everything back to shareholders in the form of stock buybacks, companies will behave according to the incentives they’ve got.
Do you see your own investing as an example for other venture capitalists?
Yeah, we would like it to be. We certainly feel like we’ve had lessons to share, and we don’t think we’ve cracked the code on this by any means. But we would like to see people think about [these issues], and we’ve written extensively to share our lessons.
We wrote a piece, for instance, called Across the Returns Continuum to talk about investing across the returns spectrum. Similarly, Good ID [is the] kind of technology we think companies should be investing in. And we work with other investors to try to build coalitions of people who want to invest in companies that don’t monetize you, that provide data control and data privacy by design.
I do think we’ve got more work to do, and we’re nascent in this more-privacy-by-design, new alternative-business-model space, so we have fewer lessons to share compared to the lessons we’ve built up in education or financial inclusion. But I think one key to this would be getting other investors to pursue these same theses.
Do you think that Silicon Valley philanthropies, especially those with a tech pedigree, have a special obligation to pay attention to the problems caused by technology?
I can only tell you about our journey. We do feel like we have a special obligation [and that we have] something to say because of exactly the source of Pierre’s success in the tech sector and [his] hard-won lessons.
We do talk to [Silicon Valley philanthropists] about our analysis of structural problems and a special obligation to pay attention to technology. We’re hopeful that people will see our example as a reason to participate as well.
You have talked a lot about how the tech sector, if you will, has informed your thinking. So do you find it important to try to bring technological solutions themselves to the problems you’re trying to solve?
Yes – and by the way, we see equally interesting innovations coming out of Bangalore. Four of our staff is in Bangalore and they’re doing pretty interesting work out of there on digital ID. And so, I wouldn’t say just the Valley, but there’s a couple of [aspects of the] Silicon Valley ethos of ‘test things and be experimental’ that we think are super important.
Everything gets A/B-tested in the Valley. The notion of being experimental and not simply thinking you’ve got one answer in your hypothesized theory of change and testing things, that’s an important piece that we take out of the Valley’s mindset. Customer-centricity, thinking always about end-users of the systems, certainly B to C firms coming out of the Valley, impact our thinking endlessly. A couple of years ago we did an enormous run-through our portfolio of just doing NPS [Net Promoter Score] scores, for how do they all think about their companies and if they’re having [an] impact on their lives.
I do think there are aspects of always asking the end-user, the customer, that person at the end of the chain. Silicon Valley startups are always thinking about their customer; philanthropy should always think about how they can get more proximate.
Are philanthropy and technology always positive?
You’re clearly, thinking a lot about systemic change. But one critique, of course, is that philanthropy itself can be part of the problem because it gives so much power to a relatively concentrated group of elite funders and that, conversely, we’d be better off if the wealthy paid higher taxes. How do you respond to those critics and what do you think the role of philanthropy is within a capitalist system?
We think this debate is essential and we really welcome the conversation.
I think a couple of things. One is, obviously, as I said at the outset, there’s some things that you wouldn’t want to see the government do, for instance, funding independent media in civil society as a check on government itself.
That being said, we are thinking a lot about our power and how we partner with groups and people and networks, where we would be ceding power. When we talk about rebalancing power between companies and the people who work for them or rebalancing power between states and markets, [we’re talking about] important structural changes that need to take place. I think there will always be a role for philanthropy, but many of the things we’re talking about would actually increase the power of government.
And we think there’s an obligation to be transparent about our points of view, and we’ll be publishing more of our points of view so that people who are working with us or want to critique us will know what it is we’re trying to get done in the world.
What is the best way for people in tech at all level, to give back? Is it donating their labor, advocating within their companies for some of the changes you were talking about, working on changing the culture on, for example, minorities and access?
I think all of that would be important and really valuable. We’re quite excited at the moment about the power of the employee to help shift the company’s own attitude towards their own society. We think that they have a unique role to play in the ecosystem, as powerful as any other, to push organizations to take an ethical view of what’s going on and be mindful of their role.
We have a couple of grants that work with that community of tech workers to help them do more of that. And we are, to give you a preview, the survey I mentioned in the UK we are repeating in the US as well, because we think it’s important to get a more systematic view of the attitudes of workers about the technologies that they’re working on.
We remain quite convinced that technology can be a force for good but that technology is inherently dual-use so it requires some guardrails around it to make sure, some institutional checks to make sure it gets channeled in the right direction for the right reasons.