Designing a Theory of Change with Neil Malhotra

June 14, 2022


min listen

Episode Summary

What are distinct differences between a social venture and a traditional for-profit business? This week on the podcast, we're joined by Neil Malhotra to discuss what is a theory of change, and how it is an essential component to communicating your mission and measuring its effectiveness.

Neil Malhotra is a professor at the Stanford Graduate School of Business, where he directs The Center for Social Innovation. He is the author of the recently released Frontiers in Social Innovation: The Essential Handbook for Creating, Deploying, and Sustaining Creative Solutions to Systemic Problems. 

This book is a compilation of chapters from some of the smartest thinkers in social innovation. It serves as a handbook for anyone who is looking to understand the key components of social innovation and what are the themes that someone should be thinking about and considering, and studying as it comes to engaging in business in a way that makes an impact on people and the planet.

Show Notes

What are distinct differences between a social venture and a traditional for-profit business? This week on the podcast, we're joined by Neil Malhotra to discuss what is a theory of change, and how it is an essential component to communicating your mission and measuring its effectiveness.

Neil Malhotra is a professor at the Stanford Graduate School of Business, where he directs The Center for Social Innovation. He is the author of the recently released Frontiers in Social Innovation: The Essential Handbook for Creating, Deploying, and Sustaining Creative Solutions to Systemic Problems. 

This book is a compilation of chapters from some of the smartest thinkers in social innovation. It serves as a handbook for anyone who is looking to understand the key components of social innovation and what are the themes that someone should be thinking about and considering, and studying as it comes to engaging in business in a way that makes an impact on people and the planet.

Neil Malhotra is the Edith M. Cornell Professor at the Stanford Graduate School of Business, where he directs the Center for Social Innovation. He is the author of "Leading with Values" (Cambridge University Press) and the editor of "Frontiers in Social Innovation" (Harvard Business Review Press). He has authored over 75 academic articles on topics such as the relationship between business and society.

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Music by Darren King on Soundstripe

Full Transcript

[00:00:00] Sean Pritzkau: All right hey there and welcome to episode 28 of We Can Do This. I am excited for today's episode with Neil Malhotra. Neil is a professor at the Stanford Graduate School of Business, where he directs The Center for Social Innovation. He is an author, and he's also the editor of the recently released Frontiers in Social Innovation: The Essential Handbook for Creating, Deploying, and Sustaining Creative Solutions to Systemic Problems. 

[00:00:33] Sean Pritzkau: This book is a compilation of chapters from some of the smartest thinkers in social innovation, and they cover topics such as high-performance leadership as a driver of social change design for extreme affordability, scaling, social innovation, corporate decarbonisation, social innovation and healthcare in the post pandemic, and donor advised funds and impact investing. I've personally worked to make my way through this book. And it's really is a handbook for anyone who is looking to understand the key components of social innovation and what are the themes that someone should be thinking about and considering, and really studying as it comes to engaging in business in a way that makes an impact on people and the planet. 

[00:01:26] Sean Pritzkau: I had such a good time talking with Neil. We discuss some key themes and the book, and we make our way around the few different topics that are brought up. And I really think you're going to enjoy this conversation. Like I said, it really is a primer for anyone who's interested in. Social change and innovation. But as Neil talks about this book is really intended to be for people who are new to the topic, but also people who are veterans. It compiles a really wide spectrum here and invites everyone around the table who wants to make an impact on, on the world and use business as a vehicle for change.

[00:02:07] Sean Pritzkau: I'm excited for this episode, let's jump in to my conversation with Neil Malhotra.

[00:02:27] Sean Pritzkau: All right. Hey, welcome to the podcast today. I'm here with Neil Malhotra. Neil is the Edith M Cornell professor at the Stanford Graduate School of Business, where he directs The Center for Social Innovation. He's the author of leading with values and the editor of Frontiers in Social Innovation. He's authored over 75 academic articles on topics.

[00:02:49] Sean Pritzkau: The relationship between business and society. And I'm really excited to have Neil as our guest on the podcast today. So Neil, welcome to the podcast. 

[00:02:57] Neil Malhotra: Thanks for having me and happy to speak with your terrific audience. Yeah, I 

[00:03:01] Sean Pritzkau: know. Everyone's going to really enjoy our conversation today because we are talking about this new release that you have released with Harvard Business Review.

[00:03:10] Sean Pritzkau: And I've been able to make my way through as much as I could. Recently of this book, I love specifically the format of this book, where you can kind of choose your own adventure, if you will, and go through chapters that are really relevant to you. And you really designed this as a handbook for social entrepreneurs, whether new to the field or veterans.

[00:03:29] Sean Pritzkau: So I'm excited to talk about this today. Do you want to briefly just introduce yourself? And I would love to hear what was the impetus behind. Sure. 

[00:03:41] Neil Malhotra: So my name is Neil Malhotra. I'm a professor at Stanford business school. I direct The Center for Social Innovation. So The Center for Social Innovation provides experiences, including social entrepreneurship, impact investing to kind of train the next generation of leaders in the field.

[00:03:57] Neil Malhotra: And we also engage in thought leadership. So. Might be leaders of the Stanford social innovation review, which used to be published through The Center for Social Innovation. So we get requests basically every day from social entrepreneurs saying, can you help us? I have this great idea for adventure. Can you give us advice on how to scale it up?

[00:04:18] Neil Malhotra: And. Yeah. We'd love to have the scale to respond to all of these requests, but we don't on kind of individual basis. So as a result, I thought, how can we get the ideas we teach here at Stanford, out into the world? So they're not cloistered in the ivory tower so that anybody, no matter whether you grew up growing up in Mumbai or Chicago can have access to these ideas.

[00:04:41] Neil Malhotra: And I said, you have the book to basically kind of democratize and open up these ideas. So they're not the domain of a privileged few, but for every. 

[00:04:49] Sean Pritzkau: That's amazing from many levels personally, I have a background in a completely different field, undergraduate messages. And really pivoted my own way towards really having a passion for social innovation and entrepreneurship.

[00:05:01] Sean Pritzkau: And I know there's many people out there like me who don't have a traditional background here, but feel the whole towards integrating purpose with business, whether that be a particular area that they're passionate about or really honing in on the climate right now, because there's some urgency here and really want to pivot their career to this.

[00:05:21] Sean Pritzkau: And it's important that these resources are accessible. So we have a lot of people here who are new to the idea of integrating impact in business. They may have come from a career and they've pivoted their way here. Talk to us about why this book might be an appropriate read right now, specifically on the outset of their journey in entrepreneurship or specifically.

[00:05:45] Neil Malhotra: Sure. I mean, I think kind of one thing the book is very valuable for is it introduced people to not only the substance of frameworks, but the language that people in this industry use. And that's actually really important as you're recruiting talent, as you're trying to get capital from unique sources of capital, like whether it's plans for pace or impact investors.

[00:06:04] Neil Malhotra: You kind of have to be able to talk the talk in addition to walking the walk. And so a lot of things, the book does is try to reorient how social entrepreneurship is different from traditional for-profit entrepreneurship. And there's a reason why, for example, that traditional sand hill road venture capital does not invest a lot in social entrepreneurship because they just have a very different business model.

[00:06:28] Neil Malhotra: They're looking for a unicorn. Right. Companies that are going to be worth a billion dollars or more. And to do that, you know, you can't say, oh, we're targeted on an underprivileged population. You know, that's not like having a solution for a group like that is not going to create a billion dollar company.

[00:06:45] Neil Malhotra: It might create a multimillion dollar company, but that's not the business traditional venture capital is in because they need to make 50 bets and only one or two of those bets. So as a result, there's been kind of new sources of capital that have been merged. And they're looking for sort of different things beyond product market fit or lean startup, these kinds of traditional ways of starting a business.

[00:07:08] Neil Malhotra: So for example, the book talks about theory of change and impact models. So that's like a very common framework where instead of thinking about. Building as much growth and customer touch points as possible instead focuses on how is your business going to socially impact society and what is the actual step-by-step process whereby the activities of your business lead to different outputs and that leads to different social outcomes.

[00:07:35] Neil Malhotra: And then how you actually have measurement strategies to look at each piece of that funnel of the theory of change. So that's just an example where I think kind of people who are in the traditional businesses. They hadn't been used sort of a reorienting of how people in the social purpose enterprise 

[00:07:49] Sean Pritzkau: world thing.

[00:07:50] Sean Pritzkau: That's really great. And it touched on something I'd love to begin talking about. First is really this idea of a theory of a teams. A lot of people, I think that are probably new to the space are starting company that they want to be rooted in an ethic or particularly working towards a social cost.

[00:08:06] Sean Pritzkau: Probably stemmed from connections right there. We're making a connection between potentially a group that can be served by their company or their intervention. Right. And they're making a connection between that group and potentially a customer, right. Or someone who could have a problem that needs to be solved.

[00:08:23] Sean Pritzkau: And those can connect in a, in a meaningful or unique way. And so people might have made a connection between these two things, but they haven't gone as far as to develop a theory of change. Like you talk about. They might have an idea. Could you talk to us briefly about, you know, how do you really take that step from having an idea or the beginning of a business model and really developing a theory of change that you could communicate to your audience or potential.

[00:08:50] Neil Malhotra: Yeah. And I would say, I mean, these look, these investors are looking for, they're asking, what is your theory of change? Can we see it? Have you thought through it? So I kind of will explain it through an example. So ed tech, I think is a good example that communicates a lot of this and it shows kind of what the difference between the for-profit and social enterprise worlds are like.

[00:09:09] Neil Malhotra: And it's really distinguishing clearly between what are your activities? What are your inputs? What are your outputs and what are your outcomes? And those are all very distinct things and they get confused a lot. So for example, you could say, are you having a social impact? And you say, oh, well we have like a hundred thousand kids using our product.

[00:09:28] Neil Malhotra: Well, that's not social impact just because you have a hundred thousand kids using your product, that product can be doing them more harm than. So, if you, for example, compare a standard video game company to an ed tech company, all the video game company has to ask is, do we have users? Are we making money?

[00:09:45] Neil Malhotra: Are people addicted to the. Right. Whereas the social impact and tech company has to ask, okay, like not only are kids engaged with this product or they're actually increasing their learning outcomes, how do we measure those? And then ultimately, is it translating into better quality of life? Are they being able to participate the economy to a higher level?

[00:10:05] Neil Malhotra: So that's just way more complicated, but if that's really what your. You have to break all those pieces out. The other differences, I think in the for-profit world, there's exceptions to this, but the customer, the user are generally the same person. And so I think that simplifies things a lot more, but in the social enterprise world, the customer is oftentimes very different than the user to an ed tech.

[00:10:27] Neil Malhotra: You're basically selling to school day. So they're the customers, but the users are the students, right. They're not paying for the product. And so that creates like an important tension, the period of change, which is the customers may want one thing, which is maybe for their test scores to increase, but you may want something else, which is for the actual educational enjoyment and commitment for the students to increase, but you have to sell to the customers, not to the users.

[00:10:55] Neil Malhotra: So how do you balance those things? How you make it consistent with your mission? These are all the things that I think the theory of change helps a social entrepreneur through that traditional entrepreneurs just have the luxury of not thinking about sometimes. 

[00:11:08] Sean Pritzkau: Yeah, there's a layer of complexity that just makes this specifically this industry or impactful work very difficult.

[00:11:15] Sean Pritzkau: And when I was reading the book, I remember the image that came to mind through one of the chapters was. The difference between maybe flying a plane where you have a certain amount of dials levers in front of you, and then maybe going in the space with more dials and more levers. And right here, you're not just talking about what is our profit, but you're saying, Hey, what are the.

[00:11:34] Sean Pritzkau: They're getting and the outcomes, and there's a layer of complexity and a founder or someone in this space will need to be a storyteller in a lot of ways. And what ways do you see that really being involved like one being able to measure and really communicate this info, but actually also be able to tell the story to investors and your audience, who you want to know is making a good and conscious decision when they purchase it.

[00:12:00] Neil Malhotra: Yeah. I mean, I think a lot of I models a big believer. The data kind of tells the best story. And I think kind of when traditional companies are able to use data to investors to tell their story that are pretty easy job, because then they can kind of use lean startup. Right. They do use things like randomized controlled trials to try to increase engagement.

[00:12:20] Neil Malhotra: But at the end of the day, a lot of what for-profit businesses. Iterating quickly creating minimal viable products, just trying to get traction and then kind of developing growth. Right? And that's you, you can see if you're growing, that means you're doing something right. And if you're not, you need to pivot and change and try to fit where the customer is.

[00:12:39] Neil Malhotra: So social impact is very different because as I explained earlier, you know, just because you have a lot of growth, it doesn't necessarily mean you're making social impact or often you don't grow very fast, but you are making a big impact. Part of telling that story is actually collecting the data. I mean, sometimes that can be randomized controlled trials, but as the book talks about, there's more like lean ways of, of getting that data to, to say, okay, like it's not enough to tell people, oh, our users increase 10% year on year or something like that.

[00:13:10] Neil Malhotra: But here's the impact metrics that we said we believe in, and this is how they're changing as well. 

[00:13:18] Sean Pritzkau: Pretty tough to stay focused on those metrics. I recall in the book, a few instances where the contributors, which if we didn't mention that there's many contributors, excellent contributors in, in this text.

[00:13:30] Sean Pritzkau: And I believe it was the chapter on leadership where they were saying how important it is to make decisions on those key metrics that you begin with at the outset. Being too tempted, potentially by funding or by other opportunities to stray too far away from those key metrics, because that's really where, how you're determining success for your initiatives or interventions or solutions.

[00:13:53] Sean Pritzkau: The other thing that I really kind of wanted to talk about with you. You talk about in the book, sort of some of the key attributes of kind of like the modern social entrepreneur, probably a millennial or gen Z, maybe that's kind of stepping in and really caring about purpose. And really the three things you talked about is empathy, social justice, and technology, and being a millennial myself.

[00:14:16] Sean Pritzkau: It's very fun to kind of see yourself in the text and see how these three things have kind of led you into maybe the career path that you've walked into or really inspire what you're working. I'm curious, what do you think it is about these three things that are important for social entrepreneurs and maybe why that is something that's really coming to the forefront of our, our contests as new startups are walking into this space and prioritizing purpose.

[00:14:41] Neil Malhotra: Yeah. So just to compare it, that was a, a tap offered by one of the contributors, not me. So I don't want to take credit for those. But, yeah, but just to kind of, I, I, that was one of the first shoppers in the book and it's a great one. So I think that that chapter just kind of tries to lay out like kind of these trends and the support, and also for people at advancement to understand kind of younger generation.

[00:15:03] Neil Malhotra: So the chapter doesn't really talk about like how, like, why there's this generational difference, but I can actually kind of speculate on that if you're interested, you know, I think kind of, if you think about the prior generation who grew up a lot in the seventies and eighties, that was going to characterize by kind of stagnating American economy.

[00:15:22] Neil Malhotra: So a lot of what the ethos of that generation was is that you have to kind of get back to core principles, like shareholder value, profit maximization, set America. And then, you know, American kind of gotten competitive in the eighties and nineties, but then we kind of went in the opposite direction where we're just like this late stage hyper capitalism, that doesn't focus on stakeholders.

[00:15:45] Neil Malhotra: And so this next generation, they were not forged in the seventies and eighties with stagflation, et cetera. Therefore in like 2008, which is the financial crisis. A lot of that stemming from corporate greed. And I think kind of the opportunities of just kind of a lot of the low hanging fruit of the post-World war two economy is kind of over.

[00:16:09] Neil Malhotra: And so I think kind of what motivates people is not like, okay, we're going to amass as much money as possible because all the low hanging fruit to do that is kind of gone. So it's like, okay, well, what is the purpose of being in business? Well, it's to actually help people use the grow, like leveraging organizations to do social good.

[00:16:27] Neil Malhotra: And I think it's increasingly in this stage of capitalism, it's you have to think a little bit harder. It's not just the invisible hand, which is, oh, well, if we just look at competitors and maximize short-term shareholder value, then everyone will do better. I think this newer generation is fortunate era where that's not like an obvious connection anymore.

[00:16:45] Sean Pritzkau: Hmm. That's a really good insight. The one in there that I found personally intriguing is this level of empathy. That's. And I know in the, in the book, a reoccurring theme is human centered design. And actually in our, our most recent episodes, we had Y labs on. And why labs talked about human centered design.

[00:17:02] Sean Pritzkau: Do you want to share with us kind of, why is that such a critical piece in developing this kind of new era of social innovation and really being keenly aware of the needs of all states? 

[00:17:14] Neil Malhotra: Sure. So I'll give a little bit background for people who are kind of new to this a little bit, but there's themes in the book that recur the tide, each other.

[00:17:20] Neil Malhotra: And one of them is human centered design. Human centered design is very popular in the for-profit space too, but I think it's especially important in the social space. And so we have a chapter that's kind of written by the instructor of this class, which is called design for extreme affordability. It's like a very famous class.

[00:17:39] Neil Malhotra: I mean many people come to the university just to take that class. And a lot of people don't know about the D school, the design school it's tied to companies like IDEO is just very, very influential in promulgating. This idea of design thinking. And, you know, I think kind of the basic ideas, if you just sit in like laboratory.

[00:18:00] Neil Malhotra: And from above paternalistically, say, this is kind of the product we need to solve the problem. Many of those products fail and they fail. Not because they're bad products, but because you don't understand human behavior. To understand kind of how regular people would respond to this. And paternalism is a problem in the U S don't get me wrong, but I think it's especially a problem with Western people.

[00:18:22] Neil Malhotra: Try to go into developing economies and try to say, okay, this is the right solution for your action. As opposed to human centered design. As you have to invest a lot of time upfront understanding the culture. Time the needs of the users and on adapting your design to meet those. So, you know what examples are, you know, there's kind of medical device products, whether it be like incubators or ways to do kind of birth delivery and sanitary ways.

[00:18:49] Neil Malhotra: And you know, a lot of these birthing practices, there's like kind of cultural practices. A lot of people have. So if you're not sensitive to. Cultural practices and allow your technology to work with them rather than against them. Then it doesn't matter if you're going to like increase into mortality or decrease it by like 20% people are not going to use your product.

[00:19:10] Neil Malhotra: Right. And so I can kind of understanding where people are coming from and then designing products to meet them where they are, is going to have the biggest impact. So that's kind of the basic idea. 

[00:19:22] Sean Pritzkau: Yeah, it's, it's really pulling us out of the center of these solutions, pulling other people in and saying these are really built around you and for you.

[00:19:31] Neil Malhotra: Yeah. So I'll just give you another example too. So this is not in the book, it's just, you know, so if you think for example, of a lot of companies now working on childcare for hourly workers, the salary workers, you know, sometimes get a lot of benefits of childcare. You know, there's companies you might have heard about or bright horizons or things like that, but it's a lot more complicated for companies to do this for hourly workers, even though for hourly workers, childcare is like much more of a, an issue.

[00:19:59] Neil Malhotra: So when you kind of do the design based thinking and thinking that you're going to like write this in a consultants laboratory or. You would say, oh great. Okay. We just use the model or the bright Verizon's model and just export it. So that's kind of like outsourcing labor on this contract basis.

[00:20:15] Neil Malhotra: And that works for salary workers. I think they're generally fine with it. But when you interview hourly workers, where are they getting a childcare from? They're getting it from family members and friends. And so now you're saying, okay, now we're going to shift that model to be like on track workers.

[00:20:31] Neil Malhotra: They were like, what are you talking about? Like, I'm not going to totally change how I do my childcare. So actually the better way to do it is these co-op models where you basically have the workers themselves providing the childcare, many of them onsite and kind of going in and out of the childcare facility, in their regular job, in the warehouse or whatever.

[00:20:50] Neil Malhotra: Now that's something that you wouldn't have understood. Like the deep investigation and interviewing of people who are the user base that you should be using a clot model. And the book, you know, gives like, what are the exact scripts and questions, et cetera. We ask when we do design based thinking what we try to look for, et cetera, and how you implement that.

[00:21:10] Neil Malhotra: So that's just another example of where like the paternalistic model would lead to. 

[00:21:15] Sean Pritzkau: Yeah. Oh, thank you. That's maybe supplemental to the book stories, even the stories in the books. That's one of the things that I found personally, like great takeaways as to here are these actuals scenarios. Case studies of actual, you know, students that many of them were in a part of Stanford that through this process and through the program, like developed some unique and world changing models and very much centered in the ACD in design thinking.

[00:21:39] Sean Pritzkau: And so in the process of the book, I mean, I understand you as essentially assembled some of these great thinkers and diverse topics. And like we've said at the kind of outside of the show is this is sort of. For people to pick up and go to maybe a chapter that is particularly helpful at the moment, or is this addressing a certain pain point?

[00:22:00] Sean Pritzkau: Is there anything, you know, throughout the book that you found particularly important and that you really wanted to emphasize? 

[00:22:08] Neil Malhotra: Well, I think kind of one kind of theme you'll see. And I think this is why the case study approach is good is that I think like 20 years ago, people in this space, they kind of thought through it all along the lines of nonprofit.

[00:22:22] Neil Malhotra: So it's like, then what you do is you start a nonprofit and you raise money for it and you spend the money. Right. And increasingly all the case studies showed is that there's a huge diversity of organizational forms and you have to pick the right organizational form, which matches your. And not just your theory of change.

[00:22:42] Neil Malhotra: So, you know, that might be a benefit corporation. It might be a standard for-profit enterprise. It might be a non-profit that uses philanthropy. It might be a non-profit that uses earned revenue or some mix. And as you mentioned earlier, how is that going to be consistent with all, you know, in all the funding pressures and et cetera, would you know, how do you not have mission drift?

[00:23:05] Neil Malhotra: And so I think those are tensions that the book talks about through examples, and it's not obvious what the right answers to some of those are, but unless you kind of know those ahead of time, the world kind of catches up with you quickly. So an example, I mean, this is obviously not in the book, but a lot of these financial inclusion startups kind of FinTech that try and disrupt traditional banks.

[00:23:27] Neil Malhotra: You know, they have a lot of pressure now to make revenue because they're just standard public companies. Right. But theirs have social missions. So if you kind of don't have the non-profit forums, there's going to be pressure to meet what the investors want, which is to make money on their investments.

[00:23:43] Neil Malhotra: And a lot of these financial inclusion, startups, like a lot of pressures to behave more like a regular. And even though that's kind of, wasn't their original mission. And part of that is not doing kind of the crummy stuff that banks tend to do, like overdraft fees, et cetera. But rather it's like marketing towards like middle-income customers.

[00:24:04] Neil Malhotra: Right. As opposed to just focusing on lower-income customers. So then the question is, all right, is that consistent with your mission? Is it not? And I think these are just the hard questions. The book delves into. 

[00:24:15] Sean Pritzkau: In the book it's shared that these changes have kind of been developed over a couple of decades.

[00:24:21] Sean Pritzkau: But more so we're seeing a lot of, you know, people embracing for-profit business model and trying to affect teens outside of the traditional nonprofit or foundation model. But the point really comes across to me is it's not an or, but it's a, and right. There's chains that can be fostered through this for-profit business model, but often in conjunction with foundations, nonprofits, and seeing some cross collaboration amongst the youth specifically, because there's so many foundations and nonprofits that are just well-rooted over time.

[00:24:49] Sean Pritzkau: Are there any, I mean, I'm curious, like kind of predictions, what you see in that space, in the future. I think, you know, probably increasingly seeing for-profit companies and social impact business models, B corporations, et cetera, grow, but do you have any kind of predictions for us? I mean, the 

[00:25:05] Neil Malhotra: book kind of delves on this and part of this is my opinion, but I think other contributors in the book agree with this, which is I think a really good space for your audience to get in on now.

[00:25:18] Neil Malhotra: Is using for-profit mechanisms for social change. And the reason for that is because the capital available is going to become more privileged. So let me explain what I mean about that. So right now it's like really hard. For like pensions, for example, to invest in impact investing funds. So impact investing is kind of like a niche product right now.

[00:25:46] Neil Malhotra: So like, you know, JP Morgan or TPG will like kind of sell it to their LPs. And it's kind of like, all right, like, yeah, I like invest a lot of money and all invest like 5% or 10% and it's like social stuff. So I feel good or something like that, but increasingly it's going to become like a pretty embedded.

[00:26:04] Neil Malhotra: Part of the financial structure of this world. And like an example is you look at like BlackRock and states and a lot of these people, they're already saying like these ESG metrics and social impact is like the really important part. And they control a lot of capital. If you will get pension funds, like a lot of the pension holders are like, we don't actually care about maximizing the retirement return.

[00:26:27] Neil Malhotra: We want it to be done in a socially responsible way. So you look at like Tia craft, like teachers funds or. Calsters all the kind of major government worker funds. A lot of those people, like they're not like, you know, investment bankers, like they are in public service careers for their whole lives. And now it's like, how do you manage the money?

[00:26:45] Neil Malhotra: And they want to do it in a way that is socially responsible and does social. So I just think as the world kind of becomes more stakeholder oriented, the capital structure and availability is didn't come way more open and privileged. Like if you basically are like, if some, like, like CalPERS says half our money has to be devoted to the impact investing space.

[00:27:09] Neil Malhotra: I mean, that's just like way more capital available now. And it's because it's not because of some rules, because like, these are just what the pension holders believe. 

[00:27:17] Sean Pritzkau: Yeah. And how. If you want to give us a sense of, you know, there, there might be people listening that are looking or preparing for funding.

[00:27:27] Sean Pritzkau: What is really available in 2022, what is really available for people that want to fund impact related work and would much rather be funded by this model that is really looking to fund impact, and they might be able to avoid some of the pressures of the social impact company that is still really being pressured to improve their bottom 

[00:27:47] Neil Malhotra: line.

[00:27:48] Neil Malhotra: And I think a lot of it's just opportunity, which is a lot of the traditional sand hill firms are just not going to invest in social enterprises. You know, I think the real choices do you go through the foundation or do you go through the impact investing fund and you know, a lot of foundations, they will invest sometimes in for-profit, you know, or B Corp, I would say like foundations have their role, but as one of the chapters talks about their, they're not really nimble organization.

[00:28:18] Neil Malhotra: Let's say like they're kind of designed to live forever, to carry on the legacy of whoever started the foundation and make money in the stock market and like pay out 5% of that money and live forever. And if that's your model, it's very hard to be innovative. On the other hand, if you're like collecting a bunch of money from LPs and you need to deliver positive return is concessionary return, but it's still pausing.

[00:28:47] Neil Malhotra: You know, that's going to potentially lead to more innovation. Now you're saying there could be a trade off there, which is that there's mission drift, but that's life like life is full of trade-offs the book talks about those trade-offs and I think that's what social entrepreneurs have to think about, which is all right.

[00:29:03] Neil Malhotra: Like what do I want to trade off? Is it okay that there might be some pressure down the line, but I'm working with capital with. Going to be, you know, more innovative and it's going to like pressure me to understand how the business model is gonna work. One thing about it is if you have a great company, you're going to find competition from impact investors.

[00:29:24] Neil Malhotra: And we've already seen that sometimes impact investors are competing for the entrepreneurial talent. And one thing that actually sells some of these firms above and other is whether it has how committed they are to the social mission. And these companies like the impact investing firms don't want to get a reputation that they are, you know, like pressuring people to, you know, be profit-maximizing et cetera.

[00:29:46] Neil Malhotra: So, you know, I think it's a very dynamic space right now, and I would really encourage your users to think about it more broadly. And that there's a lot of diverse sources of capital. 

[00:29:55] Sean Pritzkau: So with this book release, I'm curious, what are the outcomes that you're looking to hope to see? I mean, you really designed this as a handbook and it sounds like, I mean, the, the themes here seem to be a bit timeless in the sense where I hope this is something that, you know, today's social entrepreneurs are picking up, you know, a decade from that too.

[00:30:12] Sean Pritzkau: There's great. Great concept. 

[00:30:14] Yeah. 

[00:30:14] Neil Malhotra: I mean, that's what the, the goal is of the book, which is to get the concepts out into the world because we think they're great concepts. And so, you know, if you already want to get a few of them, we have some online videos that are for. That are kind of tied to the book.

[00:30:27] Neil Malhotra: So you can just Google Stanford center for social innovation and take it to our, to our homepage and it'll have links to our teaching assets and that those kind of speak to you. You can then look at the book and get a deeper dive, but I think you kind of nailed what our goal is and all this, which is the goal is to change the world by spreading ideas.

[00:30:47] Neil Malhotra: That's our theory of change. Yeah. Oh, I love it. 

[00:30:50] Sean Pritzkau: Well, I'll definitely pull some of those resources and link them in the show notes so people can, Immerse themselves in, beyond the book. Definitely suggest people pick up the book. We'll definitely leave a link in the show notes as well, but kind of before we wrapped up, is there anything else you, you want to share with.

[00:31:06] Neil Malhotra: Well, I'm just saying that I just want to save the audience. Like I just so proud of everyone just love what you're doing. And I think if you're listening to a podcast like this, you've already taken the first step, which is to realize that, you know, business and organizations are not the antithesis of social media.

[00:31:21] Neil Malhotra: But rather they can work in conjunction with it. And actually like the big thing we, we preach is that actually thinking rigorously about both the social impact model and the business model in conjunction and getting those to work together is the key. And, you know, the world is not going to be changed, waiting for government or just waiting for the traditional philanthropic foundations to do their work is your audience is going to change the world, which is using the levers of capitalism.

[00:31:52] Neil Malhotra: To make the world a better place. 

[00:31:54] Sean Pritzkau: Hmm. I love it. And I believe that just as we were reading, you know, stories in the book of the chains that people are making, I know we're going to be continuing to tell those stories. They get through people who are listening to podcasts and reading these books and doing the work.

[00:32:09] Sean Pritzkau: So thank you so much, Neil. It's it's really been an honor to have you on the podcast. I appreciate you taking time with me and I know moments like these, that people might be walking down the street, listening to a podcast. They're gonna pick up this book and do something great. So thank you for your time today.

[00:32:23] Sean Pritzkau: And that I really. 

[00:32:25] Neil Malhotra: Thanks for having me and for the amazing questions.

[00:32:41] Sean Pritzkau: All right. Well, I had a really great time chatting with Neil for this episode. If you found that anything we talked about resonated with you, I highly suggest picking up a copy of Frontiers in Social Innovation: The Essential Handbook for Creating, Deploying, and Sustaining Creative Solutions to Systemic Problems.

[00:33:00] Sean Pritzkau: It's filled with case studies from the field, discussing the challenges and opportunities, social entrepreneurs and innovators face. And features contributions from practitioners and philanthropists, such as Laura Arrillaga-Andreessen, Kim Starkey, Bill Meehan, and then more. And I'll make sure to leave the link in the show notes for you to buy the book.

[00:33:20] Sean Pritzkau: If you're interested, if you liked what you heard that today, I'd love it. If you. Just a second to send us to a friend who's also working to use business as a vehicle for change. And if you haven't subscribed to the podcast, go ahead and click subscribe in your podcast player. So you don't miss out on new episodes.

[00:33:38] Sean Pritzkau: So thanks again for listening. I see you next week. .

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