Theodore Vail

“We recognize a ‘responsibility’ and ‘accountability’ to the public on our part.” Such a line might not seem out of place if said today by any of the growing number of business people who identify with the causes of social entrepreneurship or socially conscious capitalism.

But for all the buzz in recent years around those concepts, the quote does not belong to the present but to the past. It was uttered in 1911 by Theodore Vail, the man who built AT&T’s telephone monopoly in the early 20th century.

Why bring this up? To explain why the business community at large owes today’s social entrepreneurs a debt of gratitude, for reasons that become clear once one compares today’s vision for socially conscious business with that of a past era.

Vail’s vision of socially responsible business was inseparable from his belief in the power of monopoly, a view that has thankfully been largely discredited over the past century. Termed ‘Vailism’, his philosophy was built on a compromise between government and private enterprise. Companies like AT&T wouldn’t be broken up by the government but rather allowed to monopolize a massive industry, and in exchange it would rule with a benevolent hand, providing universal service to the country.

The idea here was that market competition was fundamentally wasteful — why have two companies working on a product when one would suffice? — and that it ignored the interests of the least well off who were unable to pay for a critical service.

Vail framed AT&T as a socially conscious brand, as we might say today, in order to gain it monopoly status. Like social entrepreneurs committing not only to profit but also to impact, AT&T accepted a social mandate in addition to the aim of dominating its industry.

Today’s social entrepreneurship movement thankfully shares little resemblance to Vail’s brand of monopolistic social business. But the comparison illustrates the critical importance of present day’s conscious capitalists.

The idea of monopoly is much more frowned upon these days (in theory, if not always in practice) and we recognize more clearly now that competition and a vibrant marketplace are drivers of innovation and prosperity.

And yet markets remain highly imperfect. They discriminate against those who can’t afford to pay and, in plenty of cases, pursue profit at the expense of social good.

And that’s why today’s social entrepreneurs are so critical. Like Vail, they happily accept a dual purpose in business. Except unlike him, they do so in an explicit embrace of capitalism and free enterprise. Whereas the ethos of AT&T was to replace competitive markets with socially conscious capitalists, today’s social entrepreneurs hope to augment or even save capitalism through the addition of a class of businesses focused on more than the bottom line.

The business world can be a little rough around the edges. It creates losers as well as winners. But the growing strength of social enterprise today is providing a check against all of that by applying the principles of innovation and entrepreneurship where we might otherwise require regulation or subsidy.

Business people owe social entrepreneurs a debt of gratitude because the latter’s success helps to ease the imperfections of a hyper-competitive marketplace. Businesses that do good are, in that sense, good for business. So the next time you see a social entrepreneur, say thanks.