Social Entrepreneurs Wanted: Compensation Commensurate with Impact  | Net Impact

Social Entrepreneurs Wanted: Compensation Commensurate with Impact 

Social Entrepreneurs Wanted Compensation Commensurate with Impact | Net Impact

Social Entrepreneurs (and Intrapreneurs working within existing companies) can be the drivers of solutions to the world’s more pressing problems - reversing climate change and fomenting social justice. A still prevailing ‘business case’ framing, i.e., ‘what is the business case for this effort’ is a commitment to incremental action when exponential outcomes are called for. 10X type results are what the entrepreneur is seeking. There is an underpinning optimism in the prospect of social entrepreneurship helping to close gaps fast, that marginally better business-as-usual and less dysfunctional governmental institutions cannot (but can facilitate or at least, get out of the way). A stultifying doomism around our problems masks the human history of innovators rising to the challenge. The entrepreneur and innovator, our human legacy of innovation, if unleashed, can support optimism borne by ambition, around a future with a social foundation for all people and respect for our planetary boundaries.

Definitional Errors Do Social Entrepreneurship (Progress) a Disservice 

Our recent piece,The Four Types of Social Entrepreneurship, features one quote that I take exception to, and definitionally misses, I believe, a key characteristic of virtually all social entrepreneurs - profit motive. We quote the author, David Borstein, as saying, “(w)hat business entrepreneurs are to the economy, social entrepreneurs are to social change,” as if somehow social entrepreneurs are not expected to, nor plan to create businesses as a going concern, driving employment and wealth creation. I think few successful social entrepreneurs thought or planned that their entrepreneurial activities were about social change solely. Entrepreneurship, de facto, assumes the building of businesses of value. There is nothing discordant about effecting social (or positive environmental) change and making money. In fact, the ability to do so is at the heart of the sustainability argument - that business can be a force for good and create jobs and wealth. This definitional error is damaging as the capital markets require prospective financial returns, regardless of measurable social/environmental impact. Tagging social entrepreneurs with an altruistic mantle is limiting and potentially dissuades capital flows to them. Here’s my rephrasing: what social entrepreneurs are to the economy, is what social-agnostic entrepreneurs used to be. Like all aspects of evolving toward business as a force for good, an antiquated sense of pure altruism in the social entrepreneur will dissipate near term. Just as impact investors say, ‘one day it will just be investing’, so too, will social entrepreneurs just be entrepreneurs one day.

The World's Most Vexing Challenges are Daunting - What Social Entrepreneurs Face

This decade has been ushered in by pandemic, technologically-stoked political division and distrust, and increasing global acknowledgment of the deficiencies of a “growth at all cost” mindset that is testing our planet’s resources and further diverging the advantaged and disadvantaged. Such a rich landscape to wade into.

And What of Human Progress? Oh, that Distraction… 

How are we to reconcile our accountability and plan corrective actions in order to deal with what humanity has wrought? And hold up, what of all the good that has occurred? We are living in the most peaceful time ever. Human life expectancy has doubled in the last 100 years. World hunger is on the decline.... All this retrospective wistfulness does is delay affecting solutions. The magnitude of human progress came at an expense. Introspection and debate about the past is part of a dysfunctional (sometimes deliberate) delay to the ‘benefit’ of those that would either chose to continue to borrow forward from our future to benefit few today, or ignore the ticking clock of this Anthropocene[1]era, effectively whistling while the world burns.

The Math of Taking Up the Project to Save the World - Why it Doesn’t Work (Nor Matter)

If we were to think of the costs of acting versus not, and couch it, say, in finance terms, we might say that we weigh the costs (money, time, effort) spent today - Present Value, against the expected future outcome - Future Value. In terms of finance, if the Future Value gives us attractive payoff, we’d undertake the project (unless our resources are scarce and there are better risk-adjusted projects to take up, but no, we have only one planet). The problem with a calculation like this regarding the investment to Save the World, is that 1) we find it hard to imagine a better future world; 2) it’s so far in the future we don’t see an impact on people we care about; and/or 3) the daily incremental loss of inaction isn’t that painful. Do something, do nothing? hmmmmm…. 

Human Coding Toward Overweighting the Negative - Why Bother? 

The unknowns about what can work to reverse the climate crisis, lift people out of poverty and create equitable opportunity stop many in their tracks. If we cannot price nor foresee favorable outcomes to our efforts, why do them? And what if it all goes wrong? We have all experienced wins and losses. However we are, given our humanity, prone to overweigh the experience of loss relative to our gains. This human bias, the loss-aversion bias, suggests that even in a 50/50 outcome, we suffer (or fear the prospect of) the loss more than the equally probable gain. Psychologists Daniel Kahneman and Amos Tversky suggested perhaps twice as much![2] So given the difficulty in modeling out the project to Save the World, why do it? What if we are wrong? It costs more than anticipated? The results are less favorable than expected? Gratefully, social entrepreneurs (like Fitzgerald’s rich) are different from you and me.

Green Swans and Exponential Outcomes 

A modern miracle is something that is impossible from from an old understanding of reality, but possible from a new one - Charles Eisenstein 

For all the possible negative futures, it is part of our biases to underweight and/or fail to see the prospective favorable exponential outcomes from efforts of social entrepreneurs - driven by opportunity (as with past socially agnostic ones), as John Elinkington describes as ‘world-saving Green Swan’ outcomes.[3] In Green Swans - The Coming Boom in Regenerative Capitalism, Elkington describes the Green Swan as taking “the world by surprise, in large part because of their exponential character and because they produce outcomes previously considered to be not just improbable, but impossible.”[4]

This is what is called for in this time and place  - not just safe commitments to incremental improvement or companies operating slightly better with each year, doing less harm - but direct investment in social enterprises and the ideas of social entrepreneurs with the prospects of plausible 10X outcomes. Impact investors should lead this charge. Corporate impact investing, the fastest growing class of impact investor, should consider this a logical competitive advantage and part of research and development. Governments worldwide should offer support in the form of tax breaks and catalytic capital/grants to drive capital formation behind innovation. 

We are supposed to make this effort. We can and must think beyond our (and our children’s lifetimes). Social entrepreneurship can cause exponential favorable outcomes, and in so doing, help achieve a just and sustainable planet, one with new jobs and wealth created for more of humanity living longer, healthier, fulfilling lives. Who really loses in this scenario? And what legacy do we leave if we do not try?

 


 

[1] The Anthropocene is the geological epoch dating from the commencement of significant human impact on Earth's geology and ecosystems, including, but not limited to, anthropogenic climate change, portending human demise.

[2] Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47, 263-291

[3] Green Swans - The Coming Boom in Regenerative Capitalism - John Elkington, Fast Company Press, 2020 

[4] IBID