Social entrepreneurship was supposed to save us—what happened?
Hey folks. This is the 7th edition of The Great Near. Spring is in the air, normalcy is returning, and I’m excited to share today’s post. It’s the second in a series that is exploring our fuzzy expectations for companies to create impact, interrogating the social enterprise, and uplifting the social justice enterprise as a new frontier for better business.
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It’s 2006.
A twenty-something-year-old serial entrepreneur from Los Angeles is vacationing through Argentina when he spots a shoe. It’s a soft, versatile shoe that’s popular with the locals. He puts it in the back of his mind until he meets an American woman volunteering for a shoe drive to help kids exposed to disease from bare feet. An idea hits him: “why not create a company that will provide shoes to these children?” Genius. Sure, he had no idea what he was talking about (he admits it) but his friends back in LA loved the idea. He sells 10,000 shoes that first summer. Before he knows it, he’s running a $400M business fueled by one story: buy our shoes and change a poor person’s life.
Forgive me for starting here, but you can’t tell a story about social entrepreneurship without a few characters: Muhammad Yunus, Bill Drayton, Bill Gates 😬, and of course, Blake Mycoskie, our innovating traveler and founder of TOMS shoes.
Mycoskie narrowly missed the cancel culture window, otherwise criticism of TOMS’ might be more broadly known. (Don’t worry, I’m not going to tell you to burn your shoes.) The “Buy One Give One,” or BOGO model that he popularized captured the attention of entrepreneurs and investors, who believed we could provide low-income people with basic amenities like shoes or tampons. Contrary to TOMS’ marketing materials, giving a kid shoes does not solve poverty. (Buying these shoes does, however, satisfy our desire to know that we are good people.)
Plenty of ink has been shed on why TOMS was a terrible idea. My only reason for starting here is that people like Mycoskie have captured the narrative around social entrepreneurship to the detriment of true successes. TOMS is often the only social enterprise most people can call to mind.
Has social entrepreneurship worked as intended? Many argue that it has, citing international examples like One Acre Fund, D.light, and Grameen Bank, or local successes like Thread (Baltimore), Hot Bread Kitchen (NYC), and Higher Purpose Co. (Clarksdale). Success in these cases is not always synonymous with scale. In fact, our obsession with scale is why we have mega-monopolies like Amazon and Facebook. Thread, for example, works with Baltimore students in the lowest 25% of their class and has helped 69% of these students pursue a 2- or 4-year degree.
Others argue that many social entrepreneurs haven’t met the audacious goals they have promised for decades, or worse, that they undermine and distract from collective political action. There’s truth to this, despite a revival of public interest in bolstering our democracy in light of the 2020 election.
With no clear winner of this debate, our interest in social entrepreneurship has dwindled, lightly confirmed by Google searches that yield research from over a decade ago. (Maybe it’s because we can’t solve systemic racism with a mobile app.)
Social enterprise has struggled to find its place in the social impact world, which is a product of a confused ecosystem more than the entrepreneur. To confront inequities that are woven through entire systems—like decarbonizing the economy—we’ll need everyone, including social enterprises. Doing this will require us to acknowledge two truths: the ecosystem that props up social entrepreneurship is broken, and these problems will require us to go beyond social entrepreneurship.
I’d love to hear from readers: what do you think? Reach me at caitlin@commonfuture.co or drop a comment below.
A broken ecosystem.
Language matters 📣
In the last post, I argued there is no universal definition for “social entrepreneurship.” As LinkedIn will confirm, everyone is free to call themselves a social entrepreneur. For this post, I’ll use “social enterprise” in the way it is most often used, as a catch-all term for socially conscious, innovative organizations including nonprofits, for-profits, and everything in between.
Although SSIR published “Social Entrepreneurship: The Case for Definition” in 2007, the field never really coalesced around one. Not only is this confusing to the public—most people only equate social enterprise with mission-driven business—it affects the types of organizations we fund, study, and showcase as models.
Bill Drayton, CEO of Ashoka, is widely credited for coining the term in the 1980s. To Drayton, a social entrepreneur is an individual “who conceives of, and relentlessly pursues, a new idea designed to solve societal problems on a very wide scale by changing the systems that undergird the problems.” To Drayton (and to the confusion of all) every individual who leads a social enterprise is not necessarily a social entrepreneur. To be one, you must focus on changing the underlying system.
Muhammad Yunus, founder of the first micro-credit organization Grameen Bank, prefers “social business,” to define commercial enterprises that solve problems, reinvest profits back into the business, and operate sustainably. I could spend a whole piece on definitions alone, examining those from Deloitte to the Social Enterprise Alliance, but that would likely leave you more confused. Liza Mueller, VP of Knowledge at Echoing Green, argues,
“The term, social entrepreneurship, needs a redefinition. We actually just need more words. Social enterprise has been a catch-all for too many different kinds of enterprises. The fact that TOMS and a small grassroots organization focused on movement-building fall under the same umbrella is illogical. They have very different reasons for being, practices, and outcomes, and to call them the same thing muddies the water.”
That’s the real problem with definition ambiguity. We’re not only pitting grassroots organizations against TOMS, but every consulting firm, bank, and Fortune 500 company that has co-opted “social enterprise,” and its proxy terms, “positive, social, scalable impact.” (Salesforce actually tried, and failed, to trademark “social enterprise” in 2012.) This makes it impossible for consumers and investors to support the organizations that will really change broken systems.
💡While we wait for better terms, Heron Foundation has made it simple to assess any enterprise for investment by asking: “what is its net contribution to the world?” Models like this allow for a more nuanced understanding: not every corporation is bad, not every social enterprise is good.
Academia matters ✏️
There is a striking absence of data on social entrepreneurship despite the explosion of graduate programs teaching this subject. I struggled to find one quality literature review or academic study assessing the success rates of various social enterprise models, aside from country or sector-specific studies. In “The Research Gap in Social Entrepreneurship,” Mark Hand concludes that there is a wide gap between what is taught and what is researched, meaning professors and practitioners hardly reference any of the leading academic research. More than half of the most influential academic articles are about defining social entrepreneurship. We’ll never escape it.
For years, people have also been ringing the alarm about how we teach social entrepreneurship. In her article on heropreneurship, Daniela Papi-Thornton speaks about the phenomenon in MBA programs to sell a “mass-produced version of the promise of the social entrepreneur,” ultimately hooking students on the idea of being a founder, or hero, at the expense of collective impact, or building upon the ideas of others. The mirage of the social entrepreneur has detached it from the enterprise itself, and many wield it to signal status and brand above genuine impact. She says:
“We—the educators, social entrepreneurship training program designers, social impact funders, and university professors who give money and accolades to students to go out and solve problems before we’ve given them the tools to understand those problems—are largely to blame for this phenomenon. We’re wasting limited resources on shallow solutions to complex problems, and telling our students it’s OK to go out and use someone else’s time and backyard as a learning ground, without first requiring that they earn the right to take leadership on solving a problem they don’t yet understand.”
Universities are not always welcoming to students on the frontlines of social problems—degrees at Harvard or Stanford, homes of elite social enterprise graduate programs, cost over $200k— yet social enterprise 101 teaches us that these individuals should be at the helm of solutions. This becomes a source of cognitive dissonance for privileged if well-intentioned students who are also told: “you too can be the next Muhammad Yunus.”
How we teach is just as important as who we teach. The authors of “Social Enterprise Is Not Social Change” argue that our approach to social entrepreneurship is“redefin(ing) civil society as a space in which to create parallel, private institutions that circumvent the state and citizens’ claims to its resources.” They argue that this makes “little sense when addressing truly systemic social problems such as economic, racial, or gender inequality.”
💡Academia should acknowledge that our most serious social problems arise not from a lack of knowledge or technology, but from deep power imbalances. (An app that teaches healthy eating is good. Making sure every low-income community has a grocery store is better.) Our educational systems must celebrate all the ways students can be successful and make a difference, especially by reimagining our public institutions, if we’re to break the myth of the heropreneur.
Investors matter💰
Our obsession with Silicon Valley venture-style investing has raised interest in social entrepreneurship as a quick way to generate impact alongside returns. Remember that our definition of “social enterprise” includes nonprofits and for-profit businesses, so there are many types of funders offering many types of capital to grow these organizations.
Regardless of the type of funding, we can ask one central question about an investment: whose interests are prioritized—the enterprise and its beneficiaries, or the investors?
Let’s first look at venture philanthropy: a practice where donors see their philanthropic gifts as investments, and impact is the metric of success. (This is also known as catalytic or strategic philanthropy… investors also have a definition problem.) This emphasis on performance sidelines the fact that nonprofits need investment for enterprise growth as much as, or more than programs. This is not unique to nonprofits; imagine a business failing to invest in its staff or technology.
Venture philanthropy isn’t inherently harmful. It’s good with the right approach, as demonstrated by organizations like Omidyar Network that are questioning what it takes to shift structural power. In many cases, though, it tends to prioritize the interests of funders who want to show off that they’ve picked the winners.
This breeds an obsession with metrics—“we fed 1,000 children for thirty cents per day”—at the expense of nonprofits that really need flexible capital to invest in organizational growth, experiment with new approaches, or respond to the unpredictable (cue global pandemic). Vu Le, editor of NonprofitAF, calls out a need for multi-year general operating dollars (MYGOD!) and Heron Foundation has drawn attention to properly capitalizing enterprises.
What about impact investment? You may have heard that investing in a social business can be good for the world, and generate a financial return for investors. This is what Rodney Foxworth calls the fallacy of impact investing: “The mainstream approach to impact investing not only continues to task the most privileged with improving the system, but in the pursuit of doing well by doing good, it maintains the established order of privilege, power, and wealth.”
Investors are so focused on maximizing financial returns that they often overlook investments that could maximize impact. Perhaps because those may require them to sacrifice returns (and give up a little power). If investors truly “went towards the opportunity,” we wouldn’t have a $3 billion investment gap in Native America. Investors often believe it is too risky to work in certain communities, yet this is often confused for a simple lack of knowledge and motivation. Partnering with local leaders from organizations like Native Women Lead or Change Labs could mitigate this.
💡Having barely scratched the surface on the types of social enterprise investment, my recommendations here would fall short. Instead, I’ll leave it to Rodney: “If the goal is to get at root causes, then disrupting the concentration of power, wealth, and privilege is the solution we ought to set our sights on. Shouldn’t the aim be to do good by giving up more? Less privilege. Less wealth. Less power.”
What if today’s problems require us to go beyond the social enterprise?
If social entrepreneurship is here to stay, it’s critical that we fix this ecosystem. While we’re at it, we can cut out the social impact sector jargon that is so often used as a way to exclude or claim moral high ground by proclaiming one model superior to another.
How do we go “beyond?” We invest in organizations supporting Amazon workers in their fight for a union. We support nonprofits calling attention to destructive monopolies. We support policies that enable workers to own their workplaces. Changing systems will do infinitely more good than building an app to help gig workers manage their finances. (Forgive the focus on apps, but funders really love fintech.)
TOMS, in fact, has started to go beyond its criticisms by abandoning the BOGO model and donating 30% of profits to grassroots efforts. I’m encouraged by the changes they lay out in their recent impact report, including a more collaborative, equitable approach to working with grantees. While it’s too early to tell whether rhetoric will translate into action, this is a step in the right direction.
I’ll close with the social business, the social enterprise with the most main character energy, in a lead-up to the last post in this series. Aaron Tanaka, Director of the Center for Economic Democracy, has uplifted strategies that can improve upon private-sector models like the social business, in effect transforming them into “social justice enterprises.” What are the qualities of these enterprises? Are they feasible? I’ll explore in the next post.
To win, we’ll need a big tent. One that’s big enough for the grassroots nonprofits, small business support organizations, activists, mutual aid organizations, movement organizations, for-profit social businesses, and beyond. Together, these organizations are strengthening our democracy and rebuilding the fabric of civil society. We should celebrate them just as much as every Blake Mycoskie.
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What’s Up This Week? 👀 ✨
Caught my attention
JP Morgan Chase is planning to issue credit cards to people with no credit score. Banks remain “on edge” as Americans pay off their debts, so this may or may not be a good thing for communities that have struggled with traditional finance.
We talk a big game about ESG (environmental, social, and governance issues within companies), but corporate boards are still the most important stakeholder in driving change. This HBR article revealed that “PWC’s 2020 Annual Corporate Directors Survey found that only 38% of board members think ESG issues have a financial impact on a company.” This is surprisingly low given the number of institutional investors, from BlackRock to State Street, that have proclaimed a strong focus on ESG.
Finally, this tweet. In a reply, Dan Price adds that he ran the numbers and “Mark Zuckerberg single-handedly has 2% of all Millennial wealth.”
A deep dive
Check out this report on data capitalism from Data for Black Lives and Demos, which they define as “an economic model built on the extraction and commodification of data and the use of big data and algorithms as tools to concentrate and consolidate power in ways that dramatically increase inequality along lines of race, class, gender, and disability.” This is by far the most comprehensive resource you’ll find, covering topics like the roots of big data in chattel slavery (p.8), how FICO scores encode racism (p. 14), and how data capitalism enables employers to dodge responsibility. You can also read their tl;dr version here.
until next time,
-Caitlin