[Lapg] Social Business Entrepreneurs Are the Solution Muhammad Yunus

Tue Mar 18 18:48:31 PDT 2008

Social Business Entrepreneurs
Are the Solution

http://www.grameen-info.org/bank/socialbusinessentrepreneurs.htm

<http://www.youtube.com/watch?v=kW-4gJmXy5M>YouTube - Muhammad Yunus: 
Building Social Business <http://www.youtube.com/watch?v=kW-4gJmXy5M>...

Preview of Muhammad Yunus: Building Social Business Ventures ...
<http://www.google.com/search?hl=en&q=Social+business&btnG=Google+Search#>Watch 
video - 4 min 36 sec -
www.youtube.com/watch?v=kW-4gJmXy5M
Muhammad Yunus

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Capitalism is Interpreted too Narrowly

Many of the problems in the world remain unresolved because we 
continue to interpret capitalism too narrowly. In this narrow 
interpretation we create a one-dimensional human being to play the 
role of entrepreneur. We insulate him from other dimensions of life, 
such as, religious, emotional, political dimensions. He is dedicated 
to one mission in his business life ---- to maximize profit. He is 
supported by masses of one-dimensional human beings who back him up 
with their investment money to achieve the same mission. The game of 
free market works out beautifully with one-dimensional investors and 
entrepreneurs. We have remained so mesmerised by the success of the 
free market that we never dared to express any doubt about it. We 
worked extra hard to transform ourselves, as closely as possible, 
into the one-dimensional human beings as conceptualised in theory to 
allow smooth functioning of free market mechanism.

Economic theory postulates that you are contributing to the society 
and the world in the best possible manner if you just concentrate on 
squeezing out the maximum for yourself. When you get your maximum, 
everybody else will get their maximum.

As we devotedly follow this policy sometimes doubts appear in our 
mind whether we are doing the right thing. Things don't look too good 
around us. We quickly brush off our doubts by saying all these bad 
things happen because of "market failures"; well-functioning market 
cannot produce unpleasant results.

I think things are going wrong not because of "market failure". It is 
much deeper than that. Let us be brave and admit that it is because 
of "conceptualisation failure". More specifically, it is the failure 
to capture the essence of a human being in our theory. Everyday human 
beings are not one-dimensional entities, they are excitingly 
multi-dimensional and indeed very colourful. Their emotions, beliefs, 
priorities, behaviour patterns can be more aptly described by drawing 
analogy with the basic colours and millions of colours and shades 
they produce.

Social Business Entrepreneurs Can Play a Big Role in the Market

Suppose we postulate a world with two kinds of people, both 
one-dimensional, but having different objectives. One type is the 
existing type, i.e. profit maximizing type. Second type is a new 
type, who are not interested in profit-maximization. They are totally 
committed to make a difference to the world. They are 
social-objective driven. They want to give better chance in life to 
other people. They want to achieve their objective through 
creating/supporting sustainable business enterprises. Their 
businesses may or may not earn profit, but like any other businesses 
they must not incur losses. They create a new class of business which 
we may describe as "non-loss" business.

Can we find second type of people in the real world ? Yes, we can. 
Aren't we familiar with "do-gooders" ? Do-gooders are the same people 
who are referred to as "social entrepreneurs" in formal parlance. 
Social entrepreneurism is an integral part of human history. Most 
people take pleasure in helping others. All religions encourage this 
quality in human beings. Governments reward them by giving tax 
breaks. Special legal facilities are created for them so that they 
can create legal entities to pursue their objectives.

Some social entrepreneurs (SE) use money to achieve their objectives, 
some just give away their time, labour, talent, skill or such other 
contributions which are useful to others. Those who use money may or 
may not try to recover part or all of the money they put into their 
work by charging fee or price.

We may classify the SEs, who use money, into four types :
   i) No cost recovery
   ii) Some cost recovery
   iii) Full cost recovery
   iv) More than full cost-recovery

Once a SE operate at 100% or beyond the cost recovery point he has 
entered the business world with limitless possibilities. This is a 
moment worth celebrating. He has overcome the gravitational force of 
financial dependence and now is ready for space flight ! This is the 
critical moment of significant institutional transformation. He has 
moved from the world of philanthropy to the world of business. To 
distinguish him from the first two types of SEs listed above, we'll 
call him "social business entrepreneur" (SBE).

With the introduction of SBEs, the market place becomes more 
interesting and competitive. Interesting because two different kinds 
of objectives are now at play creating two different sets of 
frameworks for price determination. Competitive because there are 
more players now than before. These new players can be equally 
aggressive and enterprising in achieving their goals as the other 
entrepreneurs.

SBEs can become very powerful players in the national and 
international economy. Today if we add up the assets of all the SBEs 
of the world, it would not add up to even an ultra-thin slice of the 
global economy. It is not because they basically lack growth 
potential, but because conceptually we neither recognised their 
existence, nor made any room for them in the market. They are 
considered freaks, and kept outside the mainstream economy. We do not 
pay any attention to them, because our eyes are blinded by the 
theories taught in our schools.

If SBEs exist in the real world, it makes no sense why we should not 
make room for them in our conceptual framework. Once we recognise 
them supportive institutions, policies, regulations, norms, and rules 
will come into being to help them become mainstream.

Market is always considered to be an utterly incapable institution to 
address social problems. To the contrary, market is recognised as an 
institution significantly contributing to creating social problems 
(environmental hazards, inequality, health, unemployment, ghettoes, 
crimes, etc.). Since market has no capacity to solve social problem, 
this responsibility is handed over to the State. This arrangement was 
considered as the only solution until command economies were created 
where State took over everything, abolishing market.

But this did not last long. With command economies gone we are back 
to the artificial division of work between the market and the State. 
In this arrangement market is turned into an exclusive playground of 
the personal gain seekers, overwhelmingly ignoring the common 
interest of communities and the world as a whole.

With the economy expanding at an unforeseen speed, personal wealth 
reaching unimaginable heights, technological innovations making this 
speed faster and faster, globalisation threatening to wipe out the 
weak economies and the poor people from the economic map, it is time 
to consider the case of SBEs more seriously than we did ever before. 
Not only is it not necessary to leave the market solely to the 
personal-gain seekers, it is extremely harmful to mankind as a whole 
to do that. It is time to move away from the narrow interpretation of 
capitalism and broaden the concept of market by giving full 
recognition to SBEs. Once this is done SBEs can flood the market and 
make the market work for social goals as efficiently as it does for 
personal goals.

Social Stock Market

How do we encourage creation of SBEs ? What are the steps that we 
need to take to facilitate the SBEs to take up bigger and bigger 
chunks of market share ?

First, we must recognise the SBEs in our theory. Students must learn 
that businesses are of two kinds : a) business to make money, and b) 
business to do good to others. Young people must learn that they have 
a choice to make --- which kind of entrepreneur they would like to be 
? If we broaden the interpretation of capitalism even more, they'll 
have wider choice of mixing these two basic types in proportions just 
right for their own taste.

Second, we must make the SBEs and social business investors visible 
in the market place. As long as SBEs operate within the cultural 
environment of present stock markets they'll remain restricted by the 
existing norms and lingo of trading. SBEs must develop their own 
norms, standards, measurements, evaluation criteria, and terminology. 
This can be achieved only if we create a separate stockmarket for 
social business enterprises and investors. We can call it Social 
Stock Market. Investors will come here to invest their money for the 
cause they believe in, and in the company they think is doing the 
best in achieving a particular mission. There may be some companies 
listed in this social stock market who are excellent in achieving 
their mission at the same time making very attractive profit on the 
side. Obviously these companies will attract both kinds of investors, 
social-goal oriented as well as personal-gain oriented.

Making profit will not disqualify an enterprise to be a social 
business enterprise. Basic deciding factor for this will be whether 
the social goal remains to be enterprise's over-arching goal, and it 
is clearly reflected in its decision-making. There will be 
well-defined stringent entry and exit criteria for a company to 
qualify to be listed in the social stock market and to lose that 
status. Soon companies will emerge which will succeed in mixing both 
social goal and personal goal. There will be decision-rules to decide 
upto what point they still qualify to enter the social stock market, 
and at what point they must leave it. Investors must remain convinced 
that companies listed in the social stock market are truly social 
business enterprises.

Along with the creation of the Social Stock Market we'll need to 
create rating agencies, appropriate impact assessment tools, indices 
to understand which social business enterprise is doing more and/or 
better than others --- so that social investors are correctly guided. 
This industry will need its Social Wall Street Journal and Social 
Financial Times to bring out all the exciting, as well as the 
terrible, news stories and analyses to keep the social entrepreneurs 
and investors properly informed and forewarned.

Within business schools we can start producing social MBAs to meet 
the demand of the SBEs as well as preparing young people to become 
SBEs themselves. I think young people will respond very 
enthusiastically to the challenge of making serious contributions to 
the world by becoming SBEs.
We'll need to arrange financing for SBEs. New bank branches 
specialising in financing social business ventures will have to come 
up. New "angels" will have to show up on the scene. Social Venture 
Capitalists will have to join hands with the SBEs.

How to Make a Start

One good way to get started with creating social business enterprises 
would be to launch a design competition for social business 
enterprises. There can be local competition, regional competition and 
global competition. Prizes for the successful designs will come in 
the shape of financing for the enterprises, or as partnership for 
implementing the projects.

All submitted social business proposals can be published so that 
these can become the starting points for the designers in the next 
cycles, or ideas for someone who wants to start a social business enterprise.

Social Stock Market itself can be started by a SBE as social business 
enterprise. One business school, or several business schools can join 
hands to launch this as a project and start serious business transactions.

Let us not expect that a social business enterprise will come up, 
from its very birth, with all the answers to a social problem. Most 
likely, it will proceed in steps. Each step may lead to the next 
level of achievement. Grameen Bank is a good example in this regard. 
In creating Grameen Bank I never had a blue-print to follow. I moved 
one step at a time, always thinking this step will be my last step. 
But it was not. That one step led me to another step, a step which 
looked so interesting that it was difficult to walk away from. I 
faced this situation at every turn.

I started my work by giving small amount of money to a few poor 
people without any collateral. Then I realised how good the people 
felt about it. I needed more money to expand the programme. To access 
bank money, I offered myself as a guarantor. To get support from 
another bank, I converted my project as the bank's project. Later, I 
turned it into central bank project. Over time I saw that the best 
strategy would be to create an independent bank to do the work that 
we do. So we did. We converted the project into a formal bank, 
borrowing money from the central bank to lend money to the borrowers. 
Since donors became interested in our work, and wanted to support us, 
we borrowed and received grants from international donors. At one 
stage we decided to be self-reliant. This led us to focus on 
generating money internally by collecting deposits. Now Grameen Bank 
has more money in deposits than it lends out to borrowers. It lends 
out half a billion dollars a year, in loans averaging under $ 200, to 
4.5 million borrowers, without collateral, and maintains 99 per cent 
repayment record.

We introduced many programmes in the bank --- housing loans, student 
loans, pension funds, loans to purchase mobile phones to become the 
village telephone ladies, loans to beggars to become door-to-door 
salesman. One came after another.

If we create the right environment, SBEs can take up significant 
market share and make the market an exciting place for fighting 
social battles in ever innovative and effective ways.

Lets get serious about social business entrepreneurs. They can 
brighten up this gloomy world.

Santa Barbara Permaculture Network
(805) 962-2571
P.O. Box 92156, Santa Barbara, CA 93190
margie at sbpermaculture.org
www.sbpermaculture.org

"We are like trees, we must create new leaves, in new directions, in 
order to grow." - Anonymous

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