May 20, 2010
Building Social Business
I listened to Muhammad Yunus talk about building social business in Chicago today. I don’t usually just rehash material on this blog, but I also love making exceptions and adding to the unpredictability and randomness to my collection of posts. So here it is: a rare summary post.
In a less-than-hour lecture, Professor Yunus made three points, all uncannily genius and, of course, obvious in hindsight.
Conventional business is one-dimensional, but human beings are multi-dimensional.
Actions can be divided into 2 tags: selfish and selfless. Conventional business is selfish. The purpose is to increase the bottom line. But that one-dimensional approach to capitalism doesn’t capture the multi-dimensional reality of human experience.
I wrote a post about this before, but when a Nobel Peace Prize winner says it, the audience is slightly more willing to subscribe to the notion.
Measures of credit worthiness are dysfunctional.
In January 2008 (before the crisis), Grameen Bank came to Queens, NY to apply the same concept of microfinance in a developed country that they had been applying in the third world and to exercise the belief that all human beings have a right to credit. Grameen America has since loaned out $2.3 million dollars with a repayment rate of 99%. And all this amidst the defaults and crashes faced by conventional institutions who considered Grameen’s typical borrower unworthy of credit.
This obviously brings up the question of what credit worthy means and how it is measured and influenced.
Philanthropy is an incomplete picture
Government programs that offer aid and welfare and individuals who donate don’t eliminate poverty, they merely sustain it or reduce the impact. To eliminate poverty, the cash flow needs to become self-sustained. It must be a cycle. And that is the concept behind a social business: A business that exists to solve a problem, not to create a profit.
Yunnus elaborated on joint ventures he is organizing with Adidas, Danone, Veolia Water, etc. In a social business, the goal becomes to solve a problem. Profits are reinvested into the business, and the owners take home dividends of gratitude.
I purchased a copy of his book "Building Social Business" and plan on reading it to learn more about how exactly “profits” are defined, and what the “owner” is entitled to, and if a social business regime can be practically applied anywhere and everywhere. I’m looking forward to it.