The Black Swan in Social Entrepreneurship

We talk about social entrepreneurship as a field full of great potential to resolve the most pressing social issues, our optimism is justified with research insight, news and stories that show favorable progress over time. Indeed, we need a lot of optimism especially when there is still a long way ahead. But are we truly open to sharing our uncertainties in the field as much as sharing anecdotal success? Have we been driven by our optimism until we ignore the uncertainties? There are few major ones that I observe, I think it’s time to reevaluate and be down to earth.

The Best Practice of BoP business strategy? 

The framework has been popularized by intellectuals like CK Prahalad and Ted London. Few major corporations that are considered to be successful in adopting related business principles have been echoed in the media. It doesn’t seem to matter much when the insight is based on far fewer successful business cases or early phase of promising results. How often do we have a chance learn about business experiments that fail in the BoP market? Have they even been studied as rigorously to generate insight? Our optimism that “It’s possible to reap profit & social impact at the same time” remains vague in reality. Current development of for-profit microfinance industry warrants our attention, one of the key messages that I get from it is that getting the BoP business process right is no guarantee that social mission will not drift. It’s too early to justify that we know the characteristics of successful BoP business strategy, I believe we understand too little to make such claim.

Impact investment market is expected to be worth x billion in x years 

Since the figure was estimated by esteemed bodies and investment bankers, it has been quoted repeatedly by impact investment advocates. Our love to estimates and forecasts will never cease even though key trends are not yet well understood or major uncertainties are mostly excluded. How is the estimated future market size helpful other than informing us that it’s potentially big? Does it justify throwing my money down the field? The figure simply does not reflect the reality, investors still have hard time finding quality deals, it’s tough for social enterprises to tap into the fund but major corporations could take advantage of loose benchmark and vague standard of what really qualify as impact investment funds. Impact investment is emerging and promising trend, nothing more. Don’t attach aggrandizement to it and don’t be obsessed with the figure, but try to focus on the hard work in creating social impact with this new investment approach.

What about the standardization of social impact measurement? Nobody seems to disagree for now… 

Prominent leaders and experts in the social sector have been saying the same thing, while minorities had warned that the urge to consolidate, simplify and benchmark may push us to the wrong direction. But are we really listening to dissenting voices?

Reality check – we’re trying to perform standardization when we don’t really know what social impact should drive measurement. We work around tools and metrics and hopefully we’ll gain consensus and end up measuring what really matters. No such luck, I believe. It takes time to know what strategy really works and what impact truly makes the difference. While we acknowledge that it may be impossible to capture the essence of intangible social impact with limited expertise that we have, we proceed anyway to attempt standardizing social impact measurement in highly complex social environment with uncertain outcomes that we can’t realistically predict. As for the need to measure performance & impact for accountability, it’s a resounding ‘yes’. But to standardize? How many of us would actually say we’re not so sure?

I’m as passionate about business solutions to tackle poverty as anyone can be. But meanwhile, I want to be the honest advocate, if we are quick to point out that government solutions don’t work and non-profit solutions are inadequate, we should be equally critical to social entrepreneurship approach. Have we been trapped into group-think for the sake of advocating this field? Driven by passion, have we been trying to claim certainties in what we aren’t sure of? I believe these are the questions that we constantly need to be critical of.

Notes: Thank you Nassim Taleb in helping me to see as a critic and not to be blinded in what I love. Happy holidays and hope we’ll be able to take social entrepreneurship to next level in 2011.