Using capitalism to scale a good idea
We all love the social entrepreneur who steps up in a community, takes on the power structures, and creates an organization or movement that makes a difference in the lives of the poor. Yet such talent is rare. Which comes as no surprise, since those skills and passion are equally rare among entrepreneurs in the business world. Where business has succeeded and the social sector has failed (with a few honorable exceptions such as Muhammad Yunus's Grameen Bank), is in finding ways to take the new, innovative ideas to a scale at which they really can change the world.
One of the great achievements of capitalism has been the evolution of different kinds of capital to support businesses at different stages of growth—from family, friends and other angel investors who support start-ups to the venture capitalists who help high-potential organizations grow, all the way through to the public-debt and -equity markets for large, scalable ideas. Different skills are required at different stages along the way—from the single-minded determination of the entrepreneur with an idea to the visionary and organizational capacities of the CEO leading a large corporation. Those like Bill Gates who make it all the way from the garage to the corporate boardroom as the head of their firm are remarkably rare.
Contrast this with the social sector, where the praise and reward always seems to be focused on innovative new ideas rather than the boring challenge of taking these ideas to scale. Social entrepreneurs are rightly celebrated, but we should also celebrate the social bankers, social venture capitalists, social equity investors, and so on. This is why I'm excited by the influx of suited MBAs into the world of doing good. And why, more generally, I think that those who want social change need to embrace the language and methods of business.
That does not mean that delivering social change should become a business— though if social entrepreneurs can find a way to harness the profit motive to achieve social good more quickly than through charity, as has recently happened in microfinance and is starting to take place in basic education, health care, etc then they would be daft not to do so. But the "philanthrocapitalists" that Michael Green and I write about are not looking to make a profit, they are trying to deliver social change. And, from Bill Gates and George Soros to Michael Bloomberg and Mo Ibrahim, they believe that the language and techniques that helped them succeed in business can be, if carefully applied to the admittedly more complex context of the social sector, a powerful force for good.
These philanthrocapitalists, armed with the tools of business, are starting to take on the challenges of finding and scaling solutions to the problems that blight the lives of more than a billion people on this planet who live in grinding poverty. Rather than bristling at the alien culture of business, social entrepreneurs in poor communities should be figuring out how to speak its language—and welcoming its arrival as the chance to finally have the impact they have always craved.
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The soul of a social entrepreneur
If they do . . . then in my eyes they are not social entrepreneurs. The practice of business may improve the quality of life of some people—specifically, those who reap the profits—but ultimately its goal is to maintain the status quo of existing power relationships at all costs. Too often, would-be social entrepreneurs who come at their tasks with a business model end up with a top down organization that presumes to know, without living and working with the poor, how the poor think and what they need to tackle poverty. But what is worse, because of their need to prove their success to investors, they are prone to exaggerating claims and overpublicizing successes. Modesty and humility are not their strong points.
Real social entrepreneurs are a breed apart. They have a fire in their belly that makes them constantly question the system. They are driven to prove that a different world is possible—without regard to whether they make money at it—and they set basic urgent priorities that money alone cannot solve. A social entrepreneur must first be a social activist addressing the issues that cannot possibly be tackled through the practices of business. Only then can the social entrepreneur have a feeling for the poor.
Indeed, true social entrepreneurs (unlike those in the blinkered, risk-averse world of business) are willing to fight injustice, exploitation, discrimination, and corruption. They find practical ways for addressing these issues. They bring hope and courage to the very poor who cannot fight these battles alone. Social entrepreneurs are willing to defy the powerful and the entrenched and to turn the world upside down to show that the impossible is possible.
The problem with a business-model approach is that the conflict between righting societal wrongs and showing a profit makes it difficult to do either well. This conflict is not difficult to resolve—but only if the vision and priorities are clear. The practice of business does not have to be unethical, often it is non-inclusive and non-accountable to the public.
I'd like to describe one non-business model that I believe shows social entrepreneurship at its best. It's an organization of workers and peasants in India called the MKSS that was founded in a mud hut in the early '90s by three visionaries, all activists. There were no written proposals and no grants from foreign groups, and it did not even have a legal status. Instead, it survived on public donations. Those who ran it took only modest wages ($60 per month) but in barely ten years this group galvanized their simple messages into a national movement and got two acts passed in Parliament—The Right to Information Act and the National Rural Employment Guarantee Act—that changed the face of rural India. The first act requires public officials to answer any questions in the public interest. The second, unique in the world, guarantees 100 days of work to a population that is more than double that of the United States. On the strength of these two acts alone, the present government was elected back into power.
I believe that to change the world, a true passion for the cause is far more powerful than any MBA.