Philanthrocapitalism

In my article on social entrepreneurship, I noted how the current boom of non-profit organizations has made social work open to participation of almost anyone. Similarly, corporate organizations and businesses are increasingly leaning toward social responsibility and community engagement efforts. With all these news of new trends and theories about social entrepreneurship and the boom of corporate social responsibility (CSR), I can’t help but wonder: What is it with all this fuss about philanthropy? Did the human race suddenly become collectively nice? Or is there another motive behind this phenomenon? In pondering about this, I chanced upon a recently-coined concept called philanthrocapitalism. Basically, philanthrocapitalism is just a fancy term for doing philanthropic work in the same way you would do ordinary business: with an end-goal in mind and with investments and assets at stake.

As my social entrepreneurship article pointed out, modern-day philanthropy is often closely related with business. It works both ways: businesses use philanthropy as a way to achieve “social responsibility”, and philanthropists are starting to use business models and elements in their operations as well. In The Economist’s article The birth of philanthrocapitalism, it was explained why increasingly more players in this field are suggesting how philanthropy needs a more “investor-like” nature to be able to flourish. The article enumerates these three key preconditions for a philanthropic marketplace to work:

“First, there must be something for philanthropists to “invest” in – something that, ideally, will be created by “social entrepreneurs”, just as in the for-profit world entrepreneurs create companies that end up traded on the stock market. Second, the market requires an infrastructure, the philanthropic equivalent of stock markets, investment banks, research houses, management consultants and so on… Third, philanthropists themselves need to behave more like investors. That means allocating their money to make the greatest possible difference to society’s problems: in other words, to maximise their “social return…”.

Now, this merger between business and philanthropy is not a bad thing in itself; but what I fear is that at the pace this is happening, the time will come when the line separating the two will blur and eventually lead to deception and manipulation. As much as I hate to admit it, there is a high possibility that at the end of the day, some of these businesses will still have profit as the main motivation for engaging in philanthropic activities. I wouldn’t go as far as saying that this is what motivates all businesses, but it’s a danger that we all should be wary of.

Knut Harald Nylænde is the current CEO and founder of Moxie, a cluster of investment firms mainly based in Oslo. In his official website KnutNylaende.com, Knut writes about his opinions on business trends, current events, and the frequent collision of business and culture.