Lately I’ve been hearing a lot of conversation about whether the current economic meltdown represents the end of capitalism.  I think the short answer is ‘no,’ but I do think an era is over — one in which the total free, unfettered markets are seen to have all of the answers.

So we will see more regulation and oversight, which I hope will prove to be effective, but you never know.

More interesting to me is the idea that a new meme might emerge, one in which there is an understanding that a nuanced approach to markets is the answer. At Acumen Fund where I work, nearly all our investments exist in that middle space between philanthropy and a fully functioning market.  Because of all the challenges and complexities of building new markets for the poor where they do not exist, these enterprises do not generate a return commensurate with their risk.  Often we get challenged because we don’t fit neatly into any one bucket: we’re not pure charity (-100% financial return) and we’re not a private equity shop shooting for 30% returns.

I think the starting point for this new conversation is the recognition that markets are fragile, and that they don’t spring up fully formed and creating optimal results.  Borrowing a little economics lingo, there are multiple equilibria, and not all of them are stable.  And the optimal one may not be the one with the highest financial returns.