Micro-Finance Supplement?
Giving the poor the business
Nobel Prize winner Yunus has a new idea for attacking poverty through capitalism: Enlist companies whose mission is to change the world.
By Alan M. Webber
Muhammad Yunus has already changed the world once, which is why he was awarded the Nobel Peace Prize. By creating the Grameen Bank and using microfinance to improve the lives of the poorest of the poor in Bangladesh, he demonstrated a transformational model for eliminating poverty.
Now he's playing an even bigger game: Yunus wants to transform capitalism. Of course, he'd never be so confrontational as to come out and say that. A story he told me while we were recently together in Sweden describes not only Yunus' mission but also his method.
(Illustration by Web Bryant, USA TODAY)
The way he tells the story, every time a new head of the World Bank is named, he calls Yunus. When James Wolfensohn became World Bank president, he welcomed Yunus to lunch and began to quiz him about his recently announced goal for reducing - and ultimately eliminating - poverty.
"I understand you intend to lift 100 million people out of poverty," Wolfensohn said.
"That's right," Yunus told him.
"Don't you think that's a little overly ambitious?" asked Wolfensohn.
"No," said Yunus. "We've looked at the numbers and we think we can do it. But," Yunus went on, "if you think it's too ambitious, what do you think is a better number?"
When Wolfensohn didn't answer, Yunus offered a number.
"10 million?"
Wolfensohn shook his head. Too low.
"20 million?" Yunus offered.
From Wolfensohn's reaction it was clear that number was still too low.
"How about 50 million?" Yunus asked.
Wolfensohn seemed pleased by that number.
"That sounds about right, " he said.
"OK," Yunus told him, "you do 50 million and I'll do 100 million."
And that's how you win the Nobel Peace Prize: by making peace with the powers-that-be, the keepers of the status quo, rather than by declaring war on them.
Negate pure-profit motive
Yunus is using the same mild-mannered approach in his campaign to transform capitalism. On the one hand, as an economist and, now, a banker, Yunus embraces the discipline of the market. On the other hand, he believes that profit-maximizing companies turn complex human beings into one-dimensional creatures, devoted only to making as much money as possible. Pure-profit maximization is bad for people, for the environment and, ultimately, he argues, for capitalism, since it places unsustainable demands on the system.
But if unfettered capitalism has its shortcomings, so does out-and-out charity. Yunus sees charity as a bad bargain for both those who give it and those who get it. Rather than providing a path to self-improvement, charity relieves recipients of the responsibility for their own betterment. And those who give charity find themselves writing a check every year for the same problem, without any expectation that it will ever be solved.
Finally, Yunus takes a hard look at corporate social responsibility and finds little to love there, either. In fact, it is the worst of both worlds. It gives companies permission to operate as pure-profit maximization enterprises, then allows them to feel a little better about themselves by writing checks for charity. Nothing fundamental happens to improve the lives of billions of people who are doomed to living in poverty.
Which is not to say that there isn't a solution - a brilliant solution as proposed and already tested by Yunus. The answer to the profit maximization vs. charity dilemma is to create a new hybrid option: the social business. A social business must operate in the marketplace and earn the support of real customers who pay real money to buy a real product. At the same time, a social business has a social cause, not just a financial goal.
Focus on underserved communities
Yunus can identify myriad such causes; they exist wherever there is an unserved population. A social business could provide health care to those currently left out, feed malnourished children, provide clean drinking water to communities, or offer insurance to the uncovered.
Social businesses have investors - but they're neither hoping to maximize their profits nor writing off their investment as a charitable gift. The first profits from a social business go to paying back the investors. Once they've recouped their investment capital, investors forsake additional returns. Instead, profits from the social business go back into the business, to help even more people. Think of it as capitalism with a human face.
Yunus has test-driven the idea of a social business in a partnership he forged with Danone, the French food producer called Dannon in the USA. A joint venture between Grameen Bank and Dannon has produced a yogurt social business producing a tasty product for the children of Bangladesh. Yunus reports that, in less than 18 months, two cups of the fortified yogurt per week dramatically improves the health of malnourished children.
What's particularly exciting about Yunus' campaign for social businesses is how timely it is. Americans, in particular, are hungry for this kind of hybrid thinking. Foundations are looking for social entrepreneurs to whom they can give grants. But social businesses offer foundations something beyond grants. Social businesses will offer solutions that work in addressing societal problems and, at the same time, create solutions that are self-sustaining.
Statistics show that in the USA, 115 non-profits are formed every day, as young people look for ways to go beyond making a living to making a difference. Americans want a new option for making real change, one that runs like a business and delivers real help to needy people.
Muhammad Yunus' social business idea offers a vehicle for doing both. It's the kind of creative economic thinking that could earn Yunus a second Nobel Prize - this time in economics.
Alan M. Webber is founding editor of the business magazine Fast Company and a member of USA TODAY's board of contributors.