This note is a part of my Zettelkasten. What is below might not be complete or accurate. It is also likely to change often.
17th July, 2020

Social Enterprise cannot bring impact sustainably

Currently, Social Enterprises (SE) are basically Corporations that have it in their ideology to bring positive social impact.

  • There is no actual, objective difference between a social enterprise and a for-profit.
  • So everyone can claim to be a social enterprise.

Becoming dependant on SE for change has the same flaws as Central Planning:

  • its dependant on the benevolence of its owners to create social impact.
  • There is nothing in its mechanism which prevents it from political abuse and straying from its mission.

An SE's value creation strategy is either some Radical Innovation which creates social impact or appealing to the Empathy of its customers (or remnants of the Moral Economy) or simply, taking part in an unfair market.

  • In case its able to create radical innovation, the social part doesnt play any role - any radical innovation which creates value is probably because of a random breakthrough and is more likely to fall to a regular for-profit rather than a SE simply because there are a lot more for-profits in existance.
    • If the innovation creates value for society (like a more efficient stove or an undiscovered labour market), its likely to do so regardless of whether its an SE or not
    • Unless there is a huge barrier to entry (like an enforceable patent), for-profit competitors will soon catchup, leading to dilution (but if the core product is creating social impact, it will continue to scale)
    • So the characteristic of the SE that its aim is to help people is meaningless in this respect.
  • If it is generating profits because of moral or unfair markets, its extracting as much value as its its only because of Market Power or Moral Economy effects. So it not be a Sustainable model.
    • During the time of a crisis, when help will be needed the most by vulnerable people, social enterprises will be unable to deliver because the market will get tighter and tighter; its funds will dry up.
  • Not forgetting the reason Moral Economies failed will apply here as well - when dealing with people and companies they dont understand or trust, people fall back to Heuristics like appearance or some other measure (like price).