[permaculture] Social Business Entrepreneurs Are the Solution Muhammad Yunus
Wesley Roe and Santa Barbara Permaculture Network
lakinroe at silcom.com
Wed Mar 19 00:59:12 EDT 2008
Social Business Entrepreneurs
Are the Solution
<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 ...
video - 4 min 36 sec -
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
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
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
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
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
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.
More information about the permaculture