March 10, 2008
Muhammad Yunnus’ book Banker to the Poor opened my mind to a new type of philanthropy – venture philanthropy – where donations to a Microfinance Institution are loaned out, repaid at an extremely high rate, and then reinvested. The thought that my small donation not only made a significant impact to the loan recipient but also was recycled appealed greatly to my entrepreneurial bent. After all, I wanted my hard-earned cash to be well-spent.
Now the Nobel Laureate has written a new book – Creating a World Without Poverty – which I hope will open the minds of business people around the world as his first book had done for me.
In the United States particularly, we have come to assume that a business’ mission must be to “maximize shareholder value”. Yunus defines these as PMBs, or Profit-Maximizing Businesses. In his new book, he shows us there can be another way, “Social Businesses” which are “cause-driven” instead of profit-driven.
This concept may be seen as radical, or even heretical, because it conflicts with our US point-of-view favoring free market capitalism. In a Stanford VTSS (Values, Technology, Science and Society) class, I learned that changing society’s values is perhaps the hardest and slowest thing of all, often lagging science and technology advancements by 10 or more years. We cling to our values and customs, not necessarily because they are right or the best, but because we are afraid of change; we are comfortable with the status quo.
However, in China, this concept of Social Business is not so radical because the relics of the Communist infrastructure, the State-Owned Enterprises (SOEs), are similar in result, though not in purpose. In other words, SOEs were not created for a socially-minded cause, but they were one of the last social safety nets, the “iron rice bowl.” But due to foreign competitive pressures from China joining the WTO (World Trade Organization), these inefficient dinosaurs are being dismantled and/or restructured, causing millions of workers to be laid off. Currently, China has an estimated 220-300 million people under the poverty line. The poor people are a powerful destabilizing force, and thus the Chinese government strongly supports, and sometimes even demands, businesses to accept social responsibility.