The New York Times ran an interesting story in the Business Section this weekend, titled, “First Make Money; Also Do Good.”  Basically, it argues that corporate philanthropy is small potatoes and corporate social responsibility not much more than disingenuous marketing (“hypocritical window-dressing” according to Milton Friedman).  Citing Harvard’s Michael Porter’s work on “shared value” capitalism, the story argues for promoting social relevance to be a SOURCE of profitability, not an externality.

When we were fundraising for our “double bottom-line” venture fund, it was not uncommon for potential investors to lean in and ask, “is this really to make money or to do the good?”  Simply insisting on our belief that this is a false choice does not give credit to the deeply ingrained assumption that doing good is fundamentally at odds with doing well.  It is true, in my experience, that corporate philanthropy is not just minuscule in comparison with a company’s profit centers, but is often not held to the standards of quality, speed, and scale that are the expectations in world-class business.  Corporate social responsibility programs do often feel like a luxury maintained when times are good.

At our fund, Core Innovation Capital – and as the article points to IBM, GE and Intuit – we believe in the “shared value” paradigm:  creating long-term value to underbanked consumers is not (and should not) be a well-intended, charitable accommodation.  Instead, it is the opportunity to create trust with, and generate revenues from millions of people who today only enjoy short-term value in return for a transaction fee.  Check-cashers measure customer value in 90 second increments.  Green Dot measures their customer in terms of months.  Would their price to earnings ratio improve if they measured customer retention in years, not months?  You bet it would.

Here’s Michael Porter’s Harvard Business Review article on Shared Value.  Check it out and let me know if you see merits or if you think this is just the same window dressing we’ve seen before.