Thoughts On Creativity

Creativity is fire - Breathed from the nostrils of a horse-dragon, birthed at a camp fire, or barely living on the end of a cigarette. The essence of creativity is found in isolated moments that inspire, transform, or force you to believe, think, or act differently.

Conformity is such a dirty word, but functioning within society is a form of conformity.  Dramatic events and intense emotions often force an individual to deviate from conforming. Inspiration can come from a variety of sources, but I am most influenced and inspired by pain. I have always defined happiness as a neutral emotion. Perhaps, I am most creative when my mind is attacked by emotions of grief, sorrow, and ecstasy. I have attempted to find inspiration behind a simple smile, but it has never intrigued me.

Creativity is important because the core of it is reliant on the word create. To create is to do; it is the process of bringing something into existence. When you do nothing, you die.

Clouded by ambiguous legal structures and funding models, the world of social entrepreneurship floats in limbo between for-profit businesses and socially conscious nonprofit organizations. The conflict created by this predicament remains unresolved and burdensome.

In 2007, Bill Gates delivered a Harvard University commencement speech challenging graduates to devise “a more creative capitalism [to] stretch the reach of market forces so that more people can make a profit, or at least make a living serving people who are suffering from the worst inequities.” Opportunities exist to solve the complicated relationship between business and social endeavors, yet some proposed solutions provide a better outcome than others.

Ambiguous Frameworks

Vermont was the first state to enact legislation to bridge business and social impact investing. Michigan followed suit in 2009 by building legal framework for social enterprises – becoming one of nine states with L3C legislation. Low-profit limited liability companies (L3Cs) are an appealing business entity because it offers legal and tax flexibility traditionally found in the LLC structures. In addition, it allows the entity to pursue foundation investment funds.

Unfortunately, the model’s framework is ambiguous because hybrid business entities with no intent to have a social impact can be created.

L3C Pros	L3C Cons
Legal and tax flexibility similar to LLCs	Tax classification as an LLC versus a 501(c)3
Ability to have revenue generated cash flow	Annual revenue cap
Ability to pursue foundation investment funds	Conflicting interests between social good and business objectives

Lack of Scalability

The Stanford Social Innovation Review (SSIR) chastises two additional hybrid funding models based on lack of scalability. The first model involves a nonprofit receiving support by a separate income-generating venture that has a separate and distinct core mission from the nonprofit. The second model is based on a B2B or consumer-direct, fee-for-service model that does not rely heavily on fundraising or government support. Both models create a hybrid cash flow scenario, but it is difficult to grow. In a 30 year SSIR study on 144 nonprofits that grew to $50 million or more per year, none of the organizations represented functioned using these hybrid models thus confirming SSIR’s criticism.

Successful Hybrids

A third hybrid model, proposed by Inc. magazine, merges a nonprofit and a for-profit business with a unified mission. For example, subsidiary Mozilla Corporation “donated” $200,000 to its parent company, Mozilla Foundation, in 2011. As Mozilla Corporation grows, Mozilla Foundation also grows which provides a sustainable scaling relationship.

Issie Lapwosky, contributor for Inc. magazine, offers three factors to defend the importance of scalability for this effective hybrid model.

1.       The nonprofit’s unrelated business income threatens its nonprofit status

2.       The for-profit needs help managing its philanthropy

3.       Each entity needs something offered by the other

This symbiotic relationship expressed by a hybrid, nonprofit, revenue-generating model paves new paths for the modern social venture.

Combining the black and white for-profit and nonprofit worlds rely on the ability to develop a new language for social entrepreneurs who exist in the grey area. The conflict of customers versus beneficiaries continues to disrupt communication, blur the effectiveness of structural frameworks, and provide scalable solutions that combine the two worlds.