2012-02-16

Co.Exist

How To Solve The Good Business Generation Gap

The old model was to make tons of money and then give back (see Bill Gates). The new model is to build a company that gives back as it makes money. How can the old guard and the new guard work together for maximum impact?

We are at the start of a journey. But there is a new breed of entrepreneur who is accelerating the speed of this journey and leading us down an exciting new path for business. When this new generation of social entrepreneurs are compared with their elders such as Bill Gates, Warren Buffett and Ted Turner, we see some key differences.

First, the younger entrepreneurs base their businesses on openness, free distribution and collaboration. Gates, Buffett and Turner and many of the stand-out businessmen of their generation made their fortunes with a closed protected model. Second, these 20th-century entrepreneurs made their money first and then decided to give back. The new generation creates their businesses with a view to giving back from day one.

Now, we should not undermine the significance of what the older entrepreneurs are doing—and with the creation of the Giving Pledge they have founded a potentially world-changing mission, which urges super-wealthy business leaders across America to pledge at least half their fortunes to charity. Buffett and Bill and Melinda Gates have put their money where their mouths are. Buffett has pledged to give away 99% of his current $45 billion fortune, and the Gates’ have pledged to donate the ‘vast majority’ of their $54 billion net worth.

But the older generation sees "giving it away" and doing good as their end point, whereas the new generation sees that as their start point. The new generation of social entrepreneurs understands that in the old world you had to be successful in business, and then invariably leave your job, in order to do good as Bill Gates and his super-rich peers have done. (As an aside, I watched a deft response at Davos two years ago from the impressive Gates when he was questioned as to whether the only reason he could do good was that he was "now free from the clutches of the evil Microsoft." His reply, "I am as good or as bad as I have always been," was both smart and true.) This new generation believes it is because of their jobs in business that they can do good. And, as I stated earlier, it isn’t just the small business entrepreneurs who believe this: we are at a turning point where many of the heads of the biggest businesses believe it too.

I believe this shift in the sense of responsibility that prevails not only through young entrepreneurs but also in the Millennial generation in general will provide the commitment and impetus that the world needs to make really significant changes for the better.

Today’s best social entrepreneurs differ from conventional entrepreneurs in that they want to create social value and financial value—and it is clear that the new entrepreneurs and big business can learn something from each other.

The new generation needs to bring the professionalism of the business sector into the social-change and not-for-profit sectors, and big business can learn how to operate in the cause-related field with authenticity, creating movements on social media as they do so. For me, the most important point within all this is that all elements—the young, the old, big business and new enterprises—need to be able to do good and make money at the same time, because without this, the business of social change will remain a niche activity.

The revolutionary shifts in social media and social responsibility are driving massive entrepreneurial change. This is true in the corporate world as well, with individuals in organizations adapting and reinventing themselves for the new landscape. I believe that the biggest area of growth will be where social media intersects with social responsibility, and I think we will see new players here that will come to dominate in the future. They will create a new kind of social responsibility, where everyone in the chain contributes and everyone benefit. As Duncan Niederauer, CEO of the New York Stock Exchange calls it, a "collaborative social responsibility."

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5 Comments

  • Thien Nguyen-Trung

    Dear David and fellow commentors,

    Appreciate the article and excitement about social entrepreneurship but with due respect, where is the ground-breaking new insight in it from a thousand other articles like this for the past 5 years?

    The blending of values, the interest of business professionals in social/do-good work, and the question of putting purpose first or later have been discussed at length for the past several years. There are harder questions that this trend has generated that should be raised instead of repeating the same "aha" moment over and over again.

    Within this article a few points raised are not only somewhat superficial but also have fueled debate for what started as innocent assumptions:

    1) "The new generation needs to bring the professionalism of the business sector into the social- change and not-for-profit sectors [...]"

    This is typical perspective of the business world (from which I come, too, full disclosure) and, though well intentioned, has caused its share of problems and conflicts between attitudes and cultures. Instead of repeating the same cliche about needing to re-educate and professionalize the social sector, the question should be asked what exactly professionalization means and how it will be actually achieved. Even if professionalization would mean something like improved processes and organization, how will you change harder structural issues like low pay, limited career development/training and legacy management of baby boomers that have yet to be solved? Because as long as these things are not solved, how will those "new generation" folks come into the social sectors in the first place to change things around and bring "professionalization"?

    2) " [...] the most important point within all this is that all elements--the
    young, the old, big business and new enterprises--need to be able to do
    good and make money at the same time, because without this, the business
    of social change will remain a niche activity."

    Again, this type of statement contains nothing new but in fact makes two assumptions that still cause problems in the world of social change. First, the assumption that most or all socially innovative organizations can be profitable businessess ("make money") when it has been shown countless times that this is structurally impossible for some of the very best social changers. Philanthropy is not just a "legacy" institution that waiting to be replaced by the self-sustainability of social enterprises anytime soon for that very reason. Second, social change being viewed as a "business" is only one side of the story and quite simplistic. I would challenge that indeed the "business" like social enterprises that can turn money the way you expect are likely to remain a niche activity for quite some time (due to reason number one above). This is further evidenced by the difficulties encountered by over 200 impact investing organizations worldwide trying to find those magical profitable and "good" companies. 

    In conclusion, while it is fine to remind people time and again about this shift in generational values, I would greatly welcome some more reality-based discussion of what is needed to make meaning out of this shift in values in a sustainable way. How can people find jobs to do this good work, how can they bring their skills to bear in those sectors needing to be "professionalized" and what are the conditions for those new enterprises to "do good and make money at the same time"?

    One suggestion would be to cross-reference "sweeping 20,000 foot observation" articles like this from Fast Company always with sites where the real change-makers tend to live and comment on like Stanford Social Innovation Review or Social Edge by Skoll Foundation so we can take the excitement that the +250 retweets of such articles apparently arouse and channel them to places where more substantive conversations take place about the topic.

    That said, this is no personal critique of the author but an earnest appeal, given the availability of literature nowadays, to move towards more substance every time we revoke the already well-known facts about the rise of socially-motivated entrepreneurship.

    Respectfully,
    Thien Nguyen-Trung
    Editor, Goodgeneration.org

  • Telemorph

    Clearly, more companies are launching today with a social agenda than ever before, and social media and related technology have helped foster this change, but comparing these ventures to Microsoft and their founders' motivation is a little misleading.   As I look at companies that appear to be tracking towards market dominance in a similar fashion to what Microsoft did a generation ago, I don't see any great distinction.   Facebook is the obvious analog, and there were no great signs of philanthropy, or 'do good' mission, in that organization until the cynical and very public donation to schools was announced a little over a year ago.

  • Donna Callejon

    David,
    I'm not a fan of the "tyranny of the 'or'" - how about letting the two mindsets (and many others) coexist?  Also curious what your thoughts are about the companies (ahem, apple) that don't think doing good in the world is relevant to their business model?
    ...thanks for this piece!

  • MovingWorlds

    Great article and great insight. Certainly a huge opportunity for entrepreneurs, investors, and corporations to grasp for a more successful - and impactful - 21st century.

  • Dorje Mundle

    By and large this article is on the money (with one key omission), and the new models of social entrepreneurship are really exciting. That said, it's still a pretty nascent field with few soc. enterprises having succeeded in truly scaling and generating large returns (social & financial).
     
    Until that happens, we need the old school philanthropists to keep impact investing their enormous financial assets into the new school entrepreneurs to help them achieve the holy grails of critical mass and system change.
     
    To that end, having (commendably) persuaded other billionaires to give 50%, Buffett & Gates would do well to educate their uber-rich peers on the merits and operations of impact investing.
     
    The key omission in this article is the hybrid category between old school philanthropist and millennial entrepreneur: namely corporate social enterprise. The likes of GE, IBM, Unilever and Novartis are pioneering new models that create social value THROUGH their business activities, not just by donating some of their profits (transparency note: I work for Novartis).
     
    Smart, strategic collaboration between innovators in all three categories is the way forward.