Is the Social Economy built on air?

Rod Schwartz (of ClearlySo) led an online discussion in May, 2011, for Social Edge -- a program of the Skoll Foundation -- questioning the efficacy of an industry built on a business model requiring grants and gifts to make an impact.

This is a view I share for many reasons, not the least of which is that entrepreneurs depending on SBEI grants/gifts often end up putting more attention on begging for dollars than actually performing the work they feel called to do.

We at MissionLaunch think missions must be sustainable -- that is, they generate through their service activities the means to carry out the mission, as well as adequately support those involved in it.

And by adequate, we don't mean subsistence. We mean enough to sustain your families and the lifestyles reasonably needed to live in this world with peace and ease. With enough left over to sock away for a rainy day and retirement.

You know. Profit for a purpose.

Anyway, you know where we stand. Here's where Schwartz stands. By the way, the Skoll Foundation sponsors perhaps the world's largest gathering of social entrepreneurs along with various initiatives to support the industry.

Here's the link to the URL where he states his views and kicks off the discussion: http://www.socialedge.org/discussions/business-models.
The article is reproduced below.

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"I am no stranger to controversy, and often welcome it, but as I set out to write this piece I greatly fear it will be mis-interpreted. Yet, I have a serious and profound concern that we in the social business, enterprise and investment (SBEI) sector have created something built on air. Rather than accept and address this problem, we seek to deny it and pump in more air—this is not sustainable.

"We wax eloquently about "harvesting the power of markets for social benefit" and the merits of sustainability. We ooze in lavish detail about the wondrous alchemy of social entrepreneurship (I am guilty here too). The sad reality is that much of this is a myth. We have had our share of colossal failures and even many of the sector's "success stories" are chronically or structurally unprofitable enterprises whose survival relies upon grants, subsidies and beneficially mis-priced contracts. And those of us, like ClearlySo, who make up the industry’s infrastructure, are far from sustainability.

"I would submit that the core problem is that although SBEI solutions look like they could play a key role in a future economic system, the scale of actual activity is still depressingly small. Our enthusiasm has got the better of us (yet pioneers are nothing, if not optimists). The economy is shifting our way, but too slowly; however, the infrastructure to support this transition requires scale. Programmes and projects like the Big Society Bank (a bank being set up in the UK to “stimulate the social investment market”) may address this, yet some trends still worry me.

1. First, I am always nervous when people say things that are just untrue—even if in a good cause. The reality is that the sector is not yet sustainable, no matter how much we wish it were so.
2. Second, I believe this situation may be worsening. This is in part due to economic circumstances, which will reduce the availability of grants and favourable contracts, especially with government.
3. Third, and perhaps most worryingly, there are too few signs of progress towards sustainability. Instead of putting the sector onto a proper footing, we hear calls for more subsidies and grants—thus building unsustainable organisations into bigger ones, with inevitably bigger repercussions when they fail.

"Instead the sector needs to become sustainable. This means proving its value in the marketplace, paying reasonable (and that does not mean grotesque) wages, expecting to deliver value for money, getting (and paying for) valuable advice and being more professional. This does not mean becoming like the mainstream, but we have to achieve the right balance.

"How can the sector make this transition without being corrupted by market forces?

"What is the process by which fair and reasonable wages can be set—or will we drift inexorably into the problems which afflict the mainstream economy?
Are my concerns above over-stated and should we try to build a whole economy on a different basis? Is this feasible?"

We recommend reading the many comments to his discussion here: http://www.socialedge.org/discussions/business-models/archive/2011/05/05....

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That's his view. You know ours. But you're the one on a mission. So what's yours?