Daniel's been working through something that's been gnawing at him since his time with Sir Ronald Cohen — the guy who basically invented impact investing as a formal discipline. Cohen's core argument is that philanthropy is radically undercapitalized. You've got maybe eight hundred billion dollars a year in global philanthropic giving, but the UN's sustainable development goals alone have a financing gap of something like four trillion dollars annually. The math doesn't close. So Cohen's answer was to make social good investable — attach a measurable return to impact, price the externality, and unlock the two hundred trillion dollars sitting in global financial markets. Daniel wants to know what else is out there beyond that model. He's asking us to trace how formal philanthropy evolved, what other ideas have been proposed for the problem of capital eroding the common good when it's deployed purely for private wealth, and specifically — this is the part I think he's really driving at — the role of incentives and scarcity as the engine under the profit motive. Because if scarcity is what makes the whole machine run, can you ever point that machine at something that, by definition, shouldn't be scarce?
That last question is the one that keeps me up. And I think it's worth starting with what formal philanthropy actually is, because the version we have now is a surprisingly recent invention. It's not just rich people writing checks. Andrew Carnegie's "Gospel of Wealth" in eighteen eighty-nine is really the founding document. His argument was that the wealthy have a moral obligation to redistribute their surplus during their lifetimes — not as charity in the old sense of alms for the poor, but as systematic investment in institutions that would elevate society. Libraries, universities, concert halls. He built over two thousand five hundred libraries. And John D. Rockefeller took that same impulse and industrialized it — created the Rockefeller Foundation as a permanent endowment, a professional staff, a theory of change. The idea was that private wealth could be redirected post-hoc toward public goods, and that the same discipline that built the fortune could be applied to giving it away.
Make the money first, figure out the conscience later.
That's exactly the tension. And it's been the tension from day one. Carnegie's steel plants were not gentle places to work. The Homestead strike happened three years after the Gospel of Wealth was published. So you've got this paradox baked into the foundation model from the start — the wealth that funds the philanthropy was generated by the very dynamics the philanthropy claims to address. And the scale problem Daniel's pointing at is real. Eight hundred billion sounds like a lot until you put it next to the problems. Climate adaptation alone is going to cost trillions. You can't charity-gala your way out of sea-level rise.
So walk me through how we got from Carnegie's libraries to Cohen's spreadsheets. What actually changed?
The big shift happens in the nineteen nineties. Before that, you had the Ford Foundation and the other mid-century giants professionalizing the model — bigger staffs, more systematic grantmaking, but still fundamentally the same structure. Wealthy endowment, annual disbursements, program officers deciding who gets the money. Then in the nineties you get this wave of business thinking crashing into the nonprofit world. People start talking about "strategic philanthropy" — measurable outcomes, logic models, return on investment applied to social programs. The language of venture capital starts bleeding in. "Patient capital," "capacity-building," "scaling what works." And by the late two thousands, Sir Ronald Cohen formalizes the whole thing into what he calls impact investing. The key innovation is the "impact multiple of money" — the IMM. It's a metric designed to quantify social return per dollar invested, so you can compare a solar farm in Kenya to a toll road in Brazil on a single ledger. The promise is that if you can price social good, institutional capital will flow toward it the same way it flows toward anything else with a demonstrable return.
And the mechanism there is internalizing externalities. Take something the market treats as free — clean air, a stable climate, public health — and give it a price so the market can see it.
That's the theory. And it's not nothing. The Global Impact Investing Network — the GIIN — pegs the impact investing market at about one point one six trillion dollars in assets under management as of twenty twenty-two. That's real money. Cohen's argument is that philanthropy's eight hundred billion a year is a rounding error next to the two hundred trillion in global financial assets. If you can redirect even five percent of that toward measurable social good, you've multiplied the available capital by an order of magnitude. And some of this works in practice. You get a solar installation in sub-Saharan Africa that demonstrates market-rate returns plus a measurable reduction in carbon emissions, and suddenly pension funds are interested in a way they never were in a grant proposal.
But you said "that's the theory." I hear a "but" coming.
The "but" is that the profit motive runs on scarcity. That's what Daniel's really asking about. Scarcity creates price signals. If something is abundant — air, sunlight, a stable climate — it has no price, and the market ignores it. If you want the market to care about carbon emissions, you have to make carbon scarce. Cap it, tax it, create a trading scheme. But here's the thing: the greatest goods are public goods. They're non-rivalrous and non-excludable. My breathing clean air doesn't stop you from breathing it. The whole point of a public good is that it's not scarce. So you're trying to solve a problem created by the profit motive's indifference to abundance by... manufacturing scarcity in the thing you're trying to protect. It's a deeply weird move when you sit with it.
It's like treating a fever by turning up the thermostat so the medicine knows where to go.
That's — yeah, that's actually not bad. The price signal is the thermostat. But the fever is the problem. And then you run straight into Goodhart's Law. When a measure becomes a target, it ceases to be a good measure. The moment you attach financial return to a social metric, you create an incentive to game the metric. And this isn't a bug, it's structural. If my bonus depends on the IMM of my portfolio, I'm going to find companies that score well on the IMM, regardless of whether they're actually doing anything additional. Which brings us to the additionality problem.
Define that.
Additionality is the question of whether your investment caused something to happen that wouldn't have happened anyway. If I invest in a solar company that was already going to get funded by conventional venture capital, my impact is zero. I didn't add anything. I just relabeled a standard investment as "impact." And there's good reason to think a lot of that one point one six trillion dollars is exactly that — conventional investing with an ESG sticker. The capital isn't additional. It's just rebranded.
So the trillion-dollar number is partly a branding exercise.
Partly. I don't want to overstate it — there are genuine impact funds doing real, additional work. But the incentive structure pushes toward relabeling because it's cheaper and easier than finding genuinely underserved opportunities that also deliver market-rate returns. The whole point of market-rate returns is that the market is already serving those opportunities. If something can deliver a competitive return, capital will find it with or without the impact label. The impact label is supposed to direct capital toward things the market is missing — but if those things could deliver market-rate returns, the market wouldn't be missing them. There's a circularity problem.
So the mechanism undermines itself. The more successful impact investing is at attracting capital, the more it converges with conventional investing, and the less additional it becomes.
And that's before you get to the deeper problem Daniel raised about scarcity. Let me put it this way. The profit motive doesn't respond to need. It responds to price signals. If the price of carbon is zero — which it was for most of industrial history — the profit motive actively destroys the climate. Not because anyone is evil, but because the signal says "this resource is free, use as much as you want." The profit motive is value-neutral. It's a heat-seeking missile for return, and the heat is price. No price, no heat, no missile.
So what else is on the table? If impact investing has this structural ceiling, what are the alternatives Daniel's asking about?
There are a few different escape routes people have proposed, and they all try to solve the same problem from different angles. The first one is what I'd call the moonshot model — mission-driven public-private hybrids. Think of the Green New Deal's proposed public financing mechanisms, or the way the US government basically created the semiconductor industry through DARPA and procurement contracts. The idea is that the state takes the lead on directing capital toward public goods, and private enterprise executes. It's not philanthropy and it's not market-driven investment — it's a third thing, where the profit motive is harnessed but not in charge. The state sets the mission, the market figures out how to deliver it, and the returns are a mix of financial and social.
That requires a functional state. Which is its own scarcity problem.
It does. But when it works, it works at a scale that philanthropy can't touch. The entire internet came out of a government research project. The mRNA vaccines were built on decades of public funding. The market commercialized both, but the state did the heavy lifting on the basic research where there was no price signal yet.
What's the second model?
This is the one that I think is interesting as a structural fix. The idea is that a company's ownership is structured so that investor returns are capped and the company's mission is locked in legally. The profits can't be extracted beyond a certain point — they get reinvested in the mission, or distributed to workers, or directed toward a social purpose. Patagonia did this in twenty twenty-two. Yvon Chouinard transferred ownership to the Patagonia Purpose Trust and the Holdfast Collective. The trust holds the voting stock and locks in the mission. The collective receives all the profits that aren't reinvested in the business and directs them toward environmental causes. It's not a foundation. It's not an impact fund. It's a for-profit company whose profits can't be privatized beyond a cap.
And the mechanism there isn't pricing externalities — it's just removing the incentive to extract.
Right. You don't have to price carbon if the company's legal structure prevents it from profiting off carbon emissions. The limitation is that it's still voluntary. You have to get founders and investors to agree to cap their own returns. That's not going to scale to the entire economy. But it's a proof of concept that you can build a company where the profit motive is deliberately constrained.
And the third model?
Sovereign wealth funds and universal dividends. The Alaska Permanent Fund has been paying every Alaska resident an annual dividend from oil revenues since nineteen eighty-two. Norway's oil fund is over a trillion dollars and it's essentially a giant public endowment. The idea is that the state owns capital — natural resource revenues, or a share of corporate equity, or land value — and distributes the returns as a public good. It's not philanthropy because it's not voluntary. It's not impact investing because there's no individual investor seeking a return. It's just collective ownership of capital, with the returns distributed to everyone.
And that decouples capital allocation from the scarcity signal entirely. The fund owns assets that generate returns, but the allocation decision isn't driven by which asset has the highest private return — it's driven by what serves the public interest over the long term.
That's the theory. In practice, sovereign wealth funds still mostly invest for financial return. Norway's fund owns shares in oil companies. But the structure at least makes it possible to do something different. The fund's mandate could be changed. You could imagine a climate transition fund that explicitly prioritizes decarbonization over maximizing returns. The point is that the capital is collectively owned, so the decision about what to optimize for is a political question, not a market one.
Which brings us back to Daniel's core question about incentives and scarcity. All three of these alternatives — public-private hybrids, steward ownership, sovereign wealth funds — they all try to escape the scarcity paradigm in different ways. The moonshot model says "the state creates the demand signal where the market won't." Steward ownership says "cap the extraction incentive so the scarcity signal doesn't matter." Sovereign wealth funds say "own the capital collectively so the allocation decision isn't driven by private return at all."
And none of them fully escape it. The moonshot model still relies on the state being functional and responsive to public need rather than captured by private interests. Steward ownership still requires someone to voluntarily give up returns. Sovereign wealth funds still invest in markets that run on scarcity. What you're really asking is whether you can build an engine that runs on something other than scarcity, and I'm not sure anyone has a working model for that at scale.
Because scarcity isn't just a feature of markets. It's manufactured. Property rights, pricing mechanisms, exclusion — these are choices. The profit motive responds to price signals, but prices are set by legal and political decisions about what counts as scarce and who gets to exclude whom.
That's the part most coverage misses. People talk about scarcity like it's a fact of nature. It's not. Clean air is abundant until you build a legal framework that lets someone charge for it. Carbon emissions were free until cap-and-trade created a market for them. The EU Emissions Trading System has been running since two thousand five, and the carbon price has bounced around from under five euros to over a hundred euros a ton. That volatility isn't the market discovering a natural price — it's the market reacting to political decisions about how many permits to issue, who gets them for free, and what counts as an offset. The scarcity is entirely constructed.
So the question isn't "can we make the market care about public goods." The question is "who gets to decide what's scarce, and toward what end."
And right now, the answer is that the people who benefit from the current scarcity structure are the ones deciding. Which is why impact investing, for all its genuine achievements, keeps running into the same wall. You're asking the beneficiaries of manufactured scarcity to voluntarily un-manufacture it. Some of them will — Chouinard did, Cohen is clearly sincere — but the system isn't designed for that. The system is designed to compound the advantages of whoever controls the scarcity signal.
I want to bring Hilbert in here, because it turns out he has a very specific — and slightly traumatic — history with measuring social return.
Hilbert: I was a social audit consultant in ninety-eight and ninety-nine.
Of course you were.
Hilbert: Boutique firm. Twelve people. We had a methodology. Forty-seven questions on a spreadsheet. Scored companies on board diversity, recycling policy, community engagement, whether the mission statement used the word "community." We charged fifteen thousand dollars per audit. The scores went into a report with a cover letter and a bar chart. Not one investor ever used one of our reports to make a decision. Not one.
What was the highest-scoring company you audited?
Hilbert: A company called NetValue. Scored an eighty-four out of a hundred. They had a recycling program, a diverse board, a mission statement that mentioned "community" three times. They were a Ponzi scheme. Collapsed in two thousand one. The recycling bins were real, I'll give them that.
So the spreadsheet measured everything except whether the business was real.
Hilbert: The spreadsheet measured what we could count. We could count board seats. We could count the word "community." We couldn't count fraud. And we weren't trying to. We were selling a product. The product was a number that made companies feel good and investors feel diligent. The number didn't have to mean anything. It just had to exist.
This is Goodhart's Law in a forty-seven-cell grid. The moment the score becomes the target, the score stops measuring what you think it's measuring. And in your case, it was measuring... what, exactly? The quality of the PR department?
Hilbert: Mostly it measured whether the company had someone on staff who knew how to fill out a questionnaire.
Do you still have the spreadsheet?
Hilbert: Printed copy in a box in my flat. The formulas are in Lotus one-two-three.
Lotus one-two-three.
Hilbert: It was nineteen ninety-eight.
The detail I can't get past is that one of the questions was literally whether the mission statement contained the word "community."
Hilbert: Question thirty-one. "Does the company's published mission statement or statement of values include the word 'community'?" One point if yes. We didn't specify which community. We didn't ask what they did for it. Just the word.
So you were measuring lexical proximity to the idea of social good.
Hilbert: We were measuring whether someone in marketing had read a trend report. And the thing is, I've been watching this impact investing stuff, and I see the same thing happening with more decimal places. The IMM, the ESG scores, the SDG alignment metrics — it's all fancier versions of question thirty-one. You're still counting what you can count. And the people designing the metrics have never been poor. They've never needed a return on anything except their spreadsheet.
That's a different critique than the scarcity argument. You're saying the problem isn't just the incentive structure — it's who's building the structure.
Hilbert: I'm saying if you've never had to choose between medicine and rent, you don't know what "social return" means. You think it means carbon offsets and board diversity. Those are fine. But they're not what matters to someone who's actually poor. And nobody asks them what should be on the spreadsheet.
That's... actually the sharpest version of the additionality problem I've heard. It's not just that the capital isn't additional. It's that the entire measurement framework is built by and for the people deploying the capital, not the people it's supposed to help.
Hilbert: NetValue scored an eighty-four. The recycling program was in the headquarters in San Francisco. The fraud was in the accounting department on the same floor. Our methodology didn't have a question about fraud. Why would it? Fraud isn't a social impact metric. It's just the thing that makes all the other metrics meaningless.
The spreadsheet lives in a box in your flat.
Hilbert: I'm not throwing it out. It's a historical document.
The spreadsheet lives on. But the question Daniel raised — whether the engine itself needs replacing — that's where we're going to leave this. Because Hilbert's forty-seven questions are a smaller, cruder version of the same logic that drives the trillion-dollar impact investing industry. Count what you can count, price what you can price, and hope the counting and pricing add up to something real. Sometimes they do. Often they don't.
The structural reason they often don't is the one Daniel put his finger on at the start. The profit motive runs on scarcity. The greatest goods are abundant. You can't price abundance without destroying what makes it valuable. So you're left with a choice. You can keep refining the metrics — better IMM calculations, better ESG scores, better additionality audits — and get incrementally better at directing capital toward things the market would otherwise ignore. That's Cohen's project, and a trillion dollars is not nothing. Some real good has come out of it.
Or you can try to build institutions that don't run on scarcity at all. Steward ownership companies that cap extraction. Sovereign wealth funds that distribute returns as a public dividend. Publicly directed investment that creates markets rather than responding to them. These aren't tweaks to the existing engine. They're different engines entirely.
None of them are at scale. Patagonia is one company. Alaska's dividend is a few thousand dollars a year. Norway's fund still owns fossil fuel stocks. The moonshot model requires a state that can actually execute, which is its own whole episode. So you're left with this tension. The impact investing model is real, it's growing, and it's structurally limited. The alternatives are structurally more sound but nowhere near the scale of the problem. And the clock is ticking on climate, on biodiversity, on public health.
If you take one thing from this, it's that the scarcity Daniel asked about isn't a fact of nature — it's a design choice. The profit motive doesn't ignore public goods because they're inherently unprofitable. It ignores them because we've built a system where abundance has no price, and then we act surprised when the market treats it as worthless. Changing that doesn't mean finding a better price. It means asking who gets to decide what's valuable in the first place.
Right now, the answer is the people who built the spreadsheet.
We should probably let Hilbert go home. He's been standing there thinking about Lotus one-two-three for twenty minutes.
Hilbert: I'm fine.
That's what worries me.
This has been My Weird Prompts. Thanks to our producer Hilbert Flumingtop, who apparently has a museum of failed social audit methodologies in his apartment.
If you want to send us your own questions about the structural limits of capitalism — or if you have a forty-seven-question spreadsheet you'd like to defend — email the show at show at my weird prompts dot com. We'll be back soon.
