Summary
Building Social Business attempts to communicate the value and potential worth of a concept called "Social Business." The author, Muhammad Yunus, through a mixture of exposure, practical advice and hope-filled discourse, lays out the case for solving social issues with his business model. Instead of presenting the story of social business in a textbook-like fashion, Yunus takes the reader on a journey though the history, theory and lessons-learned of his collective social business experience. Redundant and drawn out at times, he takes the entire book to fully explain his business model while addressing problems, fears, and inspiration along the way. Yunus concludes his case in the final chapter by expressing his vision for the end of poverty with a new proposed era of worldwide social business.
Early in the book, the author helps to explain social business by pointing out what it is not. "Social enterprise," "social entrepreneurship," "charity organizations," "non-governmental organizations," "non-profit organizations" are definitely not the same thing. Yunus defines social business simply as a traditional business that sustains itself but whose purpose is to create social benefits rather than to generate a profit. A social business can be further categorized into two subtypes. A type I business is a non-profit making company devoted to solving social problems owned by investors who reinvest all profits back into the business. A type II social business is owned by poor people themselves. Type II social businesses are "profit-making" but since these profits go to poor people (the owners), the businesses are still helping to solve social problems. Since most of the book concentrates on type I social business, Yunus feels it important to explain the Seven Principles of type I:
1. The business objective is to overcome poverty or one or more problems (such as education, health, technology, access, and environment) that threaten people and society--not to maximize profit.
2. The company will attain financial and economic sustainability.
3. Investors get back only their investment amount. No dividend is given beyond the return of original investment
4. When the investment amount is paid back, profit stays with the company for expansion and improvement.
5. The company will be environmentally conscious.
6. The workforce gets market wage with better-than-standard working conditions.
7. Do it with joy!!!
The middle chapters of the book serve a few purposes. First, Yunus talks frankly about some of the challenges that must be overcome when attempting to create a social business. For example, in 2007, Grameen Danone, a social business that makes yogurt for poor people in Borja, Bangladesh, ran into serious difficulty. The price of milk doubled and the company was no longer sustainable by selling 80 grams of yogurt at 5 taka (7 cents). He therefore had to decide if the price of the product should be raised or somehow try to cut costs another way. His decision to raise his price to 8 taka was met with disastrous consequences; yogurt sales plummeted. After a lot more brainstorming, Yunus decided to sell the product in a smaller 60 gram container for only 6 taka. The business recovered but he sends the message to the reader that running a social business (just as a traditional business) requires a great degree of flexibility.
Next, advice on launching a social business is provided to the reader. Yunus tries to reach out to those that wish to get involved with social business but don't know how. When starting a social business, don't look for opportunities that will generate maximum profits. He suggests, instead, that potential creators of social business pick a social problem then seek a business solution to solve the problem. He additionally discusses ideas on what social problems a person might attempt to solve through social business. Some common examples are poverty, hunger, disease, healthcare and pollution to name a few. While solving some of the world's toughest problems, like poverty, may not be realistic, Yunus advises that people start small and start right away. Providing employment, for example, to five people is a very realistic goal for a new social business entrepreneur.
Weaved into the discussion is information about some social businesses he helped to create over the years. His first social business was Grameen Bank (which means village bank). Established in 1976, the bank provides microcredit to poor people in Bangladesh. Microcredit loans average about $200 per loan. Already discussed is Grameen Danone, a social business that produces affordable yogurt. The social problem addressed by that business is that of malnourishment in poor rural areas. The yogurt provides essential and much needed nutrition for folks at a price they can afford.
On the healthcare front, in 2009, Yunus' Grameen organization teamed up with the Cure2Children Foundation (of Italy). The goal is to set up a social business in Bangladesh to start bone marrow transplantation, the only way to cure thalassemia (an inherited blood disorder). The goal of this venture is to make self-sustaining business by charging well-off families the standard rate for bone marrow transplant operations. This, in turn, will help to pay for families that can contribute little or nothing. For every two full price patients served, a third poor patient can be treated for a token fee or none at all.
Lastly, Yunus discusses Grameen Veola Water. The company is half owned by Veolia Water AMI (Africa, Middle East, India) and half by Grameen Healthcare. This social business was established in 2008 to supply drinking water to the poorest people of Bangladesh. Unfortunately, for geological reasons, almost all of the groundwater the country has been found to be contaminated by arsenic, at levels that make it a health hazard. Today, more than 30 million Bangladeshis are exposed to the sometimes fatal consequences of chronic arsenic poisoning.
Starting small and with the goal of producing 10 liters of clean water for 1 taka (1 cent), Grameen Veola has begun supplying safe water to poor rural people. Many of the villagers are unaccustomed to paying for water and this has proved to be a snag in the business plan. Yunus, however, optimistically states that Grameen Veola is a work in progress. As long as the central goal of providing an affordable, sustainable and healthy supply of drinking water to the poor people is kept in focus, there's no problem with testing many ways of making the project economically viable.
Yunus concludes his work with an optimistic view of his social business model and how it has attracted so much positive attention in the past few years from every continent. In contrast, however, he also takes a critical stance on capitalism by pointing out where it has failed humanity since the recent financial crisis. According to Yunus, the demands for ever-increasing profits and the creative ways to make that possible (repackaged mortgages and other such loans) caused the collapse of the US housing market. That collapse has had a world-wide affect where millions around the world who did nothing wrong are now suffering.
He's quick to point though that great crisis offers great opportunity. Yunus believes that social business has the potential to reverse current affairs by bringing the poor into the mainstream economic system. He thinks it can transform society by potentially ending poverty in the foreseeable future. When pondering what the world with be like in the year 2030, Yunus thinks that a science-fiction writer has a better chance at predicting the course of humanity than the best scientists and economic analysts of our time. Analysts are trained to make forecasts on the basis of past and present but Yunus concludes with the assertion that "events in the real world are driven by dreams of the people."
Discussion
I chose this book to read because the title led me to believe that the author is a proponent of socialism and big-government solutions to world problems. I, unashamedly, am a pro-capitalist and an anti-socialist who strongly values the ideas of limited government, free markets and individual liberty. Prior to reading, I thought this would honestly be a good opportunity to reinforce my own views while pointing out the fallacy of a world-view I don't subscribe to. My preconceived ideas about this book actually proved to be somewhat incorrect. Additionally, I am a bit embarrassed to admit I knew next to nothing about the author even though he is a Nobel Peace Prize recipient.
I do not agree with everything Muhammad Yunus presents in his work. I do not share, for example, his belief that traditional capitalism is responsible for poverty and that it creates a "fairytale of prosperity for all." Despite such disagreements, I have come away with newfound knowledge and some genuine respect for the social business concept. While I don't know for certain if Yunus values the tenets of socialism, I was pleased to read about his solutions for helping the less fortunate. He advocates neither big-government solutions nor wealth redistribution initiatives. Yunus, in a nutshell, seeks to reduce poverty by constructing self-sustaining businesses with the mission of creating social benefits, instead of maximizing profits.
The belief in helping others is not monopolized by one side of the political spectrum or the other. I believe that most people, regardless of their political and economic views, desire to be helpful to others in life. Society should, however, be ever mindful of the tenet which says "God" helps those that help themselves. This, in part, is why I hold a favorable view of Yunus `work.
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