The Effect of Social Missions On Tech Innovation

The New York Times is running a piece on how some emerging companies in the tech industry are focusing on social missions rather than profits despite having successful business methods. The startups are modeling themselves after organizations like Mozilla and TechSoup, who have both grown to significantly affect their respective markets. The article also discusses some of the non-profit support groups, such as the EFF, who contribute specific services to the field. Quoting: "'There is a lot of discussion taking place right now about a whole new organization form around social enterprise,' said James Fruchterman, president of Benetech, a social enterprise incubator based in Palo Alto. 'Many of these efforts can make money; they will just never make enough to provide venture capital rates of return.' The new stream of technology-centric and successful nonprofits, however, appears to be driven in part by a set of microelectronics technology trends that have sent shock waves through many industries, from publishing to music and movies. 'Computer technology and the Internet are lowering the cost of doing business,' said John Lilly, the chief executive of Mozilla."

Finally...

My business partner and I have been talking about stuff exactly like this, but I never knew companies were actually doing this. It always seemed a major problem that companies must be devoted to profit... and that leads to issues, like Microsoft changing their billing practices, etc. When a company is the undisputed leader in their niche, they had to do something to increase their profits. Usually thats when companies do stupid things like use the RIAA, put spyware on CDs, etc. So its actually bad for a company to focus on profits. Oh well, still too many greedy people.

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I've always liked the idea of starting a company with an added clause to the mission statement that goes along the lines of "...to help and move forward all of humanity..." That would allow the company to invest significantly into science with their R

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So its actually bad for a company to focus on profits.

...and it can be illegal for them NOT to focus on profits, if they're publically trading.

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Gee... perhaps thats the problem? Check this out: We need a new path to liquidity [blogs.com]

Re:Finally...

So its actually bad for a company to focus on profits.

...and it can be illegal for them NOT to focus on profits, if they're publically trading.

Not necessarily. Corporations must focus on providing value to shareholders. For most (i.e. almost all) companies, that means profit, though any and all legal means. But it really depends on what the articles of incorporation say.

Whenever you create a corporation, you file a legal document called the articles of incorporation that set up all of the rules about how your company works and what its goals are. The boilerplate articles that most companies use say that the company's goal is, basically, profit. When shareholders buy into such a profit-seeking company, they have a legally-enforceable expectation that the board and officers will focus their efforts on making money.

Some companies, however, write different articles. There are a number of companies in the last few years who have written environmental responsibility into their articles, and prioritized it above profit. So for those companies, shareholders expect profit to take a back seat to environmental concerns. The officers of such a company would be breaking the law if they were to, say, use cheap, non-sustainable technology to build their products in order to increase profits.

The problem, if there is one, isn't that corporate executives MUST seek profits, it's that shareholders prefer to buy into corporations that are structured to seek profits.

Re:Finally...

The problem, if there is one, isn't that corporate executives MUST seek profits, it's that shareholders prefer to buy into corporations that are structured to seek profits.

and that the majority of the money that comes from shareholders to buy shares is not from people, but corporations whose charter includes only profit aims.

Such as banks.

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The problem, if there is one, isn't that corporate executives MUST seek profits, it's that shareholders prefer to buy into corporations that are structured to seek profits.

and that the majority of the money that comes from shareholders to buy shares is not from people, but corporations whose charter includes only profit aims.

Such as banks.

Sure there is a lot of corporate ownership by corporations, in a big incestuous pile, but the ultimate source of capital is from individual investors -- primarily retirement investments. If individual investors chose social good companies over pure-prof

Re:Finally...

It always seemed a major problem that companies must be devoted to profit... and that leads to issues

I remember a press release somewhere about a non-profit pharmaceutical company created specially because of the issues you refer to. Ah here it is... http://www.oneworldhealth.org/ [oneworldhealth.org]

Anyways, some type of issues that the world deals with doesn't fit well with the corporate business model. Just because a profit cannot be made, doesn't mean it shouldn't be done.

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Well, if you are a small business, your choices are different. You are running the business to benefit yourselves, and you have more choice of the coin in which you will be paid than if you were a publicly traded company.

Growth, cash flow and profits are

ideally

all corporations would have a social mission, and we wouldn't buy from, or invest in, corporations that did not.

Hmmm....

The last time I checked, a company (versus an OSS software project) needs, to pay someone to answer the phone. (Pay the phone bill too.)

Yes, there are exceptions when it's a *really* small business, but we're talking about company sizes that include paying an accountant and have many talented employees.

It's a marketing angle to create some differentiation. Whole Foods Markets is a very well-known example. Guess what? Investors were mad as hell when their profits did not come in as targeted.

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Non-profits can have employees and pay out salaries. They can even engage in most forms of traditional business, so long as the business forwards the purpose of the organization. What they cannot do is allow any of the funds to inure to the owners (beyond

The Canonical Example

From the article:

Brewster Kahle, who has founded a number of successful Internet companies, as well as the nonprofit Internet Archive, said: âoeIf we do this right, I think there is momentum here. The next major operating systems company might be a nonprofit.â

I wonder if he's theorizing or just making a veiled reference, because it seems to me that there's a very good chance that the next major operating systems company is Canonical Ltd., producer of the Ubuntu Linux distribution. While Canonical is technically a for-profit company, it is not a profit-motivated company. Mark Shuttleworth has said from the beginning that he was willing to continue funding the company in order to make sure that it met its social goals -- distributing a high-quality, user-friendly operating system completely free of charge.

With low costs from its decentralized "virtual company" model, and moderate revenues, I believe Canonical has achieved profitability even sooner than Shuttleworth expected. But profit is and has been a side benefit, something that makes running the company easier rather than a primary goal.

I'm surprised the article didn't mention Canonical by name.

Will fuels the engine

you all know that many of the people working in those social enterprises are people (all are generally tech people anyway, just like you) who could make money by getting any job.

but there is a fact as old as human civilization itself - WILL to do something is the biggest thing that can drive people.

these people, are setting up social companies, setting up social goals, because they believe in them and really want to achieve them, unlike some obscure company quarterly profit goals in a big buck corporation. and they achieve those goals, mainly due to sheer power of will that fuels their soul. in the end they end up more than achieving their social goals - they change society.

this is how this human civilization was made. anything that changed the nature of society on the face of this planet has come through such willing breakthrough.

wake up people. this is the way society is going. modern big buck corp understanding, which is just a bastardized heir of 19th century's samuel hezekiel hapgood & sons & co understanding is dying.

a new understanding and approach to solving things and making things happen has been brewing for the last 10 years, first it was in silicon valley and software business, and now its spreading around to other sectors.

jump in that bandwagon. start living in the next century instead of living in the last. make something change for good.

Re:The Visionary Geek

Geeks will not inherit the world anymore than any other group will.

The world has to have different types, asshole types included. Without them and the other groups, the would does not and will never work. You need forward thinkers and you need short sighted thinkers. Without short sighted thinkers, you go bankrupt in the short term and there is no long term and visa versa.

No one group or type of person can do it all.

Re:The Visionary Geek

The world has to have different types, asshole types included.

That's what the assholes want you to think.

You think Enron was the only company that fudged numbers so their top brass made their bonuses? This behavior doesn't create wealth, it only redirects it from productive uses. These people are parasites on wealth building processes. The system functions despite these people.

The essence of being an asshole is being a person who habitually lies to get ahead. Many highly successful people are assholes, but for ever such there are a thousand whose lies caught up with them. It isn't that assholes aren't forward thinkers, it's that they don't look any farther into the future than is necessary to keep their deceptions from collapsing. It's not about rational self interest, it's about the inability to control the impulse to grasp and manipulate.

This doesn't mean nice guys finish first. The world isn't divided into assholes and nice guys. Ben Franklin was a bit of a conceited jerk, but he was never an asshole, and he pretty much accomplished anything he ever set his hand to. He was incredibly disciplined; it was always a penny saved with old Ben. He know the line between jerk and asshole, and didn't step over. He wasn't the type to cheat a customer because a repeat customer, after all, is the most profitable in the long term. He might deceive his way into a lady's boudoir, but his aims in those matters were exclusively short term.

And sometimes assholes smarten up. Young George Washington was a nasty piece of work, but the transparent ugliness of his social climbing ruined any prospects he had of advancement, and this changed his thinking.

Thomas Jefferson never stopped being an asshole, and suffered his entire life as a result. No question he was very bright, of course, but what he accomplished was because of his intelligence and despite his unwillingness to face his personal problems squarely.

The world needs many kinds of people: kindly people and stern people, benevolent people and ambitious ones. But saying it needs assholes is just another way of saying that it needs more fools. Saying that many assholes are successful is like saying that many people successfully pursue the lottery to riches. It's only "many" if you don't compare it to the failures.

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Oh, that's just being blunt. It may also be being a bit socially awkward.

You're not an asshole if you tell your female coworker she looks fat in that dress. You're just a jerk. You're an asshole if you tell her if she helps you on this project you'll

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This is the reason that geeks will inherit the world.

you're thinking of the *meek*.

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This is the reason that geeks will inherit the world.

you're thinking of the *meek*.

No, the m in meek is just a mistranslation from Ancient Mre^H^H^HGreek.
See? It's an easy mistake to make.

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The main goal of every company is to make as much profit as possible. You can't survive without this goal.

The main goal of every company is to make as much profit as possible -- except for the companies that have other goals. They're rare, but they can and do exist, and many of them survive just fine.

Assuming you can find investors who want to invest in a

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"Assuming you can find investors who want to invest in a company with a primary goal other than profit, it's often a competitive advantage, because you don't have to worry as much about how to generate the returns investors are looking for. So, you can ope

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"Also not true. Some investors are willing to accept a lower rate of return than they could otherwise get in order to also feel good about the benefit (or lack of damage) their investment brings to the world. They still expect a return, and aren't going to

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Again, the people that aren't interested in a profit (or low profits) are not going to invest their money, they will donate, which is different. (non-profits either get dontations from private entities or grants from the government).

Explain, then, the people who invest in, for example, the sportswear companies that commit to sustainable manufacturing practices, even though they mean higher prices and lower profit margins?

You fail to consider that an investor can have MULTIPLE goal

Not all businesses are the same

Wrong. Your ignorance here is shining through. Just because you don't see how it's possible doesn't mean that it doesn't exist, doesn't mean that there are people and businesses out there who are doing just such a thing and succeeding. There are busines

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It can't get you everything, but it can give you freedom. With enough money in the bank, you never have to work as a corporate slave again.

Really? That question comes down to how much is enough. Working my corporate job was a means to an end, which was simply earning money. To me, that seems a poor life indeed. And how many IT people who you know earn enough money to throw off the sh