(Antony Bugg-Levine is a managing director of the Rockefeller Foundation, the board chair of the Global Impact Investing Network, and co-author of Impact Investing (Wiley, 2011). The Rockefeller Foundation provided funding to Jumo. The opinions expressed here do not reflect the views of any institution with which he is affiliated.)
If you find yourself breathlessly thinking about the implications of the nonprofit Jumo.com's merger with the for-profit GOOD, Inc., I advise you to stop. Take a deep breath. Pace yourself. Because mind-bending deals like this one are only going to get more frequent in the years to come.
To understand why, you need to see this deal as a window into a gathering conflict between two world views. This might sound grandiose, but it's actually quite simple, as my co-author Jed Emerson and I describe in our new book Impact Investing: Transforming How We Make Money While Making a Difference.
For the past hundred years, especially in the United States, we have organized around two basic assumptions:
- The only way for private citizens to address social problems is by providing grants to nonprofits;
- The only purpose of investing and business is to make money.
These assumptions are the pillars of the "bifurcated world" that separates charity and investment. We have built layers of systems to support this worldview:
- Our legal systems provide a tax break to grantmaking foundations and nonprofits and separately attempt to protect the financial interests of investors.
- Our educational systems train do-gooders in policy schools for careers in public service and the social sector and train future titans of industry in business schools that focus on making money
- Our capital markets facilitate investment in profit-maximizing firms. Separate advisors and donor platforms increasingly coordinate gifts to nonprofits.
- Our language allows us to communicate separately about profit-making enterprises and social-purpose activity.
These systems work for anyone who stays within the traditional confines of the bifurcated world. That's why we don't get worked up about a merger between two nonprofits or a sale of one company to another. We have developed laws and language and practices to facilitate this activity.
But more and more people are not content to stay in the confines of the bifurcated world. These people, variably called "social entrepreneurs" or "impact investors," see the world differently. They believe:
- Business can make an effective and morally legitimate contribution to solving social challenges;
- Investors can actively target social and environmental value creation in their for-profit investments.
These simple beliefs remove the pillars on which our existing systems are built. Established policies and regulations, educational opportunities and career paths, capital markets, and language all fail to support their aspirations and practices. In fact, most of the time they get in the way.
Instead of waiting for new systems to catch up, social entrepreneurs and impact investors are forging ahead, bending existing systems to suit their needs. This can seem strange or even threatening to people still holding onto the bifurcated worldview. And the incompatibility of old systems with new aspirations creates disruption, as when a nonprofit signs a standard grant agreement only to sell itself to a for-profit company.
But defending the ramparts of the bifurcated world is not going to contain these pioneers. Instead, those of us tasked with securing a better future should focus on building the new systems that can harness their energy. For foundation executives that will mean creating new grant agreements that acknowledge the increasingly fluid line between nonprofit and for-profit corporate forms. It will mean recognizing the power our endowment investments have to contribute to our social mission and reorganizing our management and governance accordingly. And it will mean supporting regulatory reform that acknowledges how for-profit investment and private enterprise can complement philanthropy and government action.
Let's face it: if we're this worked up about a nonprofit ".com" selling itself to a for-profit called "Good," things are only going to get worse in the years to come.
-- Antony Bugg-Levine