Rupert Murdoch, the Arab Spring and the Social Economy

Headlines in the UK have been dominated by one item these past few weeks—the “phone hacking” and related scandals which led to the closure the longstanding “News of the World” tabloid newspaper and its impact on the wider media empire run by Rupert Murdoch.  UK Politicians, hitherto too frightened to challenge the power of this media mogul are rising up to call Murdoch and his lieutenants to account and the concentration of voices in the media is being seriously questioned for the first time in years.  It is not too dramatic to suggest that democratic forces in Britain are re-awakening from their slumber.

How similar this feels to the Arab Spring, where the forces of democracy rose up against those who ruled to demand that the national rather than the personal interest is paramount.  One by one, dictators are being toppled and new political and economic models are being developed.

Interestingly, abusive practices in the UK and across the Arab world were tolerated for years, as many were victimised by the powerful.  But the dominoes fell when two individuals, who embodied the very spirit of the innocent victim, brought us to our senses.  In Tunisia, it was the self-immolation of Mohamed Bouazizi, the desperate fruit-seller, whose act brought down the Tunisian regime and others which followed.   In the UK it was only when we learned that the News of the World hacked into the mobile phone of Milly Dowler, a kidnapped young girl, that our outrage gave us all the strength to challenge the seemingly unassailable Murdoch empire.

Our economy has tolerated such abuse for too long—where the societal interest is subverted in the interest of personal privilege.  Consider the scene in Italy amid widespread allegations of abuse by of another media mogul, tycoon and Prime Minister Silvio Berlusconi, of having legislated in his financial interest rather than the national interest.

These stories are only the most flagrant violations of social interest in the name of the personal—there are hundreds of others.  They may reflect the most grotesque examples of how the greed of the few has been satisfied at the expense of the many, but they are very much the “spirit of the age”—the age where profit maximisation and personal private interest came to be deified.

The Social Economy (which is how I describe the world where social businesses, enterprises and investment become the norm) is a very different model.  Although far from perfect, and many in it actors are themselves flawed (as are we all), as a model it demands that BOTH social as well as financial interests are considered.  Profits may be optimised, but not maximised.  The risks of abuse hopefully thereby lessened.

  • Is such a Social Economy a mere pipe dream or an emergent reality?
  • What can be done within government to accelerate such a change?
  • Blah
  • Blah

We live in hope!

First published in The Social Edge in July 2011

3D Investing: The shape of things to come in institutional investment

Recently, we at ClearlySo had the privilege to conduct and publish research on behalf of The City of London Corporation, City Bridge Trust and the Big Lottery Fund on “Investor Perspectives on Social Enterprise Financing”.   (The link to the full report is accessible from our homepage).  Written by Katie Hill, this 178 page report provides a comprehensive insight into City thinking on social enterprise investment.  Katie interviewed about 60 professionals as part of the work and concluded:

  • There is no silver bullet, but a number of small developments, when taken together, will improve the level of social investment.
  • There is no “City” as such; the term describes a broad array of financial institutions, pension fund managers, private equity investors, etc. Each have different needs, objectives and approaches and need to be separately understood rather than amalgamated.
  • The opportunity provided by the Big Society Bank (BSB) and the restructuring of the state is a “once-in-a-lifetime” chance to accelerate social investment and must be seized.

The launch took place in a beautiful venue, The Livery Hall, which added further gravitas to the proceedings which were headlined by the Lord Mayor.  Perhaps, when presented with such awe-inspiring surroundings, one can become prone to grand statements, but I felt as if the meeting could herald the start of a new era of institutional investing and was sufficiently moved to call it the start of “3D Investing”.  In my presentation (available here) I noted that, whereas investing had been a two dimensional exercise since approximately 1980, as investors sought to maximise risk adjusted rates of return, we are now entering a world in which a third dimension has entered the calculation: that of social impact.

Before discarding this notion as fanciful and accusing me of being carried away by the moment, I should point out that there are many examples of such trade-offs being undertaken.  How else could the Ethical Property Company, a firm which makes it very plain it will never try to maximise financial return, have been able to raise roughly £20 million over the last decade?  Although most of its investors were individuals, some were from the City and were present in the Livery Hall at the launch.

This is also not the first time a new dimension has been added to the investment equation.  When I entered the financial world in 1980, as an analyst with PaineWebber, investing was one dimensional.  Portfolio managers spoke of “average total return” over the life of an asset or portfolio.  The tumultuous 1970s meant that investors became more aware of their preferences for lower volatility.  Hence the birth of beta and “2D Investing”.

In response to the socially tumultuous period we are now in, is it so surprising that investors are becoming increasingly aware of their preference for positive social impact (as well as their aversion to negative impacts)?  Thus dawns the era of 3D Investing—anyone have a suitable Greek (or other) letter?