new economy

Social Business.

What the heck’s a social business?

First of all, we’ve started to realize that the traditional corporation, one that is designed to maximize profits for shareholders, isn’t fixing many of the problems facing the world. In fact, a lot of our problems are a result of a fixation on profits before people, shareholders before communities. Social business, as described by Muhammad Yunus (a leading thinker on the subject) is designed to function in the existing marketplace, but in a “no loss” and “no dividend” manner.

A social business is designed to solve a problem in the community, or enhance some aspect of living (usually related to poverty, education, health, the environment). The “no loss” aspect implies that the business can, and should, make a profit. Easy enough to understand, no business wants to run at a loss. It’s the “no dividend” aspect that creates the distinction between traditional for-profit enterprises, and the social business. In a nutshell, no dividend is pretty simple. Profits are returned to the community to enhance the social mission of the organization, not to buy vacation homes and fancy yachts for shareholders and executives.

Why is this distinction so important? Because as soon as you stop focusing on creating profits to share with a select few, you’re free to focus on what’s really important. The problem you’re trying to solve in the first place, or the value you’re trying to create for your community.

Here’s a few ideas I’ve got about 3 basic rules that would shift the focus of a business away from the profit at all cost model, to a business designed to solve problems.

  1. No interest or dividends are paid to investors. All money lent and borrowed is done so “interest free”.
  2. The business can’t be sold for more than 1$.
  3. Surpluses are invested back into the mission of the business, or into the community in which you operate.

Sound crazy? It’s happening. All over the world. And it’s going to be happening here… soon! Stay tuned.