02/22/2011 03:14 pm ET Updated May 25, 2011

Rich Youth Turning To Social Entrepreneurship

A young person from a wealthy family has an incredible array of choices as he or she enters adulthood and considers the age-old question--what will I do with my life? How do I make a difference? For the heir in a wealthy family, the many opportunities that lie ahead may include an undertone of anxiety, as the young adult tries to reconcile an internal conflict about the best path forward.

First of all, there is the challenge of personal identity. His life has been made special by the achievements of prior generations, some of whom have outsize achievements and personalities to match. How can he or she do anything to justify their inheritance, and make a mark in life? Adding to the family fortune alone may not count for much, but just living off the family fortune is not much of a life.

Second, as the family is well known in the community, he or she wants to do something that adds luster and respect to the family name. How will they serve the community, and earn respect for what they do with their significant wealth. This brings up the question of values, of what form the family's contribution will take. Even if he or she acts as an individual, their actions will also reflect on the family as a whole.

The aware young person beginning his or her life journey, wants to build a personal identity, that either adds to the family fortune, or to its place in the community. Is this really an either/or sort of choice, or can these competing currents be reconciled?

Working in our different spaces -- as a family governance consultant and as a venture capitalist -- with such inheritors, we have met young people who discover an incredibly creative, satisfying, self-building and socially useful path of the social entrepreneur, or impact investor to reconcile these oppositions. Taking this focus for life and work, the young person finds that the family wealth can add to the capacity of the world to sustain its future, in a way that is not simply charitable, but also offers a return on the investment. As the world moves to confront the issues of energy responsibility, education reform, and to provide a livable life for billions of people who live in poverty, good ideas are emerging that, with financial support, can make a difference that continues to grow after the initial seeding.

Social entrepreneurship takes many forms, with varying degrees of targeted financial returns (ranging from nonprofit entities to those that seek market rate returns). While some of these efforts may not lead to a product or service that can bring a return on invested capital, they share the quality of aiming not at ameliorating current pain, but in a strategy that leads to capability development to deal with the situation in the future. These ventures are entrepreneurial in that they gather the dedicated energy of a network of people to make a difference, and if not self-sustaining, at least have an impact far in excess of the capital they use. They include business ventures that create products that are useful to meeting social needs, that can be developed as profit-making ventures that have the potential to generate market rate returns.

If this young person was interested in education reform and supporting teachers, their options to effect change are higher now than they have ever been: they can donate to a nonprofit organization or even individual classrooms and teachers through Donors Choose, invest in a for profit company designed to mass produce high quality teachers like 2Tor, or become an entrepreneur and create their own solution. The next generation can help their family innovate by combining return on family capital with social responsibility.

This route is a way for multiple generations to work together in a way that respects each of their value sets and perspectives. In one company we know, the patriarch set up a US Charitable Lead Trust that could invest in socially responsible ventures. He felt that this was a way to involve and engage his son and daughter who were passionately interested in sustainability. The governance of the trust had the voting power over investments in the hands of the recipients, creating a special partnership and unifying opportunity between the two generations. The younger generation became very involved not just in giving to them, but in working with these ventures to insure their success. Their hard work deeply impressed the older generation, demonstrating both their commitment and their emerging capability.

Placing oneself and one's family in this realm, offers a special path to doing important work, and becoming a worthy heir with a sense of self-worth. This is a path that was not really open to prior generations, and allows the new generation to make a distinctive contribution to themselves, their family and the community, that can enhance both the sustainability of the family assets, and the sustainability of the world.