by Georgia Levenson Keohane
In 2006, Muhammad Yunus was awarded the Nobel Peace Prize for his pioneering work in the field of microcredit. As the founder of the Grameen Bank in Bangladesh, Yunus demonstrated that lending money to poor people to start businesses could be profitable and could transform their lives by raising them out of poverty. Today, Yunus is advocating something even more revolutionary: an entire market system of companies that solve social problems and are financially self-sustaining.
In Building Social Business: The New Kind of Capitalism That Serves Humanity’s Most Pressing Needs (PublicAffairs, 2010) Yunus describes his vision for this new economy and reports on his first experiments in social business. I caught up with him recently on the New York stop of his book tour.
You’re often held up as a social entrepreneur par excellence. And yet you make an important distinction between “social enterprise” and “social business.”
Social entrepreneurship is about an individual trying to make a difference in people’s lives. But this can be done in many ways. Some individuals do it as an NGO — a nonprofit — based on charity and grants. Others do it as a business, making money while serving people. If people don’t have eye-care service, for example, a social entrepreneur can bring them eye glasses and make money out of that. Which is a commendable action.
A social business is something different. It is a business where you don’t want to make money. You are committed to solving a social problem with no intention of making personal financial gains. You cover all costs through your operations so that your business is self-sustaining. Setting up a self-sustaining business is like starting an engine that never stops running; it does not need any fuel from outside. It returns the original investment. Within the social business, money is recycled again and again. The person who runs a social business is definitely a social entrepreneur, because he is trying to make a difference. But he is a unique kind among them. His sole intention is for the business to solve the problem, not make money from it.
You’ve gone from theory to practice, enlisting several corporate partners to create real, live social businesses: Danone, Veolia, BASF, and many others.
I said to these companies, “Why don’t you use part of the money you already spend on corporate social responsibility projects to invest in the creation of a social business of your own? Instead of giving the money away, you can invest it to create businesses that grow each year. Imagine the problems you can solve. And you would bring your business experience and technologies to the social business, which means you can solve problems much faster.”
How are these experiments faring?
[People are recognizing] that these are legitimate businesses. But social business is still a new idea, and it will take time. Any new effort goes through an experimental phase, developing the prototype in each company. Everything doesn’t always work out as you thought it would — the market situation changes, or your idea or assumptions were wrong. Yet once you develop it, and it works, you’ve discovered a fantastic thing. I use the example of the Wright Brothers’ plane, which now looks like a funny little toy, but it changed the world because it flew. Today we have all these beautiful, magnificent planes because of it. Some day we will look back and laugh at these early social businesses and say, “How simple, how crude these were.” But beautiful things will come from these first models.
Capital may flow to the high-profile projects of a Nobel laureate, but without the incentive of financial return, why would investors support other social businesses?
If you’re a foundation, you’re giving money away anyway. Why don’t you put that money in a social business fund that will recycle the investment? And in the meantime, you have gained a lot of experience in fixing the problem, and people can say, “Ah, this problem can be solved!” You inspire many more people. In social business, you share experiences. If you have developed a technology, if you have developed a patent, it is all shared — all open source — because we have the same goal: Solve the problem.
Governments can also create social business funds. We are asking them, instead of putting all monies into a safety net, put a portion into social businesses — and help people get out of the safety net. Where you give foreign aid, give 10% — not to the usual projects implemented through government machinery but to create social business funds in each of those countries.
You talk about the potential for a social stock market. Is this really viable?
This is not an “in our lifetime” question; this could happen tomorrow. Many people are very interested in this. The President of the Mumbai stock market, the largest stock market in India, came to me and said, “I would like to do this. Let’s sit down and design it.” In such a stock market, you buy and sell shares in a social business but not for speculation purposes. Whatever extra money you earn by selling your shares, you invest again in a social business.
The Grameen Bank — and microcredit generally — is often described in bottom-of-the-pyramid, poverty-alleviation terms. Would you apply that framework to social business?
The bottom-of-the-pyramid approach implies that there are vast numbers of consumers out there that you can do business with and make money. I see social business as an opportunity to help people out of poverty, which is different than an opportunity to make money. The bottom-of-the-pyramid approach says entrepreneurs will come up with tiny packets of shampoo to sell to poor people. I say, they don’t need shampoo. They don’t need small bottles of soda to drink from. These are unnecessary expenditures. That’s not my purpose. My purpose is to give them good food, good housing, good health care.
A former McKinsey consultant and foundation executive, Georgia Levenson Keohane writes and advises on social and economic policy and nonprofit management. She lives in New York City.