Social Entrepreneurship: Make a Difference AND a Profit
Muhammad Yunus (on video)
I’ve been working with poor women in Bangladesh for the last 30 years, and that worked in a way that has helped people to lift themselves out of poverty through Grameen Bank. The response I get is enormous, particularly of young people. My experience with microcredit has led me to see why poor people remain poor. The conceptual framework, you only think about business as profit maximization. To me, that’s too narrow. I think the human being is much larger than just being an instrument for making money.
You create a business to make change in the world. Changing a World Without Power (next book). I’ll be describing what social business is about. It is there in the people—not something I’m inventing. But it never had the occasion to release itself. Social businesses to express the issues of poverty, child labor, environment, anything we see needs to be hanged in order to create better world. We don’t have to put it on the shoulders of the government.
Moderator: Peter Osnos, publisher
Social business is a for-profit enterprise whose investors believe there’s more than money to be made in yogurt—or books. Is it realistic to expect entrepreneurs to put money in without a significant return?
James Wolfensohn, former president of World Bank
I would challenge what Muhammad said about having no motive other than social. You need a framework. If you just break even and don’t build any sense of momentum it’s very hard to turn it into a business. I love the goal of not taking out the profit and reinvesting in social issues. I rather think Muhammad is looking to make money even though he has the highest of motives.
Osnos: Muhammad had Dannon create a yogurt package you can eat.
Osnos: when George Soros says he wants a book out in two weeks, say yes and work it out later.
Microlending works. The big problem is how to scale it up to the macro level. There is definitely a large number of people who are underserved by commercial banks and the financial industry. Small-scale transactions are very expensive; that’s the main obstacle to overcome. The problem is how to make them grow, attract additional capital (beyond donors). That is the crux of the matter. Microcredit is lending. If you could also take deposits, that could be a viable business. But then you have a problem of microcredit not being able to repay the deposits, so it does need to be regulated.
There’s another eminent microcredit org, Brak. Bangladesh, which was a hopeless case, has emerged as a result of microcredit. There’s a foundation very interested in bringing Brak into other countries, like Liberia. I’m willing to invest some money to get it started.
Teresa Heinz Kerry
Protecting the environment is a health business, prevention of disease. It’s also potentially an economic success story with production of new capacities, new sustainable materials, therefore new jobs. And it’s also a moral imperative. It is also the legacy we leave to our children and grandchildren. I didn’t come by my concern and belief due to theoretical studies but by life exposure, in Africa where I grew up. John Heinz became involved in the environment business because of OSHA and coal mining. Once you become involved, you bring breadth [and learn more]. Global climate change is horrific, much deeper and pervasive and scarier than almost anything else. But we have a ten-year window in which to avoid calamity. It’s a ten-year precious moment, and it burns me that we spent the last eight years doing nothing to prevent. Americans—when we face a problem, we know how to handle it.
Wendy Kopp, founder, Teach for America
Can for-profit schools do better?
It’s not necessarily the central issue. What’s fascinating—there’s a group of for-profit companies that are seeking contracts to take over the lowest-performing schools and run them better. The only way to make money is to produce much better outcomes. There’s enormous politics and people have a visceral reaction. So they have to be dramatically successful. A number of them have a reasonably good track record but I’m not sure it’s worth the energy. We now have 13 million kids in our country who live below the poverty line. By the time they’re 9, they are three levels behind. And the half who graduate high school have an 8th grade skill level. What fuels our sense of urgency is the evidence we see every day that these disparities don’t need to exist. The prevailing ideology is there’s only so much we can do. We see that actually this is something we can control within schools. That fuels our sense of urgency to say we can do this, it’s just a question of public will. Who cares if you’re nonprofit or for-profit? We’re churning out millions of kids who have NO opportunity.
Soros: One should face a little problem: the criterion is profit and that’s not the right criterion for being engaged in education. For both for-profit education and for-profit health, you have the problems. Business is there to make profit. Brak in Bangladesh has schools and provides community health care as well as credit. But they are not motivated by profit. They are not running Brak to list it on the stock exchange.
Osnos: where do you think the status of those goals you’ve set—what kind of progress was made?
Wolfensohn: When I came in to the bank, the world was viewed as the rich and the poor.
Now the world is divided into 4 parts. 1 billion in countries like the U.S. But India and China will rank 1 and 3 in GDP by 2040. You have a whole new class. You have a third group growing modestly, and 1 billion living on less than a dollar a day. This is the challenge; how do we deal with a world that’s a 4-speed? And overlaying that, you have other forces, like the need to satisfy Islam. We need to get away from the simplicity of the rich and poor. It’s going to be critical.
Osnos: Teresa Heinz Kerry—what’s bringing about the paradigm shift toward the environment as center issues?
Kerry: For me, the interest has been in helping transform the region around Pittsburgh. We all know how much coal and steel and dirt, and all the related disease. John Heinz was very interested to pursue that as part of our foundation work.
Just to show you how it can happen, amongst the areas where we worked in a lot and gave money to, (children, environment, etc.)—you see they are interconnected. In 1993 I had to move out of the office that had been my father-in-law’s and I asked the owner (of the new building) if I could make it a green space, and he didn’t know what I was talking about. We did this, and Discovery Channel was very interested. We moved in in January ’94, the first green office space (in Pittsburgh), and in 2004, coming out of a recession, we had 70 buildings. We had the enthusiasm and belief that we needed to do it and we could do it. And Mr. Mascaro, our contractor, who didn’t know what green was is now building only green and consulting and teaching.
We tend to be quantitative and we forget about people’s souls, people’s ideas of themselves. And that’s one of the great sadnesses of not having had leadership in this country on the environment the last few years. We have almost completed a huge children’s hospital, built green, and everything used will be disposed properly. We have the largest green convention center—things that no one would have said in Pittsburgh 20 years ago it could be done. It’s all really related, and very exciting.
Osnos: Because George was thought of as very rich, the communists paid attention. They didn’t realize this was one radical guy. Can you tell us about open society in that part of the world?
Soros: I regret to say that it’s impossible to claim success. There was an opening when the Soviet system collapsed, but the West failed to rise to the occasion. It was pretty total: economic, ideological, moral. The new regime emerging in Russia is an autocratic regime. It’s a petro-superpower, a shell democracy. Other countries did make the transition, but politically they are not flourishing. Poland has a terrible government right now. Fortunately, the government’s not that important. As a political entity, it is in worse shape than it was during the time of Solidarity.
Osnos: Hope springs eternal and seeds have been sewn, and they will flourish. How do you continue to define and motivate?
Kopp: What’s fascinating: I and my colleagues have never been so charged up, so motivated. We have such an incredible sense of possibility, that we actually can get to the point where all children in our country have the potential to get a good education. We’re fighting the perception [that nothing can be done] but from my vantage point, everything has changed in the last decade. The New York Times has hope, the writer found three schools that were putting [students in poverty] on a level playing field. Now, what do we need to do at a system level? Those schools are showing us that it is possible. We’re gong to have to do lots of things: long-term sustained committed leadership. When thousands of our future leaders are teaching successfully in poverty schools, that will be transformative. Many will stay in education, and others will go into policy, government, and build a truly unstoppable movement.
Osnos: One of things that struck us all in working on this book (This Moment On Earth
Today’s New Environmentalists and Their Vision for the Future by John Kerry and Teresa Heinz Kerry) is that both of you have picked up the mantle of issues that you would have addressed if you had won in 2004. How do you sustain after that process that big problems can be solved?
Kerry: People sustain us. When you’re around the country and have conversations with people (even hundreds or thousands), and you don’t come in and tell people what’s right and wrong but think out loud with them, they become truly a team. That energy is because we together know something. So we’ve tried to continue that conversation and go back to the people we met, who worked with us and hoped with us for a better day. One of them was a George Bush organizer in New Mexico, and she’s been taken to the cleaners as a 6th generation rancher. People wake up that there’s something wrong. There’s a berry farmer who had so much toxic pollution from the confined dairy farm [nearby] that she couldn’t breathe. She read the Clean Air Act and Clean Water Act, and she said somebody’s no doing their job. It took her 20 years, but she won. A marine, 67, two years in Vietnam, buys three fishing boats. And he gets lesions and starts to pass out. Fisteria is a neurotoxin from chickens. He figured out what was the matter and today he’s a full-time riverkeeper. Die-hard environmentalists will say this book isn’t tough enough, but we tried to create a space where you don’t get politically or scientifically [shot down]. I wrote a chapter on toxics and health. John wrote two chapters on climate change. It’s an accessible book, a conversation, a thank-you to people for being as caring and intelligent as they were. And they must pick up the panel and lead.
Osnos: How does an institution like the World Bank recover its momentum? We all know it’s one of the few government agencies focused on eradication of poverty.
Wolfensohn: The World Bank operates in 140 countries. It’s got 10,000 people. The most important thing is that it has a remarkable group of committed people. I think the future is bright. It’s been a difficult period but I have no doubt that after this difficult period it’s going to fulfill an important role.
I’ve concluded that you don’t have to be president of the World Bank to make a difference. Select one or two things you can do. Pick out something that can make a difference; there are huge opportunities. The important thing is to have that yourself and have it for your kids, and not give the responsibility to the government or to the major philanthropists or the nonprofits. I think there is a new mood that it’s not to be left just to the big institutional framework. There is an atmosphere of [possibility/empowerment]
Osnos: George Soros, you find the act of writing indispensible. Do you think information is a key component of sustaining these issues? Why do you think books mater?
Soros: I write books to understand the world better. Trying to sort it out is something we all need to do. Writing and reading books can be very helpful in that endeavor. But I think we need to be genuinely concerned with trying to gain a better understanding of the world. I have discovered in the course of writing books and running foundations and thinking about society, what we used to take for granted: reason can gain an understanding of the world, is not necessarily true. It’s very important to have freedom of speech and of thought, but democratic discourse is not aimed at getting a better understanding of reality. It’s aimed at getting elected and getting into power. You use all sorts of manipulations of the truth to your advantage, and these have been refined. The truth can be manipulated and that creates a problem we didn’t have to face before, when we believed in the Enlightenment idea that there is reason and there is reality, and reason can actually gain knowledge of reality We are part of reality and we are not that preoccupied with the pursuit of reason. If you look at the Bush administration and the war on terror, it really worked for the Bush administration. They gained overwhelming public support to do what they wanted to do (invade Iraq). But if you look at the results, they don’t confirm their expectations.
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Shel Horowitz is the award-winning author of Principled Profit: Marketing That Puts People First and six other books, the editor of Down to Business Magazine and < a href=”http://www.principledprofit.com/good-business-blog/”>a political blogger.