[MUSIC] So there are many possible ways in which this can turn out. There are 27 actual outcomes across these combinations. There are three pure cases where everything says non-profit. They're are pure cases where all three indicators point to for-profit. And there's a third outcome where all three are neutral. Then there are dominant cases where two out of the three point in one direction, but one of the three points in the other direction. And then there are inconclusive cases where two point in opposite directions and one points down the middle. So it's not going to be the case that this is going to often be a clear cut slammed on obvious solution in terms of which one you need to follow. But let me drill a little bit deeper into each one of these possible combination just to show you what it might look like. Think the case of a pure non-profit, one where everything towards a non-profit. Here you can think about the Salvation Army which helps the poor around the world, animated by faith, has very few paying customers, at least initially, it did. It was driven by charity and from the get go, it had a very powerful selfless distributive orientation where it was about other people, not about the actual founders of the organization. Think about on the other side, another clear cut case where all three indicators are pointing in one direction. Whole Foods, it is one about creating wealth by meeting emerging need among customers for organic foods. There are tons of customers who are willing to pay top dollar for these products, and the entrepreneur behind it is by nature acquisitive, libertarian, highly individualistic, in fact, very controversial. All three indicators point towards a pure for-profit firm. But then there are some of these more mixed cases where some indicators go one way and others go in another direction. Take, for example, Accion, where the idea is to fight poverty through micro-finance and micro-lending. The market has some clients that can offer full repayment and some, maybe not. But it's a market where there's going to be return, in the sense that money has coming back into the organization from those who are lending. And finally when you think about the entrepreneurs behind it, they were in fact oriented towards distributive goals and service. But the market that they chose actually has the characteristics of something that could be for-profit because they're making loans, not grants, and the money's coming back into the organization and creating a financial model that is very sustainable, in fact, it can be in for profit micro-lending, very profitable. On the other side, think about Toms Shoes, where the idea is to generate profits by selling shoes, give one pair of shoes away for every one that's sold, and help the poor in the developing world. There is a market for these shoes that are sold, but there's also a demand for donated shoes through third party payers and that's why the organization chose the route it did. But the entrepreneur in this case, Blake Mackouski is very much in the for-profit mindset, acquisitive and focused on generating a substantial revenue. So there the entrepreneur's characteristics is a little bit at odds with the market and the idea which point more in a non-profit direction. Then you can think about the hybrid option, which is google.org, which is an organization that tries to mix both investing and philanthropy. It's an organization that's trying to help the poor, but where the market is mixed, the motives are mixed, and the idea actually has an element of both for-profit and non-profit because they wanted to support both channels in trying to solve the problems of the poor. So put it all together and you get a picture that looks something like this. Some cases are very clear cut. Salvation Army, very clear cut. Whole Foods, clear cut, for-profit orientation and conclusion. Accion and Toms, a little bit more mixed. There's elements of both those models that could be non-profit, but they have elements that have a little bit of the for-profit in them. For Accion, it's the earned income element from repayment of loans, from Toms Shoes, it's the profits generated through the sale of these sandals and then the middle are the hybrid possibilities. In conclusion, as you think about the challenge of choosing a sector for your organization, I hope these three touchstones will give you a starting point. I want you to think about the nature of the value proposition, the market in which you're going to operate, and your personal dreams and aspirations as an entrepreneur. As you think about those, that's going to start to guide you towards the right solution. Don't rush, as I said before, to making a sector selection choice. Think about this very carefully, delay it if you can and come to it only after you have a deeper understanding of those three critical touchstones. If you get it wrong, you'll have to go back and fix it and change it and that is time consuming, expensive and it can erode public support. So sector selection is an important part of the social enterprise journey, it's one I'd like to have you make successfully. I'd like you to make the right choice and I invite you to think about those three critical touchstones as you ponder where in the sector you're going to operate. [MUSIC]
