Re People’s stated preferences contradicting actions:
Perhaps people indicate their willingness to make sacrifices to a much lower degree than what they would actually act upon. However, there is not a structural reason that equity ownership by a charitable foundation, as opposed to other passive investors, would increase price. Thus, given adequate capitalization for the context in which they operate, there is no reason Profit for Good businesses would be less able to compete on price and quality than normal for-profit businesses. It amazes me that you and other critics seem to think that there is zero preference by consumers and other economic actors for charitable causes vs random investors. You mention that other factors may overwhelm this consideration, but provide no reason for thinking that Profit for Good businesses would perform worse on these other factors (other than access to capital, which I will address). In fact, if there are contexts in which PFGs can match the other factors, leaving little differentiation but profit destination, this small advantage could prove decisive (similarly to having a small speed advantage in a race is the difference between gold and naught). To summarize on this point, I think that it’s quite plausible that people would act consistently with their statements where they don’t have to give something up contra a kidney donation where they do.
Re Cost to being a PFG rather than normal company:
I’m saying that having one particular kind of entity in the shareholder position, as opposed to other passive investors, does not tend to increase costs to the business. Ownership composition changes every day in normal businesses on the stock market. If a philanthropist were to buy out a company, putting its stock in a charitable trust, and kept management the same, then there is no reason to think the company would perform worse along other metrics. So, if there is any value (consumer tiebreaker effect, talent acquisition, business partnerships) to other economic actors, ownership by a charitable foundation would confer an advantage.
Re Capital Acquisition disadvantage:
You’re right: currently there is access by for-profit investors that enables scaling and its attendant advantages that is much less available to Profit for Good businesses. But just as there are entities who are interested in making money for themselves, there are also entities interested in making money for charities: philanthropists and/​or patient philanthropists (people interested in investing to be able to donate at a later date). The key to unlocking philanthropic dollars as a source of capital would be establishing evidence that Profit for Good businesses outperform normal businesses. If this theory is correct, capital should become available through philanthropists who are motivated to get more money to the causes that they care about. As the evidence becomes even stronger, access to traditional investors should become available through debt enabling leveraged buyouts. The disadvantage on capital acquisition will dissolve if evidence is established to prove my theory.
Re Companies seldom advertise ownership:
When I’m going to the grocery store or convenience store, for most products, there is not conspicuous advertisement of who owns the business.
Social Enterprise/​B Corp:
It is great that businesses are doing this, but there are a few reasons that I think focusing on profit to charities is particularly powerful:
Money to effective charities is extremely efficient at doing good.
Focusing on doing good through business activity rather than business profits tends to increase costs, or else this would be the industry standard. On the other hand, if you keep business activities the same, having a different owner (a charitable foundation) will not tend to increase costs for the business.
Thus, I think that focus on profits to charities is warranted.
I urge you to think more carefully about the fact that business performance is affected by the choices of economic actors: consumers, prospective employees, other businesses. Small advantages among these members could compound and make it difficult for firms without access to these advantages to compete.
I urge you to think more carefully about the fact that business performance is affected by the choices of economic actors: consumers, prospective employees, other businesses. Small advantages among these members could compound and make it difficult for firms without access to these advantages to compete.
I have thought about it very carefully and long before I read this post. I’ve also pointed you to many people who’ve thought about this for decades and made billions of dollars for charity and have thoughts about this specific approach. I still find you very misguided and suggest you take a few intro to business classes.
I’d suggest that you have the humility to consider that you might not have out-thought all these people. Especially as I can tell you don’t have a lot of experience actually investing in or running businesses.
But I can tell from the tone of this comment that you’re not open to being convinced. So good luck to you!
I would have much less confidence if in the couple years I’d been pursuing this, that I had ever clearly seen the idea explored of this sort of business structure being used as a philanthropic financial leverage tool.
There definitely has been lots of thought about ethical capitalism and other ways of doing business in a better ways. But I haven’t seen this sort of weaponization of philanthropic resources… It’s like you say, there isn’t the capital for it because using money in this way is just not something philanthropists are even thinking about and no one is suggesting that they even engage in experimentation regarding the size of the effects involved. You just assume that if someone has the choice to buy nearly identical products at nearly identical prices and save a kid from malaria rather than enrich some random shareholder, they’d ignore this opportunity. You just assume that a brand identity based on profits bettering the world couldn’t garner support from celebrities/​influencers to better effect/​lower cost.
FWIW, I’ve spoken with economists who agree that my notion is theoretically sound: PFG adds a dimension of competition on which PFGs likely excel over competitors. Perhaps they should go back to school as well.
You mistake me being incapable of being convinced with me not having been convinced by you. Rather than being interested in testing the effect size, (if any) of the performance advantage being a PFG might have, you dismiss this as having been considered and explored. I don’t think it’s my epistemics that are flawed for thinking experimentation in this area is merited.
Your recap of my thoughts is inaccurate and you are confidently unaware of an entire class of organizations. Which fits my model of you not really understanding the subject. It really is strange to see someone so confidently insisting that something that exists does not exist. But so it goes.
Regardless, we are agreed that you cannot be convinced by me. Whether that is because you cannot be convinced by anyone, that is that you’re not acting rationally, or because I do not have the skill to convince you is ultimately unimportant. It’s still a waste of both our times for me to continue. I wish you luck though, I repeat, I think it would be good for you to go learn a bit more before you try this. Of course it’s your life and if you want to go for this then you’re welcome to.
Are you referring to Benefit Corporations? Social Enterprises? The B Corp organization itself? That there are businesses (Newman’s Own, Patagonia, Humanitix, Thankyou) that are PFGs? I don’t understand what you’re asserting I am totally unaware of.
I don’t care if you respond, just don’t want comments to suggest my ignorance of such entities.
I’m sorry you find my thoughts so misguided.
Re People’s stated preferences contradicting actions:
Perhaps people indicate their willingness to make sacrifices to a much lower degree than what they would actually act upon. However, there is not a structural reason that equity ownership by a charitable foundation, as opposed to other passive investors, would increase price. Thus, given adequate capitalization for the context in which they operate, there is no reason Profit for Good businesses would be less able to compete on price and quality than normal for-profit businesses. It amazes me that you and other critics seem to think that there is zero preference by consumers and other economic actors for charitable causes vs random investors. You mention that other factors may overwhelm this consideration, but provide no reason for thinking that Profit for Good businesses would perform worse on these other factors (other than access to capital, which I will address). In fact, if there are contexts in which PFGs can match the other factors, leaving little differentiation but profit destination, this small advantage could prove decisive (similarly to having a small speed advantage in a race is the difference between gold and naught). To summarize on this point, I think that it’s quite plausible that people would act consistently with their statements where they don’t have to give something up contra a kidney donation where they do.
Re Cost to being a PFG rather than normal company:
I’m saying that having one particular kind of entity in the shareholder position, as opposed to other passive investors, does not tend to increase costs to the business. Ownership composition changes every day in normal businesses on the stock market. If a philanthropist were to buy out a company, putting its stock in a charitable trust, and kept management the same, then there is no reason to think the company would perform worse along other metrics. So, if there is any value (consumer tiebreaker effect, talent acquisition, business partnerships) to other economic actors, ownership by a charitable foundation would confer an advantage.
Re Capital Acquisition disadvantage:
You’re right: currently there is access by for-profit investors that enables scaling and its attendant advantages that is much less available to Profit for Good businesses. But just as there are entities who are interested in making money for themselves, there are also entities interested in making money for charities: philanthropists and/​or patient philanthropists (people interested in investing to be able to donate at a later date). The key to unlocking philanthropic dollars as a source of capital would be establishing evidence that Profit for Good businesses outperform normal businesses. If this theory is correct, capital should become available through philanthropists who are motivated to get more money to the causes that they care about. As the evidence becomes even stronger, access to traditional investors should become available through debt enabling leveraged buyouts. The disadvantage on capital acquisition will dissolve if evidence is established to prove my theory.
Re Companies seldom advertise ownership:
When I’m going to the grocery store or convenience store, for most products, there is not conspicuous advertisement of who owns the business.
Social Enterprise/​B Corp:
It is great that businesses are doing this, but there are a few reasons that I think focusing on profit to charities is particularly powerful:
Money to effective charities is extremely efficient at doing good.
Focusing on doing good through business activity rather than business profits tends to increase costs, or else this would be the industry standard. On the other hand, if you keep business activities the same, having a different owner (a charitable foundation) will not tend to increase costs for the business.
Thus, I think that focus on profits to charities is warranted.
I urge you to think more carefully about the fact that business performance is affected by the choices of economic actors: consumers, prospective employees, other businesses. Small advantages among these members could compound and make it difficult for firms without access to these advantages to compete.
I have thought about it very carefully and long before I read this post. I’ve also pointed you to many people who’ve thought about this for decades and made billions of dollars for charity and have thoughts about this specific approach. I still find you very misguided and suggest you take a few intro to business classes.
I’d suggest that you have the humility to consider that you might not have out-thought all these people. Especially as I can tell you don’t have a lot of experience actually investing in or running businesses.
But I can tell from the tone of this comment that you’re not open to being convinced. So good luck to you!
I would have much less confidence if in the couple years I’d been pursuing this, that I had ever clearly seen the idea explored of this sort of business structure being used as a philanthropic financial leverage tool.
There definitely has been lots of thought about ethical capitalism and other ways of doing business in a better ways. But I haven’t seen this sort of weaponization of philanthropic resources… It’s like you say, there isn’t the capital for it because using money in this way is just not something philanthropists are even thinking about and no one is suggesting that they even engage in experimentation regarding the size of the effects involved. You just assume that if someone has the choice to buy nearly identical products at nearly identical prices and save a kid from malaria rather than enrich some random shareholder, they’d ignore this opportunity. You just assume that a brand identity based on profits bettering the world couldn’t garner support from celebrities/​influencers to better effect/​lower cost.
FWIW, I’ve spoken with economists who agree that my notion is theoretically sound: PFG adds a dimension of competition on which PFGs likely excel over competitors. Perhaps they should go back to school as well.
You mistake me being incapable of being convinced with me not having been convinced by you. Rather than being interested in testing the effect size, (if any) of the performance advantage being a PFG might have, you dismiss this as having been considered and explored. I don’t think it’s my epistemics that are flawed for thinking experimentation in this area is merited.
Your recap of my thoughts is inaccurate and you are confidently unaware of an entire class of organizations. Which fits my model of you not really understanding the subject. It really is strange to see someone so confidently insisting that something that exists does not exist. But so it goes.
Regardless, we are agreed that you cannot be convinced by me. Whether that is because you cannot be convinced by anyone, that is that you’re not acting rationally, or because I do not have the skill to convince you is ultimately unimportant. It’s still a waste of both our times for me to continue. I wish you luck though, I repeat, I think it would be good for you to go learn a bit more before you try this. Of course it’s your life and if you want to go for this then you’re welcome to.
Are you referring to Benefit Corporations? Social Enterprises? The B Corp organization itself? That there are businesses (Newman’s Own, Patagonia, Humanitix, Thankyou) that are PFGs? I don’t understand what you’re asserting I am totally unaware of.
I don’t care if you respond, just don’t want comments to suggest my ignorance of such entities.