Issue to be Considered for Entrepreneurship -5

Are Social Ventures Different From For-Profit Ventures?

One simple answer to this question is that some ventures declare themselves for-profit by explicitly incorporating themselves as such and subjecting themselves to the discipline of markets--or price mechanisms of one sort or another. Others eschew the necessity to seek a positive cash flow at the end of the accounting year and deny any individual the residual claims of ownership at the end of the day. Several compelling arguments have been presented for the separation between for-profit ventures and other types of organizations--including market failure, the psychology of giving, the biblical equation of money with evil, cultural and historical dictates against profiting from the unfortunate, and of course, sheer habit (Bator, 1958; McKean & Browning, 1975; Wolf, 1979; Zerbe, Richard, & McCurdy, 1999). All these arguments and even the very question "Are social ventures different from for-profit ventures?" however continue to perpetuate a dichotomy that may not have served us well in the past and may hinder the promise offered by our project of spelling out the entrepreneurial method.

Consider the fact that some goods and services are set aside to be produced through the for-profit system and others through either governmental or some form of not-for-profit system. And as a practical matter, this difference usually means that entrepreneurs have to deal with at least two different systems of funding and accountability when endeavoring to stitch together the local optima in social choice. For practicing entrepreneurs this further means that valuable skills acquired in the production of wealth cannot smoothly be transferred to the production of social welfare. For example, knowing how to make a pitch to investors for funding a casino does not always translate into compelling arguments to private foundations for funding child healthcare. Nor can the creativity and passion that drive people to save the earth or protect children be easily leveraged to produce economies that can nurture and sustain them after they have been seized from the potential ravages of climate change or disease and poverty. That is why we find that societies with large well-meaning public sectors are not always leaders in job market growth or rapid commercialization of inventions. And as Mancur Olson demonstrated, countries with the most markets are often the ones with large numbers of unresolved social problems (Olson & Kahkonen, 2000). The friction between for-profit and nonprofit costs a lot more than individuals and societies can afford--not to mention being theoretically unnecessary and practically harmful to the very causes it is supposed to serve. Even Mohammed Yunus calls for a re-labeling of nonprofits to nonloss enterprises. We would like to point out that all enterprises are de-facto nonloss for when they run out of positive cash flows, they, in fact, cease to exist.

But Professor Yunus' call for relabeling is not to be taken lightly. History often pivots on a single word or phrase--slavery, kismet, God, royalty, government--battles are waged and debates seem endless--until another word turns the pivot in another direction altogether--equality, choice, reason, evolution, democracy, market. It appears to us we are stuck for the moment on profit--for and against. May we suggest an easier pivot? The word is investment.