Why Social Entrepreneurs Should Care About Profit & Efficiency
Even if it's trendy right now, social entrepreneurs shouldn't abandon efficiencies or profit.
This past week I was scrolling through the fantastic social-media marketing of social impact brand @KhanaPanties. I noticed a troll critique the cost and the structure of the organization and, although the individual was completely wrong in his unresearched assumptions, it did make me pause and reflect.
We As Consumers Are Haters
Profit gets a bad rap these days. We often hear about how capitalism and greed fuel the push for increased efficiency and economies of scale. In fairness, sometimes they do. But that's not a complete story. There are many reasons why entrepreneurs throughout time have sided with reducing costs, increasing prices, and increasing growth.
Yes, it's popular to talk about $0 profit models right now, and how mark-ups are evil –but that's not sustainable.
If we vilify profit and efficiency just because we've seen people who encourage it do harm, we might as well permanently turn off our screens, tear down skyscrapers, and dismantle the internet too. All advancements have the capacity to do harm.
What Do We Do As Social Entrepreneurs?
As the next generation of Creators and Founders we should be invested in ideas that can scale and do so in a clean and efficient way —even if we are not determined to grow. At the same time, we should be unapologetic for pricing in a way that allows us to do more than cover our costs.
Peter Drucker defines profit as “a measurement of how well the business discharges its functions in serving market and customer.” Investing in people and places and their healthy futures is a great use for profit. But you need to stay in business before you can create that impact in the first place. So yes, it's popular to talk about $0 profit models right now, and how mark-ups are pure evil –but that's not sustainable.
Simply Put: Profit & efficiency are not enemies of social good
When we invest in good processes and price to produce a profit, we give ourselves the opportunity to do good sustainably. Because frankly, rich people being philanthropic is not a realistic solvency plan for the word's problems.
With that final opinion, I encourage you to read more about the methods of George Westinghouse in this excerpt from Andrew Small.
"What made Westinghouse different was that he was interested in the broader field. If he saw some technology that had commercial prospects, he was very happy to buy the patent and then hire as a consultant whoever that inventor was and then bring that back to Pittsburgh, where he had teams of engineers and others to commercialize that technology. Nikola Tesla, who was a genius inventor, only saw one of his inventions, the AC motor, become commercially meaningful—by collaborating with Westinghouse."
"Tesla invented all kinds of things that were ahead of his time, but without Westinghouse he never did anything with them. Westinghouse was also very progressive. At a time when Carnegie and Frick are calling out the Pinkertons and some of their workers are dying because they are ill-used by their employers, Westinghouse is pioneering the half-Saturday off, pensions, and paying for the education of his employees. He represents a sort of better, gentler capitalism while still being a major competitor."
You can read the full story here: