Entrepreneurs and Social Responsibility

Profit and nonprofit motives can go hand in hand.

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We often hear about entrepreneurship in the for-profit sector and how it differs from entrepreneurship in the nonprofit sector. They are often seen as two different universes with their own rules: The for-profit world is the one run by capitalists for whom the bottom line comes before everything else, and the nonprofit world is run by do-gooders for whom helping people comes before everything else.

But that dichotomy isn't always evident in the real world where entrepreneurs work. Via the Kauffman Foundation's great new Growthology blog, I found this essay from start-up guru Paul Graham. His basic point is that the most successful start-ups have found that benevolent and charitable actions are in themselves ways to make money and further the bottom line.

If you're benevolent, people will rally around you: investors, customers, other companies, and potential employees. In the long term the most important may be the potential employees. I think everyone knows now that good hackers are much better than mediocre ones. If you can attract the best hackers to work for you, as Google has, you have a big advantage. And the very best hackers tend to be idealistic. They're not desperate for a job. They can work wherever they want. So most want to work on things that will make the world better.

I think what explains part of the false dichotomy between capitalism and charity is the difference between acting in the short term and the long term. In the short term, it might actually be good business sense to make money through heartless Gordon Gekko-esque behavior, as the stereotype would have it. But a forward-looking, long-term strategy would recognize that if your business model is at odds with what people would consider ethical, it's probably not a winning strategy to make money.

One example I can think of is what's been going on in the music industry. The record companies have mainly been focusing on the short term—trying to stop their bleeding by suing the pants off anyone they can find who downloads music. A long-term strategy would better take into account the values of their customers and find a way to work with this new world of free downloads. That would make the record companies look much less "evil" and also better ensure their survival (they are doing this to a certain extent by working with iTunes).

Readers: Do you have other examples?


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