Millennials and Hybrid Legal Structures Are Here to Stay

When Millennials Mark Zuckerberg and Priscilla Chan announced their intentions last year to divest 99 percent of their wealth to social and environmental causes—not through a private nonprofit foundation like the Gates, but through an LLC—the ground shifted beneath the field of social innovation. Their commitment came in the same year that the largest and most diverse generation in the nation’s history also became the highest percentage of the electorate and workforce. But the Chan Zuckerberg Initiative’s hybridization of a traditional for-profit structure is no coincidence.

Millennials and the movement to pioneer hybrid legal structures—new business forms that incorporate aspects of both nonprofits and for-profits—are animated by the same historic forces. By looking to their commonalities, critics and supporters alike can sharpen their arguments and better explain the past, present, and future of these mutually reinforcing forces of social innovation.

Specifically, both are animated by the following four values and beliefs:

1. Authenticity: Social constructs—even ones like gender roles—that fail to provide an authentic view of reality are increasingly considered illegitimate by the ascendant generation. Things are no longer black and white; they exist on a spectrum or in hybrid forms. The current mainstream paradigm that pretends to divorce financial value creation from social and environmental impact is incongruent with Millennials’ basic understanding of the world.

Similarly, hybrid legal structures are at their core an attempt to codify a more authentic representation of economic performance across financial, social, and environmental bottom lines. Millennials implicitly understand that the ideal hybrid provides a more accurate representation of economic activity. The perception that these new forms are more “real” than traditional alternatives will continue to attract Millennial entrepreneurs to the movement.

2. Transparency: In part to affirm their assessments of authenticity, Millennials seek greater transparency throughout all aspects of society. From a remarkable lack of concern about the hyper-public nature of social media accounts to more controversial examples like their own Edward Snowden’s treasonous leak—or courageous whistleblowing, according to Millennials—of classified documents, this shared value is already transforming society.

While far from perfect, early hybrid forms attempted to incorporate greater transparency into the very DNA of for-profit legal structures. The current paradigm that narrowly evaluates success based on the single bottom line of profit, without consideration of social and environmental impact, runs counter to this generation’s most deeply held beliefs. To paraphrase Jed Emerson, this paradigm is logical, represents the current understanding of the world, and is inherently wrong. Millennials are rejecting it in favor of the triple bottom line.

3. Accountability: Millennials grew up in the aftermath of Enron in 2002 and came of age during the Great Recession of 2008. In both cases, the failure of the government to hold corporations accountable for breaches of public trust has greatly affected the worldview of this generation of unabashed capitalists and consummate consumers. In advance of more systemic changes, this generation believes it is holding corporations accountable with every socially conscious purchase and impact-focused donation. Whether nonprofit, for-profit, or hybrid, Millennials’ conscious consumerism and return on investment-focused philanthropy are already changing the practices of the US’s corporate citizenry.

Similarly, the social innovators leading the hybrid movement have advanced efforts to increase accountability of both for-profit and nonprofit social enterprises by combining the best attributes of each. Undoubtedly, both hybrids and Millennials fall short of perfection in this regard. Nonetheless, there is much to be learned from the early successes and failures of both.

4. Sector-Agnostic: While more research is needed, early indicators are leading some to conclude that Millennials are characteristically sector-agonistic. Whether working at a for-profit, nonprofit, private, or public institution, Millennials seem to believe they can have a positive impact on the world and live out their core values. The mere existence of boundary-spanning, for-profit social enterprises (hybrids like the L3C and benefit corporation) illustrates that the economic silos of the past are no longer beyond reproach. The “rise of the fourth sector” portends a continued blurring of the lines between the three traditional sectors of the economy that hybrids exemplify.

It seems safe to assume that the vanguards of the Millennial generation and hybrid movement, respectively, will continue to seek more authentic, transparent, and accountable mechanisms for changing the world. As members of each push their triple-bottom-line worldviews into more and more areas of American society, both will continue to have a positive and mutually reinforcing effect on the other. Explaining the past, present, or future of either requires that we understand the commonalities underlying both of these powerful social innovation forces.

Read more stories by Chris Miller.