Thanks for taking the time to debate this. I really appreciate your thoughtful arguments and interest in the topic.

At the macro level, I think we are in radical agreement. : )

My only point is that the keeper of capital have not come around to your worldview in a major way yet. I think groups like New Profit are incredible, but they are still in the radical minority. Frankly, these are the models that give me hope.

The reason I’m even in this (specific, as well as general) discussion in the first place is to contribute to changing that mindset, which is more or less what I spend every day doing.

Look forward to the next rich discussion.

First, let me say, that I have no intention of putting words in your mouth, nor did I mean to imply that you are a mercenary capitalist. I hope you will agree that open, honest debate like ours is the only way to move the markets forward and to encourage innovation.

I will also point out that I don’t have a problem with the “cold hard facts of the capital markets,” rather I, like a lot of people in the last year, have seen that the capital markets, as they’ve been envisioned and operated in the past, do not work. Therefore those “cold hard facts” are being re-envisioned, restructured and re-thought. Which is where the social capital market movement comes into play.

In my post and the follow up discussion that has ensued (which, again, I really appreciate, enjoy and think is very beneficial) I am merely making the point that we cannot dismiss nonprofits from the movement or the restructuring that will need to happen as meaning and money converge.

I know you balk at my characterization that you are still subscribing to some kind of binary thinking, and I honestly mean no offense, but I do think your thinking is still gravitating toward a dichotomy between financial investment and philanthropic donation. Rather, the two are converging.

Nonprofits can and do return capital (PRIs, loans, etc). But they also (if done right) return social impact. And “someone with money, who is trying to decide how to deploy it” is beginning to consider both in the equation about where to place their money. A nonprofit that is high performing and generates impressive social return can be an attractive alternative to a traditional or social business that may provide more financial return but less social impact. The calculation becomes more complicated, less either, or.

And there are more financial models emerging for investment in the nonprofit sector. Your comments make me wonder if you are aware of the venture philanthropy movement. You might want to check out New Profit (www.newprofit.org) a venture philanthropy fund that has been around for 10+ years. They have provided growth capital to nonprofits such as Teach for America, Citizen Schools and others. The growth capital investments New Profit has made helped to generate 5X+ growth in the social impact created by their portfolio companies while elevating the revenue-generating functions of those organization so that they could maintain that level of social impact once New Profit exited. True, New Profit does not see a return of their capital, but their investments have allowed their portfolio organizations to create exponential growth in social impact.

Some investors are interested in maximizing social impact in exchange for diminished financial return, and some aren’t. But why not expand the financial tools and vehicles available to nonprofit organizations while we are expanding the tools and vehicles available to social businesses so that we can increase social impact no matter what the business model?

Finally, let me address your last comment: “But until non-profits take more care of the financial capital they receive, the SoCap discussion, and the professional capital mangers therein, is going to focus more of its energy and interest on the for benefit / for profit enterprises.” I would not argue with you that nonprofit organizations are dysfunctional and at times broken. There has been tremendous mismanagement of funds, inefficiencies and value lost. But, I’m sorry, have I not just described the for-profit sector as well?

Again, my point is, each of the three sectors (nonprofit, private, public) has its share of inefficiencies, poor financial management, misaligned incentives, bad metrics, and so on. No one has figured it out. Why would we dismiss one sector (or two, as those who are equally frustrated with the government sector might want to do? Aren’t we better off by figuring out how to restructure, rethink and re-purpose all activity that is occurring in the social impact space so that all of it (for profit or nonprofit) is more efficient, is adequately capitalized, turns no investor away and ultimately, succeeds in creating solutions?

Thoughtful and well-articulated points.

First, some personal clarification. I agree entirely with your perspective, which I’ll call the basic blended value position. I also subscribe more-or-less completely to the spectrum view, both on the enterprise side, and on the money side. I share your values (I think), and see a pretty significant gap between these values and how investments are generally handled.

By way of ensuring quality discourse, kindly don’t put words in my mouth, nor mis-characterize my intent. I’m by no means the mercenary capitalist you imply, and it seems to me that you have a bit of an issue with the cold, hard facts of the capital markets, which I have neither created nor defend. Nonetheless, they exist. I am reporting on the perspective on the progressive (read: SRI, sustainable, 3BL) wealth managers I know, as well as the HNWs in my network, and not my own view. Ignore this reality at your own peril (you’d hardly be the first non-profit exec with that worldview).

When you ask me to “define investor,” I mean someone with money, who is trying to decide how to deploy it. I know that no matter how these decisions get made, there are financial, social and environmental impacts that go along with it, just as there are with almost any decision about deploying any type of capital (including social capital, human capital, intellectual capital and so on).

Unfortunately (and I honestly wish it were different), philanthropy is a tiny fraction of all the money that people deploy. I don’t know the number, but suspect it’s less than 5%, probably much less.

So that leaves us with the bulk of the investment money in the world getting deployed in such a way as to at least ensure the value of the money is maintained, and, generally speaking, that there is some kind of growth.

You inaccurately characterize my description of reward as being “narrowly financial.” What I am saying is that without financial reward — which non-profits typically do not create for an investor — a lot of the potential money comes off the table. I think the discussion about how financial reward should be balanced with social and environmental benefits is one of the most important discussions of our day.

I would love to learn about non-profits that return financial capital to a philanthropist. I know there are debt funds (where money given to a non-profit is a loan, and not a grant) out there, but perceive they are in the minority (please correct me if I’m wrong here). Generally, though, non-profits spend grants directly on programs, getting a 1x multiplier effect. However, if the same amount of capital can get an enterprise up and running that has the ability to generate its own cash flow, then there can be a 2x, 5x or 10x multiplier effect on the same initial investment.

Furthermore, financial sustainability is the core of any enterprise (for-profit or non-profit), and the lack of it means that zero social or environmental impact gets generated. The lack of fiscal innovation and discipline in non-profits as a whole (there are wonderful and inspiring exceptions) is probably the single biggest problem in philanthropy today, in my humble opinion.

If non-profits don’t take into account the importance of respecting and maintaining the value of financial capital — as for-benefit and 3BL for-profits do — then they won’t have the same opportunity to make the impact on social or environmental issues.

In closing, I absolutely do not subscribe the binary model you suggest. I think a blended value investing model is the best path out of the mess we are in. But until non-profits take more care of the financial capital they receive, the SoCap discussion, and the professional capital mangers therein, is going to focus more of its energy and interest on the for benefit / for profit enterprises.