Among the many topics at the Skoll World Forum, the question that has swirled around my head is “can you have your cake and eat it too?” posed in relation to social good with market returns. The most interesting answer to this question came as “Well, it depends on if you like cake.”
Filled with a panel of financial and foundation experts, the conversation got to the heart of the debate – what kind of returns can you/should you expect from social good organizations? Is there a number you can attach? Is 7%, over time, an accurate amount? How much “time” are we talking?
The opinion from a leading investment bank representative was “if you aspire to create a positive externality, it’ll cost you.” For many of us of interested in creating social good, that is a fair trade off. After all, how do you price the externality of alleviating poverty, improving education, or reversing climate change? Certainly they would be worth a smaller financial return?
My favorite analogy made was in relation to baseball owners. It is financially certain that you will lose money by owning a baseball team. Yet, we continue to have teams – and folks continue to own teams. In this sense, there is more than just making a financial return. It’s more than just the most rational choice, its about personal interest – possibly, personal legacy.
Going forward, we need to create financial products that allow us to explore the area between social and commercial investment. In the future, balancing this duality will be a core competency of any investor. (At least that is my hope.) But to get to this place we’ll need two things: 1) we’ll need to understand what the risk/reward is for social ventures and 2) we need to encourage long term thinking – just building, scaling, and selling will not be enough.
This isn’t an easy task, but it plenty exciting. Or, it just depends on if you like cake.