The Growing “Do Good” Economy

CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Curt Nickisch.

Corporate social responsibility, sustainability, ESG, doing well by doing good. You’ve probably heard these phrases a lot lately, including on this show. It seems that whether you work in government, a not for profit, tech startup, corporation, or even your own business, the part of the economy that is claiming positive social impact is growing rapidly.

However, incorporating social impact into a business brings up all kinds of system dilemmas, and when it goes wrong, it can go horribly wrong. Just take a look at FTX, which espoused effective altruism. That company is now mired in an enormous financial scandal. Or WeWork. The company whose filing paper said it was going to change the world. Its founder walked away with a giant buyout package even as its valuation crashed.

With us here to talk about meaningful strategies for positive impact is Jacob Harold. He’s the former CEO of GuideStar, which reports on nonprofits in the US. He also cofounded the philanthropy data platform, Candid and wrote the new book, The Toolbox: Strategies for Crafting Social Impact. Hi Jacob.

JACOB HAROLD: Curt, I’m thrilled to be here.

CURT NICKISCH: To start, let’s talk big picture about this doing good economy. How have you seen it change and grow over the years?

JACOB HAROLD: I love the framing of a doing good economy because it captures that there are a lot of different types of organizations that are doing good. In the US alone we’ve got over a million nonprofit organizations, countless businesses that have a social purpose integrated in their work, and many thousands of government agencies that are tasked with helping to build a better world. But even more important than the organizations are the people. In the nonprofit sector in the US alone, there are 13 million people who are employed full-time. Millions more working for a better world in government and business. So we as a species have created this new profession almost. We don’t even have a name for it, but all of these people whose full-time job is to build a better world.

I consider this an extraordinary achievement on the part of human society to have figured out how to pay people’s bills while they’re trying to make a better world. But it’s also very clear that it’s hard work. There are no simple answers. And figuring out how to do the work of social good is a challenge that we’re facing in even more acute ways as we see crises of war, pandemic, climate change, racial reckoning around us. And we have a lot of work to do to figure out what does it mean to do good in this moment.

CURT NICKISCH: There is definitely a trend toward trying to bring in positive social impact into for-profit enterprises though lately, right?

JACOB HAROLD: Oh, I mean, absolutely. And you see that across multiple dimensions. You’re certainly seeing that from a consumer perspective in terms of shifts in consumer behavior. You see it from employees. It’s very clear that coming generations are committed to working in jobs that are aligned with their values. We see it in the capital markets. Investors in charge of tens of trillions of dollars are making decisions based on their best bet, their best understanding of what the social good is. But the truth is, across all these dimensions, employees, consumers, investors, it’s difficult. This is not easy work. And we’ve seen with the current crisis of confidence in some of the ESG data. We see it in a very different way with the collapse of FTX, where you have a company that made a social purpose philosophy, effective altruism, a core part of its identity. And we’ve seen how a business collapse can then spill over to have very real implications for people who are working for the social good.

It’s overall, I think, a very positive direction. One that I find very encouraging. We are folding these questions into multiple aspects of the human experience and we’re putting resources and people to work. But it’s also become very, very clear that it’s hard, it’s complex, it’s messy, it’s interconnected, and that there are no easy answers.

CURT NICKISCH: So it does seem like that’s something almost any leader in any corporation has to think about now.

JACOB HAROLD: That’s right. And it’s getting more complicated for other reasons as well. The continuation of technological process continues to complicate the world. And we see this in the ways that, for example, people have responded to social media, the difference of the conversation around the power of social media that we saw around the Arab Spring versus what we’re seeing right now with Elon Musk’s takeover of Twitter.

That as time has passed, the implications of technology get more and more complex and nuanced, and every leader has to deal with that right now. Every leader has to deal with the very real crises of war, pandemic, climate crisis as well. And so on multiple dimensions I just think it’s gotten more complicated to do good.

The good news in my mind is that there is actually an abundance of tools, of perspectives, of ways of thinking and acting towards the social good that we can draw from. The bad news is that there still are a lot of people out there who are picking one model or one tool, and are so focused or obsessed with that one particular way of making a better world that they end up stumbling against the complexity of the world around them. Arguably you would see this with FTX and that part of the effective altruism movement that tried to distill all of social good into a linear mathematical equation. And I am a lover of math. I was a math nerd in high school. Math is one of my favorite tools.

CURT NICKISCH: Mathematical modeling is one of the tools that you spend a chapter on in your book.

JACOB HAROLD: But if you only use that, you’re going to end up putting on blinders that prevent you from understanding other dimensions of the problem. The flip side of that, you mentioned WeWork before. And WeWork arguably was a case of storytelling taking such a dominant role in the strategy of an organization that it became ungrounded from the realities of the actual work on the ground. I think you see this also in the nonprofit sector. So we have to be careful when we’re thinking about what tools we use to craft a strategy to make a better world, that we don’t get too obsessed with any one tool and instead to really embrace this abundance that we’ve got a lot of options here, a lot of ways of thinking and understanding, and we’re going to need to use them if we want to navigate the complexity of this moment.

CURT NICKISCH: So if we need a toolbox for solving these kinds of problems, what’s maybe the first go-to tool in that toolbox that you think leaders should have?

JACOB HAROLD: Well, the nine tools are storytelling, community organizing, institutions, behavioral economics, mathematical modeling, markets, design thinking, game theory, and complex system science. But before I even get to talking about those nine tools and which one you might start with, the place we really want to start is with our values. Because starting with values provides a degree of clarity and some guiderails for your work. To me, that creates a bit of a foundation that you can build upon.

CURT NICKISCH: If values are the place to start, how do you begin that conversation?

JACOB HAROLD: I would encourage people to begin where they are. Which is to say, if you think about ethics within an existing framework, whether that’s a religious framework or framework of a friend or a sports team or a favorite book or whatever it may be, to stick with that. You don’t need to come up with a new ethical framework necessarily. But what we do need to do is be clear about what our ethical framework is and to establish as best we can, what are the foundational principles of our life? I would say in my family, my wife and I have it written down in our marriage contract of love, truth, and wonder, and we’re able to go back to that, to those three concepts if we run into a challenge. And when I was at GuideStar, we laid down our organizational values as compassion, clarity, collaboration, and courage.

And we would actually return to them and we had them up in every single room. And that sort of exercise can be a kind of ethical whitewashing if you’re not careful, but it also if it’s repeated enough, can become a sort of cadence in the culture of an organization or the culture of a family. And I’ve seen it done well. And so I think people should not allow the fact that sometimes those corporate exercises and coming up with corporate values do not reflect the reality within an organization. That’s sometimes true. It doesn’t mean they can’t. And that we can begin with that sort of foundation as we’re then moving on to some of the questions about strategy, which are often, as I said before, intertwined with questions about ethics.

CURT NICKISCH: You’ve got these nine tools in the toolbox. Where’s a good place to start?

JACOB HAROLD: Let’s start with the first chapter, the first tool chapter, which is storytelling. And humanity experiences and understands the world through stories. We’ve seen that go terribly wrong, but it is also the locus of some of the most beautiful parts of the human experience. And it’s just really relevant for social change work. It’s really relevant for corporate strategy more generally, I would say.

And that the simple act of really identifying the protagonist in your story itself can be quite profound. Are you the protagonist or is your funder the protagonist? Or is your beneficiary the protagonist? Is your employee? The simple act of assigning roles. Is there an antagonist? Is there an enemy that you’re fighting against? And is that enemy an actual person or organization, or is the enemy a situation that you’re trying to defeat? What is the arc of that story? What are the challenges that you face along the way? The basic frameworks of storytelling are immensely valuable in creating a basic strategic framework for just about anything that people do.

CURT NICKISCH: What’s an example of that?

JACOB HAROLD: Well, I mean, we can think of perhaps the most classic example in modern American history would be Martin Luther King Jr.’s I have a dream speech where the protagonists are the children, arguably. There is a sense of narrative progress. There are obstacles along the way. And that allows people to imagine that future in a different way than a simple recitation of facts or a linear explanation of how we’re going to get somewhere.

CURT NICKISCH: Let’s try another tool.

JACOB HAROLD: Sure. I’ll mention complex systems science. To oversimplify, those cases when the whole is greater than the sum of its parts. And there is extraordinary work being done in physics, in biology, in computer science, in economics about what does it take for a system to show emergent properties where there is some phenomenon that couldn’t be predicted just by the behavior of the individual parts. And this can be very powerful in social change work because most of the things we care about are complex systems. A school district is a complex system. An ecosystem is a complex system. The criminal justice system is a complex system. And so for us to be able to understand those interactions, there are incredible lessons to be drawn from science that I believe can be applied at least as metaphor to the work of social change. I’ll also add that I think we need to hold a mirror up to ourselves, we in the social sector broadly defined, and think about are we a complex system?

And much of my work at GuideStar and Candid was using the metaphors of complex system science to think about the philanthropy marketplace and the ways that individual nonprofits were seeking capital, how they were relating to each other, how efficient was the transfer of resources from one entity to another, to what degree was their standardization of the processes. And that thinking about that system as an ecosystem, I thought was one, quite humanizing, but it also was quite analytically useful.

So the work of complex system science is harder to directly map to a specific strategy, but I think it can be very evocative when thinking about the complex groups of interacting individuals and organizations that make up the things that we care about in a very complex world.

CURT NICKISCH: And for an example, what can that look like on the ground?

JACOB HAROLD: Sure. I’ll use the example again of GuideStar and Candid that we really had to think intensely about the question of how do you enable the faster flow of information from one entity to another? And a lot of the way that you do that is through the standardization of how information is presented. And we’ve seen in other aspects of life how effective that can be. I like to talk about how nutrition labels on packaged food are an incredibly efficient way to convey information, in part because people have gotten used to that format and so they’re able to very quickly look at it even though they’re bringing different kinds of questions to that nutrition label. Some people just want to know, is there much vitamin C? Other people are counting calories, others want to know if they can pronounce the ingredients. Similarly, in the nonprofit sector, when a donor or a journalist or an advisor is trying to learn something about a nonprofit, they’re bringing different sorts of questions. But we argue that that actually can be addressed through the standardization of information flow.

And that can be done in a way that still celebrates the diversity of the nonprofit sector. And so this then played out in a number of ways like technical standards around protocols and taxonomies. And it allowed over time for much greater scale because you had efficiency of information flow. And this is the key thing, it allowed to a way to celebrate and reveal the diversity of the nonprofit sector. It was not pushing everyone into a single box. Instead it was saying, if we standardize how we talk about things, we’re able to see the richness much more effectively.

CURT NICKISCH: We did mention mathematical modeling earlier. How important is that tool in the toolbox for nonprofits? Where a lot of people sometimes like to say that they don’t really pay attention to the money or the numbers and they’re more mission driven, not coin operated.

JACOB HAROLD: Yeah. I really faced a struggle when I thought about how to write a chapter about mathematical modeling when I knew that there would be some readers who were skeptical. And for that reason, I started with a poem by the Nobel Prize winning poet, [inaudible 00:16:30], and it’s a rather brutal poem. It’s about the death camps during World War II in Poland. And in it she talks about basically counting dead bodies. Now that sounds dark, but I put that there in order to highlight in the starkest terms possible that there is profound dignity in counting, whether it’s something truly terrible or it’s something beautiful that a nonprofit is doing in a thriving community.

In all of those cases, counting is a way for us to give dignity to people, to ecosystems. And it also forces us to be rigorous. So of course there are equations in that chapter, and we talk about statistics and we talk about linear modeling. But what I think is in some ways the essential insight is that at its best mathematical modeling is a way to really bridge the ethical and the strategic because, and to come back to storytelling, any equation is a story and the variables are the characters. So we have an opportunity when we’re creating a mathematical model of some activity or some system to tell a story and to help that help us design a better strategy going forward.

CURT NICKISCH: Do you find it’s harder for people in nonprofits to take on these “business tools” like mathematical modeling or harder for people in businesses to try to craft ways to bring social impact into their business models?

JACOB HAROLD: It’s interesting, the great management writer, Jim Collins, wrote a bit about this question and he was once asked, why can’t nonprofits act more like businesses or be more like businesses? And he said very clearly, “It’s not that nonprofits need to be more like businesses, it’s that both nonprofits and businesses need to be disciplined.” And I think that’s a very important distinction. And I would go further than that and say that both nonprofits and businesses need to be disciplined and they need to be ethical and they need to be systematic, and they need to take multiple perspectives on complex problems. And so ultimately we see a real commonality between the business world and the nonprofit sector. And thank God for that because as we talked about earlier, there is so much commonality now in the purpose and even the business models of different organizations that are working for the social good no matter what their tax status is. And so I’m just convinced that commonality actually ultimately tells us more than the tax status differentials do.

CURT NICKISCH: Where do business leaders or owners who are trying to incorporate social impact into what they do, where do they go wrong?

JACOB HAROLD: A couple of ways. One is quite simply arrogance. The idea that success in business … And success in business is itself, often partly a product of luck. But even with that aside, the belief that success in business translates directly to success in social impact is, I would argue a kind of arrogance. That doesn’t mean there’s not a lot to contribute, but to return to the toolbox theme, you have to bring multiple approaches and multiple perspectives. And if you are simply applying a tool that worked in the context of a cutthroat marketplace to an issue like racism or climate change or addressing the coronavirus, you’re going to fail. So the first one I would say is arrogance.

And then the second one’s a little bit more subtle because that first one is really a … That’s a question of character. But the second is an intellectual challenge, which is the application of market based models to social problems, which again, is often incredibly insightful, incredibly powerful, especially when you’re looking for scale, but it just doesn’t work all the time. And you think about something simple like a ballet and that most every ballet has significant earned revenue. It is operating in a marketplace, even multiple marketplaces. But almost invariably that revenue will not add up to cover the costs of the ballet company. And so a overly simplistic application of a market based model will really leave you seeing only half the picture. And you see similar phenomenon throughout different social issues. And so that intellectual model of the marketplace has to become one of many tools instead of the only tool that you use.

CURT NICKISCH: We mentioned FTX and WeWork, and even without big scandals like that, there’s a lot of skepticism among the public for companies that claim to have social benefit. Especially if you’re an oil company or an automaker. What’s your advice for businesses that are in these really difficult spaces?

JACOB HAROLD: Well, it’s interesting. I almost would take two examples you just gave and let’s differentiate them. Because in a zero carbon future, there’s not much place for oil companies. There could be a place for automobile companies, but I think it’s pretty rare when people should be ashamed of the business they’re in. But I think it’s pretty common that they should be ashamed of how they do business. And I think that the first step is to figure out which of those two categories do you fit in? And then also I will acknowledge there are many, many businesses that are doing an incredible job. And there is skepticism, but you look at consumer behavior and people’s buying decisions are definitely impacted by their perception, at least, of the social and environmental impact of a given organization, given company. And so we are seeing that despite that skepticism, there’s real openness I think, on the part of the general public for companies to do the right thing.

And there are companies that have really reaped the rewards for that financially in addition to ethically reaping the rewards of just doing the right thing. So we can look at the examples that have really succeeded. Patagonia is a particularly fascinating one to me, but there are many, many others and they don’t have to be big. There are lots of small companies that are doing deep good for the world. One framework I would suggest is one that has been developed by the FB Herron Foundation and they just call it net contribution. And they look across different types of capital, natural capital, financial capital, social capital.

And basically, did you have a positive or negative impact in that particular type of capital? And they just forced themselves as a foundation to do that for their investments, for their grants, for their contracts, and to look at both the positive and negative consequences of their work across these different dimensions. And that simple act of being honest allows you to see pathways to do things differently. And so this is a case where I think if you start with honest reflection and you do that through some sort of a basic framework like the net contribution framework, you’re going to be making a pretty powerful first start to figuring out what the strategic and operational implications are of your current practices and how you might do them better.

CURT NICKISCH: Jacob, a lot of businesses are trying to move in this direction, but it’s a fascinating new world because there isn’t really a turnkey way to do this. We’re all learning as we go. So thanks so much for coming on the show to help people start moving in this direction in an effective way.

JACOB HAROLD: It’s been great to be here. We’ve got a long way to go, but I also think we have the tools to make real progress even in a complex world. And so ultimately, I’m hopeful.

CURT NICKISCH: That’s Jacob Harold, the co-founder of Candid. His new book is The Toolbox: Strategies for Crafting Social Impact.

And we have more episodes and more podcasts to help you manage your team, manage organizations, and manage your career. Find them at hbr.org/podcasts or search HBR in Apple Podcasts, Spotify, or wherever you listen.

This episode was produced by Mary Dooe. We get technical help from Rob Eckhardt. Our audio product manager is Ian Fox. And Hannah Bates is our audio production assistant. Thanks for listening to the HBR IdeaCast. We’ll be back with a new episode on Tuesday. I’m Curt Nickisch.