Jeremi and Zachary have a chat on the web with Dr. Miha Vindis and Lance McNeill about crowdsourcing. What are the positives and negatives of the power to raise funds through social media at lightning speed?
Zachary sets the scene with his poem, “The Pockets of the People.”
Miha Vindis is a professor at the University of Texas at Austin where he teaches graduate and undergraduate courses on leadership and entrepreneurship. When not teaching, Miha works as a consultant helping organizations create and implement strategic planning processes and train their next generation of leaders. He also serves as a board member for Habitat for Humanity Texas. Prior to moving to Texas, Miha worked for Shell Oil in The Netherlands and also worked with entrepreneurs in Europe, a passion which he has continued in Texas. He is originally from Slovenia and has lived in Thailand, Germany, Poland, and The Netherlands. Miha earned his master’s degree in Global Policy Studies and a Ph.D. in Public Policy from the LBJ School of Public Affairs at the University of Texas at Austin.
Lance McNeill is a Program Manager with the City of Austin’s Small Business Program. In this role, he coaches and teaches small business owners and aspiring entrepreneurs. He also oversees the City of Austin’s Challenge Studio Program, which incubates social entrepreneurs working toward solutions to local and regional challenges. Lance was born and raised in Austin, Texas. After graduating from Texas State with a MBA, he joined the Peace Corps and worked as a small business adviser in Namibia where he taught entrepreneurship at a rural secondary school and consulted small businesses in the community. After coming back to the U.S, he attended the LBJ School of Public Affairs.
- Lance McNeillProgram Manager at the City of Austin's Small Business Program
- Jeremi SuriProfessor of History at the University of Texas at Austin
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Jeremi Suri: Welcome to our new episode of This is Democracy. In this episode, we are going to discuss a topic that’s vitally important for our world today, crowdsourcing. It’s a concept we didn’t have years ago and it’s fundamentally the concept that we’ll talk about with regard to how a larger public can be involved in financing and supporting major efforts in our society during times of prosperity and times of crisis. We’re fortunate to have two of the foremost thinkers and actors in this space, in Austin and in the country, Lance McNeill and Miha Vindis.
Lance McNeill is a program manager with the City of Austin’s Small Business Program. In this role, he coaches and teaches small business owners and aspiring entrepreneurs. He also oversees the City of Austin, Austin’s Challenge Studio Program which sounds great. It incubates social entrepreneurs working towards solutions to local and regional challenges. So Lance is really in the center of work being done that’s related to crowdsourcing and small business entrepreneurship.
We also have Miha Vindis, Dr. Miha Vindis. Whereas Miha has already been on our podcast before, he is among other things, a scholar and practitioner of so many important areas in our society. He’s a professor at the University of Texas teaching graduate and undergraduate courses on leadership and entrepreneurship. He also is a consultant working with organizations to create and implement strategic planning processes. He’s an expert on scenario planning, and wrote a fantastic dissertation actually, that I had the great pleasure to advise at the University of Texas. Miha, Lance, welcome to the podcast.
Lance: Thank you.
Miha: Thank you.
Jeremi: Before we turn to our discussion with Miha and Lance, we have of course, Zachary Suri’s scene-setting poem. Zachary, what’s the title of your poem today?
Zachary: The Pockets of the People.
Jeremi: Well, let’s hear about the pockets of the people.
Zachary: Masses, we are the people. The collective spirit of millennia, of group-think, ages of individualism, sacred memories of the holy. We are the conjoined us, and we are the seven billion strong. Each of us a contradictory singularity, getting the paper in our socks covered with fallen pollen. Masses, the millions with little red books, the endless boots goose stepping into collective hallucinations, dying in our farms, marching to death for the people. The centrifugal power that doesn’t know it’s own might. Masses, we are the millions, each of us on our own journey across the ocean to the virgin, pull yourself up by your bootstrap soil of Massachusetts Bay or at San Diego’s Great Harbour, motivated by the unitary thought of American individualism. Masses, we are the billions releasing carbon into the atmosphere, squeezing oil from rocks, looking down from heavenward jets. Masses, we are the people with one dollar in our back pocket to save the planet, a dollar in our front pocket to change the world, a dollar in our breast pocket to fund the next Steinbeck, a dollar in our hearts for the thousands it takes to make a kid cancer-free.
Jeremi: You cover a lot there, Zachary. What is your poem really about?
Zachary: My poem’s really about this contradiction that, this idea of the masses, of a collective group of people who have the power to do a tremendous amount of damage, to kill millions, to destroy our planet, but at the same time, we have the power to create immense beauty and to help so many people even to save our planet.
Jeremi: That’s a wonderful vision. Miha, this is something you’ve thought a lot about. I want to turn the discussion over to you so you and Lance can talk about this. But maybe why don’t you get us started Miha with how we should think about and frame this question of crowdsourcing.
Miha: Yeah, absolutely. Great poem, Zachary. I think you hit the nail on the head there, that crowdsourcing like any other tool, can be used for good or can be used for bad. It is just a tool. But nevertheless, it is something that’s becoming more and more popular, more and more predominant in society today. It’s seen some absolutely amazing applications. But before we get into some of those, I wanted to start off the discussion by breaking down what is crowdsourcing and what is crowdfunding. We often think of crowdfunding and people, I think most of your listeners might probably think of things like Kickstarter, Indiegogo, Patreon, GoFundMe. These are tools which for the most part are used to generate funds. But there’s a lot more to crowds than just funding. So I want to pose this question to Lance. So Lance in your views, what is crowdsourcing and why do you think crowdsourcing is important today? How is crowdsourcing related to the kind of crowdfunding that I think most of us think about today?
Lance: Yeah, certainly. When I hear the term crowdsourcing, I think it’s helpful to think about that as the larger, broader umbrella and crowdfunding as one component of crowdsourcing that fits underneath that. So crowdsourcing can include anything from open innovation from a company or any organization, turning to its potential customers and stakeholders and asking for their input, their ideas. This has been done to help come up with ideas for new products, to improve products. We’ve also seen crowdfunding really take off from about 2008 on as a way to fund projects. The projects can be anything from arts related, cultural related to now we’re seeing the evolution of that turning and help small businesses start and help businesses grow in scale. We’re going to see really the importance of this tool.
Again, as I mentioned, it really kicked off in 2008 with two platforms starting up, Kickstarter and Indiegogo. That was really in response to the recession that we were experiencing then. It was in response to the money that had dried up for cultural projects, arts related projects specifically, and so Kickstarter and Indiegogo have since become one of the main sources of fundings for those types of projects. Even today, Kickstarter has more funding for arts and cultural projects than the National Endowment for the Arts. So it’s really grown. That was something that started during a pinch and so we might see again with any kind of economic recession, how crowdfunding can step in and be a useful tool to help us move forward.
Miha: That and I think you make a very good point that we are seeing some similarities today to 2008 of this in terms of the economy and perhaps it’s no surprise that crowdfunding projects have doubled both in number and the amount of money raised in the last two years. In fact, the projections for this year are that, combined, all these platforms will raise over $8 billion through crowds, which is absolutely astounding and it does create an interesting source of funds, of money, of ideas, of resources for organizations that might otherwise struggle. Then this brings me neatly to the next question. So this power of the crowds, this idea that we are leveraging the masses to solve some of our complex problems, to solve some of our resource challenges, Lance, do you feel that there is something inherently democratic about this? The idea that we’re relying on crowds, is it making this process more equitable, more accessible?
Lance: Yeah. There’s been some evidence for that already and you mentioned venture capital, which each year in the US invest more than a $100 billion in growing and scaling startups. Although crowdfunding is a much smaller number, 8 billion, 10 billion, the amount of people contributing to that 10 billion is what is really interesting. Since 2016, the very end of 2016, we saw some changes in legislation that allowed for non-accredited investors to support projects in exchange for equity or to become a peer to peer lender or peer to business lender to help support businesses and get exchange in return a financial payback, whether that’s a revenue share, term loan, or a piece of the business. Since 2016, there have been nearly half a million people who have participated in this type of crowdfunding and so it’s bringing in a lot of people who weren’t otherwise able to get involved as an investor in projects. Even though they may be contributing small amounts of money, as we can see that those small amounts can pull together to really make a big difference. It is getting people more involved and that’s inherently democratic.
Since Jeremi loves history, I have a story that really underlines it and it goes back to the 1880s. Most people know that Lady Liberty, the Statue of Liberty, was a gift from France. What they don’t know is that was actually the very first example of crowdfunding and to raise the $250,000 that it costs to create the Statue of Liberty wasn’t paid for by the French government, was actually paid for by the French people. The committee overseeing the sculpture, they put a campaign out there and they asked for contributions. In exchange for those contributions, they gave small statuettes. So for a dollar you could get a six inch statuette. For five dollars, you could get a twelve inch statuette replica of the Statue of Liberty with your name engraved by the artist and they were able to raise the $250,000 to fund the sculpture. It was really a democratic process back then and we’re seeing that really scale now with people’s access to social media.
Jeremi: It’s such a great point, Lance. Many of our public monuments in the US, including parts of the mounting for the Statue of Liberty, as you said so well, it came from public subscriptions and public crowdfunding in the way you described the Statue of Liberty in France as well. I also think of the March of dimes and the ways in which philanthropy in the mid-twentieth century, especially during the depression relied on public money. I guess my follow up question on this though is, what are some of the barriers? Are there ways in which this process of opening up funding to a larger number of actors and stakeholders? That it sometimes leave certain groups out and maybe gives them less influence than they would have in a more traditional regulated government centralized structure like what many of our European counterparts have.
Lance: Sure. I think about the funding aspect and right now we’re looking at so many of our institutions to provide funding and disaster funding. It’s great that we have that. You still have to go to these institutions and go through their process. You have to fill out their required forms. There may be through traditional lending. There’s certainly always credit checks and so there will still be credit checks here. As we know, there are many populations who have had difficulty building credit and accessing capital because of credit history. Crowdfunding doesn’t look at your credit history. It is a little riskier in terms of an investor. It can be riskier, but there’s not an institutional barrier. It is still up to the crowd. They know that in advance that this person may not have good credit but they can still invest, they could still lend to this business. In many ways, it breaks down a lot of those barriers.
Zachary: How is crowdfunding being used in many ways to take advantage of this mass funding system to either further messages that are dangerous or hate-filled or in many ways, we often hear about scams on crowdfunding. People funding causes that aren’t real. How do we prevent that and what does that look like in our modern world?
Lance: There’s probably a lot fewer of those instances that have garnered a lot of media attention so there haven’t been a lot of outright scams. You can probably find them but there’s this idea of the wisdom of the crowds. If you have enough people looking at something and they’re able to ask questions in an open and transparent way, they can flag anything that looks suspicious that doesn’t add up. We have had many businesses funded, many projects funded that didn’t make it and you can turn back and say, “Well, was it a scam? Was this the intention from the beginning?” Oftentimes you can see that it was just a failed project, maybe mismanaged. Maybe there was a problem in the supply chain that was unexpected. There’s a lot of things that can still go wrong. There’s not guaranteed success, but there hasn’t been a ton of bad actors that have gotten away with scamming people. Now we have these intermediaries who serve as brokers and portals for crowdfunding. Their job is to do a little bit of vetting. They make sure that before a business posts a project to solicit investment, that they’re able to run background checks. They’re able to make sure this business is headquartered in the US, and it has to go and get filed through with the SEC. They’re able to run some of those checks to try and eliminate any bad actors there. It’s certainly still possible, but the good outweighs the bad considerably.
Miha: Yeah, just to add to that, I think it’s absolutely true that most- I think that most people who start campaigns have good intentions in mind. While there probably are some bad actors out there, for the most part, failures tend to be because of poor strategy, poor planning and poor execution as Lance suggested. To put it in perspective on Kickstarter the success rate is about a third. We shouldn’t be surprised that just like with new businesses, most crowdfunding campaigns are not going to succeed. Often there just isn’t the interests. People come up with great ideas, they put them on various platforms and hoping that people will support their ideas but the idea is not enough. You need more than just that idea. You need some strategy. You need to convince people to buy into it and often campaigns simply fail. Zachary you had mentioned in your poem the idea of group-think. That also is a risk with any crowds, reliance on crowds, that there is a risk that people simply buy into it and essentially go along with it because it sounds great. The more people that believe in something and think it sounds great, the greater the likelihood that others will join and so group-think is a potential risk.
Jeremi: There is a wisdom in crowds and there is also sometimes an idiocy in crowds. Yes?
Lance: Yeah, absolutely.
Miha: Yeah, absolutely. The example Lance you gave, the Statue of Liberty is really fantastic and it does lead us to the next point that I hope we could discuss, which is this idea of using crowds and crowdsourcing in the policy-making sphere. There have been many attempts to use crowds in public policy or in general to solve complex real-world problems. I’ll give you one example. The tool Foldit, which was created a few years ago, is essentially a game that relies on crowds to fold and unfold proteins. The actual structure of a protein matters because it dictates what it does. If we can better understand these proteins, we are better able to tackle diseases, everything from HIV/AIDS, cancer, Alzheimer’s. Crowds have been used to fold and unfold proteins to better understand how they function and that has given medicine a head start on some of these diseases. What about using crowds in the policy sphere outside of medicine and science? Can we use crowdsourcing to do things like increase civic engagement, increase participation, and generally find a way to create a policy process that is more inclusive, more equitable, and creates the opportunity for access?
Lance: Yeah, and that’s probably something I’m even more excited about than just simply the crowdfunding, but it’s the ability to co-create with different populations to solve public challenges. This is something that I’ve tried to bring in and establish with the City of Austin through some of the projects that I’ve done. For example, right now, we have a challenge competition that’s helping Austin reach its zero waste goals. So by 2040, we want to eliminate 90 percent of recyclables that go into the waste stream and repurpose them somehow. So each year we hold a competition where we offer prize money, we offer mentorship, subject matter experts, to help aspiring entrepreneurs and the community take some of these materials that are ending up in the waste stream and repurpose them into new products and to help start new businesses that are now part of the circular economy.
We’re in our fifth iteration of this and so we hold it each year and it’s been really rewarding to see the number of people and the diversity of people. We’ve had high school students participate in this call to action, we’ve had retirees participate who have never tried a business endeavor before. So this is the first attempt at entrepreneurship and it’s exciting to see that entire spectrum get involved and say, you know what, I would like to help solve this problem in a way that’s not me asking the government to do something but it’s me saying I can work with government and I can work on the platform that government offers to help create solutions and maybe start a business at the same time. So that’s what I’m really excited about is there are so many use cases. You mentioned Foldit, that’s just one, there’s challenge prizes that go back pretty far in history and have done some amazing things. Now we’re able to really start to do those at the state and local level and really engage our local constituency.
Jeremi: That’s super awesome. I love that, that’s super awesome.
Miha: So Lance, if you recall between 2010 and 2012, we were working on a civic sourcing idea and this was the idea to create a platform where these initiatives could occur, where people could tap into the expertise of crowds to find others with like-minded concerns or interests and use that platform to tackle challenges. Can you talk a little bit about the concept of civic sourcing because you are the one who introduced me to the project, I think back in 2010.
Lance: Yeah, that was a fun project to work on together and it was really this idea of there were so many technologies and channels to engage people that were emerging. It was an attempt to try and bring these together. So if I’m asking people for solutions to a zero waste challenge in one channel and then they’re asking, well, I have an idea but how does it get funded? Then we look to crowdfunding as a different tool to use that. The idea was really trying to bring these together to make it happen in one seamless funnel and I really haven’t seen that yet but I see that these different channels and different tools are really working together more seamlessly. A great technology and company that’s doing this for so many years is called HeroX and it was a spin-off of the X Prize, which was a huge challenge prize done to help get commercial spaceflight. Now it’s an open platform where you can go and host challenges and we’ve been using that platform for our reverse pitch competition for the Zero Waste challenge.
So there are these tools out there, you have to know where they are and how to use them. So there’s still some expertise that’s necessary for running a successful challenge competition or a crowdfunding campaign. But the tools have improved since we started working on that and they’ve become more user friendly and accessible and that’s what’s really exciting.
Miha: I know most of your work obviously has been that the City of Austin, but in that role, have you worked with other cities, perhaps in Texas or the country or abroad that had been doing similar things? Is there an example out there you can point to and say, this is an example that perhaps we could, if not emulate, learn from?
Lance: Certainly. I think Austin is progressive and that I see as try more things than a lot of other local municipalities. I’ve really tried to emulate what is happening at the federal level and try to bring it down to the local level. So if you look at challenge.gov, which started the very beginning of the Obama administration in 2008, is a platform that is hosted by our federal government that allows these different agencies to run challenge competitions and engage the crowd. NASA is one of the more active ones on there and engaging its crowd of followers and advocates and helping solve problems. But not just them, so many other agencies are using it really well and really effectively to engage the crowd to come up with new ideas. That’s where really what we have emulated, I think we’re just now seeing that this is available to local and regional governments as well and they can also use it. There are some state-level examples but there’s just not very many. I’m hoping that some of the work that I’m doing and some of the success that the city has had and some of its competitions and challenge prizes will be an example that others will look to.
Jeremi: Lance, your description just there reminded me of such an important historical lesson in our democracy, which is that many of the changes, if we think about the progressive reforms of the early 20th century, if we think about the New Deal, if we think about the Civil Rights Movement, many of the biggest changes in our society came from new cooperation mechanisms, new initiatives pursued by local and state and national actors simultaneously often working across lines, members of churches, members of cities, members of the federal government working together to get things accomplished. What facilitates that today? Because that’s not the story we hear when we think of government or when we watch the news, at least the national news, about our government. What’s facilitating, what sounds like a renaissance of that activism in your space that you operate in?
Lance: I think it’s the willingness to try something new and with our reverse pitch competition, for example, this is a cooperative effort by multiple departments in the city of Austin. The Economic Development Department, the Austin Resource Recovery Department, the Innovation Office, the Sustainability Office. We actively work together to co-plan the event and execute the event and then we also fund the event from all of our different budgets. There’s probably not a ton of projects that you can look to and say, I have four different departments in a city government had enough alignment and clarity of focus and saw the value in this that they were able to contribute from their own budgets to making it happen.
So I think that’s really exciting and it starts I think with some of those department directors and some of that middle management and these huge bureaucracies and organizations that are saying, “Yeah, I’m willing to give that a try. I’m going to admit that I don’t know all the answers and I don’t have all the solutions and I see the value in the public being a participant in co-creating a solution. I’m willing to engage them.” So I’ve had several department directors with that attitude and I really latch onto that coalition of the willing. Because I think if we can have success working with them, then some of these other departments will say, “Well, that really worked for them. I’d like to give it a try too and so that’s been really exciting.
Miha: Lance, I think you gave a really good example of how different actors played together to make this happen. I wanted to ask that follow-up to that and that is, do you think that tools like crowdsourcing, this idea of using crowds, is it changing the way that we think of enterprise? Is the changing perhaps the way that younger generations are thinking about enterprise, not just in terms of private but also public enterprise?
Lance: I hope so. I love the, “Ask Not”, speech by Kennedy, because it was just such a call to action. It was very clear what the goal was and it was pretty inclusive. This is what we’re going to do as a nation and it’s not just us, it’s everybody. Maybe somewhere since then we lost that a little bit but I feel like it’s really starting to come back where the people feel that they can be part of the solution. It doesn’t always have to be this agency that comes up with the solution or this form of government. I hope that it continues. We just need to know that we can be part of the solution and there are ways to engage.
Jeremi: Lance, that’s a perfect place for us to turn to our last question. It’s really the question we always ask at the end of these wonderful podcast interviews. What is it that you think our many young listeners, and our not so young listeners, what they should take away? What are the ways in which all the energy, and all the creativity and all the co-creating that you’re describing can be furthered by our listeners? How can they contribute? What should they do to make what you’re describing more prominent and some of the counter pressures that are all too common in the news cycle, make those less prominent in our society?
Lance: Great, great question. Here’s the call to action. Go to challenge.gov, go to herox.com, go to Kickstarter, go to Indiegogo. Find a project that you can support that has a cause that you believe in and that you want to be a part of and contribute $5, $10, $15, $25 to that crowdfunding campaign. Look for a project on challenge.gov or heroX, where you have a skill set, a piece of knowledge that you can contribute and help somebody solve a challenge. Sign-up for those competitions and get involved. You’ll meet new people, you’ll extend your network, you’ll increase your experience and it will be very rewarding when you see how your contributions can make a difference.
Jeremi: I love the pragmatism and the idealism of that both together, meet Miha, is this what motivates you and so much of your work in the space?
Miha: Yeah, absolutely. I think for me the motivation comes from this idea that we need to find ways of getting people, particularly young people, more civically engaged, more involved in our democracy. If we believe in the political system we have, and we believe that this is a good and effective and an equitable way to organize society, we need to find ways and tools that speak to young people. Tools that allow them to participate in ways that they feel comfortable participating. Since we’ve seen an explosion of these tools, we’ve seen a lot of young people tap into these tools, everything from Kickstarter to GoFundMe. To me, this is a natural extension than saying, well, can we use these tools to get young people involved. This is why I was so excited when almost it was ten years ago, Lance asked me to become involved in the civic sourcing project because I see this, the whole concept of crowdsourcing as a powerful tool that if we use wisely can help increase participation.
Jeremi: I love it. I love the image of that. You’ve embodied that Miha, certainly, in the almost ten years that I’ve had the opportunity to know you and work with you. Zachary, for young people like yourself stuck at home now, taking your classes online, is this inspiring? Does this address the concerns that you have about the future of our democracy?
Zachary: I think it does. I think young people are naturally egalitarian. What this does is it offers us a platform, it offers us a way into the system and that’s really powerful.
Jeremi: I agree. I agree. Well said, Zachary. When Lance referred to John F. Kennedy’s, President Kennedy’s famous inaugural address on reaching and as a new generation, taking the reins of leadership, I think it’s something that inspires all of us. Another speech that inspires this podcast, of course, is Franklin Roosevelt’s address that we used actually in Episode 1, 86 episodes ago, where he talks about the next-generation writing, the new chapters of democracy. It sounds to me, Lance, Miha, Zachary that crowdsourcing is a wonderful grassroots approach to writing the next chapters of our society. Chapters we can’t fully anticipate, but chapters that as Lance said so well are the wisdom of the crowd, can help us to navigate as we go forward regarding health, economics, technology, so many of the issues we care about. Lance and Miha, thank you for all of the great work you do in this area and for providing us the opportunity to learn about this exciting space, the idealism and the pragmatism of it. What you’ve done and what you’ve described, I think will inspire many of our listeners. Thank you for joining us.
Lance: Thank you so much.
Zachary: Thank you..
Jeremi: Zachary, thank you for being our bridge as always to younger thinkers. The people who will in the end be going to Lance’s office and helping him to do what he does. I hope all of our listeners will be inspired and see that even in a time of crisis and suffering in our society, there were so many possibilities for all of us to make a difference, and that there is a wisdom in what all of us can do as individuals, as part of a larger collective American and International community. Thank you for joining us for this episode of This is Democracy.
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