The Economist Gregory Dees Social capitalist Dec 24th 2013 SOCIAL entrepreneurship is a hot topic. In business schools students seem increasingly keen to find ways to use the skills they are learning to improve the world as well as their bank balances. Search for social entrepreneurship online and you come up with dozens of headlines ranging from "The Rise of Social Entrepreneurship Suggests a Possible Future for Capitalism" and "Fostering Female Social Entrepreneurs" to "Nelson Mandela Taught Us the True Meaning of Social Entrepreneurship." In 1998, when Gregory Dees wrote his short but seminal article on “The Meaning of 'Social Entrepreneurship’", the term was still novel, barely used even by the sort of innovative solvers of society's problems who nowadays call themselves social entrepreneurs. In the article, Mr Dees, who died on December 20th aged 63, provided the definition that the concept badly needed. He also spelled out the difficulties of combining an entrepreneurial mind-set with social activism. Social entrepreneurship, Mr Dees observed, is "a phrase well suited to our times”, combining the "passion of a social mission with an image of business-like discipline, innovation, and determination commonly associated with, for instance, the high-tech pioneers of Silicon Valley." Many regular entrepreneurs improve the state of the world without ever meaning to, as a byproduct of building a successful business. But, as Mr Dees saw it, intention matters. Not all entrepreneurs are social entrepreneurs. Rather, social entrepreneurs are "one species in the genus entrepreneur." What differentiates them is their social mission. Whereas many regular entrepreneurs are motivated by the prospect of a financially lucrative exit, for social entrepreneurs the “social mission is explicit and central". That has big implications for how they perceive and assess opportunities. The social entrepreneur's main measure of success is not wealth creation but "mission-related social impact." Yet, as Mr Dees recognised 15 years ago, measuring that social impact is extremely difficult. And without reliable measures of performance, the market forces that play a crucial role in sorting out the sheep from the goats in regular entrepreneurship cannot "work as well for social entrepreneurs." In particular, market forces fall short in “valuing social improvements, public goods and harms, and benefits for people who cannot afford to pay”—elements that are "often essential to social entrepreneurship." As a result, Mr Dees argued, it is "much harder to determine whether a social entrepreneur is creating sufficient social value to justify the resources used in creating that value." He rejected two indicators commonly used to claim success in the social sector. "The survival or growth of a social enterprise is not proof of its efficiency or effectiveness in improving social conditions. It is only a weak indicator, at best.” Likewise, success in collecting fees for services or competing effectively for donations, volunteers and other kind of outside support may look like market discipline at work, but this sort of reward is often not closely aligned with the social entrepreneur’s mission. “It depends on who is paying the fees or providing the resources, what their motivations are, and how well they can assess the social value created by the venture." Since he wrote his paper in 1998, there has been modest progress in measuring social impact—thanks not least to subsequent work by Mr Dees himself during spells at Harvard, Stanford and Duke universities. No one seriously disputes that social entrepreneurs from Muhammad Yunus in microcredit to Teach for America's Wendy Kopp have achieved significant impact. Yet there remains a long way to go before the concerns raised by Mr Dees can be said to have been solved. Billionaire philanthropists such as Bill Gates have focused on better measuring the results of their giving. The Global Impact Investment Network assesses businesses with explicit social goals. Metrics will also be critical to the success of social impact bonds, an innovative public-private financial instrument that is now being piloted in several countries in the hope of tackling thorny social issues such as reoffending by former prisoners. The influence of Mr Dees extended far beyond his academic papers. He helped convince the World Economic Forum to embrace social entrepreneurship, and fly social entrepreneurs to Davos to meet the titans of big business. He taught the first course on social entrepreneurship at Harvard Business School, and helped launch the influential Centre for the Study of Social Innovation at Stanford University. He also pursued social entrepreneurship in practice, for instance among the poor of the Appalacians and by advising philanthropists on how to revive downtown San Jose. Should everyone aspire to be a social entrepreneur? Mr Dees thought not. Social entrepreneurs require capabilities and a temperament that makes them exceptional, in the same way that "not every business leader is an entrepreneur in the sense that Say, Schumpeter, Drucker, and Stevenson had in mind." Nonetheless, given the big, complex social challenges of the 21st century, Mr Dees rightly concluded that "we could use many more of them."
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