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All Entrepreneurship Is Social

Let’s not overlook what traditional entrepreneurs contribute to society

 

Over the past decade or so, the term social entrepreneur has become a fashionable way of describing individuals and organizations that, in their attempts at large-scale change, blur the traditional boundaries between the for-profit and nonprofit sectors. Given the ceaseless appearance of innovations and new institutional forms, we should welcome a new term that allows us to think systematically about a still-emergent field.

One danger, however, is that the use of the modifier social will diminish the contributions of regular entrepreneurs—that is, people who create new companies and then grow them to scale. In the course of doing business as usual, these regular entrepreneurs create thousands of jobs, improve the quality of goods and services available to consumers, and ultimately raise standards of living. Indeed, the intertwined histories of business and health in the United States suggests that all entrepreneurship is social entrepreneurship. The pantheon of model social entrepreneurs should thus include names such as railroad baron Cornelius Vanderbilt, meatpacking magnate Gustavus Swift, and software tycoon Bill Gates.

THE STEW OF POVERTY

People tend to think that advancements in health care, for example, are the achievements of either government or the social sector. More recently, they note how the work of social entrepreneurs is improving population health, particularly in developing countries.

Yet the experience of the United States demonstrates that business entrepreneurs have done as much—if not more—for American health in the past century and a half as did medicine or public health. In the middle of the 19th century, most of the U.S. population was ridiculously poor by today’s standards. Americans not only had low incomes, but also spent the bulk of their money on life’s basics: food, clothing, and shelter. What they purchased, moreover, was of questionable quality. Because there was no refrigeration or ability to transport foods over long distances, most people subsisted on a kind of stew that, by all accounts, was simple and tasteless. A poor diet meant poor nutrition, which meant poor health.

Clothing was also neither plentiful nor desirable. With little production of new clothing, the average American wore the same clothes over and over again. And they seldom washed these clothes—or themselves—because they lacked indoor plumbing. This was not the only failing of American homes: They were often poorly ventilated, meaning that most people’s lungs labored to breathe air made dirty by cooking and heating fires.

Because of these poor conditions, Americans’ lives were short, and their deaths were usually caused by disease. Yet since 1850, life expectancy for Americans has risen remarkably quickly, from below 50 years to 78 years today. Likewise, annual mortality rates have plummeted, from around 23 deaths per 1,000 people in 1850 to eight in 2009, with infant mortality markedly falling. Meanwhile, infectious diseases have receded as a primary cause of death.

Many factors played a role in these changes, from improvements in sanitation to upticks in education. (The practice of medicine played a noticeably small role here and, in fact, probably did more harm than good for many years.) But one important factor is often overlooked: the increased consumption of higher-quality goods and services. As entrepreneurs invented and distributed these improved goods and services, they deserve considerable credit for the rise in Americans’ health and longevity.

THE ENGINES OF WELL-BEING

One innovation that fueled prosperity, well-being, and further innovation was the American railroad system. The spread of railroads in the 19th century permitted something nearly unprecedented in human history: conquest of the weather. Better movement of people and goods reduced the vulnerability of the population (especially in rural areas, which still dominated the country) to cyclical vagaries. Even in the depths of winter, consumers could purchase food from afar.

The food people ate improved dramatically as well. Long-distance transportation of food required advances in refrigeration and canning. Gustavus Swift pioneered the refrigerated railroad car and built a meatpacking company that was, at one point, among the largest American companies in terms of gross revenue. As a result, consumption of meat, dairy products, fruits, and vegetables increased. No longer were Americans consigned to eating an unappetizing stew.

Railroads also facilitated the rise of large-scale national companies and allowed a geographically disparate country to purchase new and better goods and services. Consider, for example, the contributions to American health and welfare made by just two companies: Sears, Roebuck and Montgomery Ward. Their first catalogs were only single sheets of paper, but in short order they grew to include thousands of items. By making products such as iceboxes and better farm tools widely available, these companies empowered Americans to improve their lives.

Similarly, factory production of clothing and its national distribution in new department stores—created by men such as Harry Selfridge, Alexander Stewart, and John Wanamaker—reduced prices and increased access. Economists have estimated that from the mid-1800s to the mid-1900s, the real value of goods and services available to the average American increased by 700 percent.

The cascade of goods available to everyday consumers continued in the 20th century. The Dallas Federal Reserve has chronicled the steep declines in the amount of work Americans had to perform to afford staples like chicken, eggs, and milk. In 1919, for example, an American had to work 10 hours to afford a basket of 12 food items. By 1997, the work time required to purchase this food basket had fallen to two hours.

The falling costs and increasing quality of food, clothing, and shelter made Americans healthier and more resistant to disease. Accordingly, stature and life expectancy have risen at unprecedented rates from the late 19th century forward.

The lesson of this brief history is not that entrepreneurs can singlehandedly solve all the world’s problems. Public health measures such as establishing regular trash collection and building reliable infrastructures for clean water played vital roles in improving American health, as did scientific research in areas such as vitamins and vaccines. But we would be remiss if we did not count people such as Vanderbilt, Swift, and Wanamaker as social entrepreneurs.

Today, we might also count as social entrepreneurs people such as Bill Gates—in his capacity as Microsoft founder rather than as philanthropist—as well as the late Don Fisher, cofounder of the Gap. Through his dogged pursuit of a vision of personal computing, Gates has revolutionized work and communication across the world. The impact on relationships and quality of life has been considerable. Meanwhile, the Gap has democratized high-quality clothing.

Entrepreneurs typically generate a surplus benefit above and beyond the profits they reap, finds the eminent Yale University economist William Nordhaus. Nordhaus has calculated that entrepreneurs capture only about 2 percent of this surplus, with the remainder passed on to society in the form of jobs, wages, and value. By creating so much value that does not accrue to themselves, regular entrepreneurs are also social entrepreneurs.

CALLING ALL ENTREPRENEURS

What might be today’s equivalent of the railroad and its beneficial social impact? Diseases continue to plague most developing countries, so it is understandable that alleviation of them attracts the attention of social sector organizations (although there is considerable debate over whether these organizations are devoting enough attention to the right diseases). Yet it very well could be the case that the most transformative event in the economic trajectory of developing countries is not the spread of vaccines, but the spread of cell phones.

Cell phones cannot cure diseases, but they can spur the development of new business models, new companies, new technologies, and, thus, economic growth. Among businesses, cell phones also facilitate the scaling up of networks, firms, and innovations. They allow people to dream big, rather than focusing only on staying afloat. Several studies in the past few years have found that a 10 percent increase in cell phone penetration in developing countries would increase the annual growth rate of per capita gross domestic product (GDP) by nearly 1 percentage point. If that does not sound like much, consider that a country growing by 2 percent per year would double its per capita income in 36 years. If its growth rate rose to 3 percent, income would double in 24 years. At 4 percent per year, wealth per person would double in only 18 years. The economic multiplier effect of cell phones is enormous.

Such growth would in turn improve health and nutrition by allowing people to consume better goods and services. As Nobel Peace Prize winner Muhammad Yunus, founder of Grameen Bank, has observed, “income is the best medicine.”

This is not to say that public health and vaccination are unimportant in developing countries—far from it. But in the coming decades, it will be regular entrepreneurs—those who start and grow companies—who will be lauded for their role in improving society. Specific individuals and firms stand behind the technological innovations that make growth possible. Entrepreneurs, it turns out, are good for your health.


Carl Schramm is president and CEO of the Ewing Marion Kauffman Foundation. He is the author of The Entrepreneurial Imperative and coauthor of Good Capitalism, Bad Capitalism.

 
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COMMENTS

  • BY Leanne Hoagland-Smith Chief Results Officer

    ON February 25, 2010 06:09 AM

    Well written and probably too late for many to truly understanding.  Paying taxes is also being socially responsible.  However the current socio-economic-political band wagon attempts to recognize social good (behaviors) as something unique and cannot be associated with anyone making money.

  • BY Martin Thoma

    ON February 25, 2010 07:09 AM

    A very nice example of turning the telescope around and looking through the other end. Thank you!

    The fundamental misperception that this article attacks is that money/profit-motive is the engine of entrepreneurship. Not true. Money is simply one useful byproduct of the entrepreneur’s unique ability to create value in the world.

    Value creation is the motive force of entrepreneurship. That’s what makes it so energizing to work with entrepreneurs….and to be one.

  • BY Dr. Mark Albion

    ON February 25, 2010 07:25 AM

    The important reframing for me is that “social” entrepreneurship is a form of social change, not a form of entrepreneurship.
    The goal of our efforts is not making money, as stated above—though necessary to exist, “no margin, no mission.”
    The goal is social change, and we look for the best vehicle(s) to do that. Unfortunately, because of the breakdown of our institutions—corporate enterprise, government, etc.—there is a need for some other form of human organization to exist in order to address these social challenges. Therein lies the purview of the entrepreneur. Whether the form is “for-profit,” “non-profit,” “hybrid,” or “B-corp” is only important in finding the form that can most sustainably address the social change and in this instance, support the entrepreneur. Thank you, Carl, for the proper framing of social entrepreneurship.

  • Tom O'Brien's avatar

    BY Tom O'Brien

    ON February 25, 2010 08:32 AM

    People’s drive for profit will bring many benefits for society.  But there are dangers, as Adam Smith noted, from man’s natural propensity for greed.  This is why we need a democratic government insulated from the influences of money (we don’t have this yet) to keep markets free where they function in the public interest and to regulate the others where market failure is repeatedly experienced.

    We will never be short of those who want to get rich and have an idea.  What we are short of are those who want to pay for insuring that the un-profitable but humane and essential is accomplished.

    While the contribution of 19th century entrepreneurs should be noted, let’s remember that the most successful entrepreneurs weren’t called “Robber Barons” for nothing.  As Smith predicted, they did everything they could to restrict competition and crush the rights of workers on the business side while assuaging their guilt (or that of their families) through philanthropy.

    Prosperity was achieved and the public was lifted because our democratic system allowed for commerce and conflict, agitation and ultimately reform.  This aspect of history is forgotten in essays such as Mr. Schramm’s.  The assertion of free speech rights in practice, the rise of trade unionism, the tariff barriers that allowed US- based businesses to grow absent competition from abroad, the progressive’s push for more open government, and the drive to educate the masses to demand public health measures all played major roles.

    Business leaders most often opposed any change that didn’t benefit them directly.  For example, businesses’ opposition to ending child labor is only the most obvious (see the Wall Street Journal’s editorials on this topic!)

    Another example is more recent.  Since the 1970s we can see in Commerce and Labor Department data that business has generated enormous wealth driving our GDP to unprecedented heights.  Yet in the absence of structures to countervail the normal and natural corporate focus, such as strong unions and vigorous government programs, wages (adjusted for inflation) have remained flat or fallen despite substantial productivity gains over 30+ years.

    Why? Whatever social impulse entrepreneurs have will fall to their narrow self-interest—to their human nature as Smith noted. 

    We don’t need to toast people pursuing profit – except when soliciting donations!  However, while SBS and so many others are raising their glasses, let’s not forget those who set aside material gain for the public good.

  • BY Andrew McFarland

    ON February 25, 2010 09:30 AM

    Excellent article.  Customer service is an unique part of entrepreneurship and social responsibility. 

    Imagine how much energy, time and money is wasted through poor customer experiences.  Imagine how much happier people would be if what they needed (bought) was what they got.  Imagine a world where purchasers of goods and services could trust the company/people who made the sale.

    To get value, give value.

  • BY Travis Kiefer

    ON February 25, 2010 11:48 AM

    I agree with Tom O’Brien in that while it’s true entrepreneurship has created tremendous value, there have been serious ramifications to deal with the built-in greed/selfishness that comes from unrestrained capitalism. To add more fuel to the flame, though, my question is, how much More social progress could we have made if we put a better balance on personal profit / societal good? I don’t know if we can ever truly answer that question given the lack of great data, but it’s an interesting question to contemplate.

    Also, I would like to make a quick argument that progress, in and of itself, isn’t that valuable. It’s whether or not it pushes human needs forward - and all of society - that’s valuable. For example, if cannibals were to progress towards having forks, would that be a major social advancement? Or if I was to create an adult film studio in the developing world, would that be social entrepreneurship. I think there’s more to that debate and I recently wrote an article exploring that question - http://bit.ly/dlxLHc.

    Overall, nice job, but it’s not enough. Entrepreneurship - in itself - isn’t enough to solve the problems we are facing in society. It’s a good model, but we need more. We need morality, integrity, character. That isn’t inherent in entrepreneurship, but I think it can be in social entrepreneurship. Let’s keep the distinctions between entrepreneurship and social entrepreneurship by working towards a moral fabric that challenges society to do more than earn a quick buck.

  • Searching for year round employment opportunities for his people, seeing the filth on the streets, this “social entrepreneur” came up with an innovative solution. This solution has led to cleaning the streets, raising living standards and providing employment for hundreds of people. Are we talking about a social entrepreneur living in the Third World today? We could be but…

    this was George C. Witt, in 1899 in Cincinnati, OH.  He was an entrepreneur who started a manufacturing company in 1887.  The Witt Co. made ornamental cornices which was not a year round business.  Being driven by wanting to build his business and keep his employees working year round, George looked for what else they could make.  Seeing how unsanitary it was for people to throw their trash onto the streets, he identified a critical need and invented and patented the Corrugated Galvanized Ash Can and Lid, the galvanized garbage can.  The Witt Company continued under family leadership for 120 years. 

    There are many other examples throughout Witt’s history which show that there can be much social good in running a business, particularly a family business. Many businesses have not pursued profit so narrowly as Mr. O’Brien seems to believe in one of the previous comments.

    What is exciting today is that the line between sectors is really blurring.  Solutions for pressing , complicated social problems are coming from many sectors and really will be most innovative and effective when the sectors - nonprofit/social, business and government -  work together and understand the gifts and talents each other brings to the table.

    By the way, I am George C. Witt’s Great -Granddaughter who ran Witt for almost 20 years.

    Marcy Wydman

  • BY Travis Kiefer

    ON February 25, 2010 01:01 PM

    Marcyrw,

    Thanks for your comments. I definitely agree and abload your great grandfather for doing so much for his community. It really is laudable. But when we look at big corporations, those with a lot of money, influence, and power, it seems fewer and fewer of them are really doing more than ‘pilfering’ their communities. There are notable exceptions, but on the whole, I think Mr. O’Brien and myself are standing quite firm in that you guys are the exception, not the norm. We need that to be the norm. How can we do it? How can we guide businesses/government/nonprofits more in the direction of being innovative, creative, thoughtful, and pushing the world forward? What fundamental changes do we need to make? Why did your great grandfather do what he did? Did he feel morally obligated? What does, ‘doing the right thing’ mean? How do we encourage more of it?

    I agree that there are great examples from all disciplines. Making a profit is generally an honest way of life - I don’t see anything inherently wrong with it. It’s simply not the norm that we improve all aspects of society through profit. What can we learn from George Witt to do this more?

    Travis

  • Darnell Shaw's avatar

    BY Darnell Shaw

    ON February 25, 2010 05:46 PM

    I think when someone is doing what he or she is really good at, then they do have a surplus of ideas and goods regardless of social obligation.  It’s all about the fun.  Improvement and being a world-class business is a fun pursuit that requires one to do something that benefits all of society, not for price or reward.  The path to greatness involves many, not just one individual.

  • BY Steffen Bethmann

    ON February 26, 2010 08:24 AM

    I have been debating about the same issue with a colleague today, trying to come up with a Social Entrepreneurship morphology (btw: if anybody has one please send it to me).

    No doubt - there are many great business entrepreneurs that have created huge positive social impact.

    However a simple formula works for me to distinguish in between business entrepreneurs (with high positive social impact) vs. social entrepreneurs: the “non distribution formula”. Meaning monetary profit will not go to owners / CEOs but be reinvested to reach the social goal. The entrepreneur may pay him/herself a regular salary but not get rich ...

    Klaus Schwab from the WEF just proposed that no owner / CEO of a company should earn more than 20 times of the lowest salary in the company. It might not be very useful to say: An entrepreneur can only have x times more income as his/her coworkers to be called a social entrepreneur - but looking at the private pay outs can give you a hint about the underlying mission

  • BY Luke Taylor

    ON March 17, 2010 10:21 AM

    Excellent article, no matter what your views! I have written a short 5-page paper analyzing the article and the whole field in general.  I would absolutely love you feedback! Thank you!
    http://bit.ly/98kq2t

  • BY John Brown

    ON March 25, 2010 04:20 PM

    I would recommend everyone read this article who’s struggling with the perception that you can’t make money and also improve the lives of others. It’s been our position that the metrics of being a .com versus a .org, something we’ve also struggled with as a startup, allows us the potential to expand further and thereby do more social good in the world. Being an entity that focuses on individuals in the third stage of their lives, we find it difficult to break attitudes ‘set in stone”. It’s my intention to share this with other third agers, hoping to better clarify our position of both “for profit’ and “helping others”.
    Thanks

  • Sabrina Qutb's avatar

    BY Sabrina Qutb

    ON March 25, 2010 05:07 PM

    Does anyone really believe that the social impact of traditional entrepreneurs is being overlooked?  By whom?  Recent bank bailouts stand as evidence that the health of our for-profit business sector is given first priority on our nation’s agenda, and Washington is teeming with business lobbies working to make sure that it stays that way.

  • Sabrina Qutb's avatar

    BY Sabrina Qutb

    ON March 25, 2010 05:09 PM

    Indeed all entrepreneurs are “social,” in the sense that their work has social ramifications.  These ramifications have been positive in some cases, negative in some cases, and in most cases a mixture of both.  By focusing solely on businesses positive influence on the community, Carl Schramm’s argument creates room for an “ends justifies the means” approach to business growth, which can of course lead to an increase in irresponsible, damaging practices. 

    To give an extreme example, ask any entrepreneurial drug dealer, and I bet they will be able to identify many ways in which their business benefits their employees and even their customers.  This does not erase the negative repercussions of their work on their community.

  • Was Hitler attempting to create social change? What kind of entrepreneur was he?

    I had a job in the non-profit sector for the last 2 years and recently took a job with a for-profit. Even after that change I’m pretty sure I’m the same person. And if I took a government job, I’m not sure I would change into whatever the stereotype is for somebody that works in government.

    I’ve never understood these govt vs. capitalism vs. non-profit discussions. Does anybody disagree that social good and social ill is created by all three sectors? I know it’s soft and mooshy, but at the end of the day America is Great, when America is Good, and if she ever ceases to be Good, she will cease to be Great.  The same goes for me as an individual, irregardless of what sector I work in.

    I realize Carl didn’t point out all the social ill that capitalism has created, but that article has already been written hundreds of thousands of times. It’s refreshing to have one article that points out the social good done by capitalism. Well done Carl.

  • I am what the West would call a ‘social entrepreneur’. Nobody in the so called “Third World” (a term I hate more than George Bush!!) would consider themselves social entrepreneurs, at least not until a few years ago. My investors built one of the biggest companies in India and their motive was not social change to begin with, but they ended up creating 15000 odd direct jobs in one of the least developed parts of the country. Now, one could market this as social entrepreneurship and say “..they increased the incomes of 150000 people and thus got them out of poverty”. Its just a spin at the end of the day. Now, a bunch of kids get excited to do social good out of college (great thing!!) and find a common sense of purpose when they fall under the umbrella of ‘social entrepreneurs’. So be it. Let us not create a science out of it. I also disagree with Dr. Albion’s broad definition of social entrepreneurship. It might apply to non-profit entities but not for-profit social businesses that need to stay respectably above the sustainable line.

    C Witts, quoted by his grand daughter, is a fine example of a good entrepreneur. I believe there are “good and honest” entrepreneurs who intend to not harm the society (if not do good!) as they build their businesses, and then there is the kind that cares only about profits. From the perspective of social good, it is either good or bad businesses. It is a balance on the triple bottom line metrics. 

    Also, ‘Social entrepreneurs’ are new (at least the way they are defined) and hence don’t have a track record to be compared to giant traditional businesses. Afterall everybody starts with doing good business. It is a matter of where they go with it. Too early for comparison.

    Cheers!

  • BY Neerja Raman

    ON March 25, 2010 10:08 PM

    All entrepreneurship is not social. Some is and some isn’t. In India despite high growth rates, the poverty divide as measured by opportunity (i.e. food, education and health-care) has actually grown. The issue is that the cost of development is disproportionately borne by the poor (think e-waste and toxic dumping) in the name of growth. And the poor are in emerging markets/developing economies/rural areas. So in theory while it is correct that all entrepreneurship is social, in practice, till there is equal opportunity for all such statements merely obfuscate. Sort of like quotas or affirmative action - ideally we wouldn’t need them. Till we get to ideal it is useful to draw a distinction between business as an enabler of social good and just business.

  • Jeremie Yoder's avatar

    BY Jeremie Yoder

    ON March 25, 2010 11:01 PM

    What interesting and polarizing comments this article has spawned. Unfortunately the comments have moved further and further away from the content of the article and have focused more and more on the content of others’ comments.

    When we consider truly and completely the role that many intelligent men and women have played in the building of our country, it would be remiss not to acknowledge the social value their pursuit of personal wealth and gain has brought to people here and abroad. But it seems somewhat simplistic by my estimation to consider an entrepreneur a “social entrepreneur” simply because the byproduct of their enterprise is some social benefit. As Net Impact so often reminds us, in order to be socially responsible, we must do well AND do good. 

    There are social benefits to doing well (increased tax base, greater standard of living, jobs, etc.), and both the author and people who have posted highlight a number of these contributions; but it seems to me that you, Mr. Schramm, are suggesting that the ends justify the means. What a odd bastardization of the term it seems to me to refer to such men as Andrew Carnegie and John Rockefeller as social entrepreneurs simply because one could argue that society benefited from their contribution. The motivation for starting a business and the way one conducts his/her business must be as much a topic of consideration as the byproduct of their business pursuit.

    Per my understanding of social entrepreneurship, the question is less of a “.com” vs. “.org” and more of a “social objective” vs. “for-profit objective.” These pieces are certainly not mutually exclusive, but, by the same token, they are certainly not the same thing.

    Traditional entrepreneurs can and often do accomplish social objectives, but let us not confuse them with social entrepreneurs.

  • BY Marilyn Bancel

    ON March 26, 2010 02:35 PM

    Mr. Schramm’s interesting version of business history aims at a non-existing target. The term “social entrepreneur” emerged in the late ‘90s, hard on the heels of “venture philanthropy.” The terms were both created by people working towards getting nonprofits to plan in ways that were more intelligible, meaning more measurable, to capitalists who wanted to make grants. The thinking was that by asking nonprofits to use bottom-line-like language, formats, business plans, and goals, suddenly do-gooder, pro-active capitalists would be able to make clear-eyed evaluations of all those maddening nonprofit proposals and make grants (now “investments”) to organizations and projects with much more confidence that there would be a social ROI they could measure. And in some cases it actually works, making the “investors” happier. That’s the whole story.

  • Horsnell's avatar

    BY Horsnell

    ON March 30, 2010 06:11 AM

    For me, social entrepreneurship is defined by an explicit intention to make the world a better place, and an execution that backs that intention up.  This is not to say that “business as usual” cannot and does not have definite benefits for society; the author’s (albeit selective) history points this out.  But business as usual does not, by definition, require an overarching imperative to make a better world, and frequently business as usual does not make for a better world - a fact that the author conveniently leaves out of his one-sided presentation. Social entrepreneurship (enterprise, business - whatever you want to call it), however, does require this imperative.  So let’s not obfuscate the discussion by saying that “all entrepreneurship is social”, because it simply isn’t true.  A casual review of the business news of the last two years will provide ample evidence of this.

  • Jacob Samuelson's avatar

    BY Jacob Samuelson

    ON March 31, 2010 09:05 AM

    I want to echo the smart comments from Jeremie Yoder.

    It is clear to most rational observers that those who vilify markets, globalization, and “regular entrepreneurs” can quite often overlook the great benefits these actors and systems create. It is true that the indirect and unintended results of the actions of soulless MNCs and profit-seeking local entrepreneurs, whose only concern was to take advantage of profit opportunities, have lifted millions out of abject poverty. We need a more balanced and inclusive view of how development outcomes are achieved and I think this article does much to remind us of this fact. It has been and never will be the case that “social entrepreneurs” – often associated with entrepreneurs with businesses that provide critical goods and services that directly serve the needs of the poor – are the only ones helping to create a world that is more equitable, just, and prosperous.  We should not be so blind to believe this view and ignore the good of what most people consider “regular entrepreneurs”.

    But I feel in presenting the other side of the argument, we risk drifting into the similar ideological fundamentalism that ignores important nuances. No all entrepreneurs and businesses have profit and social good aligned - and not all entrepreneurs do “good” for society.

    You cite Nordhaus in saying, “Entrepreneurs typically generate a surplus benefit above and beyond the profits they reap” - or positive externalities -  in their pursuit of profit.  But shouldn’t we also consider negative externalities from these entrepreneurs? Many businesses destroy jobs, just as they can create them. Entrepreneurs can make profits by asset and resource stripping. Entrepreneurs can threaten the sustainability of our planet with their waste and emissions. Where legal systems are poor, entrepreneurs can kick landowners from their land or restrict their access to natural resources, causing many people incredible harm in pursuit of profit. Entrepreneurs can prey on information asymmetries to make money by deceiving customers. I won’t open up this can of worms as it will cause a whole new debate (!), but entrepreneurs and firms that create “financial innovation” can create risk rather than help us deal with risk.

    Amartya Sen has been on a mission since the financial crisis, to remind us of the real messages of Adam Smith (some of this can be found in his 2009 FT Op-Ed: http://www.ft.com/cms/s/0/8f2829fa-0daf-11de-8ea3-0000779fd2ac.html?nclick_check=1). In doing our homework for us, Sen reminds us that Smith argued for regulations to protect society from the damage of speculators who can cause great damage in their pursuit of profit. Many of the “prodigals and projectors” (Smith’s language, not mine) would self-identify as regular entrepreneurs.

    We should resist the urge to over simplify and dismiss on both sides of the table. Thank you for starting this conversation and making all of us think harder about these issues.

  • Geri Stengel's avatar

    BY Geri Stengel

    ON May 3, 2010 11:51 AM

    Entrepreneurs can definitely contribute to the betterment of society and need to be acknowledged for that, but I do see a difference between entrepreneurs and social entrepreneurs as I’ve detailed in this blog post http://ventureneer.com/vblog/what-social-entrepreneur I als.o believe that any small business, not just the ones that innovators, can play a role in the betterment of society by being socially responsible, as I have described in this blog post http://ventureneer.com/approaches-business-social-responsibility .

    But, while I applaud railroad baron Cornelius Vanderbilt, meatpacking magnate Gustavus Swift, and software tycoon Bill Gates in creating jobs and industries, I would not include them on the list of social entrepreneurs. The plight of meat-packers in the Chicago stockyards was well chronicled in Upton Sinclair’s The Jungle. Any social good that these magnates did was inadvertent, not intentional.

    Those business leaders you cite wrung every drop of sweat they could from workers at risk of the workers’ lives nor did they care about the ill effects—pollution, destruction of natural resources and habitats, etc.—that their enterprises wrought. (Gates does not fall into this category in the same way as others did because he has been constrained by government regulations). They did not balance profit with people and/or the planet. They were not trying to solve a pressing social problem. In fact, they created as many problems as they solved. It was left to nonprofits, activists, real social entrepreneurs, and governments to clean up and control their messes.

    Sincerely,
    Geri

  • Christel E's avatar

    BY Christel E

    ON July 20, 2010 11:59 PM

    I agree with Geri.  Though it can be articulately argued by Carl that any entrepreneurship is inherently social, there must be a clear distinction between those entrepreneurs who are taking their business savvy skills with the specific intent to combat a social ill and those who see a financial opportunity and pursue it.

    The determination of whether an entrepreneurial venture is deemed social or not, in this context, is found in the results of the work.  That is to say, at the end of the fiscal year the question to be answered is not, “How much profit was made?” but rather “How many people have truly benefited from the venture in terms of health, wellness and quality of life other than adding another wigit to their collection?” 

    It is this type of distinction that can drive those with the passion towards bettering humanity to indulge their entrepreneurial spirit and not rely solely on governments and non-profit work to do it.

  • BY Rebecca Stone

    ON February 8, 2011 09:56 AM

    Hi Carl! First off, I’d like to say that I just got done reading The Entrepreneurial Imperative. It was positively fantastic.

    Anyway, I also enjoyed reading this article. It really goes to show you that everything has a domino effect. One event always leads to the next—for better or for worse. I also agree that being an entrepreneur not only means financial gain, but striking social progress. Trade has and always will be the most important factor in technological development. Hands down. The faster we’re able to get to places, the faster we’re able to exchange goods and ideas. Now, the internet and social media is making entrepreneurship even more important than ever. The internet isn’t feeding people, but it’s spreading ideas. Also, capitalism isn’t a crime—like most people want it to be.

    Interesting viewpoint:

    http://www.newsrealblog.com/2009/onboarding/2009/03/23/capitalism-did-not-cause-the-financial-crisis/

    Anyway, thanks for sharing the knowledge, Carl. I’ll certainly be coming back. smile

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