I have been suspecting for a while that there is something about creating a mobile + web-based platform so that people can enjoy interactive media experiences at every turn (you know, like a walking, multimedia, tour guide but with unique content and features or something) that such efforts elsewhere tend to involve years of work cooped up inside some research lab – I mean, it is not just the amount of time it takes to gather, curate and generate good content, and we are not even talking about testing that content with different audiences yet – it is the very fact that you have a setup doomed to fail from the outset: you are an enterprise trying to supply a merit good. And merit goods, as we know and all agree on, tend to be underconsumed in the free market, warranting some sort of government intervention, usually in the form of subsidies.

That merit goods tend to be underconsumed either due to consumer ignorance or their negligence of the associated positive consumption externalities really came home for me when, after our initial foray into certain Chinese cities for business development, the first question that came up from a school group looking to come into Singapore this August was, “Is the breakfast buffet-style?” I was all “let me tell you all about the Red Revolutionary trail in Singapore!” and the first question they asked was, “Is the breakfast buffet-style”. Hurhurhur.

I suppose that’s the whole spirit, entire rationale behind starting up lean – people never behave the way you expect them to. D:

So it almost seems like any social enterprise is destined to fail because if the market is incapable of providing said good/service in question, it basically means that there is no cash on the table. Without cash on the table, a social enterprise that sustains itself on the basis of grants and/or donations might as well call itself a charity. Of course, that the signalling and incentive functions of the pricing mechanism should fail in certain instances is precisely reason for intervention, so that every child, regardless of family incomes, could enjoy equal chances at success (as much as possible) and so forth; I think the moral case has already been made and the social conviction is there where social entrepreneurship is concerned, but working models appear to be sorely lacking (disclaimer at this point: I have not done a literature review yet.).

How can a private enterprise even begin to supply a merit good given its constrained nature? A public good? How can a company begin to provide essential services to people who cannot pay? Any business has to be concerned with this equation at the end of the day for long-term sustainability: Total Revenue – Total Costs (Fixed + Variable). If there are limited ways to raise the former, then it must follow that many a times a social enterprise can be made viable only when the latter is dramatically reduced.

Economists have estimated that from the mid-1800s to the mid-1900s, the real value of goods and services available to the average American increased by 700 percent…

The falling costs and increasing quality of food, clothing, and shelter made Americans healthier and more resistant to disease. Accordingly, stature and life expectancy have risen at unprecedented rates from the late 19th century forward.

— All Entrepreneurship Is Social

In the above examples, private firms that may not have set out to improve life expectancy ended up doing just that because dramatic cost improvements made food, clothing and shelter more accessible to a wider group of people than ever before. Of course, one may argue that a third cause is possible but let’s consider another example: It was not always obvious from the day of mainframe computers that anyone beside an obsessed geek would have a need for such a monster. But then Moore’s Law. And a group of entrepreneurs had a vision that every home needed to have a desktop, then as prices fell more and more consumers enjoyed access to computing power that started transforming the way we live, work, communicate and engage with politics. Yet none of this would have been possible if computers stayed expensive. This is not to say that the IT industry is a mega social sector, but to reiterate my point that cost, and therefore efficiency matters. No ready example comes to mind, but my quick guess is that many successful social enterprises that stay around must have found a way to do something for far cheaper, most probably by making use of idle resources.

But there is 1 particular mega social enterprise which succeeds on the basis of raising high revenues, at least partly: the Grameen Bank. When you think about it, it is a very clever model that leverages peer pressure to ensure repayment of loans extended to poor people who would otherwise have not received credit (so kudos to that); but the interest rates… Hurhur.

In conclusion, it seems like there is no escaping the profit equation when it comes to social enterprises. What then are social enterprises? Given that all traditional enterprises generate jobs, are these SMEs not already creating a significant social impact by virtue of the external value generated from employment creation? If we say that the distinction between a social enterprise and a traditional company lies in the size/significance of the social impact created, by what metric do we measure this social impact? And say we take a ratio of 5:1 (social impact created:private benefits reaped ) to qualify an entity as a social enterprise, are the 2 measures even directly comparable to make any sense at all as an expressed ratio? If we stay away from measurement and say that it comes down to intention, that is wishful-thinking at best. That I intend to be a billionaire automatically qualifies me as a non-billionaire, but it hardly follows that I would actually become one.

At the end of the day, I think we can hardly escape measurement – especially more so when it comes to areas we demand improvement in. They say that accounting gave birth to modern capitalism. So perhaps what is needed for a new capitalism is a new set of measurements… AHA! How about ERHNI (also pronounced as “Ernie”)? :p… The Environmentally Responsible Happy Nation Index for which I still owe professor Ng my final draft, oops.


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