This link has been bookmarked by 2 people . It was first bookmarked on 25 Jul 2008, by Jeremy Price.
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28 Jul 08
Takuya Hommahis claim of social recognition being important because it creates economic opportunities for a company is close to valid, but I think what Gates meant by this is a bit different. he placed sincere stress on 'recognition' rather than cared whether social recognition would lead a company to be economically better. i think he believes that people, especially rich people, are more motivated by recognition than being economically successful, as we can see from when warren buffet announced his intention of giving his assets to the gates foundation. it doesn't make economic sense(maybe), but he made this decision based on his belief that it's a good thing. Gates didn't send the message of recognition to normal business people, rather, he sent it to rich people like him and encouraged them to make actions.(i suppose)
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In their day jobs, capitalists make money and stay in business only because consumers like their products enough to pay a price high enough to allow the capitalist to make money. This ensures that businesses add value on a sustained basis. But this automatic feedback loop is generally missing in the social sector, precisely because it is often necessary to intervene in places where the market, left to its own devices, did not, or cannot, arrive at the desired outcome.
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And in many cases no sacrifice is required. Firms spend large amounts of money to sponsor things like car races so as to gain brand recognition, presumably because it makes economic sense. One might imagine that being associated with a sufficiently sexy philanthropic cause could be a just as effective way to advertise.
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This automatic feedback loop is generally missing in the social sector, precisely because it is often necessary to intervene in places where the market, left to its own devices, did not, or cannot, arrive at the desired outcome.
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One approach, championed by such creative capitalists as the Acumen Fund, has been to focus on identifying areas where a gap between private and social value does not exist, or is sufficiently small. There are many cases where the poor would be willing to pay for a service at full price if the service were to exist. But no one may have offered it yet, or there might be a way to offer it more cheaply or more effectively. Creative capitalists can focus their efforts on offering these types of services, and getting paid for it. After all, inventing new products and ways to sell them is what capitalists are good at.
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Public health interventions are an obvious example: when there are large externalities -- everyone in a community might benefit from an individual vaccination -- the private value is lower than the social benefits. As a result, requiring ‘sustainability’ in the narrow financial sense (each project must generate enough revenue to finance itself) may result in very valuable projects not becoming real.
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25 Jul 08
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The insight of creative capitalism is that the warm glow of giving can be marketed. But the warm glow runs the risk of being divorced from any actual benefit.
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The insight of creative capitalism is that the warm glow of giving can be marketed. But the warm glow runs the risk of being divorced from any actual benefit. What makes a consumer, employee or shareholder feel good is not necessarily what truly helps a poor person. It is in this wedge that Bill Easterly’s criticism lives; in fact, he often argues that what makes the rich feel good actually hurts the poor.
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focus on identifying areas where a gap between private and social value does not exist, or is sufficiently small
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requiring ‘sustainability’ in the narrow financial sense (each project must generate enough revenue to finance itself) may result in very valuable projects not becoming real.
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Thus, creative capitalism should not be equated with having a ‘double bottom line.’ The confusion between creative capitalism and social entrepreneurship can lead us astray, because it can lead the creative capitalists to focus solely on the search for sustainable investments, when plenty of investments may never yield a profit but will yield much greater social returns. But if we accept this point, we still have to solve the problem of aligning public recognition and social value. The solution is to create a system in which companies have an incentive to rigorously assess the impact of the projects they support or initiate, and to publish these assessments
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focus on creative experimentation: thinking outside the box to come up with new ideas or identifying them among their local partners, and then spending the time and money to rigorously evaluate them
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focus on scaling up: implementing on a large scale ideas that have been demonstrated to work elsewhere.
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This will require institutions to gather, validate, and spread knowledge, and it requires some standard for what constitutes an acceptable evaluation.
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