Expanding Dr. Yunus' Sphere of Influence

FACE TO FACE: Muhammad Yunus talks to Liam Black

These are some of the chosen parts from the conversation in London on 15th February (MY = Muhammad Yunus, LB= Liam Black):

MY

For a profit maximising company, the bottom line is how much money you make. But when you run a social business, it’s about impact. Ours was about impact on malnutrition in children. But you need to have measurement and we needed to understand the measurement of nutrition. If you have 100 units and you reduce it by one unit, it’s still a reduction. Measuring your success is different between a social business and other businesses. It is purpose driven and objective driven, not money driven. Measurement is a process and you have to build up to these things, but it can be done. If there’s a problem, it has to be measured. If we can’t measure it, we can’t do anything about it.

LB

I’m a great believer in social reporting and accounting and we (Fifteen) have just published our report. I have found a lot of people in the social enterprise sector reluctant to engage with reports and provide them. It’s where the cynicism from capitalism comes from.

MY

This leads us to talk about the social stock market. It has to be measured to gradually define the improvement.<

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MY

The point I make is it’s everybody’s heart, not just special people. Even the most greedy businessmen who make every pound for themselves feel that way. But there is only one road and the only thing we do is make money or charity. The companies making money are the big lorries speeding up the road and overtaking the small farmers pulling their carts. Now that I have built a new road, people say to me ‘here I am’. Social business will come with an unexpected amount of enthusiasm. People like doing things for other people and they want to do it, so why deprive them of that enjoyment. Life is about enjoyment and I am depending on that. These who take the first step are the ones at the front line.<

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MY

Yes, there will be competition, but if Nestle is competing with Danone, and they are on the same side of the road, it is fine. In a social business we are purpose driven, not money driven. If I am trying to bring water to these people and they are trying to bring water to these people, then we are friends. We reach more people and we can provide even cheaper water.

LB

But what if we have a payroll to meet every month? I have seen it in the social businesses I have been involved in.

MY

What is the competition? If I am a charity and I go to a donor and don’t get the money, I close the shop, but in social business, you never close the shop. In the charity world, I go to the donor, spend the money and then go back to the donor. In social business, the money is recycled. There are thousands of people that need help. Why should microcredit compete if we are not interested in profit?

LB

But we need the profit to innovate, don’t we?

MY

If we are recovering the cost, we can repeat endlessly. This is a great year because we have reached another 20,000 people. They are safe and they don’t have to drink nasty water. On the financial side, we made a five per cent surplus, but the owners can’t take dividends, so no one can take that away.

LB

Innovation is driven by making money. Do you think the good heart of a chief executive of the social business is enough to drive innovation and create good products and services?

MY

My assumption is making profit is a driving force to push us into lots of things, like expansion. Similarly, doing good is a strong driving force. Can I make it easier? Do people have to walk a mile to get their water? Could I bring it closer than half a mile? Can I do it near their home?
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LB

Your book got a hostile review in the Financial Times. The reviewer said that funding a social enterprise proposition relies on people giving up a return on their money, on the kindness of strangers. If the heart of the Grameen proposition is that a woman needs money to unleash her entrepreneurial drive and make money for herself, then it’s proposing a social business model that retains the profit. Isn’t that a contradiction?

MY

It’s different profit. It’s about her profit. She is making a profit to lift herself out of poverty and make a better life for herself and her family. When I brought this yoghurt to the children I didn’t say ‘we must get your parents to pay for it’. I said ‘this is a delicious yoghurt. Are you going to pay for it?’. It’s our conspiracy that whether they enjoy this lovely yoghurt or not, I give them some medicine. I didn’t create the Grameen Bank or Grameen Danone Foods to make money, I did it for the good of others. But why does it work? Is it because Danone wants to make money out of it? No, there’s no profit to be made.

LB

Well, I’m talking to the master here.

If there is a recession, what impact will it have on this?

MY

Some adjustment will have to take place. If we are looking for someone who makes a lot of money, they will be concerned about their money. They might wait until the next year to invest in something. Everyone will be cautious, but that will be everywhere in charity, business and social business. It will not mean everything closes down. The businessmen might say ‘I could lose millions on the stock market, so I might as well put my money in a social business’. At least they get back what they put in.

LB

It’s dependent on someone with enough money waiting to invest in social business. Will it be that that part of social business will always be dependent on capitalism?

MY

What’s wrong with that? This is supposed to be the means to an end. The real picture is here we make money and this is our money to do good for the world. That will stay in tact. People say ‘what am I going to do with these millions?’. Look at Bill Gates.
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MY

As long as you are a profit maximising business, your thinking process is about how to make money. Imagine you came to a business where you don’t have to make money, you just do good. Your thinking changes completely. A lot of things become relevant and irrelevant. If you are not making money, the packaging becomes irrelevant for example. You do not need to promote it. You use that money saved. You just think about delivering the real thing. People think that if they are not making money, they will not be interested in investing. It’s a common question I am asked. But they are not giving me money, they get it back.
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MY

If I am poor and I lived here, then wouldn’t a social business help me? In America, what about health insurance, which is a good sector to start with. We understand what it is, not being covered by health insurance and living in the US. I don’t have to tell you. You can do it because you don’t want to make money from it. Millions of people in the US don’t have a bank account because banks don’t see them as big enough. When they get their cheque from work, they don’t put it in a bank, they have to get it cashed. There’s a series of all these cheque-clearing shops and they rip them off. Loans are another one. Your car breaks down and you need it to get to work. For some, the only option is going to loan sharks, who charge you an extra 50 or 60 per cent. These are all uses of social business You have to look at the problems around you and be innovative.
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LB

If you had a magic wand and there was one thing you could do, what would it be?

MY

To have social business recognised as a businesses entity and define what are the norms and standards. As soon as social business becomes established, the fake people will get involved. They think secretly it will bring them money. The future needs to be innovative. Ask students to enter competitions to design packaging. Every time I speak to students I see overwhelming numbers who want to set up social businesses.

LB

Hopefully, you have helped bring some sanity to the world.

MY

I hope so.