For Such a Time as This?
And who knows but that you have come to your … position for such a time as this? The Book of Esther (4:14b)
The world as we knew it is gone forever. I know that’s a stark observation, but with the phrase “uncharted waters” having rocketed to the top of the cliché hit parade, it also seems to be quite clear that the notion of a return to the way things were is quickly fading into the rear window.
The aftershocks of this pandemic will ripple throughout society for generations to come. And anyone who thinks they know how it will end is just guessing. Social systems will undoubtedly change, and whatever we currently recognize as an economic structure will be nothing more than a wistful memory. The only thing that seems certain is that we will need each other more than ever.
For the past fifteen years, I’ve been part of a movement known as Social Entrepreneurship, which has the audacity to claim that the spirit of innovation that has driven global capitalism can be redirected to make the world a better place — and reduce the economic burden of social support systems at the same time. Gutsy, sure. But as I watch and listen to world events from my personal isolation pod, I’m starting to think that it may be our one best hope to emerge from the current catastrophe.
While the debates over economic stimuli continue, there are many making comparisons to a post 9/11 economy. I was in the middle of building a technology company at that time, and I can tell you first hand that the investment capital market dried up overnight — and that was after an event that really deeply affected only the American economy, and only interrupted commerce for about a week. With economic activity already ground to a halt around the world for almost a month, it seems reasonable to think that there won’t be any sort of risk-based capital available for quite some time — making the current model of for-profit innovation unworkable going forward.
As individuals and business owners tighten their belts (voluntarily or by government decree), the loss of disposable income — the font from which charitable donations flow — will force many organizations that provide vital social services to close up (think about your local soup kitchen, homeless shelter or rehab center). And while tax holidays are certainly vital for those living on ever-tighter budgets, loss of government revenue (a key factor in the financial health of many nonprofits as well as a direct provider of care for others) may cause funding for social services to be reduced or curtailed; just when the need for social support will be at its highest.
The pride that many hold in having built an innovation economy is well-founded. Advances in technology have driven substantial improvements in healthcare, communications, and logistics, to name a few. Global poverty is at record low levels. But in these turbulent times, we are going to need to channel that pioneering spirit in a new direction.
The current popular notion of Social Entrepreneurship began less than fifty years ago, and originally centered around the idea of a nonprofit developing a way to earn income that was free from the perceived negatives of grantmaking and fundraising; usually through the sale of some sort of product or service (one of the great early wins was the Greyston Bakery in the Bronx, NY; which employed folks returning from challenged circumstances, training them in a commercial bakery that supplied the brownies to Ben & Jerry’s Ice Cream).
More recently, the field has begun to move towards the notion that an effective social service can reduce the economic burden on society and should be fairly compensated for doing so. The underlying logic is that social programs should produce positive, measurable outcomes (an increase in childhood literacy, or a lower incidence of diabetes, for example) in a specific population (such as a challenged neighborhood in a designated city) and be rewarded when — and only when — that outcome is achieved. This somewhat bold idea is currently referred to as Pay For Success and has been slowly growing in popularity in nonprofit and social innovation circles for some time now.
The tools for achieving these lasting breakthroughs are quite familiar to any entrepreneur and include understanding the needs of your customer (or constituent), quickly developing prototype solutions and deploying them in an iterative fashion to gain feedback and refine the model, and quickly adjusting as needs and conditions change.
Until now, Social Entrepreneurship has been slow to grow. Popular (but incorrect) notions of prohibitions on earned income for nonprofits are still prevalent. Existing legal structures are insufficient and force the entrepreneur to make choices that may incur additional costs down the line. Growth capital has been reluctant to concede a slower and/or lower return in exchange for a positive social outcome. And the management of an enterprise that is seeking to produce economic, civic and social value all at the same time is no easy trick. But there are some among us who are building these brave new ventures, and others who are developing the training and support systems needed to help these organizations grow. Perhaps, unbeknownst to us, we’ve been preparing for just such a time as this.
The current funding model for this process goes by the somewhat awkward name of Social Impact Bonds, where a private investor puts up the money to launch or grow an effective social program, with repayment coming from the net reduction in government expenses. Tricky, certainly. Complicated, perhaps (although the underlying math is pretty straightforward). So far, Social Impact Bonds have been slow to take off (mostly due to a lack of political will), and may not be the right answer going forward as investment capital of any sort may be hard to come by. But there can be little doubt that effective social programs are going to be in high demand for the foreseeable future, and individuals that can develop these programs are likely to become the leaders in moving our society on to whatever the new normal may look like.
The economic trifecta of weakened capital markets, reduced charitable and philanthropic support and tightly constrained government budgets suggests that the dominant value proposition going forward will be enterprises that can show how they can improve the human condition while reducing societal costs over time. In fact, it may be our best hope to save whatever is left of civil society.
