socially marketing

The idea of applying market savvy to the social sector is still a pretty young one, but is growing up fast. We can now see social entrepreneurship, one of the more enduring labels attached to this idea, becoming institutionalized - for example, in our institutions of higher learning.

The Catherine B. Reynolds Foundation is sponsoring a Program in Social Entrepreneurship, which they define (rather nicely I think) as

“a form of public leadership that maximizes the social return on public service efforts while fundamentally and permanently changing the way problems are addressed on a global scale.”

Reynolds offers full scholarship and other support to the most promising future social entrepreneurs it can find at the two universities it endows: The Kennedy School at Harvard University, and The Wagner School of Public Service at NYU.

I know a good deal about this program, since I am a proud and active alum of Wagner myself, and was pleased to serve as a judge for selecting the 2008 Reynolds fellows earlier this month.

This was a tough gig - largely because by the time we judges came along, the huge number of applicants was whittled down to the most promising four score or so. Such pre-screening guaranteed that pretty much all the candidates we saw demonstrated a clear vision of their future as social entrepreneurs, on top of a history demonstrating their clear ability to walk their talk.

I see a trend, and I like it. In just a few short years, social entrepreneurship has migrated from the fringes of social science to its very core. As a result, some of our most promising young minds are incorporating its ideals into their own plans for their place in the world - and from what I’ve seen of those minds, the world will be the better for it.

Back to the harsh reality of limited resources, only a few of the candidates I saw made the final cut to become Reynolds Fellows. This is of course sad, but there is this consolation: who better than these budding social entrepreneurs to tackle this classic problem of too many worthy social causes and not enough money to support them?

I have trouble just keeping up with the nonprofit and philanthropy blogs I already follow, let alone the new kids on the block. But when I heard about a blog called Philanthropic Crap, I admit I was intrigued.

The first post I read there was a review of Michael Edwards’ paper called Just Another Emporer (link here) which apparently “tears social entrepreneurship a new asshole.” (sassy language may not be the high road to getting attention, but it is effective

Expressed in less colourful terms, this paper does indeed call to task the social entrepreneurship model, incarnated here under the somewhat unappetizing label Philanthrocapitalism.

We here at socialmarkets believe strongly in transparency, and relatedly, in presenting a fair and balanced perspective on the social capital markets we champion. Mr. Edwards paper is intelligently presented, and at well over 100 pages, certainly well-considered. So if you’re looking for a counter to some of the arguments we present here, it’s a good place to go.

Listen to both sides of the story, and see where you land…

I know that social capital markets are not for everyone. I’ve listened to and spoken with many of its detractors in both real and virtual space, and usually find such conversations constructive. But once in a while I’m bumfuzzled by arguments from seemingly reasonable people that slide right off the rational rails.

Yesterday I was directed to this recent review of social capital markets (SCM) on the Gift Hub blog. I found it far more instructive than constructive, at least as an example of the anti-SCM sentiment that borders on the zealous.

In a quite short post, Gift Hub finds space to liken social capital markets to alchemy, and conjures up both William Blake and Jesus to fuel the fire. I find this and similar discounts of SCM both heavy-handed and surprising. SCM’s approach to philanthropy is new and different, but it’s not evil, and can play nicely with others - which begs the question: why can’t we all just get along?

Decisions of charitable giving are as complex as the humans behind them, and as unlikely to be black or white. There are countless considerations behind these decisions, and social capital is one potentially valuable piece of that puzzle.

Even stepping out of the gray, I acknowledge someone could use social capital as the only basis for their selection of charity, just as they might follow only their heart, minister or Ouija board. Giving to charity, which is for now and the foreseeable future a voluntary enterprise, has room for all the above.

Social capital markets is not alchemy or voodoo, but rather a thoughtful model for incorporating some market science into the art of giving. It raises the visibility of social benefits that are often difficult to see, and presents those benefits in familiar, easily understood terms. It is a supplement to, not a substitute for, the grand carnival that is charitable giving.

The social sector above all others is a place where intolerance should not be tolerated. I dunno about Blake, but I believe Jesus would second that emotion.

A recent post thread at Tactical Philanthropy on the topic of measuring nonprofit effectiveness caught my attention. It discusses the issues related to recent (and possibly over-enthusiastic) efforts to apply scientific measurement techniques to help evaluate the work of nonprofits. I could not resisting throwing in my $0.02, which is reproduced below (and can also be found in the originating post here):

It seems to me a recurring theme of the ‘metrics mania’ debate is that it involves both art and science. If the ‘art’ position is that non-profit value defies objective analysis, and the ’science’ is that non-profit worth can be reduced to equations of input and output, I expect I’m somewhere in the middle.

This is surprising, since in the interest of full disclosure, I should say that I am co-founder of socialmarkets.org, where donors “invest” in nonprofit projects based on their SROI (Social Return On Investment.) This sounds like pretty hard science, but there is actually quite a lot of room for art to soften the edges.

The stock market analogy already seen in this thread is spot on. Apple’s stock price is influenced rather than defined by the financial science that slices and dices its cash flows. The beauty of a market is the marvelous job it does boiling down a large, complex set of valuation inputs into a single output called “price”. This number is useful on both an absolute scale and relative to other offerings in the market.

In a testament to the wisdom (or lunacy) of crowds, Apple’s stock price reflects the collective opinion of financial analysts, status-conscious teens and everyone in between. The potential to harness the same power to “price” The Red Cross or your local community foundation seems both possible and useful to me.

There are plenty of donors looking for a “best-bang-for-the-buck” (i.e. maximum SROI) approach to non-profit investment, and right now there is not much useful data out there for them. The success of sites like Charity Navigator are a testament to the need for metrics, but they only tell potential donors about what nonprofits spend, rather than what they accomplish. Surely we can do better than that.

Those with a less scientific approach may not find metrics like SROI as compelling, but still potentially useful. Consider Albert Ruesga’s story of the high-risk, low-return homelessness project that he presents as an argument against metrics. This is where the difference between the sectors becomes significant.

For starters, unlike the for-profit model, there are often donors willing to invest in hard-luck nonprofit cases - as they ultimately did in Mr. Ruesga’s example. More importantly, since nonprofit metrics is still a new field, we can - and should - redefine the notion of return to more accurately capture the total social value being added. That seems to be the most constructive cross-product of art and science in this space: a more artistic approach to the science of metrics.

The social capital marketplace that socialmarkets advocates is a relatively new idea, but is clearly gaining traction - and visibility.

We were delighted to see this article in the Financial Times by Sean Stannard-Stockton (who also runs the excellent blog at Tactical Philanthropy) describing a future where social capital markets are the norm, not the exception, across the nonprofit sector.

His vision offers a model of nonprofit funding that closely mimics today’s for-profit financial markets, perhaps more closely than even we would have guessed. It includes the somewhat hyperbolic story of a nonprofit that defaults on a billion dollar bond issue, shocking the social capital marketplace and tightening credit across the sector.

While such a story may exaggerate the point, it certainly illustrates the potential power of the social capital market model. It also reminds us that such a market is subject to both the rewards and the risks inherent in its successful implementation.

Here are a few more features of this proposed future which resonated particularly strongly with us:

• Turning the tables: Google, IBM and Exxon don’t have to explicitly lobby for investors. There are plenty of third-party agencies offering potential investors both the data they need to make an informed decision and the mechanism to invest once they do. Nonprofits can reap the same benefit from similar tools in their own sector, allowing donation dollars to come looking for them rather than the other way around. Music to our ears, as well as to the legions of nonprofit staff who spend way too much of their time scrambling for financial support.

• Not your father’s marketplace: The social capital marketplace will inevitably differentiate itself from the financial marketplace it is modeled upon, a direct result of the people behind the market. The fortunes being sought by social capitalists go beyond the simple dollars of their finance counterparts, including the human, environmental and spiritual enrichment that defines multi-bottom-line accounting. The common goal of greater social impact will motivate both donors and nonprofits to share their experiences and related information, forming the tight community that keeps the social capital markets humming.