The Benefits of Making Money While Saving the World

From this week's readings, I was particularly struck by Hugh Whalan's piece on developing a profitable social venture. Whalan discusses the reality that many people frown upon social ventures that are grounded in a profit motive, and question the ethics  - and efficacy - of basing a business on selling things to some of the poorest people in the world. He counters by arguing for a psychological benefit to having people purchase goods versus receiving them via charity, that profitability allows for greater scalability, and that creating a market pushes local prices down whereas pure charity can drive local prices up.

The idea that there is a tangible psychological benefit to selling something to people rather than giving it to them reminded me of Frantz Fanon's The Wretched of the Earth, wherein he emphasizes the need for a colonized people to reclaim their dignity in the process of decolonization. Whalan obviously proposes a less violent approach than that of Fanon, but the concepts are closely linked. The vast majority of the world's less developed countries are former colonies of Western powers, and since decolonization we have, in many cases, shifted from political colonization to de facto economic colonization. When it comes to the psychology of colonization as defined by Fanon, international almsgiving is not going to offer the same empowering effect as allowing individuals to purchase a good and become masters of their own respective destinies.

Looking further into Whalan's work, his company, PEG, provides small solar systems to impoverished people in Africa utilizing a repayment plan. This is actually quite similar to the way in which solar has diffused in the United States, with power purchase agreements (PPA) being the vehicle driving the vast majority of home solar growth over the last decade. In the case of both PEG and the American home solar industry, the growth driver is private enterprise, and the mechanism is minimizing upfront cost to the end-user. While there is no mention of PPAs in any of PEG's literature, I have to wonder if the company's model was inspired at least in part to the PPA's emergence in the United States.

One area that Whalan did not touch on is that selling a good offers a far better test of its usefulness than if you are giving it away. As we have noted repeatedly during our class discussions, poor people are very discerning customers and will not purchase something if it they fail to see its usefulness. This being the case, you could develop a truly useless product that was intriguing enough to Western donors to get them to donate significant funds for its distribution, but that does not mean it will help its intended users. When you are selling a product, on the other hand, you can be assured that those same users will not waste their own precious funds on something that they don't see the utility in.

Ultimately, Whalan provides an interesting frame of reference on how to approach social innovation, particularly given that his own work largely goes against the definition of social innovation that we're using for our course.