Ryan Plott
June 20th, 2011, 05:14 PM
Muhummad Yunus is probably best known for starting the practice of micro-lending in Bangladesh with the Grameen Bank. This current book project entails his recent partnership with what Americans know as Dannon which makes yogurt and bottled water. Details of their partnership can be found here (http://en.wikipedia.org/wiki/Grameen_Danone).
This book is divided into three sections, (1) The Promise of Social Business, (2) The Grameen Experiment, and (3) A World Without Poverty. It's roughly 250 pages long and a very easy read. I have no education or background in business and I found it to be very understandable and concise. Because of that I really don't have the tools to critique the model Yunus is laying out very thoughtfully, but next on my reading list is to re-read a book that does. For the purposes of the review, I'll only summarize and review sections (1) and (3).
If you're interested in (2) then this book (http://www.amazon.com/gp/product/1586481983/ref=pd_lpo_k2_dp_sr_1?pf_rd_p=486539851&pf_rd_s=lpo-top-stripe-1&pf_rd_t=201&pf_rd_i=1891620118&pf_rd_m=ATVPDKIKX0DER&pf_rd_r=1T5PKWKYVP0SQMM07JFP) lays the story out in much more detail than the 5 chapters in this book.
Section 1 begins with talking about the rise of capitalism and the prosperity it has brought, along with some of its consequences and how they prompted the Millennium Goals by the UN to reduce poverty in half by the year 2015. Yunus' philosophy of why free markets fail so many people is that they are not designed to help. They may actually exacerbate poverty, disease, pollution, and crime instead of meeting a social objective. Government, non-profits, and multilateral institutions are all incapable of meeting this social objectives or have severe shortcomings which prevent them from being able to meet these goals.
A social business...
1. is not set up to achieve profit but to pursue social goals. The criterion it should be evaluated by is how well it creates social benefits for those whose lives it touches. Essentially, a cause-driven business. One example of a cause-driven business that springs to mind is the Financial Peace University started by Dave Ramsey.
2. employs workers, creates goods or services, and provides these to customers for a fair price consistent with its objective.
3. may earn a profit, but the investors who support it do not take any profits out of the company except recouping an amount equivalent to their original investment over a period of time.
4. is not a charity. It has to recover its full costs while achieving its social objective. This is done by chargin a price or fee for services or products it makes. If you can't cover costs you're not a social business. The idea is to be able to repeatedly invest the same 20,000 dollars repeatedly in a social business rather than donating 20,000 to a charity that will never come back and the funds used only one time for one goal.
5. could be defined as a non-loss, non-dividend company. Rather than giving profit to investors, the profit is invested back into the business. These profits are passed on to beneficiaries in such forms as lower costs, better service, greater accessibility. Profit needs to be made to pay back investors and support the pursuit of a long-term social goal.
6. needs to have a long term road map. This helps it move into new areas , offer a wider range or higher quality of goods, increase efficiency, etc.
7. Repayment of investors money would be specified by the business and investor collaboratively. It could be a 5, 10, or 20 year period.
8. will operate in the same marketplace as PMB's (profit-maximizing businesses) and against other social businesses. Again, product, social benefit, and service quality will be determining factor of evaluation, not profit.
This is a pretty rough draft of (1). Took me a bit longer than I thought and there's homework still to be done. I'll post on (3) Wednesday.
This book is divided into three sections, (1) The Promise of Social Business, (2) The Grameen Experiment, and (3) A World Without Poverty. It's roughly 250 pages long and a very easy read. I have no education or background in business and I found it to be very understandable and concise. Because of that I really don't have the tools to critique the model Yunus is laying out very thoughtfully, but next on my reading list is to re-read a book that does. For the purposes of the review, I'll only summarize and review sections (1) and (3).
If you're interested in (2) then this book (http://www.amazon.com/gp/product/1586481983/ref=pd_lpo_k2_dp_sr_1?pf_rd_p=486539851&pf_rd_s=lpo-top-stripe-1&pf_rd_t=201&pf_rd_i=1891620118&pf_rd_m=ATVPDKIKX0DER&pf_rd_r=1T5PKWKYVP0SQMM07JFP) lays the story out in much more detail than the 5 chapters in this book.
Section 1 begins with talking about the rise of capitalism and the prosperity it has brought, along with some of its consequences and how they prompted the Millennium Goals by the UN to reduce poverty in half by the year 2015. Yunus' philosophy of why free markets fail so many people is that they are not designed to help. They may actually exacerbate poverty, disease, pollution, and crime instead of meeting a social objective. Government, non-profits, and multilateral institutions are all incapable of meeting this social objectives or have severe shortcomings which prevent them from being able to meet these goals.
A social business...
1. is not set up to achieve profit but to pursue social goals. The criterion it should be evaluated by is how well it creates social benefits for those whose lives it touches. Essentially, a cause-driven business. One example of a cause-driven business that springs to mind is the Financial Peace University started by Dave Ramsey.
2. employs workers, creates goods or services, and provides these to customers for a fair price consistent with its objective.
3. may earn a profit, but the investors who support it do not take any profits out of the company except recouping an amount equivalent to their original investment over a period of time.
4. is not a charity. It has to recover its full costs while achieving its social objective. This is done by chargin a price or fee for services or products it makes. If you can't cover costs you're not a social business. The idea is to be able to repeatedly invest the same 20,000 dollars repeatedly in a social business rather than donating 20,000 to a charity that will never come back and the funds used only one time for one goal.
5. could be defined as a non-loss, non-dividend company. Rather than giving profit to investors, the profit is invested back into the business. These profits are passed on to beneficiaries in such forms as lower costs, better service, greater accessibility. Profit needs to be made to pay back investors and support the pursuit of a long-term social goal.
6. needs to have a long term road map. This helps it move into new areas , offer a wider range or higher quality of goods, increase efficiency, etc.
7. Repayment of investors money would be specified by the business and investor collaboratively. It could be a 5, 10, or 20 year period.
8. will operate in the same marketplace as PMB's (profit-maximizing businesses) and against other social businesses. Again, product, social benefit, and service quality will be determining factor of evaluation, not profit.
This is a pretty rough draft of (1). Took me a bit longer than I thought and there's homework still to be done. I'll post on (3) Wednesday.