Adam Smith’s Non-Profit

Though the father of modern capitalism is generally associated with the virtues of self-interest, he also possessed a deep moral concern for our responsibility to help others. According to the founder of Year Up, this second aspect of the free market system is finally taking hold, and its effects on society will be momentous.
  • Transcript


Question: Is the sense of social responsibility increasing among your colleagues?

Gerald Chertavian: When I was at Harvard Business School back in 1990, there were probably eight people in the non-profit club. And I think we were looked at slightly askance by the folks because it wasn't the venture capital club or the finance club. Now today on campus, the largest single club at Harvard Business School is the social enterprise club. So in 20 years, or less than that, you have had a shift in something pretty fundamental in this country around, I think, young people wanting to take more responsibility for those around them, seeing the responsibility slightly more broadly defined than just motivated self-interest, and getting involved. So we have so many more young folks in our colleges, in our grad schools today, mentoring our students, volunteering, getting involved in service movements like AmeriCorps and Vista.

So I think the pendulum is certainly swinging to a direction where many young people are taking more responsibility for those around them and realizing that's not at odds with, you know, good old motivated self-interest and free-market capitalism. And in fact, you know, we all remember that Adam Smith wrote a book called The Wealth of Nations and talked about free markets and capitalism and why they were good ultimately for our society. He also wrote another book. He was talking about the theory of moral essentials. And what he said is, you can have a free market, and it's going to work best, but at the same time, at some point you have to realize that just getting more and more and more is actually not in society's best interest. So even Adam Smith, as our free-market economist would say, there's a concept of being responsible for others and wrote a book about that equally. I think we don't remember. He actually wrote a few books. One of them talked about moral essentials and the dangers of just seeing an accretive process without any sense of what's enough, or any sense of distribution that I have the opportunity how to help others. You know, that's equally part of keeping a very strong and well-functioning capitalist society in check.

Question: Is the rise in people heading into non-profits sustainable?

Gerald Chertavian: Certainly many, many more grad schools are offering loan forgiveness or a loan reduction for those going into the nonprofit sector, and I do think with the rise of social entrepreneurship, the rise of non-profits, hiring better and better people, growing more quickly, we are attracting incredible talent into this sector. And the reality is, people are getting paid more and more, so the gap between the nonprofit and private sector is shrinking. And certainly in the last ten years it's shrinking from when I started back in 2000. The other way I think about the pendulum is, I'm not a huge proponent of handouts, so I have not seen, with people who are able-bodied and able-minded, where handouts are producing good outcomes. And a sense of entitlement is a very destructive sentiment. And if you ever want to play the victim, you're not going to get ahead.

So when I think about that pendulum, there's a lot of personal accountability that has to be invested in any nonprofit organization, I think, that is serving someone who is able-bodied and able-minded. I mean, there are needs for charitable acts, or needs for handouts for someone who really cannot provide for themselves or has slipped to a place where they literally cannot take care of themselves. But that's not a majority, I think, of what we're trying to do here, especially at Year Up. We believe you've got to combine deep personal accountability -- taking charge of yourself, not saying woe is me, but saying I want a chance; I want an opportunity. I mean, America needs to be an opportunity society. And so the young adults we serve want an opportunity. They do not want a handout; they want a hand up. And so my belief is that pendulum, in terms of maybe reaching out and supporting others, also has to be balanced by a healthy dose of personal accountability for those being helped. And without which I don't think the system will ever work well.

Recorded on: October 29, 2009