Social Business

• Miscellaneous
• 01st December 2011
• YC

(Remarks by Nobel Laureate Professor Muhammad Yunus delivered at AmCham Luncheon Meeting on July 12, 2011)

Thank you Aftab and thank you Gafur!

Assalamu Alaikum! First I apologize for being delayed. This is due to the familiar circumstances that are beyond the control of citizens.

But these fifteen minutes of delay is not as big a delay compared to five years of delay. Gafur has been very persistent for the last five years that I come and speak at this meeting and his persistence has become more and more intensive as the years went by. This has brought me to the conclusion that if you want to accomplish anything impossible, you can assign it to Gafur. You can rest assured, he will make it happen; he is a very persistent person.

I was always promising, but not delivering. So today I am very happy that finally I could deliver myself here to talk about social business. And that is the issue that he wants me to discuss in this meeting.

The basic concept of social business came to my mind because that is the kind of thing I was doing. Traditionally we talk about business as a vehicle to earn money, to make profit. The whole idea of business was built around the idea of making money. We all know that the earliest form of business was barter, the exchange of one good for another goods. You have something, and I have something else, and we exchange them so that both of us are better off. You have rice and I have fish. So we exchange some rice for some fish. After the exchange both of us have rice and fish. Both are happier.

That was the beginning of business. And it led to making profit, providing incentive for exchange. Since then, the focus has remained on making money.

But sometimes we do things where we do not follow the norms, and we cannot explain why we did that. We do it because we think it is the right thing to do. We all do that. I got involved in such a situation when I started lending money to the poor people and in the process created a banking methodology. Grameen Bank was born to carry out this methodology.

I never had any intention of making money out of it. Then why did I do it? I could have created a bank and made money for myself. But the idea of buying even one single share of the bank, Grameen Bank, did not occur in my mind.

This then provides an example that business can be created even when you are not interested in making money. After Grameen Bank, I created many other companies. Not one, not two, not ten, not twenty. I have created more than fifty companies along the way.

People keep asking me the question why do I create companies if I don't want to own them?

Grameen Phone became a large company, but I never thought of buying a share of that company. When they were offering shares in the market, many people got excited that now they can buy some shares. Even in our own office, our staff got very excited to buy shares of Grameen Phone. Many asked me, would I be interested in buying some shares? I said, "No, that does not interest me. I don't want to buy any share."

I look back. I look for an explanation. In some of my early writings, I keep mentioning that there is some space in the business world that remains unutilized. It is because theoreticians never paid any attention to that space. A new category of business can fill this empty space. I named this new category of business as "Social Consciousness Driven Business". It is a slightly complicated description, but I thought it described it well. This is the space where you do business out of your social consciousness, not because of your moneymaking drive. Since theoreticians do not recognize the space it remains unoccupied.

Then gradually, I realize that this space is much more fundamental than that. It is a critical flaw in the theory of economics. It is also a big missing opportunity; it is an opportunity of solving the problems that we see around us. Today, all of us are discussing the financial crisis, and the way it has shaken up the whole world. Millions of people were thrown out of their jobs. USA is still struggling with their unemployment situation, which is currently over 9%. This is a tough situation. Spain has massive unemployment! Economies of Portugal and Greece are crumbling. These are countries in the West, not in the Third World.

One conclusion that I always come back to is that, it is not because of some people did something wrong that such crisis was created. It was created because of the fundamental flaw in the architecture of our economic framework. That flaw led everybody to do wrong things, in big ways. And the flaw is embedded in the interpretation of human beings in the theoretical framework. We created an artificial being in that theoretical framework, and called it human being. They behave almost like robots. All they do in their lifetime is to make money. They pursue this very dedicatedly. They are one-dimensional beings; they have no other interest. My first point is that real human beings are not one-dimensional. Real people are multi-dimensional. They enjoy making money, but that is not the only dimension in their lives. There are other dimensions, which are not included in our economic theory.

The companies, which I was calling Social Consciousness Driven Companies, were expressions of other dimensions, not from the profit-making dimension. To simplify it, I would say that people are selfish as well as selfless. Selfishness is a part of human being; out of self-preservation, you protect yourself. That is the selfishness. This is how human beings survived on this planet. But at the same time human beings are selfless beings too. If you think human beings have only selfishness, you will be entirely wrong. Human being is a mixture of all kinds of elements. Selfishness is one part, selflessness is another part, and besides this, there are many other dimensions in a human being.

Theoreticians, who made the framework, did not pay attention to this diversity. They remained on one track and created one type of business. The other type was missed out. Can there be business on the basis of selflessness? Will it ever work? I thought the type of business that I described would fit into that, because here you are not trying to gain yourself personally, but you are trying to solve problems of others.

I named this business based on selflessness as social business. It is a non-dividend company. You do not do it for receiving dividend. You do it for solving a problem. So a social business has three features: one, it is a non-dividend company, two, it is a problem solving company, and three, it is a business, because it is sustainable. It runs by itself. Once you invest in it, once it is successful, it runs by itself. You do not have to keep on feeding it. Today if you are doing something for everybody else, you use another dimension, the charitable dimension of human beings. You become a philanthropist. And everybody has an element of philanthropy. You want to do something, you give away money, and you help somebody else. You do not expect the money to be paid back. This is something inherent in the human being.

If we have only moneymaking business in the world, we do things that will bring money to us. We are totally blinded out from everything else because that is what we are trained for, that is how our mind has been trained. We have to invest in something where we can make money. So, many things are missed out. We cannot get involved, because we do not see them. Our eyes do not allow us to see them.

If I am interested in making money through business, I'll not be interested in the beggars on the streets of Dhaka. But I can create a business, to employ or create income, for ten beggars. We have plenty of beggars on the streets of Dhaka. Suppose I create a business, where I will have opportunities for giving income-earning opportunities for ten beggars and it runs as a business; it covers its costs. I feel happy that I have done something. We sometimes give money to them at the traffic lights. But we can do another thing. We could create a business to make then beggars earn a decent living. We'll feel happy about it. We did not do it to make money out of these ten beggars. We did it to make sure that these ten beggars are now income-earning people. They do not stand on the streets of Dhaka anymore.

It does not seem terribly impossible. But a profit making business will not see this. That is the point I am making. There are many opportunities we do not see, because we are focused on making money. But if we are in a social business, we start seeing things that we could not see before. Now that we see this we can create a business out of it. Finding income opportunities for ten beggars would be a good social business for any one of us. Just ten beggars, anybody can do that, as a business proposition. What can beggars do? Your idea is as good as mine. If we spend five minutes, we will have ten different ideas how to do that. And each one will be an exciting idea. I start with one idea. Maybe we will have a flower stand, where ten beggars sell flowers. And all the sales-girls are beggars, who now have this business of selling flowers. And since it is a business it continues with its own money.

Again, the point is, a moneymaking eye will not detect these opportunities. Only a philanthropic eye will detect these opportunities. If a philanthropic eye can detect them, the social business eye will try to find a sustainable solution. Maybe I can have a creative idea how to make it happen. That is the key point for social business-creative idea. Normally we do not see how it can be done, but our creativity is immediately tickled. If we think a little bit hard, we will come up with ten different solutions for that.

Basic distinction between social business and conventional business (money-making business) is that the social business is totally de-linked from the very idea of making personal profit. It is very important to underline the words "very idea" because if we still keep the idea of personal profit alive, we remain hooked on to the old logic. We have to get away from that logic. We have to create a new logic when we are in social business. It is not simply doing another type of business; it is a business under a completely new logical structure.

Sometimes I see some confusion about social business. Some people say, "Oh! This is a kind of CSR activity. That is why big businesses are taking interest in it. They put their CSR money into it." CSR came from the following idea: since conventional business are so engrossed in making money they have no time to look at the problems of the society; these problems keep on piling up; why can't they take a small amount of money from their profit and give it to charities, towards solving these problems.
Although CSR came from this laudable idea, unfortunately, over time, it drifted away from the original mission. Because public relations people within the company saw this as an opportunity to use this CSR budget to build up the image of their company.

So what was supposedly to be used for solving social problems became promotional money for the company. If CSR is correctly executed, it will belong to philanthropy. Social business is not philanthropy. Social business is genuinely a business. It is done through a registered company, where only thing investors are sacrificing is personal profit, because investors are not interested in making money, they want to see the impact of their business in people's lives. Take the case of the ten beggars. If I can create dignified income-generating opportunity for ten beggars, which would be the fulfillment of the objective of my business. That would give me the pleasure that I was looking for. I get pleasure from the impact of the business, rather than from the monetary dividend from that.

There is another confusion. This is relating to social entrepreneurship. People say, "Ah! You mean social entrepreneurship." Social entrepreneurship is a much wider idea, where anything you want to do for the society in an innovative way qualifies you to become social entrepreneur. If we solve the problem of traffic congestion by putting some people to guide the traffic we qualify to become social entrepreneurs, because we did something to solve a problem. But that is not a business. Most social entrepreneurs are NGO leaders who are involved in non-profit activities. They have done something to solve social problems or helped people in non-profit ways, they became known as social entrepreneurs. One can be engaged in personal profit-making business and still be a social entrepreneur. If somebody is in social business, he is also a social entrepreneur. That means, while all social business people are social entrepreneurs, all social entrepreneurs are not in social business.

Are people going to be interested in social business? I very much think so. I was surprised that many people were not only interested in social business they started taking initiatives. While we were doing it in Bangladesh, some big companies from the rich countries started contacting us. We did not go to them. We did not try to explain to them that this is a good idea and that you should invest in this. It just made sense to them. They volunteered.

The first big company, which came forward, was Danone of France. We created the Grameen Danone Company. The company now produces yogurt, called Shokti Doi. The objective of the company is to bring nutrition to the malnourished children. Danone does not want to make money for themselves out of this company. The whole purpose is to solve the problem of massive malnutrition among the children of Bangladesh. If it is successful, we will all feel happy that it worked. If it is not successful, we can say we are trying to solve the nutrition problem but we have not come up with a social business solution to that yet. We'll keep trying until we find the solution.

A study has been conducted on the impact of Shokti Doi and its findings are very positive. Yes, it has made impact in the health of the children who were eating Shokti Doi. When the impact is established, it becomes a social business.

We have another joint venture social business with Veolia Water Company to bring water in the arsenic affected areas. In one small area, we are trying it out. We have joint venture with Adidas; we have joint venture with BASF, joint venture with UNIQLO, a big Japanese company. We have a joint venture with another Japanese company, Yukiguni Maitake. We did not know our joint venture partners before they contacted us. The fact that they took the initiative to contact us means that the idea of social business created resonance in their mind.

And now lots of other things are happening. Universities are creating academic programs and institutions: Institute of Social Business, Chairs for Social Business, and Centers for Social Business. Courses are being offered. This is a very encouraging development.

At the end of this month (July), there will be an Asian Forum of Social Business in Japan. And this forum will bring together a lot of people from Japanese companies, Japanese universities, and young people to discuss social business. Other countries will also participate, to discuss how to apply social business ideas in their respective countries. Japan will be focusing on solving or addressing the problem of earthquake victims, because this is a major problem in their society right now.

And by the end of the year, in November, November 10-12, 2011, there will be a global summit on social business. It will be in Vienna. UN Secretary General Ban Ki-Moon has accepted an invitation to come. President Dilma from Brazil has also accepted an invitation to come. And several other leaders like Commissioner from European Union Michel Barnier will be attending. So we are hoping a lot of people will come. Top business leaders, academics and young people will all be coming.

I hope after today's discussion we will also have some follow-up discussion on the subject, such as, how to proceed with this idea, if it is interesting to you. We are very happy that Rokia Afzal Rahman announced that she would set up a social business herself. After she has established her social business, she can make her presentation to this group.

I will stop here and let you ask questions, so that we have some interaction and some clarification.

Thank you very much.