Rob Katz

Social Capital Markets Veterans Discuss Big Issues; Jed Emerson Avoids “Getting Kicked in the Nuts”

It’s Tuesday morning at Social Capital Markets, and I?m already feeling a bit overwhelmed.? But this panel is too good to miss – Matthew Bishop, Jed Emerson and David Chen, with Kevin Jones moderating.? You know that–particularly with Bishop and Emerson–you?re bound to hear honest, blunt opinions on the social capital markets movement from this group.

Jed Emerson is the first to speak.? I’ve known his work for a while, met him last year at an Acumen Fund event – but I never knew he is trained as a social worker.? Having worked in San Francisco with homeless youth, he moved to work with George Roberts on the Roberts Enterprise Development Fund (now known simply as REDF).? While at REDF, he began to explore metrics in depth, which led to work with a range of social investors.? From there, he got involved in CSR and sustainability, which drove him to his most famous work–around blended value–and his attempt to steer the conversation towards “both/and” instead “either or”.Matthew Bishop has spent 16 years at The Economist, where in 2006 he authored a 14-page special report entitled “The Business of Giving“.? The report led to a new book–Philanthrocapitalism: How the Rich Can Save the World–where he tries to answer a simple question: what’s real in the social enterprise space?? (NextBillion covered the philanthrocapitalism debate extensively this summer.)? In his words, we need to move beyond what works and what doesn?t and instead focus on rigor, concept development and ?the need for this movement to succeed.?? What we really need?? According to Bishop, we need better research and data, ?a step change in the quality of analysis for the social sector.?

David Chen is from Equilibrium Capital, where he thinks about this space from a very practical standpoint.? He discusses exit difficulties–IPO, acquisition–and the struggle not to sell out.? He suggests that it’s incredibly hard to structure deals that keep the meaning and the money intersecting. ?

Is there a way to get your money out and preserve the company’s mission?? According to Bishop, there’s an inherent difference between ?normal? companies and social enterprises–for a typical firm, the founder doesn?t really care who buys his firm as long as he gets his money.? But a company with a social mission–de facto–needs to find a buyer that cares about the mission.

Interestingly, Emerson turns the question on its head, suggesting that, in a carbon constrained world, anyone who cares about their assets in the long term (for inheritance purposes, say) must take social and environmental factors into consideration.? An investment that doesn?t will–in his opinion–underperform.

Bishop fires back, suggesting that Fannie Mae and Freddie Mac are social enterprises–companies with a social mission–and that we ought to be very careful with how social missions are embedded into companies.? (Note: Bishop notes that this was originally Larry Summers? idea, which he suggested over at Creative Capitalism.)

Frankly, I can?t keep up with the conversation.? Chen, Emerson and Bishop are all over the map, but in a good way.? They?re insightful about the past, but even more insightful about the future of the social capital sector.? According to Emerson, social capital is more than just good business–it’s a way to hedge risk, or–in his words–to ?avoid getting kicked in the nuts.?

My key takeaways?? These guys want increase the size of the market by an order of magnitude–not the $3 trillion philanthropic market, but the $60 trillion private market.? To do so, we need rigor and data and real analysis–a visionary leader and some nice photos aren?t enough.? That’s hard to swallow for me, a guy who’s worked for two non-profits in five years.? But they?re right–and many of the best non-profits out there are actually in a transitional stage.

The panel also hones in on metrics and social impact–with Chen suggesting that we’ve got good momentum around metrics but that we still need unified standards.? He compares it to the LEED standards or even the FSB accounting standards.? I?ll be interested to see how this conversation continues today at 3:30 in the ANDE (Aspen Network for Development Entrepreneurs) and the Venture Philanthropy panels.? Can?t make both?? We?ll have coverage here on NextBillion.