An E-Trade for Disasters

March 11, 2013

In eighth grade I had to pick an independent study project. It was the '80s, the dawn of the Reagan Revolution, and it was cool to emulate Family Ties' Alex P. Keaton (ok, maybe not cool, but cool enough for me), so I picked investing. This was before online brokers, before E-Trade, even before the Internet, so my dad took me down to the local Sears. That's right. Sears. For some reason Sears had decided to offer financial services, so the local office of Dean Witter was squeezed between the lay-away desk and the lawn mowers.

As I sat there, a kindly man in shirtsleeves and a tie explained capital markets. Brokers like him earned their money by knowing who wanted something (the buyer) and who had it (the seller). He served not only as an intermediary, but he understood the goals of each party in order to ensure the trade was successful for both. That, in short, is what any good broker does, be they real estate, stock, or disaster brokers.

Wait. Disaster brokers? Do such things exist? No. But they should. Institutional and cultural barriers undermine the ability of businesses, governments, and NGOs to work together to rebuild after disasters. "Disaster recovery outcome brokers" could overcome these barriers.

A few weeks ago I helped the Business Civic Leadership Center (BCLC) lead a Business Delegation Tour of the communities damaged by Hurricane Sandy. We met with every local government, local chamber, and local business leader we could find in the boroughs of New York and up and down the Jersey Shore. In every meeting, the businesses on the tour would ask, "Whaddya need?" and the local leaders would say, "Whaddya got?" After a back-and-forth it became apparent that neither side really understood the needs of the other. 

This is a classic brokerage situation: unmet needs on one side and resources in search of effective deployment on the other, compounded by a "language barrier" and a "time barrier." The language barrier arises when NGOs don't know how to express their needs in discreet work packages (send me 10 accountants to Union Beach on Wednesday and 100 cases of work gloves to Hoboken on Thursday) and the time barrier comes in when businesses with hard resources (people, money, products, services) have very limited management resources (executives capable of triaging and making decisions about where to deploy them).

It's very similar to the challenge many of us face when picking investments. Assuming we've got the money, we lack the time necessary to learn about the markets and the different investment possibilities. Enter your friendly investment broker. This situation recurs after every disaster, which is why we need effective "disaster recovery outcome brokers."

In his paper, "Can Government Work Like OpenTable," my friend and colleague Frank DiGiammarino uses his insights from running for the Office of the Vice President to lay out a new model for how public-private partnerships could work. In his words, "As a global society, we're at a cross roads. Government resources are increasingly diminished, yet our problems are more complex. If the public sector wants to break its beurasclerosis it needs to understand and embrace new ways of doing things... like Kayak, Hulu, and yes OpenTable [which] all exist to sort through huge amounts of data to deliver an individualized outcome."

Similarly, after a disaster, the needs are hyper-local (varying from town to town, even block to block) and in unstructured datasets like social media or separate databases, but the resources to solve them live inside of institutions, like governments and big businesses, who are used to structured data and detailed processes. What people need in Union Beach, NJ differs vastly from what people need in Hoboken, NJ -- much less what they need in Staten Island, NY. Knowledge about those needs exists, but only at the very local level. And the NGOs and governments that have it use different databases, if any. For businesses to respond to these localized needs they need to get them in work packages that they can easily access, so that they can assign resources to them using only a very small amount of management time.

As an example, immediately following the storm, I briefly sat in the FEMA Operations Center. A call came in for temporary housing. Racking my brain for atypical sources, since all the typical ones were either underwater or already engaged, I came up with real estate management firms. I called one of the largest. They said, "Love to help, but we manage office space. We can't convert that to housing. Sorry." Weeks later, I relayed this story to a local NGO in New Jersey. The poor woman's head nearly exploded in frustration, "Argh! We needed office space for staging areas!" She hadn't thought to ask for office space from businesses, and even if she had, chances are slim that her request would have surfaced to me in DC.

Now, it is true that systems like Aidmatrixexist and act as big spreadsheets in the sky for cataloging needs, especially for product donations. Those systems have their own advantages and disadvantages and smart people are hard at work trying to improve them. But even those plans won't address several core challenges.

First, at a basic level, we need systems for dealing with services, skills-based volunteers, and directed cash donations. To deal with part of this challenge BCLC has partnered with National Volunteer Organizations Active in Disasters (NVOAD) to launch a Disaster Recovery Aid Portal for these specific needs. More fundamentally, however, we also need a bit of rapid human intervention. My Dean Witter broker, back when I was in eighth grade, did more than just match cells on a spreadsheet. He helped broker high-value relationships by understanding both the buyer's and seller's needs. The same thing is needed for disaster recovery and rebuilding. The BCLC/NVOAD portal will do some of that by inserting an actual human being into the posting/matching process to ensure the needs from NGOs and governments are expressed in a way that a company can respond to.

We also need a broader conversation about the role of businesses in disaster rebuilding and recovery. It has become increasingly common practice for companies like UPS and FedEx or Walmart and Target to embed in emergency management operations centers so they can coordinate with the governments and bring their supply chains to bear immediately following a disaster. That kind of partnership needs to extend beyond immediate relief efforts and security issues (so called "first response") to the medium-term issues of rebuilding and long-term recovery ("second response"). Doing that will help breakdown several cultural and institutional barriers that currently impede long-term recovery.

On the cultural side, many people in NGOs and governments inherently distrust business. Part of that is inherent to their position: they have to keep potential vendors at arm’s-length to avoid compromising the procurement process. But it also comes from a knee-jerk suspicion of the motives of the private sector. On the other side, businesses, like the rest of us, have short attention spans. While they're willing to open their wallets in the immediate aftermath, once things leave the front page, their interest and giving often wanes. Which is a shame, because if anyone has the know-how to solve these long-term issues, it's business. We need to simultaneously better educate NGOs and governments on how to work with businesses and raise awareness among companies of the roles they can play in a long-term solution. Governments and NGOs shouldn't be naïve in selecting partners, as there will always be bad actors, but they need to learn how to separate the good from the bad. And businesses need to give smarter, focusing their resources on the problems they can uniquely solve.

Disasters, like many other problems, are beset by silos. Government agencies work in their lanes, NGOs in theirs. Businesses, same story. "Outcome brokers aren't slowed down by silos. Instead, they're focused and designed to solve problems," says Frank DiGiammarino. An outcome broker for disaster recovery would cut across these different sectors and craft hyper-local solutions, drawing on the vast institutional resources from each.

I haven't cracked the code on what an outcome broker would look like for disaster recovery, but drawing on lessons from other models, here are some attributes:

  • Cross-sector governance. The major parties -- businesses, governments, and NGOs -- need equal seats at the table. A study by the Center for Strategic and International Studies (CSIS) pointed out that the US federal government still comes to the table in public-private partnerships (PPPs) with  the mentality of "my wallet, my rulebook," meaning that as the major funder it calls the shots. The CSIS report calls for a "catalytic checkbook, dynamic rulebook" model, where the government pitches in the starter capital and adjusts its rules to the situation. For outcome brokers to emerge, that mentality needs to spread.
  • Access and analysis of large data sets. What makes the Kayak or OpenTable model work is those companies’ability to use localized data and customize it for easy use. I often hear problems of data security and confidentiality as barriers to data sharing in PPPs, but I can think of few more competitive environments than restaurants and travel. If Kayak and OpenTable can figure out how to get competitors to safely share information, so should we.
  • Integrated operations. Beyond overall governance and access to data, we also need integrated day-to-day operations. I recently interviewed a broad set of business leads responsible for their companies' management of PPPs. Almost every one of them mentioned the importance of integrated day-to-day operations as the key to their success or lack thereof. Without trust and good working relationships at the ground level, things fall apart, even with intense backing from executive leadership.

I hope these principles can start a new conversation. Recovery and rebuilding will always be hard. But it doesn't have to be as hard as it is today. By shedding light on these principles I hope outcome brokers will emerge who, like my old Dean Witter stock broker, will understand the needs of all sides and break through the cultural barriers, institutions, and data to find tailored solutions to hyper-local needs.