Paradigm Shift

I’m reading a great book by Daniel Kahneman called “Thinking, Fast and Slow”. In it, he writes about how people’s behavior can be “primed” by different signals. He cites an experiment where researchers at New York University asked students to assemble four-word sentences from a set of five words (e.g. “finds he it yellow instantly”). For one group of students, half the scrambled sentences contained words associated with the elderly, such as Florida, forgetful, gray or wrinkle. When they had completed the task, the young participants were sent out to do another experiment in an office down the hall. That short walk was what the experiment was about. The researchers unobtrusively measured the time it took people to get from one end of the corridor to the other. The young people who had fashioned a sentence from words with an elderly theme walked down the hallway significantly more slowly than the others.

Kahneman goes on to cite another experiment that explored how financial themes affected behavior. The fascinating discovery was that “money-primed” people become more selfish and independent than those without the associative trigger. The money-primed students were much less willing to help someone else, showing a “reluctance to be involved with others, to depend on others, or to accept demands from others”. This is the current paradigm.

On the Kiva Zip team, we’re having fun inverting paradigms.

Conventional lenders have minimum financial requirements in their underwriting criteria – “Minimum 660 FICO score”, “Collateral at least 35% of the loan”, “Debt to Income ratio greater than 35%” (and hence income of at least 35% of debt payments). We have maximums. If your income is too high, or you’re a millionaire, we don’t want to lend to you, because you have adequate opportunities to access capital elsewhere.

Conventional lenders charge higher interest rates to higher-risk borrowers. We do the opposite. We make loans to small business owners who are considered too risky by everyone else, and we charge these small business owners no fees and zero interest.

But the biggest paradigm shift we want to engineer is this: Rather than money priming selfishness and individualism; we want financial transactions on Kiva Zip to engender emotions of generosity, empathy, inter-connectedness and joy.

While conventional lenders, lending large amounts of money, are motivated by minimizing risk and maximizing financial return; Kiva Zip lenders, lending in tiny increments of $5 each, are motivated by creating positive social impact – enabling a young entrepreneur to open the nail salon she has always dreamed of, or expressing support for a veteran business owner whose credit was damaged by his years of service abroad.

While conventional investors are walking away from communities like Ferguson, inner-city Detroit and the Mississippi Delta, exacerbating their economic decline; Kiva Zip’s “investors” are running towards these places – driven by their unswerving commitment to economic justice, and their desire that every entrepreneur with the talent, drive, and dream should have access to the opportunity to chase it.

While conventional loans come from an impersonal financial institution, and are just about the money; Kiva Zip loans come from a warm community of hundreds of supporters, who can provide social capital to borrowers, as well as financial capital – by dispensing business advice, becoming brands ambassadors or customers of the small businesses they are lending to, or simply sending messages of support and encouragement.

While the current paradigm is a financial system based on statistically-tested algorithms, black-and-white criteria and numerical transactions; our vision is of one in which human relationships and personal connections are restored.

Whenever I think of the hopefulness and gratitude of the hundreds of borrowers that my $25 Kiva Zip loans have supported, I don’t feel selfish or independent…I feel like I am part of a community. I am “money-primed”, but the effects on my behavior and attitudes have been flipped. That’s the most exciting paradigm shift of all.

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Posted by Jonny Price, Kiva Zip Senior Director

Jun 12, 2015

Jonny first came to Kiva in 2009 as a volunteer on a 5-month externship from his management consulting firm Oliver Wyman. After 6 years at Oliver Wyman, first in London and then in San Francisco, he joined Kiva full-time in September 2011, to lead the Kiva Zip program. Jonny is married to Ali, who he met at Kiva, and occasionally you may glimpse them cycling their tandem through the streets of San Francisco. He graduated with a BA in History from the University of Cambridge, where he represented his college at 14 sports (although 3 of these were table football, pool and chess).

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