d.light customer illuminating her produce market

Rethinking Friedman: Imagining a More Inclusive Capitalism

Jacqueline Novogratz


This past Sunday marked the 50th anniversary of Milton Friedman’s influential essay arguing for shareholder capitalism in the New York Times Magazine. Over the past week, numerous people have written passionately about the impact of Friedman’s theory. Most have chosen a side: shareholders or stakeholders. Some have argued that the problem is capitalism itself.

Let me make a plea for nuance. Like most debates, shareholder versus stakeholder has become an ideological one. I worry the debate over shareholders and stakeholders will morph into capitalism versus socialism. At the extremes, both systems are dysfunctional.

I left a banking career 35 years ago after experiencing the way low-income people were excluded — and sometimes exploited — by capitalism. But exploitation and exclusion are not the singular domain of markets. In many of the countries in which I have worked, government and charities have treated the poor as invisible, dangerous or dependent. What matters is not the rubric, but what values lie beneath the systems we create.

The brokenness of our systems has grown out of a widely accepted ethos that placed the individual and her/his freedom at the center of all our systems. Greed was good, we told ourselves, and if we weren’t harming another person, we could do whatever we want. What we missed was that our actions — and inactions — have enormous impact on people we don’t know or see. We missed how much harm we were doing just by doing business, well, as usual.

By seeing capitalism as an either-or proposition, we lose the opportunity for a generative and creative exploration of using markets without being controlled by them. For the past 20 years, my organization has focused on investing long-term patient capital in entrepreneurs seeking to solve the toughest problems of poverty. These entrepreneurs are guided by deep commitments to purpose, including providing affordable solar electricity to the poor, revitalizing food deserts, and strengthening the health and wealth of smallholder farmers.

The most successful entrepreneurs share a commitment to serving low-income people and to treating them fully as customers. They learn to access and use a spectrum of capital — from grants to patient capital to more traditional investment. They partner with government or civil society, occasionally both, in ways that are not always comfortable. Ultimately, they recognize that success is measured by the changed lives of those served and by their ability to operate with financial sustainability, not just now but for the long-term. It is measured by whether the poor are included, not just how the rich are treated.

I think of d.light, a company started in 2007 to bring off-grid solar electricity to 1.5 billion people who lived in the dark after sunset. That level of energy poverty resulted in leaving a huge swath of people without the fundamental building block to create real change in their lives. Imagine the limitations of your prospects if you lacked the power of electricity.

Two young entrepreneurs — Sam Goldman and Ned Tozun — set out to change that. They understood that making markets work for the poor takes time. More importantly, it would take moral imagination. Only by understanding the poor as customers and building solutions from their perspectives could there be a chance of success. d.light had investors — Acumen was amongst the earliest — but we all understood their priority was serving low-income people in broken markets. Financial returns to shareholders would have to wait — more than a decade, as it turned out. But think of what those returns generated in terms of human energy unleashed: jobs, productivity, human connection, better health and a cleaner, more sustainable environment.

Building a company whose stakeholders included limited income customers meant enabling the creation of an entire ecosystem. It took partnerships with companies, governments and nonprofits. It took more patient capital so the company could fail and try again. By focusing first on the problem, then finding the right kind of capital and partnerships, d.light has brought clean, affordable electricity to over 100 million people. The company helped pave the way for a growing off-grid solar sector that accounts for nearly 400,000 jobs. Now the world can see a pathway to universal energy access — because of courageous entrepreneurs like the d.light founders who helped spark a movement focusing not simply on enrichment, but on solving one of the world’s paramount yet seemingly intractable problems.

Markets must play a role in solving our problems — but we cannot solve our problems without a more nuanced understanding of where markets work — as well as understanding their limits. In other words, what’s necessary in reimagining capitalism is not just a technical shift but a mind-shift. Our opportunity today is to move from systems that insist on profit alone to those grounded in our shared humanity and the sustainability of the earth. That requires that we focus not just on the few, but the many. We have the tools to solve our problems — and we have the ability to control markets rather than them controlling us. What we need is will — and moral imagination.

Jacqueline Novogratz is Founder and CEO of Acumen, and author of New York Times bestseller The Blue Sweater: Bridging the Gap between Rich and Poor and Manifesto for A Moral Revolution: Practices to Build a Better World. She is also a frequent speaker at forums including TED and the Aspen Ideas Festival, as well as the lecturer for the course The Path to Moral Leadership at Acumen Academy, the world’s school for social change.



Jacqueline Novogratz

Founder and CEO of @Acumen. Dedicated to changing the way the world tackles poverty. Learn more: www.acumen.org