Part of the objective of this conference was to introduce you to some new people and to develop your network. We have been very successful so far. I would like to start the day by introducing Mark Pinsky, who will guide us through our breakfast.

Mark Pinsky is president and chief executive officer of the Opportunity Finance Network (formerly National Community Capital Association). Pinsky is leading the organization toward its goal of creating a high-impact, high-volume financing system benefiting millions of low-income and low-wealth people. Since 1995 when he joined Opportunity Finance Network, the organization has introduced the Equity Equivalent investment, the CDFI Assessment and Ratings System (CARS) and performance-based financing. Pinsky speaks often and to diverse audiences about the opportunity finance field. He has published five books and many articles. In 2002, he was appointed to the CDFI Fund Advisory Board in the U.S. Department of the Treasury. He serves on several national boards, including the CDFI Data Project (which he chairs) and the CDFI Coalition, as well as advisory boards to the Center for Community Development Investments at the Federal Reserve Bank of San Francisco and several New Market Tax Credit community development entities.  website

Take a few minutes to jot down the things that jumped out the most to you from yesterday. What did you learn? Did anything perplex you? What was the most useful thing you heard?

• I was surprised to learn that Edison, Gates and Jobs were not geniuses—they were great innovators and risk takers.
• Your value is in how you connect ideas.
• Capital is more than just financial capital, it is intellectual and human.
• Networking is more than exchanging business cards. The more you invest in the network, the greater the value.
• Innovation is really figuring out how to connect things in new ways.
• Mobilizing your network, putting it in motion, acting on the ideas and implementing them are most important.
• The Innovation Cafe worked so well. If I hadn't been moved around to meet everyone, I never would have met the people I met and learned what I learned.
• It's easy to say you need a network and mobilize it, but how do you actually do that?
• Visual learning and capture was very innovative, as was the Innovation Cafe.
• The idea of connecting different worlds really jumped out. It's about more than linking business interests. Sometimes it's linking things that don't even look as if they would make sense together.
• We need to stop segregating our intelligence by sector and division, we need to look at this from a broader perspective.
• We need to bypass institutional silos. The systems are in place to keep things segregated. We need to take it upon ourselves to remove these barriers.
• It was surprising that we all developed trust so quickly, engaging people into deep conversation really helped to connect us all, the process really connected people.
• The relationships we spent so much time building yesterday will be expanded upon today.

It's important in my mind to put this into a historical context. This is a nation built on community development. It comes out of the civil rights movement 1964-1966. The first effort was to create some opportunity for African Americans in the deep South. The only way the federal government knew how to do this was to give money to people in the communities. In the late 1960s and early 1970s, an enormous amount of money was invested into programs that would give some local community control over capital. The idea was to allow people to grow instead of survive.

There have been a series of innovations since then which have changed the way we do business. We thought we were growing, we were on a mission, we were changing things. But, we created an industry that was very siloed; financial institutions were segregated. What could we separate? What could change? CDFIs had an ability to fit capital to customers that was unique. We determined we needed to focus on that core. But it became the question of how we aggregate. It is grow, change or die. The problems grow faster than we can in some ways. We need to be innovative because if we don't, our mission is not going to succeed.

If you look at the program for this conference, there are so many things that stand out as unconventional. If you had looked at the program several years ago, you would have been surprised at the connections that we are making now. CDEs (community development entities) were different from a CDC (non-private non-profit) where the restrictions were not as rigid. The things that we are here to do are incredibly innovative. Innovation happens over weeks, months, decades. There are innovations within a cycle of innovation.

There is often a disconnect between resources and projects. There are two issues here. One is that the resources are inadequate and there are not enough of them to go around. There is sometimes a dam being built upstream that diverts resources elsewhere. Not all community projects are equal, and sometimes there is a connection problem or resources we aren't leveraging.

A small proportion of the country controls almost all the distribution of wealth. The idea of economic mobility has changed. It has become more than a dream to get to the middle class. It has become the dream of getting "rich." There is a real issue that we have an economy that could collapse if it isn't managed properly. What Bill Gates is doing with his wealth is phenomenal. We could all learn from him. The notion of inclusive prosperity is important for the well being of our nation. We need to figure out how to harness this.

Linking technology (Linux and Apache) and innovation, these networks are developed collaboratively with enough engineers in an open source starfish network. There could be an open network developed out of this conference to share ideas outside of the system and come up with some true innovation. How do we share knowledge with no friction? There is a wealth of knowledge here and with a willingness of information-sharing, we can accomplish quite a bit.

Every community has wealth. Much of it leaves our rural communities when people die or retire. If we could capture 5 percent of this wealth and keep it in the community, we could invest it into making things better in those communities.

Andrew's speech yesterday told us some important things: Innovation is connecting not inventing, the scope of your imagination depends on your investment, mobilizing your network is the most important thing and the future is already here if we look at it peripherally.

• The future is already here, what kind of futures are here?
• There are a lot of resources out there but they are unevenly distributed.
• We are in a knowledge-based economy. There are many youth dropping out of school or not continuing to college. How are we going to be able to compete in a knowledge-based economy with this type of problem?
• Sometimes we stick our heads in the sand and refuse to see the future: China, oil, these things are here right now but we are choosing not to see it.
• We don't have a shortage of ideas, we just pick and choose the ones we accept.
• Community development is now a business enterprise. It is no longer just make money but spending money in a grassroots kind of way.
• We can look at things from the perspective of youth, energy and motivation. This is key to keeping our momentum.
• Cell phones and blackberries used to be giant. Things become miniaturized. This is an indication of the future.
• We see civic assets where others see social liabilities.
• There is a crisis in the nonprofit movement between executives and their boards. Major changes are going on and there is no guidance for sustainability. This area needs critical attention and in-fighting needs to stop.

I want to end with a story about a Turkish teacher in a mosque. He went to teach one day and asked the students, "What do you think I am going to teach you today?" No one could answer, so he said, "If no one knows, what's the point?" and he left without teaching anything. The next week he came back and asked the same question, and everyone raised their hand. He left again and said, "What's the point if you already know?" The third week, he asked again. Half the class raised their hands and half did not. He said, "Those that know, teach those that don't." And he left for a final time.

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Sandra Braunstein is director of the Division of Consumer and Community Affairs of the Board of Governors of the Federal Reserve System. Braunstein oversees the development and administration of Federal Reserve policies related to consumer financial services and consumer protection. She also administers outreach efforts to the financial services industry, government officials and consumer and community organizations. Some of these responsibilities are carried out through the System’s Community Affairs offices, which conduct community development activities and promote increased access to capital and credit in underserved markets. Prior to joining the Federal Reserve, Braunstein was executive director of the Northeast Community Development Corp. in Washington, D.C.; coordinator for commercial revitalization in Alexandria, Va.; and a management consultant for McManis Associates. She also worked as a federal program administrator for the city of Wilmington, Del.  website

John Talmage is president and chief executive officer of Social Compact, a coalition of business leaders promoting successful business investment in lower-income communities for the benefit of residents. Previously, Talmage was deputy director for economic development for the City of New Orleans. In New Orleans, he focused on business development issues, including workforce development, international trade and business recruitment and retention. Before joining the mayor’s office in New Orleans, Talmage worked in New York City, primarily for the New York City Council. While there, he worked with communities throughout North Brooklyn to address economic development, housing and land-use matters.  website

Robert Weissbourd is president of RW Ventures, an economic development firm specializing in technical economic analysis of urban markets and in helping urban economies grow. Current projects include research, strategic and business planning, product development, public policy and start-up services for institutions, including large national foundations, local governments, insurance and technology companies and community organizations. Weissbourd previously served for 10 years in executive positions at Shorebank Corp. He has been a frequent public speaker on a broad range of urban markets issues and has testified on these issues before federal, state and local legislatures. Weissbourd also has been active for more than 25 years in community and civic organizations. Before joining Shorebank, he was a partner at Hartunian, Futterman & Howard.  website

Sandra Braunstein:

There are two sayings that relate to us here today. The first one is: "Necessity is the mother of invention." Community development was born because of need from under-represented communities. These communities began to organize themselves and began to become politically active. Nonprofit lending community development groups were formed to meet the needs of their constituents and became innovative in their approaches to lending. Banks began to notice the benefits to linking with these groups.

The industry has grown over the last 30 years, serving lower-income and struggling communities to become home owners, start businesses, leverage resources and impact communities. Despite the growth in the number of community development groups, many aspects of the field can be captured by our second saying: "The more things change, the more they stay the same." In today's financial services world, there is in certain aspects an indication that the groups have done their job too well. Is there access to too much credit? It seems that some financial service providers seem to know how to attract their customers and advertise their products. Have community development groups become too much like banks?

Opportunities for innovation can be reached by attempting to improve upon the sustainability of initiatives. When it comes to funding, the majority comes from the federal government. Public policy and foundation funding is consistent with the mission. Are there ways to get better at this while remaining true to the mission? Processes, from financial counseling to loan servicing, could be improved. Competition has increased for CDFIs. How can they remain sustainable? Succession is another issue. The leaders are aging. Is there a plan for succession to prevent a brain drain when the boomers retire? We are being called into new roles. When it comes to innovation, can we re-define their customer base and re-evaluate our services?

We need a context in order to determine an opportunity for innovation. It seems that we are often very market based. We may not always have the resources we need, but we are well positioned to innovate at this point in time. The barriers to communication are that we do not have a marketplace. In new marketplaces, you get the opportunity to test and verify and pilot. Since we do not have this opportunity, it can be seen as a barrier. R&D is limited in nonprofit and not-for-profit arenas. We are not getting the same data acquisition on the public and private scale. To obtain public data, you need to often go through a proprietary company to obtain it and pay for it. We need to develop funding sources for R&D or become innovative in order to obtain this type of data. 

Data is also often inaccurate in some of the areas we need it for. It is difficult to obtain accurate data from which we make decisions: credit scoring, better and alternative data, market opportunities and so on. There are structural barriers in place when it comes to census data. We can now get to 20 cities per year instead of 2-3 cities per year. We focus on micro-markets like Louisville. The markets are starting to move. 

In the politics of community development, we just completed a project where we interviewed politicians from all levels of government to understand the role of government. There is an opportunity for some political breakthroughs, we need to enable markets to operate better and make some policy changes. On the macro level, it is lifelong learning and it starts with education. We could offer tax credits for investing in human capital and lifelong learning. Early stage R&D could be an investment that can impact things enormously. The city infrastructure also could be looked at when it comes to data especially. There are issues with development and capacity: there is a lot of data but very little information.

How can we avoid being insular? Who should we talk to more often? The people that are developing the models. The community needs to be involved in the system of credit scores. There needs to be some mitigation to predatory activity and there also needs to be education. The private sector connects the dots through consortiums and product development groups. We could create that type of institution and share our knowledge with one another.

Discussion with John Talmage and Robert Weissbourd:

• Some communities are looking into natural disaster relief issues. State emergency management associations can be contacted.
• The private sector is very impatient at obtaining quick returns on their money. Are there programs that could bridge the time-gap? The issue with private sector is not unique to us, we could potentially develop some subsidies. This is an excellent idea.
• There may be as much as $40 trillion invested in urban areas in the next 20 years. Whether this is investment in existing communities or new developments needs to be discussed when it comes to these historical amounts of capital to make sure it isn't all going to be money-making projects for high-income developments. Inner cities need to be considered
• The credibility is increasing in this industry. Part of this has to do with how we talk about what we do. Mark Pinsky has been a major player in terms of terminology and presenting our work to people that are not a part of our industry.
• We need to know what can apply outside these walls,
• We need to use new terminology. There is no vernacular when it comes to community development.
• Software and data is infrastructure. We need a paradigm shift to meet the private sector.
• When it comes to the energy crisis, what innovations are in the works? Measuring the ecological footprint, working with sectional zoning where areas that meet LEED certification will be discounted. There is an investment in the world that has begun. It is not sufficient yet, but it has improved dramatically

Thomas Dorr joined the U.S. Department of Agriculture (USDA) in 2001 and was appointed in 2002 to the position of under secretary for rural development. Rural Development consists of three program areas that provide up to $18 billion annually for loans, grants and technical assistance to rural residents, communities and businesses. Rural Development also holds a $94 billion portfolio of existing business, housing and infrastructure loans to rural America. As under secretary, Dorr serves as chairman of the USDA Energy Council. Dorr has broad agricultural, financial and business experience. He has been a member of the board of directors of the Federal Reserve Bank of Chicago and the Iowa Board of Regents and a member and officer of the Iowa and National Corn Growers Associations. Dorr was president of a family farming and agribusiness company for 30 years. website

I would like to discuss rural development with you today. When it comes to development policy at any level, we need to move beyond the talk and face the challenge of limited budgets and sustainability. Our ability to innovate and identify unconventional means to finance things is essential. Our experience is applicable to the development community at large. Our market in rural America is changing. We are developing new tools, challenging our staff. Rural broadband is an excellent example of development. There has been an incredibly steep learning curve we have had to climb, but we believe that our broadband program is going to improve communities and businesses.

We are doing so much more with no more resources. This means we have to innovate. The shift runs deeper than budget or accounting. Reliance on private lenders is supporting us. We need to put our partners in the drivers seat. We have an enormous portfolio. We are supposed to be risk takers and innovate. We are unfortunately too tied to balance sheet financing. Because we are essentially going to the market, we are no longer a lender in the old-fashioned sense. Our goal is to be an investment bank for rural America. Financial institutions are going to have to help us to sustain these kinds of opportunities.

Broadband is changing us, making us more competitive. In rural communities this impact can be multiplied as it levels the playing field. It allows rigidly centralized groups to have an access to a market. Rural communities can upgrade services enhancing the quality of life. Biofuels are an excellent example. The rapid build out of the ethanol industry is always in the news. Broadband has allowed the industry to rely on remote monitoring and technical support.

The issue is how to ensure broadband access in rural areas? Electrical and telephone service used to have the same problem. We have been remarkably successful in these arenas through innovation of a rural profit utility. In 2002, the commitment was made to enable broadband to be accessed by our rural communities. We have not been sitting on our hands, but we cannot move fast enough. We have new regulations that are being put in place. Our capacity for innovation is certainly being tested. In broadband, we are entering into a highly competitive market. There are issues of low density, underserved by commercial providers. The cost is very high in some areas to provide the access. Communities that do not become broadband-enabled will find themselves redlined.

For those of you who are developers, rural America is something you need to look at.

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