D.A. Wallach believes we should expect more from companies we support than the “compassionate capitalist” movement popularized by TOMs and other companies like them. He argues that while consumers are busy lauding TOMs (which is just the straw man in the article) for their work donating shoes to children who need them, TOMs is busy using their commitment to the cause in their marketing material to grow the company.
In the end, he says, the enterprise does a relatively small amount of good in the world, but the company and its founders make out like bandits thanks to the financial return. Meanwhile, the argument goes, the local shoemaker in the African village is left with a failing business and hungry mouths to feed at home.
And so we arrive at the title of Wallach’s article, When Mother Theresa Drives a Ferrari, in which he proposes an alternative:
A hundred percent of all incremental value created for a business by charitable business models should be donated. This includes incremental enterprise value realized at the time of a liquidation event (sale, IPO, etc).
Up to this point, I was along for the ride Wallach was taking me on. I could see the logic in his arguments and I was already starting to form a number of potential solutions in my head. Then, with this proposed solution, he lost me.
So, thanks to the Medium platform and the culture of engagement on the site, I decided to respond (admittedly nine months after he hit publish on the post). Here is what I said in full (if you want full context for this conversation, I highly recommend reading the article first):
This solution doesn’t seem to address the root problem you identify in this article: that TOMs does not address the systemic issues driving the lack of shoes on childrens’ feet around the world.
Further, you argue that the TOMs model perpetuates the problem, and, theoretically, creates a dependency on TOMs. This is due to the fact that a local entrepreneur attempting to sell shoes cannot compete with free shoes given by TOMs.
This is a logical argument.
To then propose a solution in which more of the proceeds from a venture like TOMs goes toward the problem is to accelerate the problem itself. After all if free shoes are threatening the local economy and creating local dependencies, then more of the same would only make the problem worse.
I think the premise of the question being proposed in this article is important: does a “compassionate capitalist” approach to business solve systemic problems or make them worse?
There are many other ways to potentially address this issue without demanding more money from the company or denigrating the founders for their personal gains from the enterprise.
For example, we might argue that taking those same funds and using them to improve the sustainability of the materials used and the quality of the shoe construction actually adds more social value than giving shoes away. Perhaps this supports sustainable farming practices, creates less water table pollution, and employs people in better working environments. Perhaps TOMs could source materials from the communities in which children want for things like shoes.
In other words, asking TOMs to first take on supply chain, labor, and diversity issues in their own organization might be a better short-term use of the resources. But let’s say those two ends — giving away shoes and building sustainability and responsible business practices into the core of the business operations — are not mutually exlusive. Then should we still argue for the money to be spent differently?
Perhaps the answer is still yes. Perhaps the problem is not in TOMs mission to put shoes on the feet of children in need, but in the method by which they pursue that goal.
If this is true, then we might argue that TOMs should hit pause on their giving program to find a better solution to the systemic problem.
If we take a closer look at the way TOMs has grown their giving program over time, we see signs that they are getting smarter. For example, buying their eyewares leads to safe, corrective eye surgery for people in need. If TOMs is working with and paying local doctors to perform these surgeries then you might argue that they are already doing what you suggest.
Similarly, in buying a TOMs bag, TOMs now provides a safe childbirth to a pregnant mother in need. Is there any way to argue against the social value of this service? What if they are training local midwifes in the process, both funding safe births and training a generation of local midwives who can continue to serve the community?
The story goes on. Granted, much has happened since you posted this article 9 months ago and perhaps TOMs has improved because of conversations like this.
However, I think it’s important to explore many possible solutions and not look at an entire model as flawed because the method by which a single entity implemented the model was flawed.
D.A. made an excellent argument for why we should demand more than simplistic solutions to systemic problems from the companies we support. And then he failed to open up a conversation about any number of solutions that would actually get at the real problem.
If TOMs (or insert name of your favorite social enterprise here) works to solve systemic problems on the ground level in communities that many of us will never read about in the news, let alone visit in person… then who cares if the founder gets a big pay day in the process? Who cares if the company grows? Who cares what percentage of funds they give to the cause?
If 100 villages in Africa end up with trained midwives because TOMs put in the effort to learn to solve problems at the root level, then I don’t care whether Blake Mycoskie rides around in a Ferrari. That’s a matter of his personal values and at the end of the day, if I’m an activist, I care more about the problem being solved than whether the person solving it benefited in the process.
In an ideal world, yes, the leader of the company would share my values and he would do the right thing in shepherding her personal resources while also doing good through the company. But if I have to choose between a company who has no social mission built into its core or a company that goes out of it’s way to solve important problems in the world while the founder makes a bunch of money… I’ll take the second option every time.
Mother Theresa driving a Ferrari is not the point.
Thanks to D.A. Wallach for being willing to publicly publish a post that takes a critical stance of a widely supported model. I have enormous respect for him wading into the conversation head on and to Steven Levy for publishing the article on BackChannel. If by some long shot either of you end up reading this, thank you for your work. I hope my thoughts add to the conversation.