Solutions, Not Asset Classes


Or: Reflections on SOCAP 2012

This month, I attended SOCAP 2012, along with 1,600 others interested in all things money and all things change. SOCAP started in 2008 as a way to bring together socially-focused venture capitalists, but since then it has grown into a mecca of sorts for those who are interested in using resources, financial or otherwise, to better create change. Philanthropy was well represented, as was social enterprise, impact investment, and even government.

The theme of the week was “Making Meaning Matter,” although much of the week focused on the genesis of the conference: impact investing. There was a lot buzz around how we–or specifically, the impact investors themselves–should go about creating “a new asset class” that not only focuses on financial returns, but social as well. A lot of jargon got thrown around–exit strategies, return rates, investment horizon. I was concerned SOCAP would be just another conference that ends up only promoting the thoughts and ideas of the organizers, with no broad-based critical discussion on the assumptions that brought us together into one room.

But then I was fortunate to hear a speech from Sasha Dichter of the Acumen Fund. He threw out a line that stuck with me for the rest of the conference:

“If you focus on problems, you come up with solutions. If you focus on building an asset class, you create funds and products.”

What this meant to me, and what Sasha reiterated at another panel later on, was that we shouldn’t focus on building up impact investing for impact investing’s sake. Rather, building up impact investing as a viable investment source is only useful in that it can help solve problems. Thinking of impact investing as a solution to be perfected, it can be improved and developed to deliver better results. But approaching impact investing as a given, as something absolute, we lose sight of why it’s really there: To improve the state of people’s lives. Losing that focus will cause impact investing to develop in ways that don’t do justice to the reason it was created.

I began to see this theme reflected throughout the rest of the conference. In a panel on public-private partnerships, the speakers joked about how they had all been forming these kinds partnerships for years, decades, but it was only recently that their work had been given a name and gotten attention. One panelist, Mitchell Strauss of OPIC, said she had worked to develop these partnerships because they “just make sense.” She didn’t do it because a consulting firm told her to, or because it was a best practice, or because it was new exciting thing–it was just the best way to solve a certain problem.

I think we can very quickly get hyped into thinking the next big thing is where we should be focusing our time and resources, but with that hype we lose site of why we need innovative ideas: to solve problems better, or to solve new problems.

Joy Anderson of Criterion Ventures and John Fullerton of the Capital Institute presented several sessions under the theme “We Made This Shit Up, We Can Make Up Something Else.” These focused on the financial crisis of 2008 and the reluctance of people to revisit the financial system because most think there’s no other way to create financial products than the way we’ve been doing it. In reality, the rules of the financial system were set up by a small group of people for their own benefit. If they made it up, we can make up something better.

I would apply this lesson not only to the financial sector, but to the social sector as well: We made this all up. Anything from the rules and regulations governing the nonprofit sector to the  culture of social entrepreneurship to the measurement infrastructure for impact investing, we made up. To solve problems. And we can change it, however we’d like.

Nothing is sacred, and nothing should be accepted as a given. The point of all this work is to solve problems. Nothing more, nothing less. Remember that going forward, and don’t get too caught up in any kind of hype.

3 thoughts on “Solutions, Not Asset Classes

  1. I think very much related to your point of solving problems, not asset classes is the fact that impact investing is not THE solution. It is an excellent tool in our toolbox of using finance for economic and social development.

    Many organizations have recently been pondering how they can shift their grants, donations, and other forms of capital to into an impact investment model. This makes me incredibly nervous. Are they doing it because they have identified a problem that can be best solved with impact investing? Or is it because of the hype?

    The reality is a diverse mixture of coordinated capital is essential to any developing enterprise. Let’s not get ahead of ourselves here.

    • Thanks for your comment, Ryan. “Tool in our toolbox” is my favorite way to describe this issue. It’s a cliche, but it’s a useful one.

      I totally agree with you about your trepidation around people shifting to different models based on hype–but I think the real problem here is that people with money support these hyped-up flavors of the weeks/years. So it may not be the best thing for orgs to shift to these news models, but it may mean money for them. This is the real problem here–that people with power (money) hop on to these trends without any critical thought.

  2. Pingback: Solutions, Not Asset Classes | SocialEarth

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