Feature 04.26.2023 7 minutes

Should Entrepreneurship Be ‘Social’?

Trojan horse statue, outside of Ancient Troy Archeological Site

When seemingly innocuous jargon turns out to be a Trojan Horse.

The term “social entrepreneur” has entered the language of American institutions, from business schools and the U.S. Chamber of Commerce to Investopedia. Like “diversity and equity,” this phrase can seem to unsuspecting observers like an unobjectionable buzzword connoting the virtuous intent to address some social ill. Indeed, groups ranging from the Left to the nominal Right employ the term “social entrepreneur” in roughly that way.

But much like diversity, equity, inclusion, and social justice, social entrepreneurship eludes clear definition—leaving it open to use by actors whose intentions are less than wholly virtuous or straightforward, and whose aims would not command widespread assent were they spelled out in plain terms.

On the Left, “social entrepreneur” tends be roughly synonymous with the phrase “change maker,” referring especially to those who advocate for policy change. Social entrepreneurship was popularized in the 1980s by William Dayton, founder of the worldwide philanthropy network Ashoka (whose website now proclaims that “the world requires everyone to be a changemaker.” If these kinds of phrases just amounted to leading social movements aimed at political or legislative change, then Martin Luther King and Ralph Nader would have been social entrepreneurs. “Social entrepreneurs,” Ashoka says of what it calls “the field,” “are individuals with innovative solutions to society’s most pressing social, cultural and environmental challenges. [They] are ambitious and persistent—tacking major issues and offering new ideas for systems-level change.”

The Right has sought to adopt the term for those mounting groups to help ameliorate social ills such as ex-offenders or substance abusers through philanthropic rather than governmental support. Indeed, these well-meaning benefactors want to substitute private investment for ineffective government social programs. That was my own operative definition when I oversaw a “social entrepreneurship award” program for two decades at the Manhattan Institute. One infers that some, if not all, members of the group Stand Together, supported by the Charles Koch Foundation, understand the term similarly to describe the groups it supports and for whom it solicits private support from others, as well in what it dubs “featured investments.”

“We partner,” says Stand Together’s website, “with social entrepreneurs who have a passion and personal knowledge in their subject area and a deep belief in the dignity of all people. We seek out partners who share our vision of a society based on equal rights, mutual benefit, openness and self-actualization.” Similarly, the Charles Koch Foundation advertises that it “partners with social entrepreneurs to remove the barriers that prevent people from reaching their full potential.” Writing for City Journal, I once described social entrepreneurs as those who “talk Left and walk Right,” and that would seem to describe Stand Together.

Stand Together supports a great many admirable groups, including some I helped recognize through the awards program I directed. Nor should one disdain those who get Ashoka grants for their work, although that group’s emphasis on change at the level of “systems” betrays a Left-leaning bent. But whether at Ashoka or Koch, the opaque definition of the term tells us that there really is no consensus understanding. Indeed, some definitions verge on the tautological, as per that of the Fuqua School at Duke: “Social entrepreneurship is the process of recognizing and resourcefully opportunities to create social value.” Perhaps that’s no big deal. If “social entrepreneur” doubles as a term for do-gooders of various flavors, it may not matter all that much. But as it has entered the murky bloodstream of the corporate lexicon in a manner analogous to that of the acronym “DEI,” it poses some reasons for concern.

Misdefinition by Design

The danger lies in the fact that, as its murkiness indicates, “social entrepreneur” can be less a description than an argument.

Implicitly, the pretense of social entrepreneurship would have it that traditional, for-profit business entrepreneurs either fail to create social value or might even be considered anti-social. Perhaps drug gangs might fall into the latter category. But, by definition, there is a social value inherent in business and trade per se. Hasn’t the iPhone created social value, in part by providing apps for a cascade of small businesses? One could ask the same question of prescription drugs, vaccines, and all sorts of life-saving medical products.

Even those who critique the supposed social harms of these and other products do so because they recognize that all goods already have a social effect, which can at least notionally be positive. One can argue—people routinely do argue—over which goods create the most positive social benefits. But the financial gains made by the goods’ purveyors is quite irrelevant to that discussion. Does the fact that their manufacturers earn a profit somehow mean they do not produce social value?

Economists routinely employ the term “consumer surplus” to describe the benefits that buyers receive which exceed the price they pay for a product. Entrepreneurship of all sorts has social value—and limiting the attainment of such value to some narrowly-defined group of non-profits addressing what may be transitory ills reveals the “social entrepreneurship” term to be an oxymoron.

Similarly, it’s not as if only “social” entrepreneurs can mitigate environmental problems. If small-scale nuclear plants emerge as commercially viable—which they may if not strangled by over-regulation—they could resolve the challenge of reducing carbon emissions while providing reliable electric power.

Then there is what insiders like to call “going to scale.” The goal of entrepreneurship is often seen as that of “growing” one’s business. So it is with promoters of social entrepreneurship. Stand Together points with pride to supporting “a wide diversity of people to innovate and tackle tough challenges. That’s why their solutions are so effective and scaling by the day.” It urges potential donors to “explore how you can supercharge the good you do by leveraging our capabilities including funding, network and principles proven to help people thrive.”

There is no doubt that it can be a positive for small groups to grow. Think here of the KIPP charter school network or such traditional bedrock American groups such as Boy and Girl Scouts. But an emphasis on “scaling” poses risks as well. As groups seek to grow, they are consistently tempted to seek funds which promise an easy path to growth: i.e., government grants. That was a consistent theme when I visited social entrepreneurs for the Manhattan Institute. I would raise with them the possibility that accepting government funds might lead them to bureaucratize, use fewer volunteers, or de-emphasize the religious faith which originally inspired their work. But it seldom occurred to the leaders of these organizations themselves that these might be dangers. Charles Koch may find that scaling and libertarianism might not be good partners.

Indeed, scaling raises the risk that a select, small group of approved organizations will be designated as magnets for charitable giving, to the exclusion of others. That was the theory of the Obama Administration’s Social Innovation Fund, which sought to match federal grants with those of major foundations. By designating specific causes as worthy of support, the Fund implicitly suppressed charitable creativity and crowded out new ideas without constituencies, such as housing for those with AIDS, while others chose to direct funds toward research to treat the disease itself. Scaling, in other words, can actually misdirect charitable funding. Think here of those who, prior to the advent of the polio vaccine, sought to build large-scale “iron lung hotels” to help victims of that disease breathe.

Both Stand Together and Ashoka like to discuss the goal of “systems” change. Those who believe that the core American system has served the nation well should be wary of this term, which, for instance, would not preclude lobbying for larger public welfare programs or even socialism. Historically, philanthropy and the non-profits it has supported have helped most not when they worked to change the American system but prepared those of modest means to succeed through it. Think here of Andrew Carnegie’s support for public libraries—which not only provided books for poor immigrants but encouraged them to learn to read well.

The beating heart of American exceptionalism has always been localism—whether municipal governments or, when they work well, public schools. So it is with the sort of non-profit creativity that the term “social entrepreneur” purports to celebrate. Whether a local historical society, park conservancy, art museum, parent group or garden club, church, synagogue, or mosque, it is the hyper-local organization that best recognizes the social needs of a community not being otherwise addressed. This is what’s known not as “social entrepreneurship” but as civil society. The approach of one community to preventing drug abuse among its teenagers need not to scaled to be a success. One community’s approach may, to be sure, inspire another’s—but that is distinct from cheering for small groups to become large for the sake of largeness, as a sine qua non of success. That’s why, in the final years of the Manhattan Institute’s program, we changed our “social entrepreneurship award” to “civil society award.” By recognizing, for instance, a rural library in New Mexico, the honor did not imply that every public library should run its own radio station, as did the Embudo Valley Library in Dixon, New Mexico.

Like so many facially innocuous terms that can serve as Trojan Horses for outlandish radicalism, “social entrepreneurship” is a vague phrase whose indeterminacy invites us to fill in the blanks about what it means—or what one may wish it meant, or prefer it to mean. And therein lies the problem.

The American Mind presents a range of perspectives. Views are writers’ own and do not necessarily represent those of The Claremont Institute.

The American Mind is a publication of the Claremont Institute, a non-profit 501(c)(3) organization, dedicated to restoring the principles of the American Founding to their rightful, preeminent authority in our national life. Interested in supporting our work? Gifts to the Claremont Institute are tax-deductible.

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