A second ‘invisible hand’ – Is this what drives social entrepreneurs?

Managing B2

ADAM Smith has two hands. More popularly known as the “invisible hand,” he introduced the theory in “The Wealth of Nations.” This refers to the pursuit of self-interest by individuals, which, in a free market, would drive them to create profit- driven organizations that lead to efficient economic outcomes. Less known is the second invisible hand, which refers to individuals’ sense of sympathy toward others. In “Theory of Moral Sentiments,” he acknowledges how human beings’ sense of attachment and desire their economic behavior.

Is this second invisible hand what drives social entrepreneurs? Filipe Santos, Academic Director of the Social Entrepreneurship Institute at INSEAD, seems to think so. And I tend to agree.

In “Positive Theory of Social Entrepreneurship,” Santos argues that within each individual, there are two main drivers of behavior: selfinterest, in which individuals derive utility from improving one’s welfare ( in the words of Adam Smith, the strong human drive for “bettering one’s own situation”); and othersinterest, in which individuals derive utility from improving the welfare of other members of society. He calls this behavioral assumption “heterogeneity of interests.”

The strength of each driver, Santos hypothesizes, varies among individuals as some people may have more propensity for self-interest, while others may have more propensity for others-interest. While these propensities may change over time due to several factors (e.g., how people see others behaving, how much wealth people already have, and social expectations), the central argument remains: that individuals “will derive their utility from a balance of self-interested and others-interested outcomes.” This will consequently influence their behavior and the types of activities in which they will