Professor Muhammad Yunus, Nobel Laureate

Transcript of Address to the Infrastructure Australia Conference: Connecting the Dots—a conference shaping the future of infrastructure in remote Indigenous communities

Hi, greetings from Bangladesh. I am delighted that I could talk to you at this conference, but I am sorry that I could not physically be with you. Actually, I was thinking of coming and Farhad was insisting that I must come. Because of his persistence, I was thinking that maybe I could make it, but after checking through my schedule I saw that it was impossible. So here I am talking to you through this video. I’m sorry Farhad that I disappointed you, and I hope to make up for it next time.

I am very happy about this conference. There are many conferences going on, but this one is of particular interest to me because of the subject matter you’ll be discussing, namely remote Indigenous communities. This is a very special kind of subject, because I see things that don’t happen normally to remote areas and people who are off the radar screen. Where things have not happened, or things have been tried in the past which did not work out.

There is a possibility of doing something very bold, something very unconventional. You don’t want to create waves by doing things in a very unconventional way, but in areas where things are not done or done very poorly, and have sometimes left a bad taste in your mouth due to past experiences, it is time to be bold and think out of the box.

So that’s what interests me, that this is a case that just fits that purpose. An opportunity to be bold, creative and think outside of the box, and that’s where my interest lies. I am sure that you will be discussing a variety of ideas. Your delegates will have a lot of ideas of what can be done for the remote Indigenous communities in Australia. Here I will be discussing a subject that is very close to my heart—this is the concept of social business. A new idea for doing business, to solve problems. We are familiar with conventional businesses and theories of economics which tells you that business means profit maximization and making money. We are all familiar with these businesses, but I am talking about unfamiliar businesses which are not very popular or well known right now.

This is the business I am trying to promote. A business which is not aimed at profit making. A business which is not for making money, but for solving problems. This is the distinguishing feature between a normal economic business and a social business. This is a concept which fits into this particular situation very well.

So we can create social businesses to solve the problems of this particular situation you have at hand right now in the remote Indigenous communities. We can design solutions in a business way, so they are sustainable, work in a way that creates solutions, and at the same time you recover the costs invested in the business. There are a variety of possibilities which will be brought up in this presentation and this is the concept I will be focusing on. I am sure you also have numerous ideas and I am also interested in your ideas. I hope you will have the patience to listen to me and see if it makes sense to you. At first it may seem outlandish, “what is he talking about, how can you have a business which does not make money? Why would anybody be interested in a business which does not make any money?” I will explain in a little while, why I think this is possible.

Social business is a business where you have a problem in your hand, and you design a business firstly to solve the problem. The whole focus is on creating solutions, and is not on making personal money. The focus is on sustainability, so you invest money hoping that the problem will be resolved, or a fraction of the problem. If you can crack a part of the problem, you will have really gotten onto the right track. Once you have done this, you can repeat this and eventually solve the whole problem. You design the business so that investors are not expecting to make a profit or personal benefit. They are entitled to take their investment money back when the company becomes sustainable and is making a profit. The owners can take back the initial investment, and this company will continue to function as it is sustainable. If is fueled by its own fuel, not by an external injection of fuel. The problem is addressed again and again.

This investment could have been made through charity and the problem, or fraction thereof, would be solved. But charity money is spent and doesn’t come back. It could be government money, an international grant, an individual charity etc. The whole purpose of charity is to give money to take care of a problem, and it does a good job. But if you want to repeat this, you have to find fresh money. Every new step becomes dependent on whether somebody would like to give you the money, or stop the money completely. So that’s not sustainable. But if you can transform this into a business or social business, social business money continues to circulate. Charity money goes and never comes back. It only has one life, but if you convert this into social business money, it has an endless life and goes onto perpetuity and does not stop. The owners are not interested in taking any profit because it is dedicated to the solution of the problem. It is important not to link to the profit motive because the logic of money making and problem solving are not the same and will take you in two different directions. A social business is a non-loss and non-dividend company for solving a problem.

So this is the idea. Now how do we design and do this?

This is basically what we know as a social business and we refer to it as a Type One Social Business. How do you run this kind of thing? Can we have examples to make sense of it for people who are listening to me? We have many social businesses in Bangladesh and there are many examples in other countries.

I will give you some examples from Bangladesh. One very attractive one, which will make the case very simple and transparent, is our joint venture with Danone, a French milk company, known for its yoghurt. I am sure in Australia you also have Danone yoghurt, and are familiar with the company. We have a joint venture with Danone and we made it very clear to the company that we are a social business. Danone enthusiastically supported us and joined us in this new company in Bangladesh. The purpose of this company is to address the problem of malnutrition among the children of Bangladesh. You are perhaps aware that many children around the world, especially in third world countries, are malnourished. I am sure that in remote communities you will have the same problem. If a child is malnourished, two things happen to the child. The child will be physically stunted and will not grow as much as a child should grow because it is lacking some micronutrients. So this is one problem. The second problem is more important. It involves the slowing of mental growth. Mental growth does not develop at the normal speed. Children are physically and mentally stunted. This is the problem, and it is not a good start for a human life.

So what we have done in this company to address the problem of malnutrition amongst the children is we produced a particular type of yoghurt and included all the types of micronutrients which are missing in the children. We included vitamins, iron, zinc, iodine and all those kinds of things, and made it very delicious and very cheap so that even the poorest child can eat this yoghurt. If a child eats two cups of this yoghurt within a week, and repeats this routine for seven, eight, nine months, the child gets back all the micronutrients and will grow normally. The child will be healthy as they receive all the nutrients. So you have solved this problem, just by selling those yoghurts. And the child loves this because it is really delicious yoghurt and he or she is always waiting for this yoghurt. The company recovers all the costs of producing, distributing and marketing. It is not dependent on anyone else’s charity money. The money is circulated; children receive and love the yoghurt; and they are healthy. So this is the purpose of the company—solving the problem of malnutrition. The company makes a profit, and the profit stays within the company. The owners, Danone and Grameen, can take back their investment money and nothing more than that. That is their intention, to dedicate their money to solving problems. Now that it works, we can expand and invest more money. We know this money will come back, so we are not losing any money. That money has far more power than charity money, because charity money will never come back. This is the idea of social business: a sustainable business; the company makes a profit; owners do not want to take money from the company and it solves a problem. If a business is not solving a problem, it is not a social business, even if the owners are not making or taking any money.

How do we do this? Social business is creative. How do you create a business to solve a problem? Danone is an example, as this is not the normal yoghurt you eat from your market. This is very different and Danone tells us that it is the most powerful yoghurt in the whole world and it is very cheap. Danone designed many ways to cut the cost to make it available to the poorest children. So this is the creativity you bring in designing, marketing and making it popular. So everyone knows the benefits and parents and children should know about it. So this is one example of a social business.

To give you another example, we talked to Adidas. Adidas executives wanted to know how they make a social business. So I gave them the idea of making a social business company first and having a mission statement for this company. They asked what type of mission statement, and I suggested the statement could be, “Nobody in the world should go without shoes, and as a shoe company it is our responsibility to produce shoes affordable to the poorest person”. The CEO of Adidas was shocked. How can you do such a big task, making sure that you produce shoes affordable to the poorest person, and making sure that nobody goes barefoot? This is a big task. I assured them that Adidas is a big company and should undertake a big task. Why undertake a small task? So it took them hours and hours of internal discussion, and they approached me to find out how cheap the shoes should be in order to be affordable to the poorest person. So I just casually said “maybe under one Euro.” They were shocked again and said “How can you produce and sell Adidas shoes for under one Euro?” This was followed by several hours of discussion, and they decided that yes, they were going to take the challenge and work towards it. If not under one Euro, as close to it as possible. They worked for two years, designing, testing them and seeing how the costs can be brought down again and again. They tried many methods and finally produced the shoes. This is our social business now and we are about to sell the shoes in Bangladesh. Already we are market testing beautiful shoes for under one Euro.

So again, it is important that you have a particular objective or particular problem in mind. What was the problem with the shoes? It wasn’t about fashion and comfort, it was about diseases. Many diseases attack our body through the skin of our feet. If you go barefoot all these diseases come into your body, particularly parasitic diseases. You will see the bloated stomachs of people because they are carrying lots of worms in their stomach because they go barefoot and are attacked by these parasites. And this is it. So now, by enabling everybody to wear shoes, you are stopping these infections from taking place. You can be safe from all these diseases. So we wanted to solve this problem of diseases, and in the process created a company. If you are selling at below cost, making donations or subsidized prices, then it is not a social business. Social business has to be self contained and should be sustainable. So you bring your creativity, your skills and design technology to make it happen. This is the strength of social business.

So I gave you these two examples. There are many, many examples. I have given you these two as these companies are known to you. We have done many such companies ourselves, as social businesses do not have to be mega companies. It can be an individual person on a very modest income. One can start a social business to create jobs for just three people. I can create a business to employ three people and give them a descent income, and I have no intention of making any personal profit out of it. All I want is that money circulates within the company; they have a job; and enjoy their work. You or I, or anybody can do that. The idea of social business can start with a very small intervention. It is all about a creative idea. How do you create three jobs and a business? There are thousands of ideas and one will stand out as the best.

You can create a social business in many different ways. There are many options for addressing the problems in remote Indigenous communities. We should start by making a list of the problems and start making designs. We could have design competitions within the community, or throughout the whole of Australia. We can get people to come up with ideas to solve a very specific problem. It could be a health care, education, training, marketing, cultural or forestry problem. You name it and we can come up with a beautiful social business idea. Forestry is an amazing social business. You can start with a small business to cover a small portion of the forest and expand it. Agriculture is a beautiful social business, and you can go on and on and on.

So this is one type of social business, another is the Type Two Social Business. Here a profit making company, which we are all familiar with, is owned by a trust. We create a trust given a mandate that this trust will solve a particular problem. Where is this money coming from? It will come from a company the trust owns. It could be any company, for example, a grocery shop, textile company or even a mining company. All the profits from the mining company would go to the trust. The trust has a management team, which manages the mine. The trust uses this money for a mandated reason, for example improving healthcare, education, training, communication or whatever it is. It could be used to undertake research. Each one could be its own individual social business. The company is endowed to the trust, and the trust uses this money for a dedicated cause—no money is taken out of the company.

So there are many situations where Type Two Social Businesses can operate under a trust. Imagine, we can create airports as a social business. The airport is owned by a trust. We can create ports, airlines, energy companies, railways etc, owned by a trust. This is a social business as the trust is used to solve a social problem. We have varieties of ways to do this.

I have discussed two types of social businesses. The question will come, “where do we find the money to do a social business when we don’t have a trust or a big company in a type two situation, where a big investor company comes in. A young or experienced person amongst your delegates today may have an idea for a social business. A brilliant idea for remote Indigenous communities but they do not have the money. So you have the idea and somebody has the money. How do we connect? We suggest the creation of a social business fund, where all the people who want to create a social business put their money into a fund. A social business fund will invest in your idea and somebody else’s ideas—maybe through a competition. They will become the social venture capitalist for you. Many of these will start working right away and others will take a bit of time. They have to work. You will do a bit of experimentation and in the beginning you may make a few mistakes, but these will be corrected by the second or third round. Then you will have a beautiful business coming in. If you want examples, we can show you all the examples that we created in Bangladesh. There are many, many examples in other countries including Japan and Germany, Cambodia, Algeria and India where the idea of social business is spreading.

So creating a social business fund is a solution. Who will put the money into the fund? Well to begin with, the government can put some money into the fund. Because, after all the government is ready to give money as a grant. So while they put money into a grant, and I am not opposed to legitimate grant making, some part of the grant money can go into a social business fund. That fund will open up ideas for everybody and the money should come back to the fund. The fund will then provide money again. So the government could provide an initial investment or grant, so it can start the cycle. Foundations could also provide money to the fund. Big business could create their own social business funds or contribute to the fund created. So there can be a series of social business funds. Remote Indigenous areas, particular projects or the whole country could have a social business fund. Big corporations could put one half of one per cent of their profit into a social business fund by way of contributing to solving a problem. After all, big companies have their own responsibility to participate in problem solving. They can get their investment back. You could also use part of your corporate social responsibility money or all of it.

The source of funding is not a problem and when you have concrete examples, more companies and even moderate income earners will like the idea of helping young people; the poor; single mothers; and assisting those dependent on welfare to get out of the cycle.

The success stories will be flowing through the media and will create a resurgence of creative ideas. Australia has no lack of creative ideas and there are an enormous amount of creative ideas around, but they are not focused in the direction of solving problems. They go into the direction of making money. Creative ideas can be used to solve problems or make money.

To sum up, here is my suggestion—we can start a social business and we can start with a design competition to solve the problem of water, unemployment, sewerage, telecommunications and how to bring technology to the remotest people. We can then move step by step, with small social businesses. We do not have to have mega social businesses. Investments of between $200,000 and $1,000,000 is the range we are talking about so don’t get scared that “oh here he comes with the big ideas”.

The first social business, or social business model or prototype, you develop is like a seed. Once you develop a seed and it works, you can have a plantation. A big problem can be resolved with a tiny little seed. And that is the social business model we are talking about and that is why a social business fund is needed. When people are unaware of what a social business fund is, how do you start this? Why not a social business promotion initiative or group, so you can talk to businesses, chambers of commerce, universities, students, leaders and politicians to get involved. First they need to learn what this is and then promote the ideas. Promotion, not fund raising.

Then there is the question of creating ideas. The communities facing the problems are the best judge to creating solutions to these problems. Companies running major projects can come up with creative ideas for small social businesses. People love to touch the lives of others, but are not given a chance. Social business gives them this chance, to have joy by making other people happy. This is an amazing kind of happiness. We need health professionals, students and everybody to get involved.

An advisory group can be very effective. If you think that I can be of any use in an advisory group, I would be very happy to be associated with an advisory group and can share our experiences which can in turn be shared with others in the community in remote areas. Or even broader Australian problems. You will be learning a lot as a nation, a lot through these remote communities and the solutions could be applicable all through the country. The ideas will be useful for many other countries. If you solve a problem, you can be sure that it is not your problem alone. It is a global problem and many people around the world would be benefited because an Australian came up with a business solution. And they will be very grateful to you.

So this is what we would like to do. After you go through this conference I hope you will put a little bit of time and energy into the idea of social business. I am just inviting you to test it, and to experiment with it. I am sure you will love it.

That is all I have to say. Again, I am sorry that I couldn’t be present but the next time you are doing something like this I promise I would like to come and talk about social business and explain what we do. But we can be in touch. Thank you very much.

Original source at http://www.infrastructureaustralia.gov.au/conference_series/connecting_dots-prof_yunus-transcript.aspx

Special thanks to Farhadur Reza Probal.