Jonathan Witt, research fellow at Acton, recently wrote a piece at The Federalist about “social business.” He argues that it might do more good to own and operate an ethical business that follows through on its contracts and “respects the dignity of employees and customers,” rather than trying to have a “social business.” Witt begins by talking about a cardboard bike. In 2012, Izhar Gafni became relatively famous by creating a sturdy cardboard bike that could be sold to the poorest around the world for $20. After two years and unsuccessful Indiegogo campaign, this potentially revolutionary project has failed to go anywhere. Witt argues that “social business” is to blame:
After talking up the virtues of a “social business model,” the start-up behind the bike, Cardboard Technologies, expended considerable energy trying to raising capital from Indiegogo donors uninterested in profit. The lack of a profit motive may have played a role. It also didn’t help that the price of the bike kept shifting—from $20 to $290 to $95 plus $40 shipping. Would-be investors had to wonder: Was the bike going to have a revolutionary everyman price, or wasn’t it?
CEO Nimrod Elmish tried to explain, saying the bicycle’s price will fluctuate depending on where you live, costing more for buyers in wealthy countries and nothing for those in developing countries. “We want to bring a social business model that will make [it] available to all,” Fortune quoted him as saying. “We don’t have a price tag, we have a value tag.”