THE RISE OF THE SOCIAL ENTREPRENEUR Feb 23rd 2006 Whatever he may be UBS, a Swiss private bank that counts many of the world's richest people among its clients, is conducting an interesting experiment in Brazil, Mexico and Argentina. It has formed an alliance with Ashoka, a global organisation that identifies and invests in leading "social entrepreneurs". The alliance is offering a new prize for social entrepreneurship, which UBS's Martin Liechti admits is an excuse to bring together two groups of people who might otherwise never meet. "As the biggest wealth manager in the region, we are at the crossroads between capital and ideas--so why not bring the people with capital together with the people who have ideas?" The social entrepreneurs that are shortlisted must have been working successfully with Ashoka for at least three years. Winning the prize is not really the point. Simply being selected to be in the room with a bunch of wealthy people gives the social entrepreneurs great credibility with potential donors, and even runners-up have a good chance of coming away with a new financial backer or some other form of help. Hector Castillo Berthier, who runs an innovative project for troubled Mexican teenagers, came third in last year's Mexican prize, but still got a crucial donation and free use of office space. Ashoka is not alone in bringing social entrepreneurs together with the wealthy and powerful. Social entrepreneurs now rub shoulders with the world's business and political elite at the World Economic Forum in Davos, under the auspices of a sister organisation to WEF, the Schwab Foundation for Social Entrepreneurship. This year, the people selected included Rory Stear, founder of Freeplay, a company dedicated to the spread of cheap, sustainable energy for all; Jim Fruchterman of the Benetech Initiative, a non-profit organisation that makes technology available to disadvantaged communities; and Victoria Hale, founder of OneWorld Health, which works with the Gates Foundation (among others) to make low-cost drugs available in poor countries. WAITING FOR A PRODUCTIVITY MIRACLE Ashoka was founded in 1980 by Bill Drayton, a former McKinsey consultant, who expects the rise of social entrepreneurship to generate huge benefits. He says it is now helping to bring about a productivity miracle in what he calls the "citizen half of the world" (education, welfare and so on), a sector that for three centuries has lagged behind the "business half of the world", where productivity has soared and vast amounts of wealth have been created thanks to its competitive, entrepreneurial culture. The emergence of more social entrepreneurs, and their improved access to growth capital as they get better connected to philanthropists, is creating enormous productivity opportunities for the citizen sector, argues Mr Drayton. The citizen sector is defined somewhat loosely, but is largely made up of government plus the non-profit sector. Both government and non-profits have traditionally been run inefficiently. The productivity miracle detected by MrDrayton is due both to a shift from government provision to more efficient private provision (by both for-profit and non-profit organisations) and by an increase in the efficiency of the non-profit sector. The improvement in non-profit organisations' efficiency may still have some way to go. In 2004, Bill Bradley, a former presidential hopeful for the Democrats, and two McKinsey consultants claimed in an article in the HARVARD BUSINESS REVIEW that, in America alone, there was a "$100 billion opportunity" for the non-profit sector to improve its efficiency through better management. But is social entrepreneurship the best way to achieve that? There is no easy answer, not least because nobody is sure what exactly the term means. In a book charting the rise of social entrepreneurship, "How to Change the World: Social Entrepreneurs and the Power of New Ideas", David Bornstein notes that most discussion of social entrepreneurship tends to revolve around "how business and management skills can be applied to achieve social ends". He himself sees social entrepreneurs as "transformative forces: people with new ideas to address major problems who are relentless in the pursuit of their visions". The late management guru Peter Drucker, typically quick to spot the trend, defined social entrepreneurs as people who raise the "performance capacity of society". Mr Schramm of the Kauffman Foundation, which promotes a better understanding of entrepreneurship, says that being an entrepreneur means being a risk-taker, but a high risk of failure may be the last thing that many non-profits need. And, surely, "every entrepreneur is a social entrepreneur," says Mr Schramm. "A successful entrepreneur...creates wealth--and without wealth there is no surplus capital to turn over to charitable activity." Mr Omidyar, too, is uncomfortable with the label, which he feels implies a disapproval of profits that he does not share. "I think of myself as an entrepreneur, and I have a social view, but I don't call myself a social entrepreneur," he says. But his fellow philanthropist from eBay, Mr Skoll, thinks social entrepreneurship has something going for it. The mission of his eponymous foundation is "to advance systemic change to benefit communities around the world by investing in, connecting and celebrating social entrepreneurs". Among other things, Mr Skoll has endowed the Skoll Centre for Social Entrepreneurship at Oxford University's Said Business School. This is part of a growing trend for academic institutions, including nowadays most business schools, to take the phenomenon seriously. Harvard Business School started teaching a course on social enterprise 12 years ago. Mr Schramm worries that some of these courses are more likely to turn students against capitalism. But Mr Whitehead, a former Goldman Sachs boss who is the driving force behind the HBS course, sees it as part of a trend among the elite in many countries who increasingly want to make not just money but "a difference". The money may not be as good as in business, but "a bright young person canhave more of an impact on any non-profit in his first five years than on Goldman Sachs, which is full of bright young people. In their first year they could make ten suggestions that would improve the non-profit operation because they have been trained in practical business ways of thinking." PEOPLE LIKE YOU AND ME Certainly