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Social Entrepreneurship as an Algorithm: Is Social Enterprise Sustainable?

E:CO Issue Vol. 10 No. 3 2008 pp. 65-85


Complexity and Philosophy

Social Entrepreneurship as an Algorithm:
Is Social Enterprise Sustainable?
Jeff Trexler
Pace University, USA

Social enterprise is charity’s web 2.0—a preneurial in the sense of pursuing innovative
would-be revolution as open to interpre- solutions to social problems. On the surface
tation as a Rorschach blot. For social en- these definitions appear contradictory, yet each
terprise to be more than the latest pass- has a fair claim to the phrase (see the paper by
ing fad in doing good, we need a rigorous Massetti in this volume for a discussion of the
re-assessment of the link between system ambiguities involved in defining social entre-
dynamics and social institutions. To that preneurship and her diagramic construct of the
end this article has three distinct yet relat- Social Entrepreneurship Matrix (SEM) as a way
ed aims. First, I want to offer a new defini- to start to resolve them).
tion of social enterprise, one that reflects Despite all the apparent differences,
its essential nature as a simple rule with sustainability is a value that cuts across defini-
complex results. Besides re-defining so- tional lines. Social entrepreneurs strive to pro-
cial enterprise, my next goal is to provide mote a sustainable environment, a sustainable
an explanation for organizational altruism social order, sustainable nonprofit or for-profit
that goes beyond latching onto the latest enterprises—an array of goals often described
popular trends. My alternative approach as the triple bottom line.
is to find the basis for corporate charity In part we can ascribe the term’s ubiq-
within corporate identity itself—in par- uity to the innate appeal of lasting effects; just
ticular, the historic function of organiza- as capuchin monkeys respond favorably to
tional form as a means of modeling emer- positive feedback, human cooperation seems
gent patterns. This article’s final aim is to to flourish when people sense that it will have
explain how social enterprise can have its meaningful results (Brosnan & de Waal, 2004).
greatest sustainable impact—by making What makes sustainability particularly com-
itself obsolete. pelling in this regard is its inherent promise to
avoid loss—after all, an enterprise that “meets
Introduction the needs of the present without compromis-

ocial enterprise is a simple term with a ing the ability of future generations to meet
complex range of meanings. Some ex- theirs” would seem to embody the ideal of a
perts say that a social enterprise is any fair return (World Commission on Environ-
venture that generates earned income for pub- ment and Development, 1987; see also Boons,
lic benefit; others argue that the term denotes 2008).
nonprofits that utilize efficient business met- However, there is more to the per-
rics; still more see it as a movement not intrin- ceived value of sustainability than equitable
sically business-like at all, but rather, entre- efficiency (Stavins et al., 2003). Echoing the
language of social networks and other complex

Trexler 65
systems, sustainability also seems to provide a Adam Smith, whose image of the free market’s
scientific basis for adopting social enterprise as “invisible hand” has itself proven to be a sus-
the new organizational norm. In the words of tainable model of how simple multi-agent in-
Paul Hawken, one of the leading advocates for teractions can produce a higher order without
what he identifies as “the movement” emerg- centralized control.
ing out of the natural order: Contrary to affirming the need for ev-
ery business to be virtuous, many systems
Sustainability is about stabilizing the currently theorists support precisely the opposite claim:
disruptive relationship between earth’s two every enterprise can pursue its own selfish
most complex systems—human culture and the ends confident that public virtue will emerge.
living world. The interrelation between these And we need not rely on the metaphors of
two systems marks every person’s existence Smith’s “invisible hand” or Bernard Mandev-
and is responsible for the rise and fall of civili- ille’s “Fable of the Bees” to find support for
zations... Today, for the first time in history, an such an argument; as physicist Neil Johnson
entire civilization—its people, companies, and suggests in his recent overview of complexity,
governments—is trying to arrest the downspin the most basic levels of nature appear to utilize
and understand how to live on earth, an effort what one might call a “combination-of-errors
that represents a watershed in human existence approach,” in which collective efficiency re-
(Hawken, 2007: 12). sults from the aggregation of suboptimal ac-
tions (Johnson, 2007: 210).
It is a noble sentiment—and an under- For social enterprise to be more than
standable draw to a rising generation steeped the latest passing fad in doing good, we need
in network dynamics as a central part of daily a rigorous re-assessment of the link between
life. The notion that social enterprise is the system dynamics and social institutions. To
first mode of organization to respect natural that end this article has three distinct yet related
system ecologies provides a theoretical basis aims. First, I want to offer a new definition of
for the revolutionary rhetoric that has flour- social enterprise (taking into consideration the
ished in social enterprise circles since the above mentioned SEM of Massetti), one that is
movement’s rise to prominence in the late designed both to distill a concise explanation
1990s. It also seems to be a killer app for per- of the phenomenon and to explain the diverse
suading people outside the charitable world to values and ventures associated with the term.
give tangible support to the development of The strategic shift in my approach is to move
social entrepreneurship, whether through rev- away from trying to identify either a prescrip-
enue-generating social ventures or donative tive mission or an array of common character-
corporate philanthropy. Since the system will istics. Rather, the key to understanding social
collapse without a commitment to sustainable enterprise lies in a fundamental principle of
initiatives, those who cling to obsolete notions system dynamics: a simple rule can have com-
of profit-maximization and centralized control plex results—and not all of them are favorable
are hurting only themselves. to social enterprise as a distinct and sustainable
Rather than providing a self-evident movement.
proof for social enterprise, however, the appeal Besides re-defining social enterprise,
to sustainable systems raises serious questions my next goal is to provide an explanation
about its long-term viability. Historians of for organizational altruism that goes beyond
systems theory with no stake in the success of latching onto the latest popular fads. Rather
social entrepreneurship have long recognized than asserting that social enterprise is a revolu-
that earlier social theorists incorporated fun- tionary disruptive innovation, I posit that so-
damental elements of system dynamics into cial enterprise reflects the recurring tendency
their organizational models (See., e.g., Bein- of the charitable community to engage in stra-
hocker, 2006; Sawyer, R.K., 2005). Not least tegic symbiotic mimesis, adapting by adopting
among these precursors of modern theory is what it believes to be the traits desired by po-

66 E:CO Vol. 10 No. 3 2008 pp. 65-85

tential supporters—an approach, I will explain, It is tempting to assume that the con-
that is, in the end, unsustainable. In contrast, I cept’s vagueness is a feature, not a bug, but as
see the root of social enterprise as lying within a programmatic strategy this is not without its
corporate identity itself—in particular, the his- risks. As NYU’s Paul Light has observed, the
toric function of organizational form as a means lack of an agreed-upon definition of social en-
of modeling complex emergent patterns. terprise is likely to hurt the movement’s chanc-
This article’s ultimate aim is to explain es of long-term success. At the very least, he
why social enterprise is a transitional form, an argues, measurement of the growth and impact
important but ultimately temporary organi- of social enterprise will be impossible without
zational technology. The ethical imperative a shared understanding of precisely what we’re
does not derive from any need to stabilize such supposed to measuring—an ironic situation
external systems as “human culture and the for a field that exhorts nonprofits to use quan-
living world,” nor does it require us to make tifiable metrics (Light, 2008).
unfounded and untenable assertions that all
social enterprises are chaotic systems or that The one and the many problem
traditional markets are not networks. Rather, To build the case for social entrepreneurship,
it flows from the very nature of corporate iden- commentators have attempted to identify
tity. Every enterprise is a social enterprise; the shared traits sufficient to demonstrate the ex-
time has come to understand why. istence of a distinct abiding pattern. One ap-
proach is to construct a definition that has
Defining social enterprise decided inspirational appeal but offers little

ocial enterprise is charity’s Web 2.0—a practical guidance in setting the apparent
would-be revolution as open to interpre- boundaries. For example, the Skoll Founda-
tation as a Rorschach blot. If commenta- tion, one of the leading supporters of social
tors agree on anything in regard to social entre- enterprise worldwide, describes a social entre-
preneurship, it’s, as Massetti described above, preneur as “society’s change agent: a pioneer
the lack of a consensus as to what the concept of innovation that benefits humanity”—a defi-
means. Whereas Massetti supplies her SEM nition that is capable of including any number
matrix as a way out of the dilemma of defin- of individuals and businesses that social en-
ing social entrepreneurship, I will explore the trepreneurs would typically not count within
problem of definition in order to probe the is- their number, such as Microsoft, big pharma or
sue of sustainability. companies with patents on toothpaste.
Oxford’s Alex Nicholls notes that “the Deciding what qualifies as a truly “so-
definition of social entrepreneurship is often cial” benefit becomes even more difficult when
seen as contested and unclear,” although he we factor in historical change. For example, lit-
adeptly reframes this as a “dynamic flexibility” tle more than a century ago urban streets were
that is the “basis of [the movement’s] extraor- rife with disease-bearing filth and a sicken-
dinary impact (Nicholls, 2006: 10.) Professor ing stench until the automobile made the city
Marthe Nyssens similarly observes that social cleaner by expelling its exhaust into the atmo-
enterprise “remains a very broad and often sphere, which is one reason why ads from the
quite vague concept,” particularly in the U.S.. era linked oil companies with nature scenes
While her European research group had dis- and fresh air—though it may seem counterin-
tilled its own preferred definition—citizen- tuitive today, back then the internal combus-
initiated community benefit with a limits on tion engine was green tech.
material benefit to investors—she expressly To flesh out the definition beyond ab-
disclaims any effort to impose “prescriptive stract ideals, commentators have also tried to
criteria.” Instead, the definition is at best an supplement formal definitions with what they
attempt to describe an “ideal-type” within a believe to be common distinguishing traits.
“galaxy” of groups (Nyssens, 2006: 4, 10.) The approach is akin what Ludwig Wittgen-
stein described as identifying family resem-

Trexler 67
blance—in other words, eschewing a single distinct definitions offered by each other, it
fixed definition in favor of “a complicated raises the question of whether a term that can
network of similarities, overlapping and criss- mean anything means anything at all.
crossing” among individual examples of the
term (Wittgenstein, 1953, 2001: 66). Experts Social enterprise as algorithm
have proposed a wide variety of more specific Making sense of the confusion is an all but im-
values that they see as emblematic of social en- possible task so long as we try to work with-
trepreneurship, such as: in the most common analytical frameworks.
Words such as “change agents,” “social” and
• Subsistence on the sale of goods and ser- even “entrepreneurship” are so open to inter-
vices; pretation that any definition framed in such
• Efficient use of grants; language borders on tautology. Trying to dis-
till a set of common characteristics from dis-
• Creative inspiration applied to “an unfor-
parate ventures is an analytical strategy that is
tunate yet stable equilibrium” (Martin &
sure to result in a model either too vague to be
Osberg. 2007);
meaningful or too exclusionary to be accepted
• Quantifiable metrics; by a wide swath of practitioners. Likewise,
• Initiation and management by private citi- proceeding from the assumption that society is
zens apart from government and commer- divided into discrete sectors (partly discussed
cial corporations; by May Seitenadi in this volume)—no matter
• Cooperative engagement among nonprof- how we try to position social enterprise as a
its, commercial business and the state; mediating, intersecting or self-contained sec-
tor, the result is going to raise far more ques-
• Organization as a nonprofit; tions than it answers.
• Indifference to organizational form, A more productive starting point would
whether for-profit, nonprofit or a mixed be to ask how a single concept could coherently
corporate group; serve as a nexus for so many contradictory vari-
• Rejection of organizational form in favor of ants. The goal of such an inquiry would not be
productive networks, or; to reduce social enterprise to a single definition
or set of traits, but to rationalize the emergence
• The creation of a new organizational form
of multiple distinct variations of a single term.
marked by “blended value” and limits on
Complex systems theory provides a
investors’ profit (see, e.g., Borzaga, 2004;
replicable model for explaining such a pattern:
Dees & Economy, 2001; Light, 2008;
namely, the potential for simple rules to give
Mair & Hockerts, 2006; Martin & Osberg,
rise to complex forms. Just as the rudimentary
2007; Nicholls, 2006; Nyssens, 2006).
decision-making rules in ants can give rise to a
diverse array of ordered nests—some flourish-
Given the all too evident confusion engen-
ing, some failing—social enterprise could be
dered by the inevitable contradictions arising
thought of as a linguistic algorithm whose spe-
among these possible distinguishing traits, ex-
cific instantiations can differ widely depending
perts have attempted to clarify the concept by
on such variables as the user and the context
aggregating traits and definitions in relation to
(Gordon, 2004).
the traditional boundaries between the mar-
From this perspective social enterprise
ket, government and nonprofit sectors. Yet
is more than merely a descriptive category –
this too gives rise to its own share of confu-
it functions instead as a generative code. The
sion. An advocate’s “considerable range of in-
repeated expression of this algorithm across
novative and dynamic international praxis and
diverse environments produces an array of
discourse” (Nicholls, 2006: 5) is to the critic an
distinct yet self-similar values. In this regard
ad hoc mélange; likewise, when the editors of
social enterprise is an organizational analog to
one collection of essays preface their book with
the Koch curve or the Mandelbrot set; while
a three-page small-print chart contrasting the

68 E:CO Vol. 10 No. 3 2008 pp. 65-85

the collective in the aggregate may seem irre- ing mess, but each specific instance flows from
ducibly complex, each particular expression the same impulse to hybridize, albeit shaped
derives from applying the same programmatic by discrete environmental influences. View-
rules (Mandelbrot & Hudson, 2004; Wolfram, ing the system as clusters of values that share
2002). discrete aspects of family resemblance, we can
Although this may not be the tradition- describe each relatively stable aggregate of
al way of analyzing organizational form, com- similar patterns as a linguistic attractor along
plex systems modeling provides an invaluable the lines of dynamical systems construct of at-
tool for resolving otherwise intractable prob- tractors discussed by Goldstein, Hazy, and Sil-
lems, most notably with respect to irreduc- berstang (in this volume; see also, e.g., Cooper,
ible semantic complexity. Take, for instance, 1999: 87).
Wittgenstein’s paradigmatic example of the In keeping with current usage, at least
complexity of the concept of “chair,” which in the U.S., it is possible to map these attractors
is susceptible both of seemingly clear expres- in relation to three primary values, although
sions and borderline cases. Rather than try to there is a fourth that the movement itself tends
compile a list of similarities and outliers (e.g., not to acknowledge. Arguably the most expan-
“four legs and a seat except when it’s a bean- sive pattern is one that results from perceiving
bag”), we can now see a deeper logic beneath entrepreneurship primarily in terms of entre-
the vagueness and apparent contradiction, as a preneurial innovation. Whether an organiza-
set of relatively simple weighted values—say, tion actually engages in commerce is beside the
discrete form, primarily for sitting, less for point; the key value is devising solutions to so-
resting prone—takes shape in a diverse array cial problems that go beyond the limits of tra-
of forms. Viewed as a whole, the array of ele- ditional philanthropy. For example, Ashoka, a
ments in the category “chair” appears to defy leading force in the movement, defines social
reduction to an algorithmic analysis, yet this enterprise as disruptive innovation in resolv-
global complexity emerges from the recursive ing social problems, an expansive definition
iteration of relatively simpler rules across space that encompasses groups from Planned Par-
and time. enthood and Teach for America to Ethos Water
A similar dynamic is at work with so- and American Apparel.
cial enterprise, except here the term functions Another approach reflects a more com-
both as a descriptor of the aggregate and the mercial vision, equating entrepreneurship
generative algorithm. The operative rule is ap- primarily with earned income. From this per-
parent in the phrase “social enterprise” itself, spective a social enterprise is a social business,
which combines a term linked to the business distinct from mainstream charity in that it es-
world with a term connoting connections out- chews grants and donations in favor of finan-
side the commercial realm. cial self-sustainability. This too is capable of
We can distill the operative rule into a bridging the for-profit and nonprofit divide,
single word: hybrid. In a nutshell, social en- both in the form of a hybrid charity/business
terprise combines values from two seemingly corporate family (e.g., Greyston Bakery and
distinct conceptual domains. Embedded with- the Greyston Foundation), charitable micro-
in the “social” component is an array of values financing of businesses in disadvantage areas
associated with behavior with an orientation (Grameen Bank; Kiva.org; Harlem’s Abyssini-
beyond the market, state or self; likewise, the an Development Corporation) and commercial
term “enterprise” links to values associated corporate social responsibility, such as Project
with business, commerce, purpose and corpo- Red or Starbucks’ fair trade coffee.
rate structure. Fused together, it is a deceptive- The third is somewhat more narrow, at
ly simple mix with the potential to take shape least in terms of its relation to corporate law.
in a wide range of forms. Viewing these par- In this model, social enterprise is synonymous
ticular expressions at the macro-level can make with nongovernmental nonprofit organiza-
the concept appear to be a vague and confus- tions, albeit groups that apply business practic-

Trexler 69
es and metrics to their work. Perhaps the most chaos theory, the tipping point or the wisdom
prominent example of this approach is venture of crowds, social entrepreneurs have been ad-
philanthropy, which transforms the tradition- ept at laying claim to the latest vogue in sys-
al rhetoric of giving into social investment; the tems-discourse to indicate the superiority of
Robin Hood Foundation, for instance, is a char- blended value.
ity funded by leading hedge funds that uses its Yet the meme giveth, and the meme
grants to promote rigorous standards for social taketh away. A systems model of the dissemi-
ROI. nation of semantic value does not play favor-
The above three patterns or categories ites; that social enterprise has emerged as a
encompass many of the individuals and groups relatively common operative metaphor does
that self-identify as social entrepreneurs, al- not necessarily indicate that social enterprise
though the fact that there are any number of is the ideal form of social organization, any
outliers and shades of difference is perfectly more than the popularity of the Macarena or
consistent with the fundamental underlying Spiderman movies means that they represent
model; at base, social enterprise is not a specific the summum bonum of their respective arts. It
category but an algorithm or generative code. may also be equally likely that the viral spread
Some will use the language of a double or triple of social enterprise rhetoric reflects the inter-
bottom line (the difference being that the triple action of environmental factors that make the
bottom line breaks out environmental sustain- hybridization of these particular values seem
ability as a separate social purpose), others will advantageous—for now. When these factors
eschew financial rhetoric altogether, but re- change, as is inevitable, our language is likely
gardless of the specific individual differences to change as well (Abrams & Strogatz, 2003;
each flows from the hybridization of social and Atkinson et al., 2008).
entrepreneurial values, whatever each user
may believe these to be. Rhetorical turbulence
Social enterprise did not arise in a vac-
The social enterprise bubble uum. It emerged out of a peculiar array of his-

s a working definition of social enter- torical circumstances increasingly distant from
prise a semantic systems analysis has the world of today. The roots of the movement
a few distinct advantages, not least of extend at least as far back as the late 1970s,
which is that it applies a well-established ana- when fiscal crises buttressed support for cut-
lytical tool for explaining complex aggregates of backs in government grants in the West and
data. Moreover, it does this without imposing the Solidarity movement gave global promi-
a Procrustean norm that forces us to discrimi- nence to the idea of what the Polish reform-
nate among competing visions of the field; it is ers called “social enterprise”—self-governed,
capable of explaining why people who believe self-sustaining and the fundamental source of
that nonprofits shouldn’t be commercial and social benefit (Brand, 1982). The sustained
those who evangelize about earned income can economic boom of the past fifteen years did
equally and credibly describe themselves as so- not only give rise to a new generation of en-
cial entrepreneurs. trepreneurs applying their expertise to philan-
In addition, the reference to complex thropy; it also fostered an association between
systems theory—a simple rule expressed in entrepreneurship and such adaptive values as
complex patterns—resonates with the argu- success, insight, growth and the future.
ments often used to justify claims that social In this environment the rhetoric of so-
enterprise is a revolutionary movement. Par- cial enterprise spread far beyond the confines
ticularly since the late 1990s, a number of com- of organizations engaged in identifiable hybrid
mentators have appealed to system dynamics activity; it also became a standardized mode
as the basis for adopting practices that blend of self-description among otherwise non-
public benefit and entrepreneurship. Whether entrepreneurial nonprofits. We see a similar
the dynamic du jour is decentralized networks, phenomenon at work in the dissemination

70 E:CO Vol. 10 No. 3 2008 pp. 65-85

of such descriptors as green, organic and, of find another way of describing nonprofits and
course, sustainability, which have emerged as charity. As opposed to a third sector, nonprof-
normative as much through imitation as ide- its were “partners in public service” with gov-
ology. This is what I referred to earlier as the ernment in administering “the welfare state”
fourth less acknowledged expression of hybrid (Salamon, 1995). Commercial business was a
values: mimetic replication of entrepreneurial sector spoken of primarily in terms of market
and public benefit language, with minimal to failure, a trope that does not seem surprising
no impact on organizational behavior. when you consider that this was a time marked
While it is indeed possible for social en- by rampant inflation, a dormant stock market
terprise to be a revolutionary new standard that and the implosion of industrial manufacturing
will forever change our ways of doing good, it in the U.S.
is also possible that social enterprise may turn In fact, the very terms we use now to
out to be an organizational equivalent to the describe doing good reflect the linguistic dy-
hula hoop. Just as each new summer brings namics of earlier times. Consider, for instance,
forth a new song that captures the ear of every- the word “philanthropy.” The use of this word
one between age two and twenty-five, evolv- to describe charitable giving reached a critical
ing political and economic circumstances give mass around the turn of the twentieth century,
rise to new ways of talking about coordinated with the rise of charitable giving by wealthy
action. In the for-profit business world this industrialists. That philanthropy is a word
is all too familiar; just as “atomic” businesses derived from Greek roots—philia, “brotherly
flourished after WWII and the invention of love”, and anthropos, “human”—is not a co-
the transistor fueled a “tronics” boom, over incidence; it reflects a strategic linkage of the
the past decade we have seen dot-com rhetoric industrial nouveau riche with the classical lan-
morphing into Web 2.0 as well as the painful guage then associated with the establishment
rise and fall of shared modes of description for elite.
hedge funds and subprime mortgages. Similarly, the word “social” used in the
That social enterprise could prove charitable context is not an isolated novelty. It
merely to be a semantic bubble is not as outra- is a word that came to prominence in the chari-
geous as it might seem. All the talk of world- table world with the early development of so-
changing revolution distracts us from a more cial systems theory in the nineteenth century.
unpleasant historical fact: that social enter- Whereas then-traditional charity viewed pov-
prise is far from the first charitable revolution erty as the result of personal flaws, social re-
witnessed in recent years. Merely a decade ago, formers—including the first generation of aca-
many of the same experts now espousing so- demic sociologists—argued instead for seeing
cial enterprise were proclaiming a “global asso- society’s problems in terms of systemic social
ciational revolution” that was poised to change dysfunction. Even the analytical language is
the world forever (Salamon, 1999). However, familiar, with analogies drawn from members
this revolution in doing good did not champi- and networks found in the society, the human
on hybrid social ventures but nonprofit NGOs, body and such radically new media as the tele-
or “civil society,” which were said to consti- graph and railroad (Wiebe, 1966; Otis, 1999;
tute a distinct “third sector” apart from state Otis, 2001).
and market. It was a paradigm well suited an Akin to turbulent disruptions within
environment that now seems like the ancient the economy (Mandelbrot and Hudson, 2004),
past—the breakdown of the welfare state, the language of charity exhibits a tendency to
waves of recession, the collapse of the Soviet evolve through waves of exploding bubbles,
Union and the Eastern Bloc and the imminence with some collapsing into nothingness, oth-
of a new millennium in the standard Gregorian ers leaving signal traces and a few systemically
calendar. reshaping how we think and act (Abrams &
But even this was not the first social Strogatz, 2003; Atkinson et al., 2008; Gross,
revolution. Go back a few more years and you’ll 2007).

Trexler 71
A variety of factors influence how these Limit factors
patterns emerge, perhaps the most prominent In the prevailing mythology of social enter-
being strategic symbiotic mimesis, in which prise, the movement will grow exponentially
groups seeking an infusion of capital adapt to so as to occupy the field, with the new hybrid
the perceived interests of potential patrons. At model of a double- or triple-bottom line dis-
present, this is the rhetoric of entrepreneur- placing more traditional nonprofit and for-
ship, with particular instantiations of reflect- profit institutions. It’s an attractive, even inspi-
ing, inter alia, the extent of adaptive change rational vision of social revolution, but it may
each actor deems necessary to satisfy the ex- have little bearing on how social movements
pectations of targeted potential patrons. Other and the way we describe them actually evolve.
factors that influence the spread of particular Rather than subsisting in periods of relative
metaphor include the emergence of new me- stasis with occasional periods of rational revo-
dia, shifts in status markers, the recognition lutionary change, the cooperative impulse ex-
of scientific progress, the vicissitudes of poli- presses itself in forms that exhibit the custom-
tics and the perceived stability of the broader ary wild and aperiodic swings associated with
economy. complex system, with the business trusts and
Here is where the analogy to Web 2.0 settlement houses of one era giving way to the
becomes particularly salient. Akin to the ini- corporation and New Deal in the next.
tial mania for the so-called dot-com revolution, The remarks in the previous section
Web 2.0 has from the beginning been criti- pointed to a few of the key factors that con-
cized as vague and questionably novel concept. tributed to the spike in social enterprise over
However, with the market downturn, Web the past decade. Yet these positive environ-
2.0’s semantic flexibility is less of an adaptive mental influences are neither permanent nor
advantage than another piece of evidence for all-encompassing, and we can already see a
viewing the idea as just an echo of 1990s dot- range of other values that could interact to cre-
com hype. The exponential escalation of Web ate a cascade in the other direction. Although
2.0 can just as quickly become an exponential social entrepreneurs may not recognize it—as
implosion, as negative associations with web- is all too often the case in bubble economies—
based social networking cascade into a market the conditions for collapse are already in place,
collapse. starting with an overt backlash against busi-
Like its online counterpart, the sustain- ness hybrids. The downtown of the economy
ability of social enterprise is entangled with is arguably the most conspicuous environ-
that of its underlying metaphor. The more so- mental shift. Not only is entrepreneurship no
ciety tends to associate entrepreneurial values longer a sustainable metaphor for personal and
with positive feedback, the greater the poten- organizational success, but an upsurge in eco-
tial for social enterprise to amplify in ways nomic dissatisfaction can make the very idea of
that reinforce the perception that the move- profiting from charity seem inequitable, if not
ment is a permanent revolution. Yet as busi- inefficient.
ness may lose its appeal, there is also the prob- The latter objection points to more a
ability that a cascade transforms into a collapse. systemic obstacle to the continued diffusion of
In the latter scenario the question facing social social enterprise as an organizing principle—
entrepreneurs will go beyond merely defining namely, its lack of a compelling rationale for in-
what they are. They will encounter increased tegrating business and noncommercial values.
resistance to the very notion of blending char- In addition, within the more tradition-
ity with entrepreneurship, a scenario in which al nonprofit mainstream, a growing number
the linkage of charity and entrepreneurship of critics are objecting to social enterprise for
may become opaque at best. what they see as its reductionistic nature. For
example, Michael Edwards’ Just Another Em-
peror has garnered significant attention for its
argument that social enterprise is a rhetorical

72 E:CO Vol. 10 No. 3 2008 pp. 65-85

mirage, an appropriation of business jargon arrayed so as to minimize transaction costs.
that is inconsistent with the core values of the Nonprofits—reduced in this paradigm to orga-
charitable sector (Edwards, 2008). Critics of a nizations that prohibit the distribution of net
more postmodern bent raise similar objections profits to insiders—form in areas of the econo-
from another angle, echoing the neo-Marxist my marked by contract failure, while business
approach to systems theory in the Frankfurt corporations, cooperatives and other aggre-
school to argue that social enterprise embodies gates with their own default rules dominate in
the “colonization of the life-world” by the eco- environments where the rules governing each
nomic realm (Humphries & Grant, 2005). The prove to be most efficient (Hansmann, 1996).
economist Robert Reich argues that hybrid This mode of understanding business
ventures are “as meaningful as cotton candy”— organization has proven stubbornly resistant
the glib belief that we can “do well and do good to efforts aimed at incorporating social respon-
at the same time” masks the subversion of the sibility into the corporate DNA. The rhetoric
common good by the aggregation of wealth of moral value and social responsibility has no
and power in the hands of corporate executives place in a world reduced to connections and ef-
(Reich, 2007: 171). ficient exchange; even the apparent victories of
What unites these disparate critical social enterprise, such as the mainstreaming of
voices is a shared sense that charity by defi- green business and corporate charity—can be
nition is distinct from commodified rhetoric recast as strategic signals that are efficient re-
and values—true virtue lies in the communal sponses to market realities, such as the rising
realm of Ferdinand Tönnies’ gemeinschaft, not price of fossil fuel. Arguments that socially re-
the impersonal gesellschaft of contracts, met- sponsible organizations are more profitable are
rics and trade. Mirroring this critique is the similarly ineffective, given the relative lack of
response to hybridization by those who see a quantitative evidence.
social mission as incompatible with for-profit The most self-defeating argument,
business (Tönnies, 2001). though, is the claim that social enterprise is
Once again the opposition is multi- superior because triple-bottom-line ventures
tiered. The most fundamental objection is function as self-sustaining dynamic systems,
that hybridization is inconsistent with corpo- mirroring the global ecosystem itself. Beyond
rate law, in which the standard for assessing the fact that such claims assume more than
corporate actions is whether they maximize they prove, complex systems theory actually
shareholder value. Here reductionism to the supports the proposition that social benefit can
latter single value becomes the standard (see, be a positive externality of selfish profiteering.
e.g., Laughlin, 2005; Woese, 2004; Kauffman, Consider the influential systems-based
2008); public-minded legislators may have argument made by Fritjof Capra, whom move-
enacted constituency statutes and other re- ment advocate Paul Hawken lauds for pro-
forms aimed at allowing corporate managers to viding a strong conceptual underpinning for
consider the interests of nonshareholder stake- sustainability (Capra, 2002). Capra grounds
holders, but the driving force of investor mar- the need for hybrid business practices in the
kets—particularly in an economic downturn— nature of living systems, in which networks of
keeps the singular aim of for-profit business complex interactions produce novel emergent
the maximization of financial return. properties. For Capra, “the spontaneous emer-
Organizational theorists extend this gence of new order” (Capra, 2002: 116) is, in
reductionistic approach to their analysis across the words of Alfred North Whitehead, “na-
the organizational spectrum. Contemporary ture’s creative advance”—the “key property of
models of corporate identity have discarded the all living systems” (Capra, 2002: 117).
metaphor of corporate personality as obsolete; Extrapolating from this principle,
instead, the corporation and its analogs are ag- Capra argues that business organizations fail
gregates of inputs, outputs and agreements—a to adhere to the animating principle of natu-
“nexus of contracts” is one prominent image— ral sustainability—they are “life-destroying,”

Trexler 73
not “life-enhancing” (Capra, 2002: 128). The to say, pace Capra, that nature uses rule-based
problem lies in the formal structure of busi- processes and destructive crisis points as the
ness itself, which consists merely of the “rules fulcrum for the mystery of spontaneous order
and routines that are necessary for the effective (Capra, 2002: 118). The Occam’s Razor con-
functioning of the organization” (Capra, 2002: clusion from natural sustainability is that me-
121). Whereas the life of a cooperative enter- chanical corporate rules and asocial profiteer-
prise subsists in informal emergent structures ing are critical components of the emergence of
marked by creativity and higher values, today’s good, just not the parts that do-gooders like.
business focuses solely on reductionistic ele- From this perspective, assertions that
ments, such as “profits, shareholder value, mar- business must reflect the natural order can
ket share” and return on investment (Capra, seem naïve, if not incoherent. As Bernard
2002: 126). The corporation as designed is Mandeville (1714, 1723) rhapsodized in his
soulless and mechanistic; blind to “the alive- classic Fable of the Bees,
ness of its communities” business fails to con-
sider social benefit, thereby fostering cascades Fools only strive
of destruction throughout the social web. To make a Great an honest Hive.
This argument may seem convincing T’enjoy the World’s Conveniencies,
within the social enterprise movement, but at Be famed in War, yet live in Ease
its core it is self-refuting. Indeed, the self-re- Without great Vices, is a vain
futing nature of Capra’s perspective curiously Eutopia seated in the Brain.
mimics the self-refuting nature of Capra’s own
consisting commitment to a version of quan- Social enterprise as transitional form

tum mechanics, that of his teacher Geoffrey ocial enterprise is at a crossroads. One
Chew, although Chew’s “bootstrap” approach path leads to an all too common fate for
has long been discredited within the physics elements in a mimetic cascade, from
community (see, e.g., Woit, 2006). Within a slang and viral video to civil society and settle-
dynamical systems model, the emergence of ment houses—mass diffusion followed by col-
sustainable order does not require that each lapse. Yes, the social enterprise movement will
particular part of the system exhibit the same persist to varying degrees, from a cadre of ad-
traits as the desired holistic outcome. To the herents to traces of its characteristic language.
contrary, as Capra repeatedly observes, one of It’s also possible that certain policy goals em-
the defining traits of an emergent pattern is braced by the movement may thrive due to fac-
that exhibits “radical novelty”—“features that tors largely outside the movement itself, such
are not previously observed in the complex as the effect of rising oil prices on funding for
system under observation” (Goldstein, 1999: alternative fuels. However, the movement de-
50). fined by remaking the nonprofit and for-profit
Far from being alien to contempo- worlds in the image of social ventures will per-
rary capitalism, this very dynamic of radi- haps dramatically recede, a twenty-first cen-
cal discontinuity is central to the metaphors tury heir to hippies, Beats and Fourierites.
and principles that economists from Adam But this is not inevitable. The core
Smith to Friedrich Hayek have identified as the weakness of the movement to hybridize is not
source of social benefit in free markets: indi- that it strives to emulate sustainable systems,
viduals and businesses pursue their own ends but that it does not provide a coherent reason
and, mirabile dictu, constructive good emerg- to integrate seemingly disparate values. In-
es out of chaos, selfishness and vice (Taylor, fusing nonprofit rhetoric with the language of
2004). Arguments based on the emergence for-profit business—“metrics,” “ROI,” “capi-
of self-sustaining ecosystems are unconvinc- tal markets”—threatens to betray the very es-
ing precisely because they do not answer the sence of the nonprofit as a space apart from
question of why a business must internalize an commerce. At the same time, grafting a chari-
ethic of social responsibility. It is not enough table ethic onto for-profit corporate enterprise

74 E:CO Vol. 10 No. 3 2008 pp. 65-85

seems inconsistent with the law and logic of legal metaphor designed to model emergence—
free market capitalism, in which social good as is the corporation itself.
emerges from the pursuit of selfish ends. That civil society is a metaphor for
Rather than dismissing so-called tradi- emergence becomes apparent when we look
tional organizations as obsolete, the social en- past its present use among NGO advocates.
terprise movement would have a sustainable Aristotle coined the phrase in the treatise com-
long-term impact by highlighting the ethical monly known as The Politics, although this
complexity of existing corporate constructs— too obscures the true significance of the work.
in short, every enterprise is a social enterprise, The word translated “politics”—in Greek,
just in different ways. In this regard social en- politike—literally refers to the “city,” or polis,
terprise is a revolution, just not in the sense of a phenomenon that Aristotle is struggling to
being wholly new. Rather, it is a returning— understand.
the literal translation of the Latin revolvere—to Aristotle’s fascination with the city
the dynamic of corporate life itself. lies in what he perceives to be its metaphysi-
To understand why, we need to change cal distinctiveness (Politics, I). Apart from the
how we think about corporate form. Capra’s city, people enter into cooperative arrange-
reductionistic image of corporate formalities— ments that are at base reductionistic aggregates
the soulless rules of corporate governance and akin to a koinonia, or legal partnership. In a
asset allocation—unites all parties in the so- business partnership, two or more individuals
cial enterprise debate, even as they differ on enter into a contract to share the profits from
the value of infusing this dead letter with a commerce—unlike the modern corporation,
social spirit. What no one realizes is that the the partnership was not a discrete entity but
programmatic code of both nonprofit and for- an aggregate of individuals whose rights and
profit corporate identity functions as a hybrid- responsibilities were set by the agreement. A
izing algorithm. family, for Aristotle, is merely a koinonia in
which two individuals unite to produce off-
The emergence of civil society spring and to manage household assets. A
Earlier we noted that the rhetoric of social village is a koinonia connecting several house-
movements is turbulent. This semantic tur- holds; like other partnerships, the village is
bulence, like that in financial markets or the nothing more than a simple aggregate, with no
generation of hybrid ventures, exhibits fractal distinct properties or values beyond its con-
properties—its swings and spikes are self-sim- stituent parts.
ilar, flowing from the expression of a common The city is different. It consists of busi-
value. The impulse to hybridize is the root of nesses, families and villages, yet it is “self-suf-
all forms, and not merely coincidence or some ficient, so to speak, emerging for the sake of life
vague mystery of the world. Rather, it is the but existing for the sake of the good life” (Poli-
defining property of corporate form. tics, I: 8). This root of this higher ethical pur-
The phrase “social enterprise” provides pose is the city’s distinct metaphysical char-
a clue as to the how this came to be. The term is acter; the koinonia politike—the partnership
actually not new; it’s just the latest variation of of the city—is not merely the sum of it parts,
a long series of constructs that attempt to inte- but it is a “whole” that is “prior by nature” to
grate reductionistic and emergent values. The its constituent elements (Politics, I: 11). This,
most influential of those constructs is “civil so- Aristotle observes, makes the city the inter-
ciety,” a term that in its recent heyday proved personal extension of human identity. Just as
to be susceptible to interpretation as social en- the human is a self-sufficient unity with its
terprise. Contrary to what today’s so-called own distinct—and ethical—existence beyond
experts claim, however, civil society does not the mere components of its body, the koinonia
refer narrowly to such things as NGOs, non- politike emerges out of the routine interactions
profits or a voluntary sector between state and of connected elements to create a higher mean-
market. Rather, civil society is a programmatic ing for them all.

Trexler 75
Two thousand years later the city’s de- Contemporary communitarian versus
fining paradox—a discrete whole irreducible liberal public policy debates should also not
to the mere sum of its parts—is routinely de- distract us of the fundamental insight embed-
scribed today with far less metaphysical bag- ded in Aristotle’s rhetoric of the good, which
gage (Batty, 2007; Holland, 1995: 1). The city, foreshadowed contemporary notions of pub-
with its order and identity spontaneously ap- lic norms that are ideally irreducible to private
pearing from the discrete interactions among interests, particularly those defined by wealth,
its constituent parts, has become a familiar ex- family or personal influence. The analog be-
ample of the natural phenomenon now known tween civic good and individual values reflects
as emergence, in which “the behavior of large how each derives from the ratio of difference
and complex aggregates ... is not to be under- implicit in emergent identity—just as personal
stood in terms of a simple extrapolation of the ideals reflect the impulse, grounded in our very
properties of a few” separate parts (Anderson, consciousness, to rise above the deterministic
1972, 2008: 222). We now know enough drives and limits of our material being, the koi-
about the emergence of collective properties nonia politike aspires to something more than
that we do not feel the need to ground them the parochial narrowness of subsistence liv-
in a distinct prior essence, and we are able to ing.
recognize the phenomenon in a wide array of The adaptive capacity of Aristotle’s
contexts, from families and small towns to model of emergent civic form made it well
animals, plants and inanimate natural forces. suited as a programmatic construct for cosmo-
Rather than making the city an object of philo- politan Rome. The Latin translation, societas
sophical speculation, we can sing of a city that civilis, was equally a legal metaphor reflecting
never sleeps without feeling the urge to medi- a partnership framed by urban citizenship. The
tate on the paradox of a city that never sleeps full history of the evolution of this concept is
even though all its denizens do. beyond the scope of this article—its influence
Nonetheless that should not obscure on adaptive Christian networks framed by
the historic significance of Aristotle’s descrip- koinonia, city metaphors and a higher unity
tion. His use of a programmatic legal meta- “where two or three are gathered in my name”
phor is a classical analogue to contemporary is worthy of its own book; for our purposes
scientific approaches to analyzing emergent suffice it to say that the model of a social order
properties in complex systems—it is, in its unifying contractual routines with a transfor-
way, a direct predecessor of current research in mative identity connections took shape in a
understanding cities through cellular autom- diverse array of forms. Arguably the most sig-
ata, agent-based modeling and fractals (Batty, nificant development in the evolution of civil
2005). Previously the metaphors for a self- society as an organizational metaphor was the
sufficient higher order tended to be religious conceptual separation of emergent identity
in nature, most notably the Hebrew “divine from city, church and empire. We can trace
contract” that linked separate family tribes the direct roots of the modern form to a series
into a sacred unity. The “partnership of the of events that now seem unrelated. One sig-
city,” on the other hand, provided a replicable nal moment in this history was the formation
model for emergent identity that transcended of the Cluniac monastic network, which used
cultic loyalties. It did so by describing key el- a common charter, rituals, clothing and struc-
ements of the process of emergence in acces- tured multi-tiered governance to create what
sible non-mystical terms—by connecting and we would now recognize as a multinational
constraining agents in a certain context, such corporation with its own distinct brand, au-
as large-scale population bounded by its physi- tonomous from the jurisdiction of feudal lords,
cal geography and common name, a city could bishops and the Pope (see, e.g., Tierney, 1964:
function as a supervenient order that shaped 28-9). An equally revolutionary moment fol-
the very people and relationships from which lowed in the twelfth century, when law stu-
it emerged. dents in Bologna co-opted the classical Roman

76 E:CO Vol. 10 No. 3 2008 pp. 65-85

law concept of a universitas to create a unified identity—an image that the frontispiece to Le-
common identity distinct from themselves as viathan illustrates by depicting citizens united
residents of their home cities. (Berman, 1983). literally within the person of the king (Hobbes
These corporate archetypes provided a real- 1651, 1996).
world model of the phenomena discussed in What is most revealing about Hobbes’
the Aristotelian writings that, not coinciden- reference to a social contract is not the meta-
tally, enjoyed a twelfth-century revival of their phor itself, which would not at all have seemed
own. new to peers literate in Latin, but the way
As Brian Tierney documents in his his- it evinces a subtle yet significant shift in the
tory of corporate divisions leading up to the meaning of “social” itself. Years earlier the so-
Reformation and the rise of fractious nation- cietas—Aristotle’s koinonia—was a mere com-
alism, the notion of a self-sustaining identity posite, a partnership that was nothing more
transformed out of its constituent elements than a contractual aggregate of individuals. By
grew considerably less esoteric with its em- the seventeeth century, however, society be-
bodiment in a replicable legal form. Hybrids spoke the greater whole, which itself emerged
and metamorphosis became a recurring theme out of self-sufficient legal entities emerging
in scholarly writing; the Church formalized from connections among individuals—each of
status as a distinct collective entity while whom was envisioned as a higher self distinct
churches and secular powers declared them- from its bodily organs and natural drives. A
selves distinct from the Church; even cut- complex array of self-similar identities pat-
ting-edge artistic theory analogized the depth terned on emergence, society, in short, was
created by three-point perspective to the col- fractal.
lective will emerging out of interactions in city Within a relatively short period of time,
government (see, e.g., Alberti, 1991). this acclimation to systems of artificial entities
By the time Thomas Hobbes wrote his defined by connection and constraint generat-
classic analysis of social theory in the mid-sev- ed a shift in the meaning of civil society itself.
enteenth century, Aristotle’s narrow focus on Cultural observers stopped limiting the scope
the city as the archetype of emergent form was of civil society to the state; instead, it became
no longer viable. Instead Hobbes describes a the corporate “realm of solidarity” that “set
nation as made up of private “systemes” of “fic- men over the animals and the basic life of mate-
titious” and “artificial” “bodies,” each of which rial existence” (Seligman, 1992: 33-34)—Ar-
mimics the relation between whole and parts istotle’s koinonia politike as the market norm.
evident in the human sense of self as a well as By the time of Hegel’s Philosophy of Right,
the collective political order (Hobbes 1651, civil society has become the realm of corporate
1996: 155-65). Writing in a time of both market relations, through which the atomistic
global joint-stock trading companies and vio- individual makes connections outside the fam-
lent sectarian conflict, Hobbes adapts Aristo- ily and in so doing mediates the ethical norms
tle’s metaphor of the koinonia politike to model that reach their highest expression in the pub-
an ethical identity that keeps the constituent lic good.
parts in check, as individuals and groups ne-
gate their own self-interest to connect within The emergence of corporate identity
a higher unity (see, e.g., Mahoney, 2000; Lilla, The diffusion of the emergent civic partner-
2007). ship from the state to private corporations
In explaining this model Hobbes did is significant for reasons that go beyond his-
not, as is commonly assume, coin a unique new toric curiosity. It is this very period, from the
image of a “social contract” the explain the ori- groundbreaking social theory of the Scottish
gins of the political order. To the contrary, he Enlightenment to the first modern corporation
was merely translating the Latin societas civilis statutes, that formalizes the hybrid structure
into an English phrase that captured the same of contemporary corporate identity, from the
image of a legal contract and a higher collective private corporation as a ubiquitous legal struc-
ture to the commercial brand.
Trexler 77
As with all forms of the civic partner- dissolved. What the architects of corporate
ship extending back through Aristotle to the form discerned was that the corporation cre-
religious state, private corporate identity arose ates an identity that its distinct from those as-
a means to model emergence and to use it as a sociated with it at any one point in time—it is
tool. As an organizational medium it exists on “one whole out of many persons,” because:
a continuum with art, music, dance and other
modes of expression that utilize rules, connec- when they are consolidated and united into a
tions and modes of distinction to create novel corporation, [the members] and their successors
patterns. Viewed from the global perspective are considered as one person in law: as one per-
these forms appear to be a whole unto them- son, they have one will, which is collected from
selves; art for art’s sake transcending the mun- the sense of the majority of the individuals: this
dane is but a more poetic analog of a corporate one will may establish rules and orders for the
brand that is legally distinct from its sharehold- regulation of the whole, which are a fort of mu-
ers, managers and patrons. At the same time, nicipal laws of this little republic; or rules and
all of these forms consist of separate elements statutes may be prescribed to it at its creation,
that viewed in themselves are routine—the which are then in the place of natural laws: the
articles and bylaws of a corporation may seem privileges and immunities, the estates and pos-
mechanical and soulless on their face, but they sessions, of the corporation, when once vested
play the same role in generating a transforma- in them, will be for ever vested, without any
tive unity as musical notes on lined paper or new conveyance to new successions; for all the
the mathematics of linear perspective. individual members that have existed from the
The connection between emergence foundation to the present time, or that shall ever
and corporate identity was more apparent to hereafter exist, are but one person in law, a per-
previous generations of legal scholars, who son that never dies: in like manner as the river
lived in an age before hyper-specialization and Thames is still the same river, though the parts
thus were more familiar with the arts and met- which compose it are changing every instant
aphor. The paradigmatic expression of this link (Blackstone, 1765-69).
was the metaphor of corporate personality, an
image now dismissed by reductionistic corpo- Whatever the additional utility of the
rate academics. What the present generation corporation and its analogs, this ratio of dif-
has lost by discarding this language as a mere ference between whole and parts is the root of
fiction is the central role of fictio—creative art, its coherence. The corporation’s name gives
from the Latin for making or shaping—in the it a distinct identity apart from its individual
culture of contemporary entrepreneurship. members; the rules contained in its charter
Far from being obsolete, Blackstone’s documents work together to create the higher
(1765-69) paradigmatic description of the collective order that members “in their natu-
law of corporate personality is the modern ral persons... could not have had” (Blackstone,
analogue to Aristotle’s koinonia politike—to- 1765-1769, Bk. 1, Ch. 18).
gether they function as the Demotic and Greek Since Blackstone’s day the image of the
in the Rosetta Stone of corporate hieroglyphs. corporate person has become a cliché. The in-
Like his predecessors, Blackstone used meta- tellectual fascination with corporate personal-
phors to model a phenomenon that we would ity evident in the works of Hobbes, Blackstone
now describe as an emergent identity, a pattern and other writers centuries ago has largely dis-
with properties distinct from those of its sepa- appeared; while corporate personality may be
rate parts. a recurring image in popular culture and prac-
As Blackstone indicates, the corpora- ticing law, theorists tend to dismiss it as little
tion arose as a counterpart to the commercial more than a distracting folk metaphor. How-
partnership, which under the law of the day ever, as Marshall McLuhan observed more gen-
was merely an aggregate of its constituent in- erally in his analysis of cliché as archetype, this
dividuals; once a partner left the partnership is precisely what makes corporate identity so

78 E:CO Vol. 10 No. 3 2008 pp. 65-85

influential. Corporate form is effective in prop- The effects of this dynamic are evi-
agating an identity defined by the difference dent in the course of corporate history itself.
between whole and parts precisely because we Through the early nineteenth century, the
no longer find it unusual (McLuhan, 1970). corporation in law was a quasi-public entity;
Whatever use we may make of the cor- as Blackstone’s chapter illustrates, the term
poration in reducing costs or maximizing ef- was synonymous with charities, churches and
ficient production, its core coherence derives corporate ventures granted charters because
from its perceived integrity as a form distinct they served the public good. It is precisely this
from its constituent elements. To this end, aspect of corporate form that contemporary
corporate law encodes the dynamic of connec- advocates of civil society overlook when they
tion and constraint depicted in the metaphor of mistakenly assume that Alexis de Tocqueville
a koinonia politike—a “partnership of the city” was referring only to nonprofits in his land-
or “social contract.” On the one hand, it con- mark description of American voluntarism. In
nects people through a common name, shared reality, de Tocqueville was describing an array
purpose and synchronized interaction; it even of cooperative enterprises seen at the time as
links people across time by enabling these ele- providing public benefit, many of which we
ments to survive the loss of any one participant would now categorize as for-profit business
in the venture. In additional, the law establish- corporations.
es the contours of an adaptive mechanism for The emergence of differentiated cat-
collective decision-making; individuals may egories within organizational law—business
have their differences, but after exchanging in- corporations, professional corporations, non-
formation they make a choice directed toward profits and so forth—reflects the same sort
re-synchronizing action. of clustering that we saw in the emergence of
At the same time, corporate law also es- distinct wells of attraction within social en-
tablishes a set of constraints that work together terprise. In certain key details they appear
to resist reduction of the whole to select parts, distinct, such as different rules for asset distri-
particularly through opportunistic self-serv- bution or different default structures for gov-
ing behavior managers and controlling share- ernance. Yet they are all self-similar, coded to
holders (see, e.g., Kraakman et al., 2004). The generate a new discrete identity from constitu-
hallmark of the modern corporation—limited ent elements, albeit to varying degrees.
liability—is one such constraint; by creating At base, corporate form is not just a set
a firewall between corporate obligations and of connections and default rules. It is an orga-
directors’ assets, the law signals that the cor- nizational technology programmed to create
poration is not equivalent to its managers. Fi- a discrete new identity. Twenty-five hundred
duciary duties perform a similar function. The years ago this identity seemed unfathomable,
duty of care and the duty of loyalty each estab- even miraculous, something capable of being
lish that a director must serve a higher interest understood only if anchored to a deity, city or
than their own; in a way contemporary corpo- nation. Over time the anchors became more
rate theory has yet to grasp, every corporation variable—an identifiable monastic order, an ac-
is to some degree a nonprofit corporation, inas- ademic universitas, a church—until eventually
much as even managers who are shareholders it became so familiar as to be credible where
must rein in their private interests to benefit an two or three people gathered together under a
entity that is greater than themselves. common name. Today the corporation is not
Like social enterprise, corporate law the only organizational medium that expresses
functions as a generative algorithm that takes distinct identity (McCracken, 2008). We have
shape in a diverse array of forms. It is at its grown so acclimated to organizational me-
most basic level the contemporary analogue of dia that mimic emergent identity that the law
the classical notion of civil society—it serves treats even the commercial partnership as a
as a means to leverage emergence as a tool, and discrete entity for certain purposes, while var-
this tool in turn reshapes how we think and ious contingent circumstances have sparked
Trexler 79
the creation of equally distinct corporate enti- water, ice and steam. However, the creation
ties, such as the limited liability company. The of a coherent emergent from human elements
brand name itself is an extension of the corpo- is a different environmental predicate, and the
rate name as a mode of creating a novel identi- result is a complex and seemingly contradic-
ty; every time we encounter a logo we perceive tory array of identities all deriving from the
a self-subsisting set of properties rooted in a impulse to rise above the mundane. On the in-
model of emergence. dividual level, our conscious ratio of difference
between whole and part takes shape in norma-
The emergence of social enterprise tive values that resist reduction to otherwise
That corporate form represents an identity deterministic forces; we strive for immortality,
distinct from its owners and managers is a le- curb our appetite for food, deny that smok-
gal principle so basic that we have lost sight of ing will hurt us, negate our sexual drives and
its significance. Limited liability, fiduciary du- engage in sex without regard to consequence
ties, the maximization of shareholder value as (see, e.g., Whitehead, 1929; Bloom, 2004).
opposed to the personal enrichment of insid- On a wider scale, groups of individuals cre-
ers—these corporate clichés are all normative ate connections and constraints that not only
institutions designed to establish a corporate extend these personal values but create new
identity that is more than the sum of its parts. collective properties. For instance, whereas
They are as much an extension of naturally oc- economies tend to exhibit turbulent swings
curring emergent form as Aristotle’s model of and the scale-free concentration of wealth in
a city partnership or our internal sense of self the hands of the relative few, we create mod-
(Whitehead, 1929, 1979; Dissanayake, 1992, els of society designed—at least in theory—to
1995; Strogatz, 2003; Bloom, 2004). generate a steady rise in wealth distributed to
Isolating the root of corporate identity all and health care is not an allocation of scarce
in a programmatic model of emergence opens assets but a fundamental human right.
dramatic new possibilities in both our theory For a non-state corporate entity, wheth-
and practice of organizational life. For the bur- er nonprofit or for-profit, ignoring the embed-
geoning research in managerial leadership and ded ratio of difference between whole and part
systems theory, the embedding of emergence can have dramatic consequences, particularly
within corporate form provides an organic ba- in the form of unwanted and burdensome gov-
sis for integrating dynamic systems research ernment regulation. It is here where the rea-
into corporate life (McKelvey, 1999; Hazy et al., soning of today’s business managers and theo-
2007; Richardson, 2008). Moreover, it adds a rists has had its greatest negative effect. The
new dimension to our understanding of orga- image of a unity distinct from its constituent
nizational law, which to far too many scholars parts is encoded in the DNA of our for-profit
seems little more than a routinized cliché un- corporate entities, yet business leaders persist
worthy of serious academic attention (McLu- in reducing corporate identity to the material
han, 1970). What professed business experts enrichment of its executives and shareholders.
have yet to realize is that the same creative im- The resulting backlash—both in public criti-
pulse we see in the creative arts animates all cism and waves of new expensive and rigorous
forms of corporate life; the Renaissance corpo- ethics rules—is akin to the reaction against the
rate consultant who nurtures an appreciation Roman Empire when it conflated Aristotle’s
for science, mathematics, literature and art ac- metaphor of civil society with paganism and
tually has a competitive edge in understanding later, Christianity; each represents the reduc-
the nuances of corporate design. tion of a higher unity to the private privilege of
In itself, a metaphorical model of emer- one part.
gent properties does not necessarily entail an A more sustainable corporate strate-
ethical commitment, any more than a hybrid gy—in the sense of maintaining the autonomy
form of collective properties emerging from of the corporate enterprise as a self-subsisting
connected atoms given a moral character to and self-regulating organizational form—rec-

80 E:CO Vol. 10 No. 3 2008 pp. 65-85

ognizes that the rules and routines of corpo- of corporate form itself. What had once been
rate form exist to do more than to generate and the prerogative of priests and civic leaders has
allocate financial return. The business part- become a social norm; we now live in a world
nership already functioned as an aggregate of where plugging into the hybridizing algo-
profit-seeking individuals, and that model is rithms of corporate form is an all too familiar
no longer the norm. Every element of corpo- experience. In this environment bifurcating
rate identity—its name, its brand, its people, the world into profit-maximizing businesses
its products—should in some way work to re- and idealized nonprofits becomes unsustain-
inforce the image of a whole beyond the parts; able; it literally does not make sense to a rising
the more that people perceive the business pri- generation accustomed to joining things to-
marily as a scale-free aggregation of profits en- gether so as to create something new.
riching insiders, the greater the likelihood that But this does not mean that social en-
society will at some point act to make the busi- terprise is itself a wholly novel concept. It is
ness something more. instead a reflection of what already exists. Ever
A similar principle applies to nonprofit since modern corporate law formalized a con-
identity. The difference between nonprofit ceptual diversion between nonprofit and for-
and for-profit entities is one of degree, not of profit entities, movements have emerged to
kind—they are both extensions of the corpo- infuse a public spirit throughout the whole of
rate model of emergence, albeit with distinct our organizational system. As we noted earlier,
wells of attraction. Whereas for-profit entities social enterprise is just latest of these move-
tolerate a certain, though not all-encompass- ments, and like its predecessors it lacks a struc-
ing, degree of commerce and personal enrich- tural basis for embracing hybrid values. Un-
ment, within the nonprofit universe the image derstanding social identity as a programmatic
of a form beyond finance and private interests model of emergence eliminates this problem.
tends toward the absolute. This means that In today’s corporate world every enterprise be-
nonprofit design requires even more rigorous comes a social enterprise once it creates a legal
attention to rhetorical effect. Nonprofit and entity or recognizable brand.
other ostensibly charitable organizations that That people feel the need to advocate
define themselves primarily as businesses— for hybrid ventures is a symptom of how famil-
as is all too often the case with organizations iarity has obscured our perception of all forms
attracted to social enterprise by the mimetic of corporate identity. At base, social enterprise
bandwagon effect—risk fostering the suspi- as a discrete movement is akin to adaptive
cion that they have in some way betrayed the morphogenesis in the biological realm, where
core values of their higher mission, regardless forms evolve in the gap to facilitate missing
of whether there is actually any wrongdoing. constructive behaviors (see, e.g., Roughgar-
Conversely, nonprofits that proceed as if they den, 2005). Among animals this is, it would
have no relation to the mundane equally gen- appear, an unreflective process, but within hu-
erate distrust, inasmuch as people intuitively man society—itself a means of modeling adap-
grasp that the higher order cannot emerge tive transformation—there is at least the po-
without connections and constraints. tential for self-awareness.
As a hybridizing algorithm, social en- The core question for facing social en-
terprise is an adaptive response to the loss of terprise is not so much whether it will last but
coherence in corporate identity. A variety of how best to exhibit what corporate life should
factors have worked together to shape the be. At a certain level the continued existence
movement as it current exists—mimetic mir- of social enterprise is more or less guaranteed,
roring of dot-com and 2.0 rhetoric, the im- much like there are still a few priests who
mediacy of electronic technology (McLuhan, speak Latin, charities called settlement houses
1964), the integrative effects of globalization or NGO workers who self-identify with civil
(Putnam, 2001; Friedman, 2007). The most society. But social enterprise ostensibly seeks
influential factor, however, is the diffusion more than mere survival as a semantic trace. If

Trexler 81
social enterprise is to be truly sustainable, it to shareholders while others view nonprofits
must find a way to become more than just the as non-market entities indicates the degree to
latest permanent revolution to experience a which the leaders of each so-called sector do
turbulent upswing and precipitous decline. not comprehend the objects of their ostensible
One common suggestion for increas- expertise.
ing the impact of social enterprise is to create Beyond rethinking group identity, so-
new separate social institutions—a social stock cial enterprise could also secure its legacy by
exchange, social venture capital funds, a social highlighting the social dimension of other or-
legal entity. As advocates note, such endeav- ganizational technologies. As noted in an ear-
ors could offer substantive advantages for in- lier section, society is a fractal concept; we have
dividuals who want to self-identify as social used the ratio of difference between whole and
entrepreneurs. Besides signaling their values parts to create a universe of self-similar hybrids.
and providing a standardized structure for From this perspective speaking of a double- or
integrating commercial business with social triple-bottom line is redundant; money and
benefit, formally recognizing a discrete social stock are themselves intrinsically social me-
enterprise sector could result in a less costly dia, with their value emerging out of complex
and burdensome operating environment than interactions and constraints (Taylor, 2004).
currently exists—social entrepreneurs argu- Once again, the methodology must shift from
ably would not face the same pressure to maxi- differentiation to inclusion—instead of graft-
mize solely the financial value of shares, nor ing social concerns onto other metrics, what
would they have to comply with the often ar- we need instead is to explain how social and
cane restrictions on business activity and profit financial values are the same.
distribution imposed on tax-exempt charities There are, of course, other useful ap-
(Wexler, 2006; Billitteri, 2007). plications of corporate identity as a pragmatic
Yet for all the strategic benefits of sep- model of emergence, but their overall effect
arate social entities, the movement’s great- should be the same: to make social enterprise
est contribution would be to remind us what a transitional form. It brings together values
corporate identity already is—and then fade that we should not have torn apart, and once
away. The first and arguably most important we learn its deepest lesson it will become ob-
step toward this end would be to stop speak- solete. While this might seem like a failure
ing of a division between “social” business and to those who champion the movement as a
existing non-profit and for-profit structures. permanent revolution, disappearance in this
Not only is the distinction untenable, it effec- context would be a mark of its success. It’s one
tively concedes that social enterprise is a niche thing to change how people talk about groups,
unto itself; by assuming a conceptual divide quite another to transform how we think.
between social and business values, it frames
the discussion in a way no argument for hybrid Conclusion

enterprise can win. Instead, advocates for the he emergence of social enterprise reflects
movement need to explain why existing enti- a systemic breakdown in our under-
ties already embody hybrid values—and how standing of an organizational medium
our failure to grasp this fuels the regulatory in- that has become ubiquitous in contemporary
efficiencies and PR debacles that ventures of all life. We have become so adept at creating new
types seek to avoid. identities that we no longer know ourselves,
The movement would also benefit and social enterprise has appeared to remind
from explaining the process of transformation us of the way things already are. Corporate
that is central to all corporate identity. All form form in its complexity is more than a mirror of
blends separate elements into a greater whole; emergence in nature; it is, to quote McLuhan,
to maintain their integrity, for-profits and “an extension of the self” (McLuhan, 1964).
nonprofits alike need to learn the art of corpo- We are all hybrids, every one of us, from the
rate composition. That some reduce business moment of our birth (Whitehead, 1929;

82 E:CO Vol. 10 No. 3 2008 pp. 65-85

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84 E:CO Vol. 10 No. 3 2008 pp. 65-85

Jeff Trexler (J.D., Yale; Ph.D, Duke) is the
Helene and Grant Wilson Professor of Social
Entrepreneurship at Pace University. Prior to
joining the Pace community, he taught non-
profit organization law at Saint Louis Uni-
versity, SMU School of Law and the Yale Law
School. In his doctoral dissertation, Professor
Trexler examined the link between nonprofit
management and organizational identity in
higher education, with a particular focus on
educational missions to China. His recent
writing and research cover a range of topics in
the area of social enterprise, including Russian
nonprofit law, Native American tribal philan-
thropy, the rhetoric of nonprofit design and the
nature of nonprofit networks.
In addition to his academic service,
Professor Trexler has worked extensively with
both U.S. and foreign nongovernmental orga-
nizations to develop more effective nonprofit
institutions. In the 1990s, he helped Russian
lawyers and government officials establish a
new legal framework for civil society in the
post-Soviet era. As a practicing lawyer special-
izing in tax-exempt organizations, he has as-
sisted a wide variety of groups covering a spec-
trum of nonprofit activity, including venture
philanthropy, grassroots education, health
care, religion and mutual aid. For the Wilson
Center, Professor Trexler is developing an aca-
demic program that integrates cutting-edge
theory with innovative social enterprise.

Trexler 85