All Entrepreneurs are “Social” Entrepreneurs

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A new hip trend has entered the American business world of late. It isn’t a more fuel-efficient Ford, or an improved credit card rewards plan. It isn’t a smarter iPhone or a thinner Nook. It’s an alternative business strategy called social entrepreneurism and it can best be understood as the creation of ventures that explicitly value social outcomes above financial returns.

This approach encompasses a vast array of charitable ventures, domestic and international-minded. For example, VisionSpring works to provide third-world people with affordable eyeglasses. d.Light serves India and Africa with solar-powered light devices. Pacific Community Ventures finances low-income-area start-up companies and lobbies on their behalf. There are many other examples.

Although these social entrepreneurs’ services and audiences vary greatly, they all seek to “make a difference” in the lives of low-income individuals. Compared to traditional, profit-making companies, social entrepreneurs encourage profit-giving as a crucial ingredient to global improvement. They believe that giving is the most effective way to improve the world. For example, consider Visionspring that claims:

A key characteristic of a social enterprise is that earnings are reinvested into the organization’s operations rather than distributed to shareholders.

But in believing this, social entrepreneurs fail to recognize the value of an activity that has resulted in lifting untold burdens from the backs of countless people, making their lives easier and their wallets thicker. Consider one organization engaged in this activity that allows millions of people access to affordable, life-sustaining goods every minute of every hour of every day. Groceries, clothing, toilet paper, toothpaste, batteries, Blue-rays, Xbox—tens of thousands of products—essential or desirable—are all available in one organized location.

The activity in question is business, and the exemplary organization is Wal-Mart, an idea brought into reality through the efforts of one self-interested businessman, Sam Walton. Since its founding in 1962, Walmart has expanded to over ten thousand storefronts in twenty seven countries. Over two hundred million purchases are made in those stores every week. Walton’s passion for improving his own life by trade with others resulted in a titanic achievement that dwarfs all the social entrepreneurs’ achievements combined. Social entrepreneurs ought to study Walmart’s successful business approach of wealth-generation, not redefine the formula of success to mean: charity first, earning second, if at all.

But what is wrong with an individual creating something new that has economic value to customers? Why isn’t their passion for improving their world celebrated with as much gusto as the social entrepreneurs?

For example, Walmart is routinely attacked for supposedly ruining communities and encouraging shallow materialism, rather than praised for the increased abundance it has brought to millions of customers. This ingratitude stems from a misguided belief that if someone profits, someone else must suffer in turn. But this is not true. When we buy food from a deli, it is not only the deli that benefits. We too enjoy the purchased products. Trade is mutually beneficial to all parties and provides an exchange of value for value.

Temporary handouts provided by charities do make a difference to the lives of some. And so many contend that profit-givers are the true heroes—“social entrepreneurs” who provide free products to needy people. But the very act of attaching “social” as a prefix unjustly robs traditional entrepreneurs of recognition, implying that they do not benefit society. This ignores the fact that charity is possible only if there are businesses that create the wealth to be handed out in the first place.

One cannot celebrate enough the value that profit-seeking entrepreneurs contribute to our lives. The most important “social entrepreneurs”—the problem solvers who lift up society—are the profit-makers, not the profit-givers. It is only through the ideas, the work, and the products of moneymakers that hundreds of millions of people can enjoy a life of health, happiness, and leisure in the long run. Their productiveness is a virtue that ought to be celebrated by everyone.

Image courtesy of Flikr user kozumel.

 

Posted by on April 14, 2012. Filed under Business & Economics, Spring 2012. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry
  • James

    Very focused and inductive. Your clearest I have read so far!

  • Connor Warden

    Marvellous. I don’t think I’ve seen this explained better.

  • Filip

    Having said this, there are “money-hungry” business people. A moral distinction should be made. How does this look if put up against the article “Steve Job’s Philanthropy – only a side-effect”?