In this issue of the Stanford Social Innovation Review we bring you an in-depth report “Too Good to Fail”—on what had been one of America’s oldest and most important social enterprises, ShoreBank Corp., and the events that led to its recent collapse. Long before anyone coined terms like shared value, blended value, or double bottom line, the people at ShoreBank were busy building a for-profit company that doggedly pursued a social mission.

Back in 1973 a group of Chicago social entrepreneurs created a bank holding company, believing they could use the bank’s capital to improve the lives of disenfranchised people living on the city’s South Side. Over the next 37 years the holding company grew, and so did the number of for-profit and nonprofit entities that it created. ShoreBank had an immense impact, channeling billions of dollars to poor communities in Chicago, Detroit, Cleveland, and other aging industrial cities, and improving the lives of tens of thousands of people.

Unfortunately, it all came to an end last year when ShoreBank was forced by the government to shut down. Although many of the entities it created live on in other forms, the power and symbolism of that single institution is gone.

The ShoreBank saga provides important lessons for people who believe that for-profit institutions can be used for social change. The first lesson is that managers running a for-profit business—even one with laudable social goals—need to pay close attention to the profit side of the equation. ShoreBank had the laudable goal of lending to homeowners and small-business people living in inner cities. But those people and businesses were also among the most economically vulnerable, and when the economy collapsed, so did many of those loans. To protect itself, ShoreBank needed to do a better job of diversifying its lending so that it was not so exposed to a bad economy.

But ShoreBank was not the only bank that made poor lending decisions in the last decade. Which brings us to the second lesson, that people engaged in social change—even those building socially responsible businesses—need to be involved in politics and advocacy. The federal government used hundreds of billions of dollars to rescue many of the same banks that caused the financial meltdown, but it refused to use any funds to rescue ShoreBank.

The reason the government didn’t step in is that right-wing advocates put pressure on the federal government not to do so. It’s difficult to know whether ShoreBank could have secured federal funding by building a broader base of political support for its work, but it is certain that without that support it didn’t stand a chance.

On a final note, I want to point out that this issue of SSIR features our first special supplement—“Innovating for More Affordable Health Care”—a 24-page insert brought to you by the California HealthCare Foundation. The supplement has a terrific selection of articles written by some of the leading investors, academics, and thinkers in health care. I encourage you to read it.

imageEric Nee is the managing editor of Stanford Social Innovation Review, published by the Stanford Center on Philanthropy and Civil Society. He is also co-host of the Social Innovation Conversations podcast channel, and serves as a judge for the Social Venture Network’s Innovation Awards.

Read more stories by Eric Nee.