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Social Business Entrepreneurs Can Play a Big Role in the Market
| Guest post by: Grameen Foundation |
Article Overview: 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. The second type is a new type, those who are not interested in profit-maximization.
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Social Business Entrepreneurs Can Play a Big Role in the Market
By Muhammad Yunus
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. The second type
is a new type, those 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 a 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
business they must not incur losses. They create a new class of business which we may describe
as “non-loss” business.
Can we find the second type of person 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 entitites to pursue their objectives.
Some social entrepreneurs (SE) use money to achieve their objectives, some just give away their
time, 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 a 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) Most than full cost recovery
Once a SE operates 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
graviational 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 entrepreneurs.
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 be even an ultra-thin slice
of the global economy. It is not because they basically lack growth potential, but because
conceptually we neither recognized 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 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 recognize them with supportive insitutions, 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 recognized 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 problems, this responsibility is handed over to the
State. This arrangement was considered as the only solution until command economies were
created where the State took over everything, abolishing the 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 the 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, globalilzation 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 ever did 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 personal
goals.
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