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Daniel Prada ’12: Every entrepreneur is a social entrepreneur

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Opinions Columnist

 

“Harvard and Yale graduates go on to rule the world — Brown students try to save it.”

This, in many ways, defines stereotypical Brown students and their attitude towards themselves, capitalism and the world around them. Meet such a student, and you will encounter an inexplicable hatred of the terms “corporation,” “profit,” “globalization” and “free-market capitalism.” Given the tremendous opportunities these students receive and the privilege that they are endowed, students guilt themselves into a mentality and feel the need to “give back” as social entrepreneurs later in their lives — after a period during which they undergo the vile slime of working for profit. A social entrepreneur, a term developed by the Ashoka Foundation founder Bill Drayton, is a person who utilizes the mentality of the entrepreneur to focus on explicitly social, charitable ends, unlike other methods of entrepreneurship. These social entrepreneurs think to maximize social and environmental value in order to solve the world’s toughest issues. Such a term sounds empowering and allows one to turn the myriad vices of “self-interest” into something selfless, humanitarian, just and caring.

I believe, however, that this term and ideology are misleading to everyone, since they fundamentally misunderstand the nature of capitalism, subjective demands, the role of profit and the entrepreneur within a free-market society.

Now you will probably read that first paragraph and assume that you know what I am about to say, so that you can file my ideas under the category “ignoramus.” If so, I ask that you use some of the charity that you plan to use in the future to read on.    

Capitalism is a system whereby people’s subjective wants are satisfied through trade on a massive scale in a peaceful, voluntary, interdependent and cooperative manner. Businesses thrive and die every day trying to find ways to make people’s lives easier, more enjoyable or more productive. If they cannot satisfy a customer’s fickle desires or expectations, they liquidate. But, if they can create more value for human beings than it costs them to mix the land, labor and capital, they remain profitable.

In reality, profit is a signal to businesses that they are creating social value to human beings.

We often talk about Steve Jobs, Larry Page, Bill Gates, John D. Rockefeller, Andrew Carnegie and a whole host of other business leaders as owning an “empire.” This term is highly misleading, since it totally reverses our understanding of who really is in power — the consumer. When Google Buzz, the HP Tablet, Betamax, the Ford Edsel, Windows Vista and the Newton Apple fail spectacularly, it’s because ordinary human beings did not want those companies to produce those goods.  

So where is the entrepreneur, and how does he fit into all this? The entrepreneur is the person who predicts the uncertain future and, in the pursuit of profit, thinks, develops and innovates products and services that customers want. This person dedicates his brilliance and his enterprise to finding ways to make ordinary people better off and spends his entire life taking enormous risks trying to create value.

Take, for example, Michael O’Leary, CEO of the Irish airliner Ryanair. He is one of Ireland’s wealthiest business people. What did he do? He totally revolutionized the airline industry by doing one thing — serving the customer. Before Ryanair, companies like Lufthansa, Air France and British Airways dominated the landscape and charged $1,000 for flights, providing free checked bags, luxury dining inside aircraft and lots of face-to-face customer service. These companies made weekend getaways to Spain, Italy, Paris, Rome and so on a luxury for the upper crust. Ryanair totally changed this paradigm and offered flights at a fraction of the cost, turning a luxury into something within the means of an average family.

He and his company have done much to serve Europeans, and his company’s current profits are a testament to the success of its ability to give people the flights that they actually want.

To say, however, that some entrepreneurship is social is just an incorrect assessment of how we serve one another via the market and how critical entrepreneurs are in creating new value for society. 

The knee-jerk reaction to such an argument is, “What about hunger, indigence, disease, filth, pollution, lack of transportation, lack of clothing and ignorance? Capitalism has not and cannot serve those populations, and therefore the state should provide help for those who need help.”

The natural condition of human history has been this. But thanks to capitalism, thanks to entrepreneurs, innovators, thinkers and geniuses in pursuit of profit — also known as serving the customer better than the alternative — we have developed incredibly creative solutions to these issues. Our frustration at the misery felt throughout the rest of the world is the exact result of our prosperity. We have become so wealthy, so accustomed to the benefits of this massive interdependence, that we forget the engine that helped us achieve these goals.

To those who want to be social entrepreneurs, all I say is the following: If you want to really help the world, if you really want to help the lives of ordinary people, then be an actual entrepreneur.

 

Daniel Prada ’12 would gladly welcome debate at daniel_prada@brown.edu.