Economic Development

Is Business the New Charity?

Investing in small business and new ventures is a good thing and vital to our communities, but we must not confuse it with charity or strategic long-term social investment.

In my recent interview with Jim Koch, founder of Samuel Adams (Boston Beer Company), he reflected on the traditional philanthropic activities of his company and peers. What he saw was uninspiring. Companies were simply taking money from their pocket and putting it into the pocket of their favorite charity. There was no value creation.

After this epiphany, Koch partnered with a strategic philanthropy-consulting firm and in 2008, he launched a program called Samuel Adams Brewing the American Dream. Rather than give money to nonprofit organizations, this program makes small business loans to small food, beverage, and hospitality businesses in South Boston, and couples them with pro bono coaching, mentoring, and assistance from his team.

He hopes that by supporting small businesses instead of nonprofits, he can create jobs in the community, and real long-term economic and social value in South Boston.

Koch isn’t the only one embracing business as an alternative to nonprofits for social investment. With a similar goal of job growth and economic opportunity, Goldman Sachs launched its 10,000 Small Business campaign, which also matches cash with pro bono resources. And on a smaller scale, other financial services firms, including American Express and Capital One, are experimenting with this approach.

President Clinton has been one of the more prominent advocates for this approach. In 2002, his foundation launched the Harlem Small Business Initiative. The effort has provided more 75,000 hours of consulting and $15 million in cash to small businesses in the Harlem area.

Perhaps the most symbolic example is Venture for America. After creating this new nonprofit, founder Andrew Yang was named one of the most creative business professionals in America. A spin on Teach for America, Venture for America places the best and brightest not in underperforming schools, but in start-up businesses in struggling US cities like Detroit and New Orleans. His goal: 100,000 new jobs by 2025.

Business, rather than the culprit of our economic trouble, is now seen as a savior—a job creator. Job creation has become the single metric that we use to define success. It isn’t health, it isn’t the environment, and it isn’t social justice.

Robert Egger, founder of the PAC CForward, which champions the role of the nonprofit sector in the economy, shared in a speech recently: “Any organization that provides living wage jobs is a social enterprise.”

These examples illustrate the increasingly popular perspective that supporting business is a charitable act. Loaning money to a small business or buying equity in a new venture, when successful, creates jobs and a return for the investor. And when it fails, it is a tax write-off just like a charitable donation. 

Here's the rub. While job creation is important, there is a much greater need for employee creation. By 2016, four out of ten jobs will require advanced education or training, and many hiring managers are finding that the talent they need is hard to find.

If we want to see more Americans gainfully employed—not in jobs, but with living-wage careers—we need to invest more in the nonprofit sector and in government programs. While these investments don't create the short-term gains that business leaders have been trained to seek, they are what will matter at the end of the day. They will create the supply of talent needed for our economy and society to thrive.

Forward-looking corporate and private philanthropists are investing in our educational system to advance science, technology, engineering, and math (STEM) outcomes. STEM skills are marketable and will lead to sustained employment.

Others are recognizing that perhaps America’s last competitive advantage in the global market, creativity, may be gone after this generation, and are working to give kids access to consecutive arts education, which has been cut from the budget of nearly every school district.

These are the investments being made by the nonprofit sector—both in advocating for policy change and creating solutions in our communities and across the nation. This is much more than taking money from one pocket and putting it in another. These are the investments that will ultimately have a tremendous return, but not next month or even in a year.

The same is true of so many parts of the nonprofit sector—well beyond education. Social justice is what will maintain our democracy and ensure the diverse and engaged citizenry that will be critical to the increasingly global economy. Protecting and restoring the environment and a stronger health care system creates a healthier and more productive population for decades to come.

Investing in small business and new ventures is a good thing and vital to our communities, but we must not confuse it with charity or strategic long-term social investment. Politicians need to talk about job creation to get elected, but we need our business and philanthropic leaders to have a longer view to ensure we aren't still focused just on job creation in 10 years.

Read more stories by Aaron Hurst.

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  • Thanks Aaron.  For what it’s worth, we think you need an all-of-the-above approach in terms of long-term orientation toward systemic issues.  We love education, environment, health, and everything else!  Economic opportunity’s only a piece of the puzzle (albeit the piece that we’re focused on at Venture for America).  Thanks for including us in the discussion!

  • Tracy Sparks's avatar

    BY Tracy Sparks

    ON June 28, 2012 12:22 PM

    For what’s it is worth,  in todays environment, the model of pro bono invades the economic opportunities of the educated and unemployed.  The 10 year stretch of the proliferation of volunteer, internship and fellowship positions in Non and For Profit enterprises, disrupts pay for service and the natural monetary agreements between employees and employers.

    A business model or Non Profit model that is constructed in such away that exploits free labor is nothing more than a pyramid scheme, no matter if it is in frontier, developing or developed economies.  - Especially when the volunteer, fellow or intern is a multi degreed individual, who needs to pay down their student loan debt,  or when a mid career professionals need to secure personal sustainable wealth. 

    A global prospective:
    Just look at developing countries, where workers are wiling to come to work and not get paid for months on end, just to keep a spot in case the employer decides to pay in the future.  Local wages go down, and so does economic status. 

    Also in developing countries non profits take on normal business activity as economies begin to rise and it is at the expense of the early entrepreneur.  It is common that non profits gets govt subsidies and grants to do the same business as the emerging entrepreneur.  That cross over can be a sustained problem and squelches bottom up activity.

    This whole Volunteer, internship, consultant free cause seems to lead to enable poor business models and poor run non profits that need knowledge leverage and can’t pitch their cause to funders.    How socially responsible is this?  It seem to me that being organizationally responsible might be where to start.

  • BY Heidi Pickman

    ON June 28, 2012 01:15 PM

    Interesting… the US Micro-business field does provide long-term skill development as well as invest in very small businesses with its entrepreneurial training programs (think mini-MBA) and microloans (under $50,000)

  • BY Anne Sherman

    ON June 28, 2012 01:57 PM

    Very interesting.  I’d also like to throw into the mix the the concept of worker cooperatives.  I chair the governing body of the Center for Family Life in Sunset Park (Brooklyn), a program of SCO Family of Services.  The Center, which is a social work organization that is very much aligned with the settlement house model, has been sponsoring worker co-ops for several years, with tremendous success, bringing literally hundreds of thousands of dollars into the hands of workers and into the community.  The co-ops, were started in response to the frustrations that Center clients and staff experienced with typical job readiness and job placement programs—they just didn’t work that well in a community like Sunset Park, where the majority of residents have limited English language skills and education.  The co-ops offer an interesting hybrid: provide people a way to do the work they would do anyway (e.g., housecleaning, child care, elder companion care) in a safe environment at a fair wage, while at the same time provide social support and training in areas such as interview skills, resume development, marketing, etc.  In my view, the coops seem to offer a way to balance the tension Hurst describes:  job creation and social justice.

  • BY Aaron Hurst, Taproot Foundation

    ON June 28, 2012 02:18 PM

    All of the above for sure - including the great comment by Anne about co-ops (they do blend social justice and jobs). 

    The piece that scares me is if we see businesses as charities.  It represents a misunderstanding of the critical role of nonprofits in society.

    It also implies free market forces and business solve social and economic problems but then turns 180 degrees to say free market needs to be subsidized (donations and labor) to work.  Is a weird distortion.

  • BY Nancy Jost

    ON June 29, 2012 11:17 AM

    If we are looking at education as the answer it must start in early childhood, waiting until the brain is almost fully developed is starting “in the middle of the production line.”  Check out the economic development work by economist, James J. Heckman.

  • BY Paul Penley

    ON June 29, 2012 02:15 PM

    It must be a both-and approach.  Certain folks are going to fall behind developmentally, be treated inappropriately or lack the ability to care for themselves in crises.  Businesses can’t make money by helping people in many of these situations.  So cooperative compassionate action is necessary by the private and public sector.  However, there does need to be available jobs or a vibrant entrepreneurial sector ready to empower those who are skilled and ready to work.  So job creation and company creation should be fueled.

    One of the most difficult elements of making “employees” as you put it is assisting people with the skills to be valuable on the job to employers.  Job placement charities often put impoverished people into low-paying jobs that have no path for promotion.  Many employers who take low-skilled, hard-to-hire folks value them for the low-pay they require.  So we do need to find a way to incentivize companies to provide education and training to employees for the purpose of promotion.  Who wants to offer reduced business loans to companies that rank high on providing education and new certifications to employees?

  • BY Barbara Saunders

    ON September 20, 2012 01:29 PM

    Many small, community-based business can’t pay living wage jobs. (E.g., as a twenty-something graduate student, I worked for a wonderful independent retail store. I earned more than minimum wage for part-time work—but no benefits. For small businesses such as that to be true “job creators” requires, in the least, accessible, affordable health care that is not connected to employment.

  • Small business has definitely become like a charity. Every opportunity help them be more informed before the application process and how others see small business is valuable. There are some other low cost tools to educate small business owner at Corporate Fast Track.  Corporate Fast Track

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