Welcome to the Social Edge Building Blended Value event series! In this event, we will be focusing on the issue of policy.

There is significant debate regarding the appropriate role of government in creating a “level playing field,” but the fact remains that government sets the terms of play and is (through its provision of capital and purchasing of services) a key actor. Governmental regulations, policies and tax code have a significant effect upon the degree to which market forces affect value creation. Maximizing the full value of our resources, both private and public, requires a strategy that draws upon a number of related tactics, and advancing a coordinated policy agenda will need to be one of them.

To advance a common advocacy agenda requires understanding and acknowledging the critical role of government, addressing the challenges of lobbying, and devising strategies to tackle counterproductive policy initiatives. For this session we have invited several special guests to speak about these topics and give us their perspectives. The event is being moderated by Alison Wise of Future500 and Stephani Kobyashi Stevenson of Net Impact

To spark the discussion, we recommend you read the following short section from the Blended Value Map Paper: Click here to read: "Ideas for Improving Government Policy/Regulation/Tax Code."

If you would like to read the full chapter of the Blended Value Map on Government Policy/Regulation/Tax Code, Click here. For a quick overview of the Blended Value concept, check out www.blendedvalue.org or the special interview by Mario Morino. Click here to read the interview.

Here are some questions to consider when posting a message in the blue box:

1. What are the current policies that affect blended value creation?
2. What initiatives are currently or should be underway?
3. What policy initiatives are counterproductive?
4. Which issues should we target for cross-silo support?
5. How can we consolidate efforts across silos to enable effective lobbying?

AlisonWise - May 24, 2004 10:27 am (#1 Total: 38)
Sea Change Sustainable Business Interest Group


Greetings-

I am so pleased to be helping to co-moderate this discussion on "Terms of Play." I am the executive director of Sea Change Sustainable Business Interest Group, a trade association of businesses who would profit from an environmentally sustainable economy (www.scsbig.org), and Director of Public Policy for the Future 500.

While eyes tend to glaze over when you start to get into a conversation about tax policy and legislative reform, it really is a tremendously exciting opportunity to create change. Policies are the tangible product of human dialogue and negotiation, a historical legacy that can shape lives and create a more prosperous future for the generations that will follow us.

Heady stuff, but we have a unique opportunity to re-think the way we craft legislation at this fulcrum between a fossil fuel economy and perhaps a future, more sustainable economy. That being said, the "triple bottom line" includes issues of social jusice and community that are of profound importance. How can we create a legislative infrastructure that will address these public concerns, while promoting a prosperous economy?

I would like to pose a very broad question to perhaps get us started. In thinking about the terms of play, we have to make sure we have the right rules, and this would also assume the right scoreboard. Nationally, when we consider the GDP, what do we think works with this measure of prosperity? What do we think could be improved as a better indicator of blended wealth?

sek24 - May 24, 2004 10:49 am (#2 Total: 38)


Welcome everyone to the last part of the series on Building Blended Value. I am honored to be co-moderating the “Terms of Play” discussion over the next few weeks. My interest in this topic stems from my professional work in the real estate sector, my service with the Peace Corps, and most recently, my experience working for an international development NGO.

By way of background, I am a Net Impact intern and will start my second year at Georgetown University’s MBA program in the fall. Last week, I just completed several courses that discussed public policy and international business diplomacy and so I hope to extend my knowledge from the academic arena to the professional one.

Many thanks to Alison who has started this discussion with some difficult questions and I would like to add on to one of her points of measuring prosperity. Can reporting initiatives be used to bring more information for the policymakers to ensure sound decision-making? From a U.S. perspective, can it be accomplished in our political environment of campaign financing where politicians must appease their constituents?

Susan Frank - May 24, 2004 11:13 am (#3 Total: 38)
Kirsch Foundation


Hello everyone. My name is Susan Frank and I am the Vice President for Public Policy at the Steven and Michele Kirsch Foundation in San Jose, CA. My foundation does both grantmaking and policy/lobbying on progressive issues such as medical research, arms control, the environment and campaign finance reform. I exclusively focus on public policy and lobbying/advocacy for the Foundation. I am a "Special Guest" for this event, and am pleased to be a part of it.

I want to take a stab at responding to one of the previous co-moderators questions regarding reporting initiatives and campaign financing. First, yes, I do think reporting initiatives can be used to bring about important policy changes and result in sound decision-making. Take a look at the group CERES (Coalition for Environmentally Responsible Economies) and their Global Reporting Initiative. http://www.ceres.org/our_work/gri.htm CERES has had tremendous success with their work, in terms of informing and making change, particularly at the federal government level.

On the issue of can those initiatives be accomplished in our political environmnent of campaign financing, I want to challenge this a bit and raise some additional questions for discussion. Legislators must appease their constituents regardless of the role of campaign financing. The key is who those constituent groups are. If we are talking about the average voter in Senator X's district, then we would probably all agree that appeasing that constituent is the right thing to do. If we are talking about the average CEO in Senator X's district, does appeasing that constituent become the wrong thing to do? What about a CEO not in the Senator's district?

I raise these issues for a number of reasons. One of the key problems in U.S. politics IS the campaign financing system. That is one of the reasons why public financing of elections makes so much sense... it levels the playing field and allows all constituents the ability to have access to legislators, regardless of the size of their pocketbooks.

I can say more about public financing later... I will stop there, and hope I haven't digressed too much.

Susan

Betsy Adler - May 24, 2004 11:13 am (#4 Total: 38)
Principal, Silk, Adler & Colvin


In the fall of 2002, I had the privilege of lecturing on U.S. nonprofit laws at two distinguished universities in China. I then participated in a workshop in Taiwan that focused on proposed revisions to Taiwan’s foundation laws. In each instance, I had to step outside my familiar silo and look freshly, without preconceptions, at our legal system in order to describe it to those who operate under very different systems, without treating our tax law as scientifically fundamental across cultures and languages, like the law of gravity, or faith-based like the Ten Commandments or the Koran and thus not susceptible to change.

I propose to approach our conversation here on Social Edge in the same spirit. We have a set of tax laws in the U.S. that apply very different rules to the assets of charities and the assets held by private individuals and enterprises. (It’s a historical accident that our charity law in the U.S. is primarily found in our tax code; other countries find this very odd.) While it’s unlikely that our conversation will change those laws, I am convinced that it is possible for the charitable sector and the private sector to work across boundaries toward shared goals without breaking the rules that govern charities in the U.S. It will take not only a better understanding of those laws but also some creative thinking, without preconceptions about what's possible. To the extent that our tax laws, and the policies that drive them, create roadblocks for the creation of blended value, we need to understand those roadblocks so as to build roads around them that are legally safe and will get us to our destination effectively.

That is, I suspect, my primary contribution to this conversation: to provide some practical and plain-English information on what those roadblocks actually are, to suggest where there’s some flexibility, and to suggest when what looks like a roadblock is, instead, a valuable protective shield. While I can’t give advice on specific matters for specific organizations in this forum, I am glad to serve as an informal translator of Internal Revenue Code sections governing charities. Please understand, though, that this information will be general information, from the 30,000-foot altitude; how the rules may apply to your particular situation is another question entirely.

But let’s not get too fixed on legal obstacles and opportunities in this conversation. The law is only one piece of a far larger enterprise. I have told clients that legal compliance is the floor of the house they’re building – you can't live in a house without a floor, but if you only have a floor, you don’t have much of a house. I'm looking forward to learning from the other participants in this conversation.

Betsy Buchalter Adler Silk, Adler & Colvin

cbd - May 24, 2004 2:05 pm (#5 Total: 38)
Coastal Enterprises, Inc.


I am a Senior Program Officer for Research and Policy Development at Coastal Enterprises, Inc. (CEI), a community development finance institution (CDFI) and community development corporation (CDC), serving primarily Maine, with some financing programs in Northern New England and New York State. CEI supports the development of small businesses, affordable housing, community facilities and social services through financing (both debt and equity), technical assistance, workforce development and policy development. Several of our programs operate through for-profit or non-profit subsidiaries, which can be thought of as social enterprises. Public policy affects all of our work.

My greatest interest in this topic is how we as practitioners gain any scale or impact from the work that we do. We can demonstrate many interesting and effective one-off projects, but it takes advocacy focused on the policy process to raise additional resources to institutionalize a successful project, and it takes consistent public policy to make sure that other economic or social factors do not undermine the project’s goals.

Carla Dickstein

Victor Rubin - May 24, 2004 6:19 pm (#6 Total: 38)
PolicyLink


Hello. I'm director of research at PolicyLink, an organization which supports, through research, advocacy, communications, and capacity-building, the adoption of a wide range of policies intended to advance more equitable development. We have connections to and interests in many of the types of activities analyzed in the Blended Value map, particularly those which are concerned with the revitalization of urban neighborhoods. For example, we coordinate a community council which helps to guide a family of double-bottom line investment funds in Northern California, and we advise several foundations on how to evaluate the neighborhood impacts of their program-related investments. We advocate with local partners for community benefit criteria and tax incentives that can ensure that state and local public investments have the most equitable impacts.

This question of the role of government incentives in guiding capital directed at disadvantaged communities is of ongoing interest to us. There are some investment funds, for which participants receive CRA credit, for which simply locating the investment in a firm or property in a lower income area, however defined, is deemed sufficient for social responsibility. There are tax credits given for investments in projects which may fall well short of the host community's goals or plans, and which are granted with no or minimal resident involvement. When the New Markets Tax Credit program began, we argued, along with a group of other organizations, for requirements for transparency in reporting to local groups, consistency with local plans, and evidence of tangible community benefits. Figuring out how and when to employ these kinds of criteria and standards is not easy, but it is one of the critical public policy issues facing socially responsible investing, and we would welcome discussion about these issues.

goldman5 - May 24, 2004 6:31 pm (#7 Total: 38)
Policy Development www.policydevelopment.org


Hello all. It is a rare pleasure to have so many interesting policy folks concentrated in one--albeit virtual--room. In the hybrid spirit of this event, I am representing two organizations here. I am the head of Policy Development (www.policydevelopment.org), a non-profit public policy and capacity-building consulting group; and I am also the head of Policy and Research for Princeton Social Capital (www.princetonsc.com), dedicated to matching social investments with investors and providing a host of related philanthropy consulting services.

Representative Bill Thomas, Republican of California and chairman of the Ways and Means Committee, in a speech to the federation of American Hospitals, asked a question about credit unions and then answered it: "...What is the good and worthy cause for which they were given the nonprofit, therefore tax-preferred, status?...I think some of it's gotten murky or lost in their attempt to build and grow and provide services to the point that if I put one down on paper and said profit or nonprofit, you couldn't tell the difference." (NY Times 3/21/04)

Now hospitals and credit unions have many unique attributes among non-profits, but the wisdom here is that as organizations innovate, new players come on the scene, and new solutions to social problems emerge, tax law is breaking down. Sure there will always be a need to crack down on illegitimate organizations, but there are a lot of great things happening that won't survive the United States' old-fashioned tax code.

Our challenge is to find ways to adapt policy to enable these promising movements, and expect more of non-profits--not less. The future promises greater social impact, sustained and complemented by market mechanisms. But there is a lot of work to be done. Let's get to it.

Aron P. Goldman Policy Development, Executive Director Princeton Social Capital, Head of Policy & Research

sjordan - May 24, 2004 7:25 pm (#8 Total: 38)
US Chamber of Commerce CCC


Alison, I think this is exactly the right approach -- if we design good policies and have the wrong premise or the wrong goals, we're wasting our time and creating more work in the long run -- so getting the scoreboard right is key. That being said, the problem with the social value piece of the scoreboard is that there are multiple values, not just one.

The community economic development folks can focus on poverty alleviation. The environmental folks may focus on preservation of biodiversity. The health care folks on wellness, and so on -- there is no single P/E ratio equivalent, and some of these values may function at cross-purposes.

We could talk about creating a "basket" of social goods, but it might be difficult to get consensus about what might be included in the basket or how each social good is weighted -- (look at the CPI controversies for example, and it seems to me inflation is relatively straightforward comparatively speaking).

So where is the low hanging fruit? Some possibilities might include:

Social organization/program reporting, transparency and governance -- via 990 reform, the establishment of an SEC-equivalent oversight mechanism, incentives for reporting impact, incentives for social accounting structures

Community development appropriations and resource allocations -- via community development mapping projects, the creation of more information portals, understanding HUD, CDC, CDFI, and 13 other government agency program allocations, facilitation of public-private partnerships, facilitation of inter-agency coordination, facilitation of local, state, & federal coordination, etc.

International development appropriations and resource allocations -- AID and MCA authorizations and approps, G-8 development agenda, getting a handle on the IFIs and the UN development financing initiatives, other multilateral development funding, coordination, and resource mapping...

It's not obvious to me that corporate tax policy is a good starting point -- on the incentives side, few companies max out on the charitable deductibility provisions currently in the law -- if they're not using it now, what will raising the limit do?

That being said, it would be interesting to discuss the pros and cons of setting up a long-term tax credit for micro-credit financing to incentivize sub-par loans in disadvantaged areas or a provision that all new companies established in "empowerment" zones are tax exempt on profits for the first three years of profitability, or to create a federal insurance program for financial institutions willing to provide mezzanine financing for inner city start-ups with at least $1 million in revenues...(I'm not endorsing any of these concepts, just raising possibilities)

You might get a significant increase in corporate volunteerism as well (or at least you would get better measurement of what is currently going on) if you set a monetary value on mentoring activities and included these activities as being tax deductible.

I'm also really intrigued by the folks who designed the pollution credit market, and I wonder if it could be possible to design a template to establish markets to achieve other generally accepted social objectives too.

On the flip side, we also have to be vigilant about the downsides of some of these ideas -- are we creating incentives for tax avoidance? are we creating moral hazard problems? are we promoting the inefficient, non-productive use of resources?

Thanks for kicking us off. This is going to be a great discussion, but I think that a lot of conceptual work and consensus-building are going to be required up front given the complexity of some of these issues. Regards, SJ

goldman5 - May 25, 2004 5:06 am (#9 Total: 38)
Policy Development www.policydevelopment.org


Regarding specific policy approaches, we must notice the current popularity of tax credits. Tax credits seem more market friendly and less expensive for taxpayers, but they are really just politically acceptable ways to transfer public dollars to for- and non-profit entities doing things we like--sub-par lending, affordable housing, etc. In fact, as Buzz Roberts, Senior Vice President for Policy & Program Development at LISC, recently pointed out to me, the Low Income Housing Tax Credit program has summarily overshadowed Section 8 as the biggest federal subsidy program for affordable housing. Yet we still think of HUD--not the Treasury--as the housing people. Perhaps understanding tax credits as another form of subsidy will help us track our social return on investment and target the issues we care about most.

Regarding good governance, I think there is a lot for us to talk about. Good governance has always been a key factor for traditional investors concerned about the viability of a given company. In the post-Enron/Tyco /Worldcom world, we now understand how good governance is also a social responsibility. In fact, good governance is the fastest growing social screen among investors right now (Social Investment Forum, “2003 Report on Socially Responsible Investing Trends in the United States.”) Sarbane-Oxley also reflects this new concern about corporate governance.

But, especially when it comes to organizations interested in social impact, where do we get our ideas about what good governance is? The corporate ideal continues to be a very powerful notion. We are still working to apply the best practices of the corporate sector to the non-profit sector. Bridgespan and armies of socially-minded MBAs are leading this charge. Also contributing to this trend, isolated scandals involving embezzlement and general extravagance have turned public opinion against non-profits recently. Some feel that non-profits lack the incentive to innovate and maximize their social impact.

So we see that, at the moment, both the for- and non-profit worlds have low credibility when it comes to governance. Let’s take advantage of this moment to help fill this intellectual vacuum. I urge us to retain a balanced to for- and non-profit models, and work towards policy prescriptions that capitalize on the best of both worlds.

Also, this site may help us keep it simple:
http://www.emcf.org/pub/jargon/words/index.htm

AlisonWise - May 25, 2004 9:27 am (#10 Total: 38)
Sea Change Sustainable Business Interest Group


Good morning-

It would be interesting to dig a bit deeper in specific policy silos (or perhaps what are perceived to be at this point), but I'd like to follow up on Steve's observation of the necessary consensus building from an advocacy standpoint that should be discussed, perhaps, as it relates to some of the items like corporate governance and micro-credit as applied broadly accross issue areas. I ran across what I thought to be a compelling (though perhaps unfortunately a bit political) statement:

"Taking a step in this direction, Redefining Progress, a think tank dedicated to promoting sustainability, has developed what it calls the Genuine Progress Indicator (GPI), an alternative measure of economic growth that factors in close to two dozen aspects of our economic well-being that the GDP ignores. The group's Executive Director Michel Gelobter describes the GPI as "the GDP minus heart attacks, prison time and clear-cut forests. But adding back in volunteerism and time people spend with their families." Just last week the group released its latest GPI analysis, which found that current GDP figures overestimate the health of our economy by $7 trillion."

Any thoughts on where these metrics and goals could be more broadly (or conversely, perhaps more strategically) applied?

And thank you for introducing yourselves as you respond or suggest other thoughts...

Sheila Bonini - May 25, 2004 7:59 pm (#11 Total: 38)
Hewlett Foundation


I am pleased to see the event getting off to such a good start and already a number of great posts and interesting backgrounds!

Betsy's post (#4) made me wonder - what would we want if we were not encumbered by our current tax laws and regulation?

I'm imagining a world where capital can flow efficiently to the most effective organizations to pursue financial, social and environmental value creation. So, a corporation that is especially good at various community activities would be funded better than its equivalent that isn't. A nonprofit that creates greater social/environmental value would be better funded than its counterpart that is not so good. To a certain extent we have the infrastucture that helps the financial capital market work, but not the full blended value capital market. If that is a possible vision - how can we get from here to there? What kind of policy changes are necessary?

I think appropriate metrics will be part of the answer, but assuming we could actually measure and report the social and environmental value created (or destroyed in some cases) what would we do with that information? Is this where tax credits come in (to Aron's post #9)?

On another note, and building on Susan's comment (#3) - consider legislation in the UK that had pension funds (and I think charities too) dislose their SRI policies. They were not required to invest in these funds, just required to disclose whether they did. After that the amount of investment in SRI funds by pension funds in the UK rose considerably. There should be more details about this in the UK Social Investment Forum website somewhere if anyone is interested: http://www.uksif.org/J/Z/Z/jp/home/main/index.shtml

I'd be curious to hear people's thoughts.

Regards,
Sheila

Betsy Adler - May 26, 2004 9:52 am (#12 Total: 38)
Principal, Silk, Adler & Colvin


Governance used to be a backwater. As a lawyer specializing in the nonprofit sector (my 14-lawyer firm works only with nonprofits of various kinds and their donors), I used to get asked with some frequency why anybody should care about bylaws. My old answer was "Your bylaws are about the allocation of power to make decisions about this venture, and that is worth your attention." Since the corporate governance scandals of the last few years and the efforts of various state Attorneys General (thus far unsuccessful, but I wouldn't count on them letting the issue go) to extend some of the provisions of Sarbanes-Oxley to the nonprofit sector, my answer now has a second part: "You should care about your organization's governance because your donors and neighbors and supporters and opponents will be watching to see whether you do it right."

Good governance is the flavor of the month. The currently fashionable nature of this issue may provide an opportunity for some cross-silo thinking about principles and their practical implementation. Sarbanes-Oxley was designed for large publicly traded business ventures. Importing that law into the nonprofit sector simply doesn’t work – there are issues of scale, issues of purpose, about which we could write books. But we could usefully think together about what governance principles really do translate across sectors and silos. I’m not thinking about the minutiae of whether you have an audit committee and how it’s composed; those will vary depending on the size and purpose of the venture. My sense is that some of the fundamental principles of corporate good governance can be translated out of corporate-speak into plain English so that they can inform the practices of large and small nonprofits. Something as basic as disclosing actual and potential conflicts of interest doesn’t always get through to community organizations or even family foundations because the conflicts there are not necessarily about financial interests but, rather, involve conflicts of loyalties, personal affiliations that influence decisions. What would a general-purpose, plain English standard look like? When is disclosure enough of a disinfectant that we don’t need to require people to abstain? What other governance standards can we come up with that work across sectors and could usefully be proposed as general standards of behavior/operation? I tend to look very skeptically at "best practices" codes because there are so many effective practices and our nonprofit sector is wonderfully diverse, but if we focus on the basics and leave the implementation to one side for a while, we might usefully advance this conversation. What do you think?

Betsy

sek24 - May 26, 2004 10:55 am (#13 Total: 38)


Thanks for the fantastic discussion with many important points and questions. Your comments sparked so many questions in my mind.

Susan asked about the issues of power and the differing definition of constituent groups that hinder public policy or create public choice issues. Tax laws create roadblocks to blended value and while tax credits can be used as another incentive for social investing, Aron elucidated on the implications of credits as a band-aid for market failures. At one time, corporations may have defined good governance, but does that exactness describe the governance of the public sector? Where do we go from here? Metrics and goals may be one starting point as Sheila indicated.

I think all of these questions overlap as those who hold power (i.e. corporations?) may determine tax laws, whereby all must abide. To begin with, can we look at the cause of the disease? I suppose I would ask you all whether these issues that we raised can be targeted for cross-silo support? Is this possible when businesses are constructivist in nature and myopically shape the agenda from the beginning?

I look forward to your comments.

Stephani

rcolmenar - May 26, 2004 3:10 pm (#14 Total: 38)
Raymond Colmenar


Sorry for getting in the conversation a little late. I'm Ray Colmenar, Senior Associate at PolicyLink - a colleague of Victor Rubin who posted earlier and described our organization. I'm delighted to be part of this conversation and would like to expand the discussion a bit as it relates to the actors that need to be engaged in the policy process to achieve blended value creation.

The Blended Value Map is a very useful and helpful way to categorize the actors that are trying to advance the Blended Value proposition. However, I think it's helpful to consider another set of players. At PolicyLink we work with a variety of policy actors in the community development/building field that are not financial investors nor entrepeneurs, but nevertheless engage in the blended value field (though they may not call it that). These are primarily community organizers, labor organizations, community building intermediaries, and social justice advocates that intervene in the market to ensure a blended social and economic return to private and public investments. They invest social and political capital primarily and facilitate more equitable development through public and private policy. Their deals are political deals that generate social, economic and environmental value.

These are actors that are essentional for understanding the authentic needs of communities, developing responsive policies, as well as ensuring that they get implemented. The creation of the CRA for instance was in no small part due to the community organizing and advocacy associated with financial institutions' redlining. Additionally, the CRA agreements that financial institutions make often result from research, direct organizing and advocacy of local and national groups around the country who leverage regulatory processes to get what they want.

A key part of the work should be in identifying these savvy political and economic actors, understanding what they do and finding ways to connect them to other investors and practitioners.

Arbor - May 28, 2004 9:19 am (#15 Total: 38)


Hi Betsy, My name is Jeb Singer you and I read a post by you on SocialEdge. I believe that you may be able to give me some advice. I had a couple of questions that I'd like to ask you in order to help me acheive a few goals. First of all, I am leaving my job as a marketing research associate to eventually pursue law school and a career in law (hopefully working a lot with non-profits), I was wondering if you know of any good pre-law programs at law firms or non-profits here in NYC. I have some volunteer experience and I enjoy writing a lot. I would be open to a paralegal type position at a law firm or something in non-profit development. I am willing to make a couple of year commitment for sure. Also, my girlfriend and I are planning on traveling in S. America in between jobs (for me at least she is on vacation from medical school) we'd like to spend a couple of weeks doing some sort of grassroots volunteer work in S. America (namely Peru). I would prefer to do something with social justice, economic developmentm, education or law and I have ran some internet searches. I have noticed that most programs require volunteers to pay thousands of dollars to participate. Do you know where to start looking for programs that do not require us to pay? I am only doing it for a couple of weeks and obviously do not expect them to pay for our housing, food etc. Any resources would be helpful. Please email me at jebsinger@hotmail.com. Thanks and have a great Memorial Day.

Jeb Singer

Betsy Adler - May 28, 2004 11:21 am (#16 Total: 38)
Principal, Silk, Adler & Colvin


Jeb, I'm based in San Francisco and am not familiar with the NYC nonprofit scene at a level that would let me be helpful. You might start with a call to the New York City Bar Association to find out who currently heads their nonprofit committee and then contact that person. I know several lawyers in NYC who specialize in this area but I don't think any of them is in charge of hiring at their firms. Three distinguished NY lawyers with expertise in this area are Victoria Bjorklund at Simpson Thacher & Bartlett, Rochelle Korman at Patterson Belknap, and Dan Kurtz at Holland & Knight; there are indeed others.

I'm also not familiar with volunteer opportunities in Peru or elsewhere in Latin America. You might have better luck talking with American Jewish World Service, Catholic Relief Services, or other faith-based groups that take volunteers for service outside the US.

Sorry not to be more help! Betsy

Aikidosphere - May 28, 2004 5:11 pm (#17 Total: 38)
introduced concept of Integrated (Aikido) Entrepreneurship


If quantifying success of a given social enterprise may be difficult, it is far easier to quantify the relative sizes of the socially-engaged portion of a sector (the Social Business Factor) and that portion that still practices myopic-profit reasoning.

The point of this is to introduce the "new" concept of Aikido Activism:

.... if corporations wield such great power, then social and environmental activism should cleverly engage that power in any way it can to turn the objective away from myopic-profit-based towards more progressive objectives -- Aikido-style.

I call this Aikido Activism (essay attached or available at a social networking software based community begun to discuss Aikido Activism: http://aikidoactivism.tribe.net/). There are many and growing social or blended enterprises, most defined by a product or service that is socially or environmentally remediative or progressive; but the very basis of today's "adolescent" capitalism -- the myopic focus on profits, is the real culprit, the real genetically modified ingredient of greatest peril.

We can not truly remove a genetically modified variable once it enters our environment, but we can turn it towards progressive outcomes. I.e., we can base the very charter of new corporations on activism, not maximization of dollar profit. To those who would say that dollar profit is life giving and essential, why then does a technology like the Apache web-server beat Microsoft with 70% market share of the Internet server software market?

... because in a free market you can pretty much choose what you would like to do...

Apache chose to give it away. Microsoft chose to maximize profit. Which one won?

In the continuum from profit to non-profit we find a multi-trillion dollar profit-based economy that essentially runs the world as long as its excesses are not so severe that bloody revolution arises (make that just as much human and environmental exploitation as we can get away with...). And we have a non-profit sector aiming for activism against social and environmental issues, relatively impotent HAVING NOT SUFFICIENTLY ENGAGED MONEY POWER. The excesses of global exploitations are so risky that there is little time to waste in seeing this disparity and addressing it.

Aikido Activism (see essay at http://tinyurl.com/35get ) systematizes the issues and opportunity. A key point is that Aikido Activism will bring in a power structure more powerful than that of today -- so that the conversation is not solely to convince traditionalists that things are out of kilter and need fixing (although that is true), but to show traditionalists in power that they can not remain in power UNLESS they adopt the new model of capitalism discussed in the essay, and -- more importantly -- to identify and secure the participation of a small number of individuals actually positioned to bring about powerful campaigns of Aikido Activism.

Douglas Rushkoff, a vastly insightful thinker about media and society (among other things) has said that Aikido Activism, "is the obvious next step, and much more efficient than bloody revolution." A lot of things Rushkoff writes about I am sure seem obvious to him, but seemed like great insights to me, so I hope that you have a look and comment on this Aikido-style approach to blending in society the issues of economy, humanity and ecology -- of blending capability, authority and its-too-often-missing-element ... responsibility.

To quantify one example of the huge imbalance in forces in progressive business versus traditional myopic-profit business, consider the telecom industry. It is approximately a $10 Trillion dollar annual industry. The telecom social enterprise, Working Assets, last year provide funds to progressive causes in the amount of $3M (according to their website), which -- if 3% of their revenue (just a guess), pegs them at $100M annual revenue last year... or .001% of the rest of the industry. What if the next merger by an up and coming innovator is not AOL buying Time Warner but an Aikido Activism campaign, begun by leading social entrepreneurs, that pushes this Social Business Factor up to something at least in the single digit percentages? When can it reach 50%? This type of transformation IS possible in a high-tech based economy leveraging intellectual property (for example) as an Aikido hold point.

Thoughts? Interest? Criticisms?

Thanks,

Reed

Attachments:

Aikido Activism dex woir.doc (111 KB)

sjordan - May 28, 2004 7:29 pm (#18 Total: 38)
US Chamber of Commerce CCC


What I like about the questions posed is that they are so narrow and focused.

Almost every policy affects blended value creation because every policy reflects choices about resources -- their use, allocation, deployment, commitment, etc.

Federal and state budget deficits affect blended value because of their impact on discretionary government spending.

Tax policies (credits, cuts, et.al.) affect corporate, organizational, and individual resource allocations and the relative power and influence of the government, companies, organizations, and individuals to determine what those resource allocations should be.

Federal, state, and local budgets affect government resource allocation, and by extension how companies and civil society organizations complement or compete with them.

At the sector level, the IRS tax code and the first amendment (freedom of assembly and free speech provisions) have led to an extraordinary proliferation of nonprofit organizations unprecedented in world history -- and our inheritance tax policy might lead (depending on what Congress does next) to doubling the sector once the Baby Boom generation gets to a point where it starts transferring its wealth to the next generation.

Individual industries are bound in extraordinary webs of regulations -- financial services, manufacturing, telecom, transportation, etc. -- over the years, a massive number of rules have been developed for many different industries, sometimes creating irrational as well as rational outcomes.

I think we have to move from a zero-sum game mentality (markets good, governments bad or vice versa) to an open system mentality (identifying the right roles for business, government agencies, and civil society organizations). Our different institutions have different characteristics and that makes them tools to do different things.

Our business sector is a very versatile tool and one of the chief assets of our society, in part because they are so tailored to meet people's needs. Businesses come in all shapes and sizes, and people generally find the companies that they patronize to be very helpful (or they don't patronize them for very long.)

(Sidebar note: According to our research, businesses think first about their customers, second about investor/owner interests, and third about their employees. Which makes sense since 99% of companies are privately owned and depend on customers for their continuing existence. There is a significant disconnect between business perceptions of themselves and public perceptions. Most people when they think of their perceptions of companies, prioritize their experience first as employees (if they work or have worked for a business), second as "brands", third as customers, and fourth as investors (if they actively invest). That's one of the reasons why a cornerstone strategy for a lot of enlightened companies is to focus on treating their employees right, and why companies in general spend 3x as much on community relations as they do on public affairs. In this context, corporate philanthropy is actually not that effective a demonstration of blended value, at least in terms of public perceptions, good employment policy is.)

Different companies are going to have different strategies, and in a pluralistic society with pluralistic values, maximizing blended value is going to vary based on perspective, resources, the competitive environment, competencies, and many other factors.

I suspect that the current policies that affect blended value creation the most for the long-term may be our infrastructure decisions -- not just highways or mass transit, wireless-wired, energy, and water, but our education infrastructure, our health care infrastructure, and our environmental infrastructure. These are the platforms on which we operate and how they are structured will impact our long-term success or failure.

Interestingly, in light of our focus on blended value in this discussion, we do not have a national policy in this country about values, civics or ethics education and development. The Romans talked about preserving the old Roman virtues, certain Islamic countries have policies about preserving their values as well.

We're not wired to think that way. We have a tendency to think of values as private, not public, and this means that while we may have majority attitudes about any given issue, we also protect minority rights. As a result, we have to accept a certain degree of inefficiency because of our pluralism -- I wouldn't want it any other way, but it does affect blended value creation.

One last note: I don't know if this is helpful in terms of question #1, but maybe we should narrow the question down to certain kinds of blended value creation -- say poverty alleviation or community capacity building -- then this might lead to more narrow discussions centered around urban policy or education policy for example.

jimfruchterman - May 29, 2004 8:49 am (#19 Total: 38)
Benetech


Being in a technology-oriented social enterprise, I've really wished we could apply for Small Business Innovation Research grants. These are often socially motivated, but nonprofits are excluded. Interestingly enough, nonprofit enterprises seem to count as small businesses under many federal initiatives (procurement preferences, for example).

So, that's one U.S. federal government policy change I'd love to see!

Betsy Adler - May 31, 2004 9:41 am (#20 Total: 38)
Principal, Silk, Adler & Colvin


Ray's point is well taken. PolicyLink (full disclosure: I had the pleasure of working with PolicyLink's founder on its formation and tax exemption) highlights the importance of actors that too many business and political decisionmakers don't remember to consider. We need more efforts like PolicyLink that recognize, honor, and amplify the many kinds of practical work that connect policy and reality. Without those connections, links if you will, conversations about policy are missing a crucial reality check.

PolicyLink has focused on community development thus far. What other areas of endeavor would benefit from this kind of approach, linking ground-level actors (who have to live with the sausage-making side of policy implementation) with policy articulators (who too often don't know enough about how the sausage is made)? Could PolicyLink be a model? What has worked thus far for PolicyLink, and what could have worked better, and what can the rest of us learn?

cbd - May 31, 2004 4:02 pm (#21 Total: 38)
Coastal Enterprises, Inc.


Our experience at Coastal Enterprises is that policy is a natural extension of our practice if we want to reach larger scale and impact of our work. We are also in the community development/community development finance arena that Policy Link targets. Successful peer organizations such as The Reinvestment Fund in Philadelphia and Self-Help Credit Union in North Carolina also use their credibility as practitioners to engage in policy. The fact that we are finance organizations helps to get us to the table. But it is also a

One issue that has been hot in our field is predatory lending. Predatory lenders undermine the hard work that many of us do to help build assets for people who are out of the economic mainstream. Here is an example where the lack of good public policy to stop predatory lending as well as the financial institutions that buy these loans on the secondary market,can undermine the work that other public policy supports (e.g.the community development financial institutions program or the Community Reinvestment Act. Our field has been busy working with coalitions to pass strong state anti-predatory legislation and also with national intermediaries, such as the National Community Reinvestment Coalition, to pay attention to national policy. Currently there is a bill sponsored by Sen. Ney that offers few protections and would preempt state laws.

Our ability as practitioners to engage depends on having sufficient capacity without jeopardizing our work as practitioners, which gives us our legitimacy in policy work. Even working in coalitions or with national organizations requires a capacity dedicated to policy work.

We have also had some experience trying to work across silos in Maine and regionally. It is not easy but we are hopeful that there is sufficient common ground that we can develop a model. We helped organize a Sustainable Development Working Group in Maine that brought together various environmental, economic development, community and socially responsible business interests to look at how to move a state wide policy agenda. It was more of a network than a coalition. We had success in discussing issues, sponsoring good conferences, showcasing best practices, and writing a policy action agenda. We were not successful in actually selecting specific policy issues to support as a coalition.

We are trying again, this time with the Northern Forest Center to develop a federal policy agenda for the Northern Forest in Maine, NH, VT and upstate NY. that can gain the support of our delegations. We are interested in more resources coming to the region as well as influencing key policies that affect the region. It is still a work in progress but the basic premise is that in a region facing similar economic, social and environmental issues, we can build consensus among various stakeholders on a set of policies that will engage our delegations and enhance our power over the long run to affect federal policy. I'd be interested if others have had experience with cross sector and cross state policy efforts.

Michael Shuman - Jun 1, 2004 6:09 am (#22 Total: 38)
Training & Development Corp


My apologies for joining this discussion late, but my own "blended value" lifestyle, including two young children, makes sleep, let alone invaluable discussions like this one, challenging. My name is Michael Shuman, and currently I'm Vice President for Enterprise Development for the Training and Development Corporation, a national promoter of workforce development based in Bucksport, Maine (I live, however, in Washington, DC). Among the current projects that shape my own "blended" worldview are a community-development venture capital fund in Santa Fe, a community-stock-help poultry company on the Eastern Shore of Maryland, and various leak-plugging community-development initiatives throughout the country.

I'd like to move the conversation (which was certainly fun to read) back to the five questions that were posed at the outset, and offer a few views that have not yet been expressed. In particular I’d like share some thoughts about (1) Federalism, (2) Nonprofits vs. For-Profits, and (3) Capital Formation.

(1) Federalism

No one has mentioned anything yet about federalism. One of the great assets of the United States historically has been the ability of its myriad states to experiment with new kinds of corporate laws, policies, and practices that make blended-value enterprises possible. And yet a variety of policies are imperiling the ability of states to serve as a cauldron of experimentation. Among them:

• subsidy policies at all levels that favor (probably by a factor of 99-to-1) that favor large, non-local businesses (of all stripes) over small, community-rooted businesses, which has the effect of disabling civil society’s creative activities;

• federal policies that have devolved responsibility to the local level for many domains (e.g. homeland security), created new grounds for preemption that limit state initiative, and sucked financial flexibility away from the states with a massive new federal deficit (in short, a recipe for destruction of federalism as we know it);

• trade policies that erode state action (e.g., procurement rules that impede buy-local efforts that otherwise could stimulate a new generation of locally rooted, socially responsible companies); and

• tax policies that push toward national uniformity and make local experimentation with Green taxes, split-level property taxes, or wealth taxes virtually impossible.

These issues may seem legalistic and esoteric, but they go to the heart of what this country – and what our options – are all about. I liked Betsy Adler’s description of her trip to China, and how it expanded her horizons about what’s possible. Healthy federalism in this country – the ability to move each state and locality closer to our own blended-value utopia – offers the same kind of virtues.

(2) Non-Profits vs. For-Profits

The entire nonprofit infrastructure in this country needs to be rethought, from the ground up. The foregoing of profit, in my view, bears little relationship with the social virtues of an enterprise. And there’s a very good argument that many of the attributes of typical nonprofits – heavy reporting requirements, self-reappointing boards, poor access to capital, awful labor standards (in the name of the public interest) – make them lousy vehicles for social change.

When CDC’s were first debated in the 1960s, there was a movement by several forward thinking senators to make them for-profit. Their efforts were shot down (some feared communities getting too powerful, vis-à-vis established political machines). The result has been an interesting boutique of CDC efforts, many focused on community white elephant projects like shopping malls and subdivisions. But collectively their impact is a tiny fraction of what it could have been, had community ownership and for-profit opportunities been built in at the outset.

The dependence of nonprofits on begging – oops, I mean fundraising – limits the sector’s self-respect, independence, vision, and impact.

And parallel problems are created by the foundation sector, designed to finance the nonprofits. I think Jed Emerson himself has commented that it’s silly to spend 5% of assets responsibly when reinvesting the other 95% for profit maximization – yet that is exactly what most foundations do.

I think we need to rethink the structure of do-good enterprises. Personally, I favor the creation of community corporations – for-profit structures owned exclusively by residents of a community. Keeping capital in place seems like a reasonable prerequisite for any socially responsible work. A great model of this, of course, is the Green Bay Packers – the only football team in the NFL not owned by a single obnoxious individual. The community ownership of the Packers ensures that it generates wealth for the community for many generations, and that threats of departure (along with the erosion of civil society and weakening of labor and environmental standards that go along with it) are off the table.

(3) Capital Formation

If creation of new kind of small business is necessary to forward blended-value thinking, then so are new kinds of capital institutions that can support them. (Sorry to touch on another listed topic here, but it seems too important not to mention at least briefly.)

The basic reality of capital markets is this: Half of business in this country (by output and jobs) is small, while perhaps nearly all pension and mutual fund monies (and much of the bond market) support large, non-local business. This is not only perverse and undermining of blended-value objectives. It’s inefficient. Were market imperfections like $1 billion to Wal-Marts over the last decade removed, the small-business fraction of our economy would increase.

I believe that we need a Boston Tea Party in Securities Law. In the name of protecting the little guy, Securities Law basically knocks all buy 1% of the American public out of financing new, community-scale enterprises. How about, instead, just limiting everyone’s ability to buy a share in a “risky” new venture to $100? Tens of thousands of new enterprises, rooted in community capital, would then get off the ground. Stock markets of local and state securities would begin to form. Venture and hedge funds specializing in small stocks would take off. Then pension funds and mutual would begin to reinvest locally.

If we want to speed this up, we could award a tax credit for anyone who reinvests retirement funds locally – which is what the Canadians do now. Today, Maine awards a sizeable tax credit to investors who support large-scale manufacturing plants in the state – those least likely to stimulate community development. It seems reasonable that the state might try to expand the credits to a larger universe of residents for a more promising universe of companies.

My belief is that if we redirect capital toward blended-value enterprises, they shall arise and amaze.

AlisonWise - Jun 1, 2004 12:34 pm (#23 Total: 38)
Sea Change Sustainable Business Interest Group


I had a follow up question to your post:

"We had success in discussing issues, sponsoring good conferences, showcasing best practices, and writing a policy action agenda. We were not successful in actually selecting specific policy issues to support as a coalition."

What were the issues surrounding the lack of success in selecting those specific policies?

cbd - Jun 1, 2004 1:32 pm (#24 Total: 38)
Coastal Enterprises, Inc.


--Your Message Here-- We did not get to the stage of identifying one or two pivotal pieces of legislation that could affect a large number of interests and enlist broad support. Instead, the group identified a number of interesting policies individual members were advocating as representative of sustainable development issues, and these members tried to enlist others' support.

In some cases, organizations suported each other's policy initiatives, for example economic devleopment organizations testifying for clean car legislation. It was more difficult to get environmental organizations to support community development legislation, such as affordable housing. In the end, some of the members looked at bills with the screens that they would typically apply to any legislation that their organization would support rather than trying to stretch and support a wider portfolio of bills that builds a coaltion approach for sustainable development. It would have been better if the affordable housing legislation were pure and encompassed more green impacts, but compromise in the political process limited the scope of the bill (although a companion bill pushed for energy conservation measures in affordable housing). However, the environmental organization was very pleased to have broader support from economic development interests.

Coalition building is difficult when the agenda is broad. We will face the same problem with a Northern Forest Initiative unless we can pin down a couple of key pieces of legislation that appeal to a wide spectrum of organizations.

ray_blanchard - Jun 1, 2004 2:15 pm (#25 Total: 38)


What if we created a non-profit website that showed all the sources and uses of income for all federal, state and local governments and agencies? Then, we could enable taxpayers to log on, provide virtual votes on budgets and spending plans relevant to them, and provide input to their lawmakers on their spending and budget priorities. Transparency is the first step towards accountability.

Sohodojo Jim and Timlynn - Jun 1, 2004 4:13 pm (#26 Total: 38)
Sohodojo


Michael, congratulations on a brilliant and provocative first post to the Social Edge community!

Thank you for reminding us of the fundamental importance of federalism. While your comments are unfortunately too true with regard to the undermining of U.S. federalism at the state and national level, we'd like to remind folks that federalism is not limited to this political domain. Federalism is a collection of organizing principles that can most generally be described as focusing on the balancing of power among peers. Federal organizations are decentralized, with distributed power, rather than being hierarchical command and control organizations. Federalism can be usefully applied in many contexts, community-based organizations and microenterprise (and small business) networks to name just two.

We know of no more relevant social commentator and management theorist than Charles Handy to mention in this context. (Find useful links here.) All his latest books contain insightful content about the potential role of federalism in our individual and social lives. The most applicable of these works is The Age of Paradox (ISBN: 0875844251). We recommend this book to anyone who finds Michael's post interesting.

Moving on to the next two of your post's themes, Non-Profits vs. For-Profits and Capital Formation, again we concur with and applaud your insights.

Folks bring too much of a value-laden and emotional mindset to their thinking about profit and non-profit organizations. This "deep structure" of how folks think about profit vs. non-profit has more to do with their ideas about personal vs. social good, and how they feel about the means and ends of wealth creation. In reality, profit vs. non-profit is nothing more telling than a management and accounting decision that is all about choosing among organizing principles. It is not the basis of a Morality Play partitioning Black Hat Greed vs. White Hat Common Good. All our many role-based "hats," like all our organizations, are blended value shades of grey.

Due largely to the "tangled web" we have with regard to incorporation laws and our tax codes, these unfortunate "black and white" mindsets color the domain of social investment and capital formation for social entrepreneurs. Michael, you may have been alluding to some of the posts we contributed during the Capital Challenge segment of this Blended Value mega-event. In particular, we suggested that social investment financial intermediaries could perhaps try thinking more about "making movies" (a capital-intensive, dynamic networking domain) rather than continue to think about "investing in the movie-making industry." (For context, this post has links to other of our inter-related posts about the challenges of funding social/business network enterprises.)

People's unchallenged mindsets – together with the tangled web of social policies and legal frameworks developed largely as a result of these mindsets – unlevel the playing field for many social entrepreneurs. Our growing frustration at having to cope with this tangled mess makes folks like us ready volunteers for your Boston Tea Party in Securities Law. Perhaps the Training and Development Corporation would like to be a sponsoring convener of the First Continental Congress for the Small Is Good World!?

Congratulations, again, on making such a thoughtful first post. We look forward to your continued contributions. And welcome to the ranks of the Friends of the Small Is Good World, a federated contingent of the Social Edge community!

sek24 - Jun 2, 2004 10:41 am (#27 Total: 38)


We have discussed a lot of relevant issues here and I want to ask you all for more ideas on ways to improve our goverment policies and regulation within the realm of public choice theory - that is, public policies can and do fail (as Michael, Jim, and Timlynn mentioned). Regarding this, I have attached a link written by our friends across the Atlantic that looks at the investor role in possibly guiding policy decisions.

http://www.insightinvestment.com/responsibility/bulletin/Spring2004/investor_role_public_policy.asp

As the balance of power remains unbalanced, how are policy decisions affected in the U.S. as lobbying remains siloed? What are some effective ways for cross-fertilizing "good" policy decisions?

AlisonWise - Jun 2, 2004 10:59 am (#28 Total: 38)
Sea Change Sustainable Business Interest Group


One way in which to cross-fertilize is to create organizational vehicles that break down the conceptual silos themselves, in other words, to bring together players that typically think of themselves as members of different teams to create a new one. These organizations can then lobby as a cohesive entity representing what previously had been construed to be as disparate interests. And of course, the one with which I am most familiar with is Sea Change, which has invited industry members from what had previously been thought of as distinct trades (renewable energy, organic/sustainable agriculture, sustainable forestry, recycling and waste reduction services) to form a new "trade" association where the common interest is building an environmentally sustainable economy.

Within this context, policies can be bundled together so that their passage represents a more holistic approach to systemic change. (Apologies for promoting my own endeavors, I realize this may be bad form but it was too pertinent for me to abstain )

sjordan - Jun 2, 2004 3:31 pm (#29 Total: 38)
US Chamber of Commerce CCC


Some of the other folks in this community may want to catalogue some of the state and local initiatives -- the federalist posts should definitely be built on.

In terms of national initiatives, some of the politically/socially-mot