Scaling Social Entrepreneurship: Lessons Learned from One Laptop per Child
The following is the Introduction to my new book on scaling social entrepreneurship, which will be published shortly and available on Amazon.
From September 2009 until April 2013 I served as the CFO of One Laptop per Child Association. The mission of OLPC is to provide a modern education through a connected laptop to every child in the developing world. Nicholas Negroponte, Seymour Papert and several other professors and staff at the MIT Media Lab founded OLPC in 2005. Nicholas was the co-founder of the world famous MIT Media Lab and Seymour, his colleague at the Media Lab, was one of the leading authorities in the area of how to facilitate child learning through computers.
When Nicholas founded the MIT Media Lab he adopted two principles that established the culture of the organization:
1. “Demo or die”
2. “Do the impossible”
“Demo or die” basically determined the type of research that was desired. Rather than writing academic papers, students at the Media Lab were required to develop working prototypes, either physical working models or working computer code for computer-based solutions. Papert’s views on constructionism and constructivism in learning probably contributed to this approach. Alan Kay and Marvin Minsky, MIT faculty members of considerable distinction, may have also influenced this tenet. “Do the Impossible” defined the types of problems that were acceptable to work on. Students were encouraged to work on large, difficult problems where the technology for a solution did not already exist. This focus on large problems is consistent with the concept in entrepreneurship to focus on large market opportunities, although at the Media Lab it was understood that the sponsors of the Media Lab might license and commercialize the new technology developed.
This orientation toward large, difficult problems guided the philosophy and development of OLPC. OLPC’s mission is to provide a laptop to 1.5 billion children in primary schools throughout the world. To achieve this end OLPC needed a solution that would scale on several dimensions. In one of our occasional discussions I said to Nicholas that OLPC, although it originated as a donative non-profit, was a great example of social entrepreneurship. Nicholas responded, “social entrepreneurship does not scale.” As was the case several times, Nicholas made a single statement that prompted me to go off and think about an issue — sometimes for several years — which resulted in this book. [Note: Nicholas’ view of the limitations of social entrepreneurship is based on a belief that to achieve scale in solving social problems an organization had to engage national governments around the world. Such governments were much more likely to “partner” with non-profits that did not have the profit motive of an entrepreneur.]
Prior to OLPC I spent 30 years working in the private sector and twenty of those years I worked outside the U.S. I have worked in over fifty countries, mostly in Asia and Latin America, and I lived in Peru and Indonesia. One advantage of spending so much time overseas is that I was able to first hand observe a country’s development over a significant period of time. With the exception of China, every country that I visited beginning in the 1980s exhibited a significant improvement in the standard of living by the start of the 21st century through the capitalist system of free enterprise. The examples I would cite to demonstrate my point would include Mexico, Singapore, Korea, Taiwan, Peru and Thailand, all of which were very undeveloped countries in the early 1980s and today are vibrant economies with a significant improvement in the standard of living. While stable governments, democracy and globalization were all contributing factors in certain countries, I see capitalism as the one common factor in the countries I cited and in many other countries. Based on my own experience I have great confidence in capitalist, for-profit companies as a way to improve peoples lives anywhere in the world and thereby address social needs.
During the financial crisis of 2008 when the world economic system reportedly came close to collapse, the issue of the morality of capitalism re-emerged as a popular topic and encouraged the growth of social entrepreneurship. History often paints capitalism as fundamentally amoral, lacking a moral system. Milton Friedman’s now famous dictum that the purpose of a corporation is to maximize shareholder returns did much to popularize the absence of morality in capitalism. However, to criticize capitalism for a lack of morality based on the egregious behavior of a few individuals is comparable to criticizing the social system of “government” because of the behavior of Hitler or Stalin. It is the people operating the social system that may be immoral and generally not the system itself.
My belief that capitalism can behave morally and make a social contribution is in part based on the nine years I spent working in Indonesia. Indonesia is one of the poorest countries in Asia with per capita income of $600 or about $2 per day during most of the time I lived there (1990–1999). With a lot of other people helping, I built a billion dollar retail company in seven years that purchased $700 million dollars a year in locally manufactured merchandise, created 20,000 new retail jobs, built out one million square feet of retail space per year and was one of the largest private sector tax payers in the country. These activities had a positive social and economic benefit beyond just our employees for thousands of other workers and their families in Indonesia. No socially motivated NGO, multi-lateral bank or non-profit organization improved the number of lives we benefited operating a for-profit company. Perhaps only the Indonesian government affected more people than this private retail company. The point here is not to toot my horn but rather to show the positive impact in a poor country of a large, private, for-profit company with no explicit ”social” mission.
This confidence in the capitalist system instinctively makes me suspect of the need for the adjective “social” to modify entrepreneurship. (This may be similar to the debate in microeconomics over whether “utility” needed the modifier “marginal”.) “Social” to modify entrepreneurship implies that this form of entrepreneurship is more focused on societal, economic and environmental problems than traditional entrepreneurship. Also implied is the idea that creating social value is better or preferred to merely creating economic value. Setting aside the problem of how one might measure “social” value, I would question the premise that we even need a distinction for the social value component in social entrepreneurship, particularly given my experience in Indonesia.
Despite my reluctance to acknowledge “social” as a meaningful distinction in entrepreneurship, I have organized this book on social entrepreneurship to develop the following themes:
· Why social entrepreneurship emerged as a new “business model”, which includes an argument for how to combine capitalism and morality as an integrated approach (Chapter I-The Emergence of Social Entrepreneurship in the 21st Century)
· The government’s defined role as the sole provider of “public good” has been relaxed, opening the door for the private sector to provide social services (Chapter II- Government and the Public Good)
· The non-profit movement has influenced the development of social entrepreneurship, resulting in social entrepreneurs erroneously electing non-profits status. Such an election restricts access to capital markets (in my experience) and deprives them of a key resource to scale their organizations to address worldwide social problems (Chapter III- Non-profit Foundations and Their Influence on Social Entrepreneurship)
· Social entrepreneurship can be defined in economic terms without the need for normative judgments. Using the framework of value creation-value capture, social entrepreneurship is defined basically as a decision to transfer value to the end user (the “social” benefit) rather than a shareholder (Chapter IV- Social Entrepreneurship Defined)
· Social entrepreneurship has three basic models where the transfer of value is coincident with an exchange (sale). To think of social entrepreneurship, as commonly defined, as combining social objectives with commercial practices is inadequate. (Chapter V- The Three Models of Social Entrepreneurship)
· Social entrepreneurship should address large, worldwide problems, wherein lies the requirement for scaling (Chapter VI- Social Entrepreneurship Should Address the Large Social Problems)
· To scale a social entrepreneurship venture (SEV), “business model” thinking provides a useful methodology or process based on my experience in both the non-profit and for-profit sectors. The parts of a business model for an SEV are described in detail with examples. (Chapter VII- Scaling Social Entrepreneurship)
· The opportunity for social entrepreneurship may have arisen due to the current shortcomings in capitalism and its executives, but capitalism and traditional entrepreneurship have made a significant contribution to addressing social problems worldwide. (Chapter VIII-The Conclusions)