Would you rather be a social entrepreneur or an impact investor?
This question may sound ridiculous. Both types of people are advocates for change, and they work to make the world a better place. The roles are often interchangeable, especially in the financial sector. Furthermore, entrepreneurs often gain wealth and graduate into investing. So why does it matter?
Power. In Rules for Radicals, Saul Alinsky argues that would-be advocates lose their bearings on the road to power. He uses an example of “the businessman who reasons, ‘First I'll make my million and after that I'll go for the real things in life.’ Unfortunately one changes in many ways on the road to… the first million, and then one says… ‘I can do a lot more after I get two million’ — and so it goes.” When seminary school graduates used to come to Alinsky for advice, they would express worry about maintaining their change-advocating beliefs amidst the “killing routines” of churches with “stuffy old pastors.” Alinsky would tell them to make their “own personal decision[s] about whether [they] want to be a bishop[s] or a priest[s], and everything else [would] follow.”
Similarly, business-oriented changemakers must decide whether they want to be social entrepreneurs or impact investors. While entrepreneurs and startup employees can hit the ground immediately to begin pursuing social change, impact investors aren’t born overnight.
Aspiring impact investors often need to rise up through the ranks of banks, funds, or consulting firms before they are even allowed to consider social impact. Profits come first. Purpose comes second. Pedigree provided by top-tier firms and business schools is often a prerequisite for transitioning into impact funds. Alternatively, aspiring changemakers could pursue angel investing, but that path requires significant capital and a high risk tolerance.
As you can see, the path to impact investing is a long road, littered with corporate politics and the cutthroat pursuit of profits. There is significant room for corruption of one’s values and internal compass on the journey. Staying true to change-advocacy throughout the process is not for the faint of heart.
On the other hand, choosing to act as a social entrepreneur leaves you with much more flexibility. Sure, one day you may become an impact investor, but you remain content if you never reaching that point because you can continue making ground-level impact.
Along those lines, another appealing aspect of social entrepreneurship is that you can retain a pulse on people’s problems. There is an old Catholic saying that says, “After a man is ordained a bishop, he’ll never again eat a bad meal or get a straightforward answer.” While an impact investor may make a high-level difference, the entrepreneur is the one on the ground, staying in touch and solving people’s problems. This brings into question who actually holds the power. Is it the entrepreneur or investor?
Are you interested in Rules for Radicals? Follow the link below to learn more about this book, which Barack Obama and Hillary Clinton both studied closely.