Social Business thoughts

A month or two ago I came across an amazing piece by Muhammad Yunus, where he introduces the ‘Social Business’. I do hope the meme builds momentum, and I’m hoping my ‘dot-org‘ concept can grow to be the technological sector of the social business world. It’s a great narrowing of the term ‘Social Enterprise‘, which I feel has almost been too broadly adopted so as to become less meaningful. I’m looking for a more narrow focus – entities that are fundamentally both in service of a mission and operated to draw income from the market, not from charity. He articulates this better than I’ve seen before, with his full cost recovery social business – leaving behind the dependency of a charity, one enters the business world with ‘limitless possibilities’.

I especially liked his points about a Social Stock Market, that it needs to be a set of separate concepts, with different measures and media outlets. But I find his ideas on how to get there a bit weak – having a design competition that rewards the best ones with funding. He also suggests that someone soon could just hatch a Social Stock Market, and a little research found that Rockefeller is already moving to fund one. But I’m fearful that it’s too much too soon, and that a bunch of not so great social enterprises will give it a bad name.

Though maybe it would just be a sector of the Social Stock Market over time, one thing I’ve been thinking about, especially as OpenGeo progresses towards full cost recovery, is making it so money generated by social businesses is viral. The current thought with OpenGeo is that relatively soon we’ll spin it off in to its own company, fully owned by the foundation (TOPP), just like the Mozilla Corporation. Most profit will then go back to TOPP (with a portion towards employee profit sharing), which is a not for profit and by definition has to reinvest the money back in service of its mission. We’ve been thinking about what ‘outside investment’ might look like, and I’m pretty sure we’d want it to operate like the money our funder is putting in now – all returns must go back in service of our mission. But I’m thinking that outside investors could then have control over which TOPP initiatives their returns could go towards, and could choose to direct a new project, leveraging a team of programmers and designers from TOPP. If there was a social stock market, however, it would make perfect sense that their returns could go to other ventures that also guarantee to put their returns back on the alternate market.

Thus money would operate like source code with the GPL – it only helps those who agree to the same set of principles, towards a commons that can be used by others with the same values. I like this because I think it cuts a nice middle ground between non-profit charity giving and the social enterprise investment now that has little way of knowing how much investors actually do care about the profit bottom line. I suppose the money could also go back in to non-profits that are more geared towards charity. This would help foundations allow to make their endowments work for good, instead of just having the capital in traditional investments. But I’d hope that instead of just returning back to foundation endowments it boot straps social venture capital firms and incubators and more capital in service of social businesses. And thus shares in the social stock market (or at least sector thereof) is a real alternative with teeth, where success breeds further capital for more success, instead of just a nice idea.

I have not read any wider literature on these things, so this may be very naive, or an idea already tried, but it sounds potentially cool to me, and it’s really just trying to extend the proto-model we have at TOPP. But I hope to read more on where things are at with social enterprise and where they can move forward, as we’ve mostly been operating in a vacuum.

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7 thoughts on “Social Business thoughts

  1. Chris,

    I think there is great promise in the fourth sector, or as you put it- the dot-org. Only if the tax laws in the States could be amended in order to entice more tech companies to go in that ‘hybrid’ direction.
    Presently, in Jamaica, we get private sector clients to invest in Open Source GIS solutions for government. Out of this arrangement emerges a for-benefit project, but it takes a while for all the stakeholders to realize our intentions. To me, adopting a vivid phrase like dot-org can only help unite our parallel missions. Thanks for all your great work!

  2. I first became interested in this topic after reading this article in the New Yorker (http://www.newyorker.com/archive/2006/10/30/061030fa_fact1). Citibank makes some interesting points (although in my opinion ultimately unconvincing) about why there shouldn’t be two stock markets. They feel that if they treat micro finance patrons like other for-profit customers (i.e. trying to maximize profits), they will be able to provide better service to these patrons.

    To comment on another one of Yunus’s points, I really like his idea of a design competition. When I worked at MIT the institution started a Social Entrepreneurship competition (http://mitsloan.mit.edu/newsroom/2006-100K.php). This competition does a really good job at encouraging social business ventures that can get to a “full cost recovery” stage. Many of the ideas that come out of MIT’s competition have great potential.

  3. This is not a deeply flawed perspective of business as others that I respect have remarked. (http://blog.cleverelephant.ca/2008/06/deeply-flawed-perspective-on-business.html)

    Let me offer the example of a 2200 acre farm that my wife and I have been involved with for many years. This rural Jamaican farm has been in our friends family since the 1850′s. It is one of those “entities that are fundamentally both in service of a mission and operated to draw income from the market, not from charity”
    These days the farm exist to create jobs for surrounding communities. However, just being able to keep ‘the doors open’ has not been enough lately. There are five businesses associated with the farm and at the end of the day they break even. As food prices soar, so do feed prices. So we want to pay our workers more (so they can feed their families)at the same time as it cost more to run the farm (feed the chickens and pigs). All of the sudden our mission become harder to attain.
    The point is, we have to change the model. And the model of ‘Social Business’ is not deeply flawed, it is just an example of thinking out of the box in order to achieve ones mission. Even if our main obligation is to create jobs for rural farmers, profit should be the driving force behind our entrepreneurial businesses. Therefore, we can create something a bit more sustainable that can assure the farm and community will flourish in the days ahead.

  4. Pingback: Social Business thoughts by Cholmes in ‘Into The Pudding’ « studyunus.net
  5. продам Форд-Фокус 2008 года за 200 тр. торг возможет. срочно!!!
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  6. Сорри за оффтоп, кто-нить смотрел ролики на ютьюбе про конец света? Ну, про андронный колайдер Ваще страшно!

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