LanX: A Social Innovation Conversation

On the observation of The Grameen Creative Lab's inaugural "Worldwide Social Enterprise Day," I was fortunate enough to have a discussion with Trex Proffitt, architect behind the Lancaster Stock Exchange, or the LanX project. LanX is a securities exchange designed for local businesses and local investors in South Central Pennsylvania. In world of financial consolidation and systemic risk, LanX is bucking the trend with its value proposition echoing the likes of E.F. Schumacher; that Small is Beautiful. In is in this spirit that LanX was also recognized as the "Most Innovative Non-profit" at the Social Innovation Awards 2010.

Proffitt described a tremendous financing gap for SME's; particularly those seeking out between $500,000 and $10M in funding. LanX provides an innovative new opportunity to fill this niche finance space. Come to find out, local exchanges are nothing new. Pittsburgh and Philadelphia have each boasted local exchanges in their pasts. The arguments against local exchanges are the same now as they were then; they are simply less efficient; fragmented markets invariably consolidate.

For social entrepreneurs that understand externalities and the limitations of economies of scale however, the local exchange provides a rewarding alternative. Proffitt explained how technology is affording many opportunities to meet fiduciary responsibilities while simultaneously controling costs, thus improving the feasibility and reproducibility of the local model. Proffitt's goal of 50 local exchanges nationwide seems not just viable, but valuable.

As a huge proponent of the local living economies movement, (http://jm.ly/LmOtzQ) I was pleased to find out that LanX has developed a unique strategic partnership with the Susquehanna Sustainable Business Network. According to Proffitt, not only have the two organizations collaborated on an innovation transfer grant, the SSBN provides fertile grounds for prospective, established local businesses that may fit well within the LanX model. Unique partnerships like these provide an impetus for educational outreach Proffitt explained has been so important. This builds valuable social capital otherwise absent from non-local exchanges.

I like to think of the LanX project as a Michael Shuman-esque vote for local self-reliance and entrepreneurship. Shuman explores the importance behind local exchanges in his book, The Small-Mart Revolution. Proffitt describes it as a medium for successful small business owners to tell their unique story in a manner that resonates with community investors. Framing the relationship between the two financing parties in this way creates compounding and cascading positive impacts for businesses, investors, the community and the bio-region. Greater resilience is developed overtime as the free hand of the market unleashes biomimetic powers of self-organization. Beyond social enterprise, this triple top line innovation in action; let's hope such innovation finds its way to a community near you and me.