(Photo: Source)

I continue to struggle with the issue of what is a ’social’ entrepreneur. The ‘debate’, if you can call it that, is weak at best. Social means anything from “improve society” to “not primarily benefit an individual”. So here’s a question to get a pulse on what the ’social’ in social entrepreneurship means – If I started a porn studio in a developing country, would I be considered a social entrepreneur? To get rid of the immediate concerns, I will qualify the business by saying that it will 1) pay the actors fair wages, 2) will not force anyone against their will, 3) will create jobs for the locals in all facets of the company, 4) the profits will be community owned rather than individually owned, and 5) for the sake of this argument we’ll assume it is very successful at making a profit.

Sounds good, doesn’t it? I am creating jobs, a means of livelihood, raising the standard of living, educating individuals about sexual health and rights, and all the other benefits anyone who thinks all entrepreneurship is social entrepreneurship makes. We’re tackling worldwide injustice by bringing a new market and much needed money to the developing world. And because the primary purchaser of adult content is male, I would be doing even more good because I would be employing many women who otherwise wouldn’t make any money. Ok, maybe you have an issue with the physical act; what if I taught and paid several people – females even – in the area to become programmers to make a 3D studio? Removes the physical element, still provides the employment and money, and does a better job at retaining female dignity.

Okay, okay. I don’t and will not ever consider creating a company like this. I consider it an absolutely absurd idea. And anyone who thinks it is socially entrepreneurial is, in my humble opinion, wrong. But, I think this example provides a great opportunity to dive deeper into the debate of what ’social’ in social entrepreneurship means. I’m tired of this simple back and forth with common definitions of social. I’m tired of people not taking a stand with a moral, yes moral, imperative as to what the social entails. It doesn’t have to focus on the individual’s personal moral characteristics, but it has to deal with a philosophy on life. In other words, I don’t think most social-e “academics” are trying hard enough.

That’s right, you’re slacking. You’re defining what the infrastructure, social constructs, how to scale, blah blah about the entrepreneurship side of the equation is about. Entrepreneurs talk about that stuff. If you want social entrepreneurship to stand as a field in its own right, start digging into the real problem – what does social mean? Why should it qualify as a separate field? Until we start looking at that question seriously, no one deserves to be called a social entrepreneur. At most, they’re an entrepreneur that operates in market failure, the third world, or maybe not even that.

In a future article, I’ll start to explore my personal beliefs – and my thesis research – to look critically at “thought leaders” in the field. I don’t mean this as mockery, simply opening the debate beyond the shallow level it has currently existed. What are your thoughts? What do you think motivates this field at a deeper level? Please comment below!

I know most of you might think I’m crazy for saying this, but I LOVE to run. I used to be on the cross country team in high school and did a pretty good job at it considering my build (I don’t have the runner’s physique). Since then, I’ve gone on and off with running, usually starting at 4 mile runs and occasionally getting up to 8 or 12 miles.

In the summer after my freshman year of college I decided I would start training for a marathon. The marathon was in less than two months and I thought “If I bump up 4 miles a week every week, I’ll be ready to roll in no time!” Lo and behold, week four after running my 16 mile day, I developed the absolute worst pain in my left foot. Commonly known as plantar fasciitis, it hurt so bad I wanted to cry. I could barely walk, let alone continue “training” for my marathon. My dreams that summer were devastated. And the worst part is that plantar fasciitis doesn’t go away in the period of a week, it hurt for over two months. Lesson learned – go slower and train right.

The cause was two fold. I was upping the ante very quickly, not giving my body enough time to adjust, and second, I was running wrong. You heard me right, I didn’t know how to run without injuring myself. The first problem I should have known better about, and given hindsight, I shouldn’t have created so much tension in my body causing it to break down on me. The second problem, which is much more subtle and I only learned after doing intense investigation, is that a runner is supposed to be landing on the ball of their feet and NOT the heel with each stride. Heel-striking, as it’s known, causes a ton of shock to the joints and wearing nice, comfy supportive shoes allows the arch muscle in the foot to become weak (just like wearing a cast results in lower muscle mass). Overall, not a good combination. And the whole point of this story is that it relates to building an organization.

An organization is a lot like long distance running. Sprinting requires quick bursts of energy, but flames out pretty quickly. Long-distance running requires patience, determination, and sheer power of will to subject oneself to the consistent hard work needed to make an organization a success. Putting the time in day in and day out is necessary in order to build up to one’s mission – which for me was a marathon. Without all of the time, preparation, determination, and work, the “overnight success” of completing a marathon is simply impossible. While a person can work hard and essentially ’sprint’ to push an organization forward, the threat of burning out and getting ‘injured’ looms great over their shoulders. If one does need to sprint (like before a grant deadline), be sure to get adequate rest before moving forward!

Second, the value of my injury proves to be a more nuanced and valuable lesson. Before I really developed my injury, my body was giving me warning signs with a tight, aching arch. If I had listened to my body, slowed down, and did some research, I would probably have prevented my two months of agony. The same is true in organizations in that one should be listening to the feedback of the ecosystem in which the organization is operating. Are people benefiting from your product? Are your teammates motivated? Is the organization properly working towards its mission? If there are warning signs regarding any of these areas, it’s probably a good sign to slow down, investigate, and get to the bottom of the problem before customers don’t buy your product, a person quits, or your metrics tell you that all of your time over the past three years hasn’t made a dent in the problem you’re trying to solve.

In conclusion, its imperative for any organization to have in mind a mission (running a marathon) and setting up a game plan for achieving that goal (training schedule). If at any point in the process there are warning signs that things aren’t feeling right (pain points), its a much better idea to slow down a bit, get to the bottom of the problem, and readjust expectations as necessary in order to prevent injury (ineffective/dead organization). Lastly, you must be willing to put in the consistent hard work to see things through. That’s it, now go make things happen!

The biggest question that I have been thinking about over the course of my past year at Stanford is why social entrepreneurship is so important. I came to Stanford excited about doing a startup, and not just any startup, but the next Google. The problem for me has been that I don’t simply want to make an iPhone applications company or insert-buzzword-here company. I want to make a difference. I want to make the world a better place. And I know I’m not alone in this feeling.

I know all about entrepreneurship. The process of creating a startup, being resourceful, innovative, tenacious, etc. But why? Why get involved? Why do something? Very few do it for the sole sake of making money, and even fewer succeed at that. To me, there has to be some underlying passion that drives the startup. This question is why I’m writing an honors thesis. And the focus is on why social entrepreneurs do what they do and focus on particular problems.

Thus far, I’m becoming more and more convinced that it’s about justice – or rather, injustice. There are serious injustices in the world – in both your backyard and across the globe. Social entrepreneurs tackle these injustices and do not stop until these injustices are eliminated. But then the question comes up, what is an injustice? Who do we help? The homeless people in the city next door or the people without food, medicine, or education access elsewhere?

This question is what drives me. I personally come from a low income background and know what it’s like to not have access to resources. To not have leverageable connections. To not have the opportunity to build a valuable skill set. Fortunately, I was born in a country that has very progressive education policies and my hard work (and a little luck) was recognized to help me get into one of the best schools in the world. But the question of what kind of injustice we are eliminating is still vague.

Are we trying to ensure equal opportunity? Equal access? Should it be based solely on merit? Do we give the disadvantaged a leg up? Who determines the way we evaluate our successes and failures? There are so many pro’s and con’s to each approach that it’s a very difficult mess to untangle. In short, I don’t know the answer. But that’s not the point – the point is for each of us to think hard about injustice and how we are either contributing or eliminating said injustice.

For me, social entrepreneurship will never grow up into a “legitimate” field until it answers these questions. The processes for growing a regular startup and a social-e startup are too close to each other to warrant a separation. The key distinction is an answer to the question Why? I believe Yogi Berra said it best – “We’re lost, but we’re making good time.” Traditional entrepreneurship rewards ‘making good time’, but if we’re going to make a difference in this world we need to create a map to help us find our way.

Check it out.

Admittedly, I did not realize the power of this document, which I received from Kiva about two and half years ago when I was involved with a microfinance group on my campus, the Social Entrepreneurs of Grinnell. I went to Kiva with questions because I was skeptical of their operations; namely, I didn’t think that the money SEG was giving them was going directly to the entrepreneurs we funded.

I was right. It was going to the MFIs instead. SEG wasn’t too concerned about this, as we were already growing beyond Kiva. We kept the document to ourselves, not really thinking it was that big of a deal.

After I parenthetically released the document, Tim Ogden at Philanthropy Action pointed out some problematic things I hadn’t realized. Issues of transparency came to the center of the debate. While I defended Kiva by saying that they made this information accessible to those who asked, Roodman said that Kiva had the capacity to explain their operations better and chose not to.

Kiva started working on their response soon after Roodman posted his original critique. About a week after the post, Kiva updated their “How Kiva works” site. The debate seems to have calmed now, with most people agreeing Kiva reaffirmed their commitment to transparency. Holden at GiveWell, who had been critical of Kiva, said that they are more transparent than most philanthropic organizations operating at the same level.

I won’t try to sum up what this debate means for Kiva, its donors and the MFIs it serves because Roodman did it best on his latest post:

“[T]he bottom line here is that Kiva has made a quick and long stride toward keeping [CEO] Matt Flannery’s promise of more transparency. I think Flannery’s response to my criticism blended grace, humility, and quiet confidence. The world would be a much better place if all charities, all organizations for that matter, were as open and responsive to criticism as Kiva has been. I trust the Kiva folks will keep refining.”

“[l]ess that 5% of Kiva loans are disbursed after they are listed and funded on Kiva’s site. Just today, for example, Kiva listed a loan for Phong Mut in Cambodia and at this writing only $25 of the needed $800 has been raised. But you needn’t worry about whether Phong Mut will get the loan because it was disbursed last month. And if she defaults, you might not hear about it: the intermediating microlender MAXIMA might cover for her in order to keep its Kiva-listed repayment rate high.

In short, the person-to-person donor-to-borrower connections created by Kiva are partly fictional. I suspect that most Kiva users do not realize this. Yet Kiva prides itself on transparency.“

This may come as a shock to some Kiva users, but its deception is only on the surface. Discovering how Kiva actually works is not that difficult for those Kiva users who look a little deeper. As Roodman says in his post, if you look at many of the loan on Kiva, the “date disbursed” date will usually be a few weeks before the “date posted” date. Anyone who finds this odd and starts to ask questions will soon find the answer.

Kiva staff are very open to discussing their actual business model. I became involved in Kiva early on, in March of 2007, by starting a campus microfinance group. I contacted Kiva around that time to ask them a few questions, and they were very straight-forward about how they operated. (They even sent me the “real” loan diagram, in contrast to the one on the site.) I was surprised at this, but my commitment to the organization didn’t falter and I kept raising campus resources for them. The campus group eventually started to move beyond Kiva, and now we are making direct loans to MFIs in several different countries, but that move away from Kiva was only in part because of their “deception.”

At the end of his post, Roodman questions the efficiency of Kiva requiring MFIs to take photos of the entrepreneurs and write up profiles after loans have distributed:

“Surely it is better to invest in an institution…without requiring it to incur the expense of posting pictures and stories of every borrower. Historically microcreditors have scaled to reach millions of people by cutting costs to the bone. Surely it would be better for us to give in a way that allows the microfinance institutions to put more of their limited energies into helping poor people manage their difficult lot and less into making us feel good.”

Unfortunately, Kiva would not have been as successful at channeling money to MFIs without the person-to-person connection its somewhat deceptive advertising creates. This deceptive advertising only hides their true operations on the surface, yet it lets them raise, literally, millions of dollars. Because anyone who does a small amount of digging can see what actually happens, I think what they have done is justified.

Beyond that, I think Kiva has been a great window into the world of microfinance, and by extension, global poverty. The person-to-person contact of Kiva (and microfinance in general) has made many individuals think more about people’s lives in the Third World. Donating on Kiva makes people feel good and it makes people want to learn more. Microfinance has opened up a lot of mutually empowering opportunities and connections between the US and the Third World, most of them created and spread by Kiva.

“[i]t seems to us that rigorous studies have not shown the impact implied by [microfinance's individual] success stories, and that the most encouraging effects have come from programs that are not centered around business expansion loans.”

However, champions of the microfinance cause should not despair. Roodman is working on a book about microfinance, applying Amartya Sen’s “development as freedom” model to the efforts of MFIs, which could offer up more holistic and positive effects of microfinance.

You may remember Courtney and Casey’s debut post this last May entitled “Skin in the Game.” Following up on the personal sacrifice and unyielding drive involved in starting a social venture, the founders of Wokai now share with us the logistics of managing and growing an idea into something concrete.

Q.) What steps did you take to transform the organization from an idea into a real, 501(c)3 nonprofit?

A.) Casey: Right off the bat, we were very lucky to have a lot of legal corporate sponsors, donating their time to help us get 501(c)(3) status. More difficult things for us involved taking an idea and a business plan into implementation with very little money. Courtney and I started the organization in March 2007, and it wasn’t until November 2007 that we even had a paid staff member.

Because we had such few resources and such big ideas, we decided to utilize a lot of volunteers. When we finished our business plan, we recruited over 10 college graduates working with us over 20 hours/week here in Beijing to start up the organization. To build our chapters in the US (San Francisco, New York, and Seattle), we put together a network of 70 volunteers, who mostly have full-time jobs and work on nights and weekends, to produce events, fundraising, and drive our public relations. We started our microfinance operations by learning how to evaluate microfinance institutions in China, conducting a lot of diligence, and finally forming partnerships with our Field Partners.

Simultaneous to all of this, we worked to build our website, the cruz of our operations, which involved finding people with expertise in web development, management, financial analysis, and microfinance.

A.) Courtney: Persistence! We went through the usual steps—team building, business plan, fundraising, getting sponsorship. But it took us over two years to build our website, chapters, and field partners. In the end, it is very little about the “plan” and everything about what you do when the plan doesn’t go as planned.

Q.) How do you draw on your personal background and your range of work and academic experiences when dealing in the everyday operations of running Wokai?

A.) Casey: More than my background in work experience and academics, I find myself drawing on general characteristics of who I am as a person. I very much enjoy entrepreneurship, I’m scrappy (most entrepreneurs are), and I like finding answers to tough questions that aren’t obvious. These characteristics, as well as having a lot of energy, are very helpful in reaching success as a social entrepreneur.

A.) Courtney: Wokai is like nothing I have ever done. I am learning as I go with this one. Some skills that help with that are my business analysis skills from venture capital and attention to detail from banking. But the most important skill is my attitude. I am a forever optimist and have not been crushed yet!

Q.) How do you collaborate or compete with other organizations working in this space? What sets you apart?

A.) Casey: In the long term however we want to work on creating a model that provides a p2p connection for people who want to create social change in China, through microfinance but through other mechanisms as well (such as education, health care provision, and green energy utilization).

However, right now, we are very similar to Kiva and we have a very positive relationship with their organization. They’ve supported our work by sharing ideas, advising us, and sharing information. I think collaboration between organizations in our sector is key for Wokai.

What sets Wokai apart is that we are the first p2p platform for China, and over time we’ll expand from microfinance into more sectors and still maintain that p2p connection. While there are other organizations out there targeting specific causes, we’ll continue to innovate to offer a new way for people around the world to give to a host of causes in China.

A.) Courtney: In microfinance (MF), we have been called a “Chiva”—Chinese Kiva—and that essentially describes our platform today. We are putting China MF on the map, and no one else is doing that. But actually, we want to highlight where Wokai is headed: we’re becoming a model, connector, and networker for the greater non-profit sector in China. China has 1/15 the number of non-profits as the US and 5 times the number of people to serve. They need a champion, and Wokai will be that Champion!

In China, we have really classified ourselves as being the first p2p giving platform for China. No other Asia nonprofit allows someone to take $10 today and give it to someone in China tomorrow.

Q.) Where do you see Wokai in the future? What social impact do you hope to have in the world?

A.) Casey: In the near future (2009) I want to get Wokai out there, through online social media, more traditional media, and build our contributor base. We plan on having exponential growth, with slow growth in year one as we get Wokai’s name out (hopefully 3000 contributors online and supporting 600 recipients in rural China) but then scaling our model to higher numbers. In three years, we want to raise around $2.2 million from over 17,000 contributors worldwide, expand our chapter network and grow our recipient base in rural china. In five years, we want to fund over 32,000 recipients from contributions by over 100,000 contributors worldwide.

In the future we want to create an online marketplace for social causes in china. So today, you could go on and support an entrepreneur in rural China, and next year you could support a semester of school for a student in Ningxia Province, and in the year after that you could help fund solar panels for a family with no electricity in Xinjiang. Along with this marketplace, we want to create an online and offline community people supporting China.

A.) Courtney: We hope to bring funding, community, and transparency to the nonprofit sector of China. Our goal is to build a community of individuals working to build a better China. Please visit our site and see our executive summary for more details.

……

As entrepreneurs we learn not only from personal experiences but also the mistakes and strength of the world around us. If your considering turning your own idea into something more, look for every chance you can to surround yourself with fellow creative do-gooders along with innovators from other fields. For individuals who simply want to put out their project, I being one of them, casual networking can often appear like a waste of time. However, learning from the mistakes of others speeds up our own process of trial and error. I’ve also found that hearing success stories first hand can reignite the energy and enthusiasm that often grows faint on the stormy road of realizing our own endeavors. Gumball Capital encourages you to reach out and find stories like Courtney and Casey’s in order to initiate your own conversations. Doing this, will reward both you and the people you wish to serve.

Abhijit Banerjee, Esther Duflo, Rachel Glennerster and Cynthia Kinnan did a study of around 100 slums in Hyderabad, India, randomly assigning half a new MFI branch. They studied the communities for about a year and a half to determine what impacts the MFIs would have on the business and individuals they served.

They found that existing business will use microfinance to expand their inventories and, therefore increase profits. No surprises there. The households without an existing business, but with a “high predicted propensity to start a business,” were more likely to cut back on “temptation goods”–alcohol, lottery tickets, etc–assumingly to save up for a large initial investment in a business of some kind that can be covered by a microloan. Still no surprises.

But when looking at the larger picture–microfinance’s effects on social improvements like women’s empowerment, health and education–the MFIs had no significant effect. Quite surprising, and a little disheartening for all of us who have worked to expand microfinance as a poverty alleviation tool.

However, Banerjee et al. do note that their study is relatively short (15-18 months) and the effects of microfinance could be farther-reaching. Over a longer time frame, the effects on social factors could be more pronounced. David Roodman, in the summary linked above, says that these findings (like in the findings in all random-controlled trials) only describe these specific communities studied in India and cannot be extrapolated to all MFIs everywhere.

So the results are interesting, its good to see more scientific study of microfinance, but the debate on its efficacy is far from over.

One story is about an immigrant father coaching his daughter’s high school basketball team. The girls are more academically than athletically inclined and rather short. But Dad makes them play high-intensity full-court press – making it very difficult for other team to move the ball to the half-way line in the allotted 10 seconds. And this rag-tag team with their less than respectable strategy go all the way to the state championships.

The point Gladwell seeks to make is this: the situations where David beats Golaith generally share two characteristics:
1) The underdogs win through sheer effort rather than skill or technique
2) The underdogs win by breaking some kind of social convention

“David can beat Goliath by substituting effort for ability—and substituting effort for ability turns out to be a winning formula for underdogs in all walks of life, including little blond-haired girls on the basketball court … their other advantage is that they will do what is ’socially horrifying’—they will challenge the conventions about how battles are supposed to be fought.”

I think we can all agree that social entrepreneurs looking to make lasting change are facing some very long odds and every success story of positive social change is truly a David beats Golaith situation. Do changemakers follow Gladwell’s rules? I think so:

Wendy Kopp – Teach for America
Wendy is a Princeton girl who took her senior thesis, raised $2.5M in seed funding, built a tiny staff and recruited 500 college graduates to start working in low-income schools in just one year. Now 20,000 teachers have passed through the system. Do you think that was a result of extensive planning, superb execution towards an innovative strategy, or maybe just the result of sweat, blood and tears?

It’s easy to say that TFA is a great idea now, but who would have believed that Kopp could have built an organization that outrecruits the biggest financial and consulting firms at most college campuses across the nation? Teaching kids over big bucks? And that many of those college grads might actually outperform* teachers with years of experience? Unheard of.

Kopp had a great idea that challenged conventional thinking about college students: their interest in, and impact on education in low-income communities – and worked her tail off to build an organization that was able to achieve that mission.

Mahatma Gandhi – The Liberation of India
He may not your first image of a social entrepreneur but very much a man who employed sheer force of will. It takes a lot of effort to get 80 people to march 248 miles to protest a salt tax by the British, or to embark on a 21-day fast during a negotiation.

Gandhi got thousands of people to face armed men without bowing down or running away. He got women involved in the social movement. If you had told India’s citizens a decade prior to Gandhi’s arrival about their chances of freedom from British rule, you’d be laughed at for certain. But through his model of civil obedience, and an unwavering commitment to his people, Gandhi got it done.

Kjerstin Erikson – FORGE
Perhaps not all of you have heard of Kjerstin, the brilliant founder and Executive Director for FORGE, an nonprofit that works with refugees in Africa to break the cycle of war and poverty. You will. As 20 year old white woman, she earned the respect and trust of war-torn refugees in Zambia and Botswaina and started FORGE with no money and no business plan.

FORGE’s theory of change emphasizes involving the community itself. It is the refugees themselves, not the supposed experts at big aid organizations, that develop community projects that FORGE vets and funds. Few people would have predicted that this model where the refugees make all the decisions would eventually help 60,000 refugees build better lives.

So yes – A brief look at some well known, and less well known changemakers suggests that socially-minded Davids, focusing less on making all the right moves, more on injecting massive amounts of time and energy into getting something done, even if it’s not the polite or accepted way of doing it – will have a much better chance of defeating the Golaith-sized challenges of the world.

*See the working paper – “Making a Difference?: The Effects of Teach for America in High School“