Poor Profiteering or Social Venture Investment?

The article “How Misinformed Ideas About Profit Are Holding Back the World’s Poor” by Hugh Whalan and the video about the MoneyMaker’s for-profit social entrepreneurship strategy, were eye-opening.  The power of markets to influence decision-making is something that is often overlooked in the philanthropic, humanitarian, and social entrepreneurship fields.  However, in order for social ventures to become more impactful, a better understanding of the for-profit motives of individuals needs to be understood. 

A comprehensive understanding of the motivations of the people social ventures are trying to affect is one of the primary reasons, I believe, many well meaning and innovative social innovations fail.  Many products create efficiencies which did not exist before, allow people access to resources that were previously inaccessible, or solve a basic human need, and yet the people who would most benefit from such social innovation are rarely the ones using them.  Why is this?

I am reminded of a lengthy critique I read recently on volunteer humanitarian aide trips to parts of the developing world, especially Sub-Saharan Africa and South America.  During these trips, participants travel to developing nations and help build hospitals, schools, houses, etc.  This sounds great!  Doesn’t it?  Unfortunately, what is not understood by many of these well-intentioned philanthropists is the severe disruption to economies that donations and volunteering can have.  The affluent kid volunteering in Zimbabwe to build an elementary school means that a Zimbabwean construction worker will not work.  The local contracting company cannot compete with the free labor that volunteer organizations provide.  This means the contracting firms shuts down.  Such humanitarian adventures, which sound so positive, can actually have negative net effects on the local economies of developing nations.  This might seem a crude example but it demonstrates  the larger problem of non-profit and volunteer venturing: they price out for-profit local actors. 

This is the reason the MoneyMaker is such a subtly brilliant endeavor.  Make the product for-profit, suddenly it requires an investment on the part of the farmer, it allows distributors within a given country to sell the product for a profit.  These distributors require labor, so on and so forth.

Hugh Whalan’s article asks the rhetorical question, “Don’t you feel like you are taking advantage of [the people you are trying to help] by making money from them?  What is not considered is the contrary questions of whether charity hurts local economies?

Finally, in my Professional Writing class we discussed strategic messaging.  One of the essential parts of messaging in political and business settings is to get your audience invested in what you have to say.  In the case of the social entrepreneur, getting your audience and potential recipient bases interested in what you are trying to accomplish is half the battle.  By having your audience invest their time, money, and energy in you product, they are incentivized to use or implement the social venture, where if they only receive charity, the incentive disappears.