But Muhammad Yunus, winner of the Nobel Peace Prize in 2006 and Managing Director of Grameen Bank, turned that notion on its head with a simple question: "Why can't we accept that we can create business without any interest in making money out of it?"
In this session, tension arose between the majority of panelists who accepted the idea that social entrepreneurs can do good for the world and profit at the same time, and Yunus, an economist by training, who argued that we use the "wrong lens" to view the social problems of the world.
"These are not opportunities for profit," he said. "Rather, they present opportunities to fix what is wrong with the human condition." In his view, "the social business is a non-loss, non-dividend company with a social goal. The bottom line for the social firm is, 'How much benefit did you bring to your people?' This is a new class of business."
There are many issues not being addressed in the mainstream markets. "If you look at serious diseases, some of these have very good vaccines," said Yunus. "But no one produces them because these are diseases of the poor and there no market. These are the 'orphan diseases' that never get addressed. This is a place to create a business! "Now, you ask, why should anyone want to do that?" he continued. "They do it when they feel that people deserve to be vaccinated! We (humans) are not money-making machines ... but we see the world through the money-making lens. With a social business lens, the world looks very different. We can produce these vaccines through social business so that people don't die, and we don't need to make a profit. This is something we wanted to do."
The argument garnered applause and presented a thought-provoking contrast to the positions of the other panelists.
Among the remaining panelists, there was consensus that social entrepreneurship could grow, but the problems it faces are more complex than simply raising more capital. The panelists offered opinions about what it takes to make social entrepreneurship sustainable, and they tended to agree that large-scale, systemic social change occurs best through institutions, rather than the individual. It's difficult for small-scale or individual investors to conduct sufficient due diligence, for example. Kevin Jones of Good Capital explained that his firm has formed a market collective to reduce the costs of conducting due diligence on potential projects. There is also a need, he said, for market intermediaries to address the lending risks resulting from basic lack of information.
Foundations and NGOs have developed numerous methods to support social entrepreneurship and tolerate different levels of risk in these endeavors. According to Debra Schwartz of the John D. and Catherine T. MacArthur Foundation, her organization targets early-stage social entrepreneurship ventures through a grant-making program, with the expectation that the grant will be repaid after 10 years at an interest rate of 1 percent to 3 percent per year. Chicago;s community development bank Shorebank was funded this way, she said. On the other hand, Shari Berenbach of the Calvert Social Investment Foundation said that she targets social entrepreneurship models with moderate to conservative levels of risk through an investment tool called a community investment note. The note allows everyday people to provide micro-loans to social entrepreneurs around the world.
Good Capital requires a return on capital, said Jones, but also a high social impact. The firm targets businesses that would traditionally be of interest to venture capitalists, but have a social capital focus. This "new asset class" attracts investors who want not only a return, but a higher social return, he said, who "look at their money in a more holistic way — more risk, lower return."
In the end, panelists concurred that while "there is no hierarchy of virtue," there are clear market failures that social entrepreneurship can address. Indeed, the market is not the solution for everything, they said. To make social entrepreneurship grow, a spectrum of approaches is needed. The common thread is meaningful commitment to social change.
"The value of traditional grants and the value of government dollars should not be lost," said Schwartz of the MacArthur Foundation. "These other sources are important, as are government regulations and incentives." Smart policies, smart subsidies and smart grant-making remain real challenges. "Sometimes," she added, "the problem is not capital, but institution building, and the ability to absorb capital."