Tax breaks for pharmaceuticals??? Here's a better idea

Offering financial incentives to pharmaceutical companies to encourage the development of vitally needed antibiotics, as suggested in an article in the New York Times last week, is like the battered wife trying to buy her alcoholic husband’s affection by pouring him another drink.

What’s next? Tax breaks to gun companies for installing trigger safety locks? To food companies for reducing the amount of corn syrup they dump into junk food? To oil companies for safer drilling rigs? How soon until we offer more tax breaks to the financial giants if they promise not to take advantage of us so badly the next time around.

Paying companies to act responsibly not only feels wrong, it won’t work. It encourages the poor behavior which created the problem and sets up a Pavlovian cycle that elicits yet more bad behavior in the expectation of yet more reward.

Unfettered, unfiltered capitalism commoditizes everything; you, me, our water, even the air we breathe. Everything is measured only by its financial value, its usefulness in making a profit. If it can’t make money, it doesn’t count, and any collateral damage caused in making the big dollars is beside the point. In the pharmaceutical industry one such externality is the buildup of drug-resistant bacteria in our industrial farms through the overuse of antibiotics.

As Einstein said, not everything that counts can be counted, and not everything that can be counted counts. This short-sighted, bottom-line approach may have worked long ago, when natural resources were vast and the negative consequences of selfish behavior were small, but times have changed. We need a new approach to help solve some of the challenges facing us today.

Let’s support a whole new approach to business that willingly puts purpose before profit and that doesn’t need to be bribed to do so. We don’t have to reject the free market – on the contrary, if the market is free then it can be open to motivations-and metrics-- other than profit. After all, in any complicated system, no single metric is enough to ensure the best overall outcome. There’s no single metric for health. It’s a balancing act that requires many systems to act together in harmony for the greater good. Healthy blood pressure won’t prevent pancreatitis. Good cholesterol won’t prevent cavities. And just as you cannot cure obesity with Big Macs, you cannot effectively wean Big Pharma off its profit myopia by offering them more money to act responsibly.

We can no more afford to heed the siren song of the profit imperative than we can personally afford to give in to the fat and sugar imperative our bodies request. This vestige of our ancestors is no longer necessary to sustain us, and in fact now causes us harm. Most of us realize we should not eat as much as our bodies tell us to – that we need to make healthier choices even at the risk of affronting our ravenous id.

So too does business need to rethink old drives. A new business model, Social Enterprise, doesn’t preclude profit, but makes it one of many metrics of health, not the raison d’etre. The primary goal of social enterprise is its ability to make a contribution.

There are many companies currently operating under this model. Some, such as OneWorld Health and Medicines360, are non-profit pharmaceutical companies aiming to develop affordable medical solutions. They’re looking for cures to diseases which have been ignored by Big Pharma’s bean counters, who predict a lack of the requisite return on investment, either because there aren’t enough sufferers to make it worthwhile (i.e. highly profitable), or the sufferers are too poor to pay. Companies like OneWorld Health are going where the profit imperative will not.

What’s more, these socially conscious companies tend to be small, startups, which economists agree are the engines of future economic and job growth. So, investing in these kinds of companies will create more jobs, create more competition, and engage not just the pocketbooks, but the hearts and minds of those who want to make a difference.

Einstein’s warning that we can't solve problems by using the same kind of thinking we used to create them has never been more relevant. Let’s think outside the box, and beyond the bottom line. There’s nothing wrong with contributing money, or even tax dollars, to help a company grow. But why invest in the bloated, exploitative system that brought us to this sorry pass? Let’s put some money toward our own evolution by giving social enterprise ventures a boost.

Why Money is Like Beer

When he was 21, heir to the Baskin-Robbins throne John Robbins left the ice cream company and his fathers money, determined to find happiness and fulfillment on his own. After becoming a successful author and establishing an independent fortune, he lost everything in the Bernie Madoff scandal. Through tumultuous relationships with money, Robbins discovered that: "Money, it seems, is a little like beer. Most people like it, but more is not necessarily better. A beer might improve your mood, but drinking 10 beers not only won't increase your happiness tenfold, it might not increase it at all." In a reflective essay, Robbins talks about his relationship to money and the economics of happiness. more

Social enterprise advances despite snags

Stephanie Strom’s article (NY Times October 5, 2010) headlines Hybrid Model for Nonprofits Hits Snags. Of course it has - It’s a relatively new business model, at least here in the United States, and it has hit snags. It’s cutting edge. If it were simple we’d be doing it already. And look where simple has gotten us.

Our traditional business model has one simple measure of success – profits to shareholders. This approach focuses on the bottom line to the detriment of us all. It creates externalities that are killing us but which have no place in the simple business model. Externalities such as depleted natural resources, diminished air quality, over fishing, and climate change. With this simplistic business mindset it makes sense to outsource and offshore work. In the name of profit companies have cut everything to the bone, and dispensed with loyalty, common sense and decency, all in the name of the clear mission that Mr. Hussy the “no-nonsense investor” speaks of. Clearly our traditional business model has hit some snags too.

Social Enterprise solutions are springing up everywhere from the nonprofit end of the spectrum to the market oriented domain. Social Enterprise, for those new to the term, is any organization structured to use the free market to make a social contribution. For the nonprofit sector social enterprise offers a path to become self-sustaining - an attractive alternative to any organization now relying on the dwindling beneficence of public and profit sectors. For the more tradition businesses it offers a way out of the soul numbing world of business as usual and offers an opportunity to use ones business to make a difference.

There are a lot of questions to be answered and a lot of problems to be ironed out for sure. But let’s not wave the white flag yet. Creating investment vehicles for these new structures is one of the key areas for development. Traditional investors are out to maximize their return. Social Investors are willing to take less of a monetary return in exchange for a larger social return. Involving traditional venture capital in a social enterprise is like asking a fox to manage a chicken orphanage. Chances are the fox sees a meal rather than an opportunity to contribute. No one should be surprised at the outcome.

Describing the hybrid as a pushmi-pullyu is a wonderful analogy but perhaps the more descriptive picture is that of the typical human being with an angel on one shoulder and a devil on the other. Everyday we’re faced with decisions of me versus we. Should you turn in the wallet you found on the sidewalk, should you lie on your expense report or cheat on the exam. Should you use the emergency lane to get around the traffic jam at rush hour. We make these complicated decisions daily, jumping over the mental hurdles of conflicting goals of maximize personal gain with something more beneficial to the whole. It’s what we do as human beings functioning in a society. We compromise and cooperate.

The news isn’t that we’ve hit snags. You don’t see the headline “Search for Cancer Cure Proves Difficult.” The news is that we’re trying brave new approaches and the intrepid explorers like the founders of GlobalGiving, Unitus, and Freelancer’s Union should be applauded for venturing out into this new terrain.

There will be failures and there will be setbacks. But progress is being made and will continue to be made until someday, like the hybrid car, the hybrid business becomes ubiquitous and we’ll wonder what all the fuss was about. We’re inching forward, mistake by mistake, and that is how evolution works.

Jessica Jackley: Poverty, money -- and love | Video on TED.com

Listen to the co-founder of Kiva.org talk about how we can participate in community and help each other through micro loans and love. It's a beautiful and inspiring 18 minute talk.

Jessica Jackley: Poverty, money -- and love | Video on TED.com