Social Business Entrepreneurship

The other day, as I was driving back home from MIT, I turned on the radio, and by pure chance happened on an absolutely mesmerizing talk by Muhammad Yunus at one of the National Public Radio (NPR) stations in the Boston area.  The lecture I was listening to - “The End of Poverty: Because Poverty Is the Absence of Every Human Right” - was originally given at Boston University in October 2007.

Dr. Yunus is a Bangladeshi economist and the founder of the Grameen Bank, which he created in 1974 to help impoverished borrowers start small businesses and obtain an education.  He first loaned $27 to a small group of very poor Bangladeshi women, and gradually increased the number of loans.  He pioneered the revolutionary concept of micro-loans to help the poor in developing countries.  With these micro-loans, the poor are able to start very small businesses, and they can gradually improve their economic situations and start moving out of poverty.  Grameen Bank now has more than 7.5 million borrowers, and about 2/3 of the families receiving loans have risen above the poverty line.   

The banking system pioneered by Muhammad Yunus is now being used in more than 100 countries.  For his innovative economic and social development work, Dr. Yunus, along with Grameen Bank, was awarded the 2006 Nobel Peace Prize.  The prize announcement by the Nobel Peace committee said:

"Muhammad Yunus has shown himself to be a leader who has managed to translate visions into practical action for the benefit of millions of people, not only in Bangladesh, but also in many other countries.  Loans to poor people without any financial security had appeared to be an impossible idea.  From modest beginnings three decades ago, Yunus has, first and foremost through Grameen Bank, developed micro-credit into an ever more important instrument in the struggle against poverty.  Grameen Bank has been a source of ideas and models for the many institutions in the field of micro-credit that have sprung up around the world."

I met Dr. Yunus about eight years ago when I was co-chair of the President's IT Advisory Committee (PITAC).  We were having a PITAC meeting in Washington around the same time that Dr. Yunus was visiting then President Bill Clinton - who has long been a very strong supporter.  Dr. Yunus came to the PITAC meeting and talked to us about his work.  It was clear that we were in the presence of a very, very special individual.  You can see for yourself what I mean by watching this video of his Boston University lecture.

What I found particularly intriguing in the BU lecture I was listening to while driving was Dr. Yunus' concept of Social  Business Entrepreneurship.  He does not view the Grameen bank and related activities as charity.  He truly views them as businesses, albeit a somewhat different kind of business from the classic ones based on maximizing profits.

Some might find the notion of Social Business Entrepreneurship an oxymoron.  After all, isn't the pursuit of wealth the key to capitalism?  Didn't Adam Smith himself, the father of free-market, free-trade capitalism, argue in The Wealth of Nations that an individual pursuing his own self-interest will also promote the good of his community, through the principle that he called The Invisible Hand?

In addition to helping create the field of economics, Adam Smith was a very moral man.  While The Wealth of Nations is his opus magnum, Adam Smith wrote a number of other books, including The Theory of Moral Sentiments, where he argued that sympathy is required to achieve socially beneficial results.  Most serious students of Smith now agree that no contradiction exists between his advocacy of both self-interest and sympathy, because in his view "individuals in society find it in their self-interest to develop sympathy as they seek approval of what he calls the impartial spectator.  The self-interest he speaks of is not a narrow selfishness but something that involves sympathy.”

Dr. Yunus, who has a doctorate in economics from Vanderbilt University and who has taught economics in the US and Bangladesh, has very strong views on the subject.  He writes, "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." 

But, he later adds, "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."  He wants to create a new type of entrepreneur, who is not just interested in profit-maximization but who is also totally committed to make a difference in the world and give a better chance in life to other people, not just through charity, but by creating social businesses.  These businesses may or may not earn a profit, but like other businesses, they must not incur a loss.  They must become self-sustaining.  Grameen Bank is such a social business.      

Dr. Yunus points out that, while there is now widespread acceptance that free markets, rather than the State, are the best mechanisms for the profit-making sector of the economy, somehow markets are considered to be utterly incapable of addressing social problems.  We have handed that responsibility to the State.  He strongly disagrees.  If markets are the best way to bring innovation and competition to the profit-making part of the economy, shouldn't markets be also viewed as potentially excellent mechanisms to bring innovation and competition to help address social problems?

He writes, "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 Social Business Entrepreneurs (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."

Muhammad Yunus has shown us that there are fresh, new ways of thinking about the roles of markets and government, beyond the tired, outmoded labels of liberal and conservative.  Our societies face serious problems in the decades ahead.  For those of us who strongly believe in the power of free markets, it is heartening to see that such powers can be applied not just to create profit-making innovators, but also to come up with innovative ways of addressing the social problems in our midst.

Comments

[Anne Johnson]

Reading Bill Gates' remarks at Davos last week, there are strongly similar themes.

http://www.gatesfoundation.org/MediaCenter/Speeches/Co-ChairSpeeches/BillgSpeeches/BGSpeechWEF-080124.htm

[Leinad]

Irving,

Reading this post I am delighted to know that you have already escaped from the writer's block that you mentioned in your first post about the Knowledge Society.
(01/07/08)

All what you express about Social Business Entrepreneurship is so clearly described that really amaze me.

In a couple of weeks I will have the enormous honour to share a dinner with you.
I am very honoured to welcome you.

I really hope that the dinner that we will have will be the greatest flow of ideas that I ever had.

I just would like to bring a subject to the table:

If all what we see are Systems, and system over systems; and the system behind all those systems is Oneself (Let’s say the People). Would it not be true that the reason for all that complexity is that the Oneself is the only system that is free to choose? To decide the value of a 1 and a 0?

Service Oriented Architecture for a Service Oriented Society.
Global Integrated Enterprise in a Global Integrated Economy.

Playing with those words I come to the following sentence:

Global Enterprise Architecture for a Service Oriented Economy in a Global Integrated Society.