Small Change: Why Business Won’t Save the World

June 3, 2010

Earlier this year, Michael Edwards published a book titled “Small Change: Why Business Won’t Save the World” in response to a book that has been out for a few years now: “Philanthrocapitalism: How Giving Can Save the World” by Matthew Bishop and Michael Green.  Philanthrocapitalism is a book that chronologs how philanthropy has evolved from a way of supporting the arts to a mixture between giving and business.  To put it simply, Bishop and Green argue that as philanthropists start to adopt business practices and as businesses start to put more emphasis on social responsibility, many of the world’s social problems can be solved.  In Small Change, Edwards takes a very adamant stance against Bishop and Green (yeah, you probably guessed that based on the title).  As an author of Rising Pyramid, its fairly obvious that I believe that business-like practices, when applied to international development, can make a significant impact on the lives of those at the base of the economic pyramid (BoP).  Of course, most of what I’ve read about the concept has been very rosy and positive, so I was eager to read a critique.  In my experience, feedback (both positive and negative) has always been an extremely powerful and eye opening tool, so I picked up Small Change hoping to challenge my thinking and test my beliefs.

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In that regard, Small Change was a large disappointment.  I knew going in that Edwards’ writings would make me uncomfortable but I expected him to make logical arguments based on facts and data.  I even hoped that the book would convince me that some of my previous thoughts about social business were indeed false.  I wanted my feelings and opinions to be tested so that I could reshape or reconfirm them.  In the end, Small Change felt more like an angry essay from a very passionate and dedicated philanthropist who is concerned that the recent emphasis on social entrepreneurship will lead to the demise of non-profits and foundations as we know them.  Apparently, I’m not alone in my opinions as the Stanford Social Innovation Review wrote a similar review here.  In some ways, it was a plea for attention to the good work done by traditional philanthropists, such as Edwards.  Though I have some issues with the way that Edwards stated his case, I do agree with his basic message: traditional philanthropy accomplishes many things that the new wave of social entrepreneurship cannot accomplish and therefore should not be forgotten. What upset me was the fact that Edwards used broad generalizations and even some ridiculous analogies to “prove” his point.  The majority of the evidence he used to support his case was anecdotal or in some cases, irrelevant.  In the process, he spoke very negatively about social businesses and in many cases criticized the new approach for not being able to solve problems that traditional philanthropists have never been able to solve (this seemed ironic to me).  Unfortunately, reading Small Change challenged my patience with the author (I actually yelled at the book sometimes and wrote responses to Edwards in the margins) more than it challenged my beliefs about the power of social business.

Let me be very clear: I believe that social business has the power to solve many social problems that have gone unsolved; however, I also believe that charity, foundations, and traditional non-profits have done wonders for the good of the public and will continue to do so in the future. In other words, there are many many problems that traditional philanthropists are better suited to solve than social entrepreneurs; they have their time and their place.  On the other hand, it is clear that there are some social problems which traditional philanthropists cannot solve and that social entrepreneurs are likely to have a better chance (even if they don’t have a better chance, it’s a new approach so why not give it a shot?).  One way or another, all of us are working for social change and we just need to figure out the best, most appropriate way to solve each unique problem.  Traditional philanthropy can benefit from the influence of a business mindset, just as social entrepreneurs would be wise to learn from philanthropy’s deep experience in the field.

To conclude, I thought I would leave you with some quotes from the book which struck me as interesting, odd or frustrating.  After each I’ve shared the comments I wrote in the margin while reading the book in italics.  Also, I maintained the full context of the quotes below as much as possible, any ellipsis or edits were used to shorten the quote while maintaining the original message.

“…CSR [Corporate Social Responsibility] is [often] a case of one step forward, two steps back, giving with one hand and taking with the other.” While I agree that some companies that practice CSR do so to offset their negative public image, before CSR it was all taking and no giving so I feel that CSR is a step in the right direction, albeit not a large enough one.

After using examples of non-social businesses to show that companies sometimes operate without concern for local citizens (this one frustrated me), “However, this is capitalism, not philanthrocapitalism, so its shortfalls can’t be used to attack those who do take their social conscience into work.” Wait, then why did you just use examples of capitalism to prove a point? Are you admitting that your facts do not support your conclusions whatsoever?

“There is some evidence that microfinance has a positive impact on the factors that lead to social transformation—women’s empowerment, for example, and building small-group skills—but these advances have not translated into significant shifts in social and political dynamics.” Just clarifying:  you’re saying that microfinance is bad because it hasn’t yet solved every problem yet?

“As the experience of the industrialized world shows quite clearly, eradicating poverty and other social ills requires much more than an effective and accessible banking system, or adding micronutrients to our food, or manufacturing solar-rechargeable light bulbs and the like.  Philanthrocapitalism will only ever be part of the solution to the problems we face, especially if our goal is to abolish all forms of violence, oppression, and discrimination.  Redistributive politics, government intervention, social movements, civil society activism, vibrant public spaces and deep personal change will continue to be crucial ingredients of any successful agenda for reform.” AMEN! But we need ALL of it, philanthrocapitalism and traditional philanthropy included.

“…reducing the transaction costs of donating to good causes but failing to engage givers and receivers in any authentic collaboration outside of writing a check or clicking a mouse on Web sites like Kiva and GlobalGiving.  A huge amount of publicity, and a small amount of additional money, has been generated by Kiva and the like, and that is always welcome, but they deemphasize community involvement and skew accountability to those who already have more power, so what are they actually transforming?” Seriously?

“Where philanthrocapitalists see the need to correct the “market failures” and lack of economic incentives that lie at the root of the problem, civil society names and attacks the realities of injustice, such as racism, sexism, homophobia, and the abuse of human rights—terms that rarely appear in the strategic plans of any of the new foundations.” GOOD! That’s right and it’s the reason why we need BOTH.

“Although its possible to get more social value against the financial bottom line when providing goods and services, the desire to make a profit always imposes restrictions on the deeper social impact of an organization and its work.” Always?? I completely disagree.

“Using the market to increase access to useful goods and services, fostering healthy and sustainable economic solutions, and adopting the kind of total corporate social responsibility… would all help to lay the groundwork for social transformation, and make it much easier for government and civil society to complete the job.”  So it’s a good thing now?

“Perhaps it’s time to launch a slow food movement for the philanthrocapitalists in order to help them savor the complexities of what’s involved and the subtle flavors that others bring to the table.  It’s not that our old ideas about social transformation were perfect; it’s that our new ideas are imperfect, too, and almost certainly won’t turn out as planned.  There is no place for triumphalism in this conversation.” First of all, this is just depressing.  Why not try a new approach, give it time, and if it doesn’t work, oh well.  If it does work…great!

“Compared with the size and complexity of the problems facing the world, the contributions of civil society and government, and the impact that business could make if it fixed itself instead of focusing on fixing others, philanthrocapitalism is small change.” Ouch.

Please feel free to drop your thoughts on the post and/or specific quotes!

- Bryan

10 Responses to Small Change: Why Business Won’t Save the World

  1. [...] This post was mentioned on Twitter by Stephen Orchard and, New Book Reviews. New Book Reviews said: Small Change: Why Business Won’t Save the World: Earlier this year, Michael Edwards published a boo… #books #writing [...]

  2. Michael Edwards on June 3, 2010 at 12:14 pm

    Hi Bryan, there’s no reason to be so touchy and defensive – it just makes you look insecure – like the Doug Bauer review you cite approvingly in SSIR. If you check out the responses to that review you’ll find a lot of reactions that challenge your interpretations of “Small Change”, which is a much more nuanced critique than the caricature you outline in your review which is constructed by selecting a few quotes out of context( By coincidence CausePlanet reviewed the book today too, and reached the opposite conclusion to yours ( I’d encourage you and your readers to engage with the many positive reactions to the book that show how and why we need to engage with each-other in a proper debate. The rising challenge to your point of view isn’t going to go away, and it would be much more useful to enagage with the criticism intead of deflecting it.

    • Bryan Farris on June 3, 2010 at 6:11 pm

      Hi Michael,
      Thank you very much for reading Rising Pyramid and taking the time to comment. I absolutely agree with you that there is a need to question whether all of the recent hype regarding social business could in fact be damaging to our shared goal of improving life for the world’s disadvantaged. Furthermore, I agree with you that traditional philanthropy is critical and without it, many of the world’s problems could not be solved. Where our opinions differ is on the appropriate role for social business. It seems to me that you think social business has very little to bring to the table (please correct me if I misinterpreted that), whereas I would argue that applying business thinking and techniques can be very beneficial in some (not all!) applications.

      As I mention in the post, I am very eager to have my personal views challenged so that I will be forced to either rethink or find better ways to support my opinion. That being said, I would love to engage further with the criticism you offer so that I can better understand it. What frustrated me at times while reading your book was that I couldn’t engage if I disagreed with one of your assertions. If possible, I would greatly appreciate the opportunity to speak with you further about the topic.

      - Bryan

  3. Michael Edwards on June 4, 2010 at 6:20 am

    tks Bryan, happy to continue the conversation. I obviously didn’t communicate my views on ‘social business’ clearly enough in ‘Small Change’, since I do think that social business, or some versions of it, have a major role to play – you might want to check out the last two pages of chapter 2 which try to speak to this very point. The key issue is how many ‘philanthrocapitalist’ experiments fall into the category of game-changers as opposed to system-extenders, if I can use some jargon i.e what forms of social business achieve the most social impact and why, and what does ‘social’ mean in all of this – a target group for individual asset building or a full engagement with the social forces that privelege the few and disadvantage the many? I think those are the key points of disagreement, or potential disagreement, between us.

  4. Carl Hammerdorfer on July 17, 2010 at 10:09 pm

    Apologies first: I’ve not read either book yet. But I will as soon as I can.

    Michael, I think my colleague, Paul Hudnut, has contacted you about getting a copy of your book and possibly using it in our MBA in Global Social & Sustainable Enterprise. We see business as the answer, but we’re constantly revising our ideas on how to make it so.

    It appears that many in the philanthropy community are moving a larger portion of their ‘investment portfolio’ towards support of business and entrepreneurship. For more than 20 years as a development worker and an entrepreneur, I’ve felt that the answer to endemic poverty is the development of locally built and owned SMEs that make products and services that people living in BoP want and need, and that provide jobs. With every successive trip through Africa, I become more an more certain of this, admittedly, very speculative hypothesis.

    I spent most of June tracking down entrepreneurs large and small in five different African countries, trying to understand the challenges and opportunities that they see. Although I can’t verify my observations with any hard data, there’s clearly something going on in terms of people’s approach to business, their hunger to learn it, their evolving sense of scalability, etc. The availability of information is a major driver of this.

    Mali, where I worked as a Peace Corps Volunteer 22 years ago was an advanced, wealthy empire centuries ago. Commerce, trade, and education were at the heart of their prosperity while Europe languished in the dark ages. In my opinion, no amount of philanthropy, charity, or state to state development aid will ever get Mali back to prosperity. Well conceived commercial codes and strategies that empower entrepreneurs to take advantage of the resources that exist can, I believe, begin lifting people out of poverty.

  5. Michael Edwards on July 18, 2010 at 2:19 pm

    tks for your comment Carl. Yes Paul and I have been in touch and hopefully I’ll be able to speak at one of your future events. I’ve no quarrel with supporting entrepreneurship as one component of poverty-reduction strategies, but perhaps I’m less optimistic than you about their long-term reach and impact. After all, well-developed market economies are still “under-developed” in so many areas. That’s why “Small Change” concentrates on the transformation of society and not just the extension of the market to lower-income groups. We shouldn’t conflate the two, and the relationshp between them is actually quite complex. But that’s a conversation for another time.

  6. The Pros and Cons of Profit « Rising Pyramid on July 25, 2010 at 12:10 pm

    [...] and I recently had a conversation with Michael Edwards, author of Small Change: Why Business Won’t Save the World, (post on the conversation to come soon too) in which we debated the most appropriate role of [...]

  7. [...] Michael Edwards’ recent book Small Change: Why Business Won’t Save the World (recently reviewed here).   In short, Philanthrocapitalism struck me as a very well written account of everything that is [...]

  8. [...] Small Change: Why Business Won’t Save the World [...]

  9. on February 5, 2011 at 2:00 am

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    There has been immense worldwide excitement about the potential of Bottom of the Pyramid (BoP) businesses to help impoverished societies escape poverty. Unfortunately, many BoP firms are locked in a “survival trap” that keeps them small, inefficien……

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