Defending Social Entrepreneurship
March 25, 2008
David Brooks recently wrote an excellent column for the New York Times on social entrepreneurship.
Then my friend, Alexander Russo, popular blogger from Scholastic and formerly from Education Week, had this to say:
The best part of last week’s NYT column on social entrepreneurs is the reference at the end to just how annoying (if hard-working) these folks can be. Indeed. Basically, what’s being described is a fad. Dressed up as something new and shiny, social entrepreneurship isn’t that different from regular old philanthropy and reform. It works outside the system. It’s generally small-scale. It relies on outside funding. There’s an awfully cozy, clubby feel to it. It doesn’t, far as I’ve ever heard, close down failing efforts or even admit to failures like you’d see in the “real” world of venture capital. It doesn’t really have any big successes, measured in terms of broad and positive impact, in education.
In a few words - I totally disagree. Social entrepreneurship is not a fad - it represents a major development in our capitalistic system. Private enterprises have historically solely made decisions based on the interests of its shareholders. In social enterprises, the interests of all stakeholders are taken into account ranging from shareholders to employees to communities to the environment.
B Corporation is a new rapidly growing venture that aims to categorize social enterprises. They represent a legal framework for: “a new type of corporation that are purpose-driven and create benefit for all stakeholders.”
The entrepreneurial thought leaders podcast series has a series of highly talented entrepreneurs, investors, lawyers, and leaders who are shifting to the social enterprise space.
As a personal example, one of my best friends left a lucrative career in the Hedge Fund industry to work at the International Finance Corporation.
The IFC measures return in terms of social and financial return. They incorporate environmental and social factors into their models and allocate capital in ways that do not necessarily yield the highest financial return.
Even five years ago, this would not have been a popular career path.
Business Schools across the country from Northwestern to Harvard to Columbia all have strong and growing social enterprise programs. Again, five years ago, these programs were in their infancy. Now they are mature, popular programs that are attracting a new class of knowledge workers into this space between profit and non-profit.
My good friend from graduate school, Anna Beard, currently works at Wireless Generation. She also started free-reading.net, which is is a real educational success in the social enterprise field.
An emphasis on financial and social return is completely new in our playbook, and appears to be a major development in our capitalistic system.