Strength in Numbers: Why Partnerships are Critical for Social Value Investing

Featured Events | Feb 10, 2020 | Cynthia Ramsaran

When it comes to solving complex, large-scale challenges facing society, no one organization or sector can work alone.

Still, solutions do exist for many of the world’s biggest problems. In fact, many are found through new partnerships that bring together leaders from the public, private, and philanthropic sectors, according to Howard W. Buffett, adjunct associate professor and research scholar at Columbia University’s School of International and Public Affairs, and co-author of Social Value Investing: A Management Framework for Effective Partnerships.

Buffett shared his framework and examples from the book in a panel discussion sponsored by the Gabelli Center for Global Security Analysis on Feb. 5th, at the University Club. He attributes the framework to his grandfather, Warren Buffett, well known for his de-centralized management style and success with value investing.

Inspired by value investing – picking stocks that are trading for less than their intrinsic or book value – Buffett’s social value investing framework provides tools for organizations to maximize collaborative efficiency and establish positive social impact so that major public programs can offer innovative, inclusive, and long-lasting solutions. Two examples he cited include the revitalization of Central Park and the Highline, in New York City.

“When there is a collaboration between two different organizations, and there is trust established between the two, they can accomplish something bigger than one organization can do alone,” said Buffett.

Visionary Leaders for Strong Collaboration

When asked how he came up with the idea for the book, Buffett said that he, along with co-author William B. Eimicke, believed the world can be much improved from where it is today. They saw the need to tell success stories about remarkable CEOs, philanthropists, and community leaders who partnered with the goal to improve society.

According to the authors, cross-sector partnerships are well-suited for addressing complex societal challenges, but only if the people leading them are highly effective in coordinating their team’s efforts across partnering organizations.

“These partnerships need a leader and champion,” said Buffett. “Without it, we cannot succeed.”

Buffett said Social Value Investing can be used as a handbook on how partnerships have succeeded and how other organizations can replicate that success. In it, he and Eimicke present a five-point management framework for developing and measuring the success of such partnerships. The book also offers practical insights, case studies, and methodologies for any private sector CEO, public sector administrator, or nonprofit manager hoping to build successful cross-sector collaborations for social good.

Panelist Matthew Bishop, Social Progress Index co-founder and former U.S. business editor, New York bureau chief and global business editor of The Economist, said the book is timely for organizations that realized partnerships are necessary for success.

“There was a moment where people realized no one sector could solve all of the challenges the world is facing on its own,” said Bishop. “We need to get these partnerships to work, agree on what success looks like, and measure progress.”

Partnering for a Better Tomorrow

How does a social value investor measure success? According to Buffett and Bishop, measurement depends on what the end result looks like. Defining success dramatically affects the intentions, actions, and results of partnerships for social good. To add another layer to that, Buffett says society is in the process of rediscovering what it means to succeed.

“As a society, if we consider changing the world, we need to address what success looks like,” he said. “While older generations considered wealth, power, and fame as the definition of success, younger individuals see this differently.”

For mathematical measurement, the authors lay the groundwork for measuring performance through an innovative impact rate of return (IRR) formula that can help determine whether partnerships are ultimately “doing well by doing good.” This formula also has the potential of standardizing how potential investors and participants evaluate the performance of a specific project.

Regardless of how goals are defined, the journey is the same for those across the domains of public policy, economic development, corporate governance, and philanthropy: participation in “making the world a far better place.”