May 7, 2003 4:00 AM PDT
Perspective: Throwing down the gauntlet to Silicon ValleySee all Perspectives
During the boom, when we were at the center of a revolution in philanthropy, the technology elite also applied their talents to giving money away rather than to just making it. In doing so, they helped create new models of giving and pushed nonprofits to increase accountability for results.
Those days seem long gone. In the wake of the stock market's decline, there has been a scaling back of tech-related philanthropic commitments and initiatives. Most recently, The David and Lucile Packard Foundation announced major budget cuts resulting from the collapse of its endowment, the latest sign of a troubling trend.
But now is not the time to lower our aspirations. We can and must do more with less. That's why it's especially important that technologists and philanthropists refocus on using technology to change the world. The best way to do this is with a powerful model that we don't use nearly enough: social enterprise. Combining technology with social enterprise provides immense leverage for good.
I became a social entrepreneur in the late 1980s, after the optical character recognition company that I had co-founded built a prototype reading machine for the blind. Using new technology, it could scan a printed page and read it aloud to a blind person using a synthetic voice. The problem was that I couldn't convince my company to develop the product--the market size was under $1 million annually, and our backers needed big returns on their $25 million investment. We simply couldn't afford to go after such a small market.
Many technologists would love to work on socially important problems, but this is rare, because they don't have viable models.
Today, there is still a huge gap between what's possible and what's profitable with technology, between breaking even and delivering a 40 percent annual return on investment. Many technologists would love to work on socially important problems, but this is rare because they don't have viable models.
The best way to bridge this gap is with social enterprise, a technology venture run like a business but structured as a nonprofit with two bottom lines: social and financial. The goal is not to make lots of money, but instead, to deliver the maximum good while operating in a sustainable manner (generally at breakeven). The technology user is treated as a customer--not the recipient of charity--and the enterprise must meet his or her needs or lose revenue.
In the case of our dilemma with the reading machine, it made more sense to spin a nonprofit out of my company to build it. Generating 99 percent of its revenue from sales, this new nonprofit enterprise quickly became the leading maker of reading machines for the blind in the world, generating $45 million in revenue over more than a decade, while operating slightly in the black.
The social enterprise model is immensely powerful, because technology is very cheap to replicate once it is created. In the social sector, this makes it possible to price software affordably to reach more users, or even to charge lower fees based on ability to pay in the developing world. After a relatively small, up-front philanthropic investment, a social enterprise can run for years based on the revenue it generates.
The social enterprise model is immensely powerful because technology is very cheap to replicate once it is created.
The possibilities are endless. With a few million dollars in start-up capital--peanuts by Silicon Valley standards--it would be easy to put a 20,000 volume library of talking electronic books in a rural village for less than $500, using a game machine, a television and an inexpensive stack of CDs or DVDs. This would vastly increase access to critical information for millions of people in the developing world, especially to those who cannot read or see. Along these lines, we have already launched an Internet service called Bookshare.org that has made more than 12,000 electronic books available to U.S. residents with disabilities, and recently gained the support of O'Reilly & Associates in growing its initiative worldwide.
Similarly, in a few years, a used cell phone will have the processing power of a recent PC and cost $10 to $20. With the right software, these phones will be able to read for those who can't read, speak for those who can't speak, hear for those who can't hear and remember for those who can't remember.
Rather than simply waiting out the downturn, entrepreneurs could be starting social enterprises, as has Lotus founder Mitch Kapor, who recently started a nonprofit that develops e-mail and personal information management software.
Corporations can cooperate with these social entrepreneurs to go after neglected markets at little marginal cost, and see their products and technology applied to social applications. Foundations need to explore how social enterprise can help their dollars go farther and how to take advantage of the immense leverage technology offers.
Ultimately, the only limit on what we can accomplish with technology is our imagination. At a time when the for-profit sector looks grim, it's important to remember how much good technologists can still contribute to the world.
Jim Fruchterman, the CEO and founder of Benetech, was selected as one of the 2003 Social Entrepreneurs of the Year by the Schwab Foundation for Social Entrepreneurship in Geneva, Switzerland.