The limits of social enterprise

Over the past year and a half, I took a series of notes on my practice. I gathered those in various documents, shuffled them around, and merged in older thoughts and reflections. Lockdown #6 was an opportunity to bring all this to shape. I am now sharing those thoughts as a series, forming a sort of mosaic on my work, and what has been driving it.

One of the most important things I learned from my father is that our economic system does not reward work based on social utility.

I’ve been working around social innovation circles for about ten years now. Repeatedly, I have come across a fervent statement that people working on social good have an unhealthy relationship to money, that we must not demonise money, that we must reconcile profit and purpose.

That discourse has always irked me for its short-sightedness.

Even in a narrow for-profit framework, the question is not just how much return you get on your effort, but risk and time-horizon. When you focus on social good, impact is added to the list. And this is where things get confused.

In a Lunchclub conversation last year, I heard from an architect about the second and third order consequences of the Sydney Opera House. Its construction used a range of new technologies, that were trialled then, and gave birth to new industries. Once built, it served as an icon, prompting tourism, and a sense of civic pride. Such positive externalities are retrospectively visible, if not clearly measurable. They benefit the collective – but cannot be directly listed on the developer’s bottom line.

If impact is truly what matters, then economic returns are ill-suited to measure and guide it. And if impact is not what matters, then pretending is hypocrisy. 

Any discourse on balancing income and social good says: favour the venture that will yield a predictable income in the short-term, over the one that might result in large scale impact. It therefore creates a norm that discourages radical risk-taking intended to benefit the collective.

Not to mention, balancing profit and purpose creates a vested interest in the current paradigm. If you rush to monetise your social impact in the current economy, your long-term interests become tied to the present logic. Or as the Gospel says, where your treasure is, there also your heart is.

Is social enterprise, then, nothing but a desperate attempt at saving capitalism? And by promoting it, are we not distracting driven, ambitious, promising young people from more important work – tying them down to the present system, and preventing them from embracing a more radical approach – one that * could * prove much more impactful?

2 thoughts on “The limits of social enterprise

  1. Millennial optimism : With social stock exchanges popping up around the world, increasing for-purpose capital flows, I find us already underway a radical system evolution due to a demand for social good.

    Yes we’re risk averse at the moment much like when funding gets dry in the commercial startup ecosystem. With a future of funds and jobs available in the social economy— money is a huge factor in providing agency to organisations and humans.

    How would you imagine a future where impact investors have much more confidence in the ecosystem?

    Historically capital flows have been seen as driver for development and impact through market. We’ve all been waiting for the invisible hand of the market, but maybe we are the invisible hand of market?

    It’s hard to just abandon what we have due to massive path-dependencies but we’re constantly altering the paths to make space for new alternatives.

    As a society we’ve just produced a cohort of humans which is super familiar with industrial efficiency, with advances in IT we have a broader perspective of systems, pace of innovation is faster than ever before thanks to compounding of knowledge. With limited funding and risk-averse growth now — we’re building a solid knowledge base for next generation of entrepreneurs to base their risk on! After all the risk-taking is also based on some amount of certainty.

    With a long-term perspective we’re already undergoing radical change, coz we’re impatient and we can’t see it coz we’re impatient.

    In my understanding of history of innovation— change always compounds but all we note is the tipping point as the radical moment of change. So I believe the radical change is happening right now but historians will decide when that ‘aha’ moment came about, when social, political and economic forces balanced out and what part of the change was worth noting.

  2. “One of the most important things I learned from my father is that our economic system does not reward work based on social utility.” Yes the economic KPIs don’t accurately all values. That’s an important issue in sustainability. How do you measure happiness? Or cultural value of ecosystems?

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