The Impact Economy

New White House Social Innovation Director Jonathan Greenblatt told people attending this year's annual PopTech conference in Maine today that the White House is preparing for the rise of an "impact economy" - a new approach to social problem-solving that involves impact investing and new hybrids of business and philanthropy to scale good.

Greenblatt, a co-founder of Ethos Water and former CEO of GOOD who began his new job last month, said his office is "looking to create a new infrastructure inside government" to support social innovation "that can involve technology but also seeks new thinking that will identify, then fund, solutions that are already working." Greenblatt said this effort "isn't angel capital for the social space. That is what philanthropy does. We are looking for solutions that already work, and to fund them commensurate to their impact."

Since its founding two years ago, Greenblatt said, the Office of Social Innovation and Civic Participation has expanded the Americorps program and is using competitions and prizes to help identify new, entrepreneurial solutions to social problems. It also has created the $200 million Social Innovation Fund to scale what works through dozens of community organizations already on the ground. Earlier this year, the Office also added a line item to the President's budget to create Social Impact Bonds, a new way to pay for public services. [The plan would use private, profit-motivated investment money to fund public services up front. The government would only pay if the services deliver as promised, and only out of government cost-savings. The idea: to avoid the waste of tax dollars on failed programs.]

But more is needed amid great challenges, Greenblatt said. "We remain in a very difficult set of economic and social circumstances, with a housing problem that has bedeviled the experts" and a national unemployment rate of 9.1 percent that gets worse in communities of color. "We also have companies that often don't abide by the letter or the spirit of the law" and "a political system where some of the actors remain committed not necessarily to governance, but to opposition in a way that I just don't think is constructive." The result, he said, is that the nonprofit sector is now often taking "the brunt of the blow." At a time when government has less resources, he said, more is being asked of nonprofit organizations. "We need them to deliver more in a moment when they actually have less," Greenblatt said.

A new and expanded definition of the social sector will help, he said. The nonprofit sector, he said, "isn't just a collection of soup kitchens" but a sector that "helps to cohere the whole population" with over $300 billion in aggregate wages. It represents 5 percent of the country's GDP and 11 percent of its work force. "Nonprofits are like small businesses," he added, with nearly all of them operating on budgets of $1 million or less. But there is something "even more profound afoot," Greenblatt added. "Business can be a force for change, too." When we look at businesses that have an explicit social dimension to their mission, he added, "the opportunity for the social sector is even larger. It is even more important," Greenblatt said. New start-up social enterprises, coupled with many large-scale corporations that are helping to create new models of shared value, working to service shareholders "but also thinking intelligently and in integrated ways about supporting their stakeholders" also are important players in the social sector. "Ensuring the health and vitality of the entire sector is critical," Greenblatt added, "and essential to our national health."

Greenblatt said the White House is preparing for two trends in social innovation -- first, the advent of an impact economy, which refers to changes in today's business community such as the emergence of impact-investing. "These are conventional capitalists who are identifying opportunities to invest in the social sector, to drive economic return and social good," Greenblatt said. He said the Monitor Institute has described this as a category that could be worth more than $100 billion by the end of the decade.

Second, Greenblatt said, he and the White House are also very focused on the idea of a civic engagement continuum. "The idea that you need to don a red jacket to serve seems important but we think there's a bigger opportunity at hand that is enabled by technology," Greenblatt said. He cited citizen advocacy efforts like Data Without Borders and Code for America as being important initiatives that "marry technology talent to need." And he cited Meetup and the crowdfunding platform, Kickstarter, as being "extraordinary" new ways ordinary people are convening to work for social change. "This is not 800 million people on Facebook who may or may never connect," Greenblatt said. "We at the White House are eager to help these phenomenon grow because we believe they represent the gears of a healthy society -- the foundation of a social sector that is vibrant."

Greenblatt concluded his remarks to the PopTech crowd by asking conferees for their help to "bring more financial capital into the field to scale the social sector" and to "boost the number of human capitalists" working in it. Said Greenblatt: "This work matters now more than ever."

-- Marcia Stepanek

[Photo of Jonathan Greenblatt addressing 2011 PopTech conference by Kris Krug for PopTech]