The Concept of Social BusinessIn a previous post, I wrote that our concept of business is too narrow in its insistence on profit being the only viable human motive. In this post, I will expand on that thought.
I took my first step in the direction of helping poor people in the mid-seventies. While poverty has remained my main concern since then, I have moved on to other issues because I have found them very relevant to my main concern. Over time I have become involved in agriculture, livestock, fisheries, renewable energy, information technology, education, health, and many similar areas. Each one, I thought, could help overcome poverty if designed in the right way. For each of these sectors, I created a company to see whether I could address the problem of poverty in a sustainable way. Poverty is a state of living. It has many facets. It has to be approached from many directions, and no approach is insignificant.
Let me turn for a moment to the financial crisis of 2008 and onwards. Unfortunately, media coverage gives the impression that once we fix this crisis, all our troubles will be over: The economy will start to grow again, and we can quickly and comfortably return to "business as usual."
But even if it were desirable, business as usual is not really a viable option. We forget that the financial crisis is only one of several crises threatening humankind. We are also suffering a global food crisis, an energy crisis, an environmental crisis, a healthcare crisis, and continuing social and economic crisis of massive worldwide poverty. These crisis are as important as the financial one, although they have not received as much attention.
Furthermore, the media coverage may give the impression that these are disconnected crises that are taking place simultaneously, just by accident. That is not true at all. In fact, these crises grow from the same root---a fundamental flaw in our theoretical construct of capitalism.
The biggest flaw in our existing theory of capitalism lies in its misrepresentation of human nature. In the present interpretation of capitalism, human beings engaged in business are portrayed as one-dimensional beings whose only mission is to maximize profit. Humans supposedly pursue this economic goal in a single-minded nature.
This is a badly distorted picture of a human being. As even a moment's reflection suggests, human beings are not money-making robots. The essential fact about humans is that they are multidimensional beings. Their happiness comes from many sources, not just from making money.
And yet economists have built their whole theory of business on the assumption that human beings do nothing in their economic lives besides pursue selfish interests. The theory concludes that the optimal result for society will occur when each individual's search for selfish benefit is given free rein. This interpretation of human beings denies any role to other aspects of life---political, social, emotional, spiritual, environmental, and so on.Human Beings are Multidimensional
No doubt humans are selfish beings, but they are selfless beings, too. Both these qualities coexist in all human beings. Self-interest and the pursuit of profit explain many of our actions, but many others make no sense when viewed through this distorting lens. If the profit motive alone controlled all of human behavior, the only existing institutions would be ones designed to generate maximum individual wealth. There would be no churches or mosques or synagogues, no schools, no art museums, no public parks or health clinics or community centers. (After all, institutions like these don't make anyone into a tycoon!) There would be no charities, foundations, or non-profit organizations.
Obviously human beings are driven by selfless motivations as well. The existence of countless charitable institutions supported by personal generosity demonstrates this. (It is true in many countries, donors to charity receive tax benefits for their gifts. But these tax breaks only repay a portion of the money donated. An altruistic motivation is still required to make charity possible.) And yet this selfless dimension has no role in economics.
This distorted view of human nature is the fatal flaw that makes our economic thinking incomplete and inaccurate. Over time, it has helped to create the multiple crises we face today. Our government regulations, our educational systems, our social structures are all based on the assumption that only selfish motivations are "real" and deserve attention. As a result, we invest vast amounts of time, energy, money, and other resources in developing and supporting for-profit businesses. We assume that for-profit businesses are the chief source of human creativity and the only way to address society's problems. And even as our problems get worse, we fail to question the underlying assumptions that helped create those problems in the first place.
Once we recognize this flaw in our theoretical structure, the solution is obvious. We must replace the one-dimensional person in economic theory with a multidimensional person---a person who has both selfish and selfless interests at the same time.Two Kinds of Business
When we do this, our picture of the business world immediately changes. We see the need for two
kinds of businesses: one for personal gain, another dedicated to helping others. In one kind of business, the objective is to maximize profits for the owners with little or no consideration for others (In fact, in the pursuit of maximum profit, many people do not mind even harming people's lives knowingly.) In the other kind of business, everything is for the benefit of others and nothing is for the owners---except the pleasure of serving humanity. The second kind of business, built on the selfless part of human nature, I have named social business
. This is what our economic theory has been lacking.
In a social business an investor aims to help others without making any financial gain for themselves. The social business is a business because it must be self-sustaining---that is, it generates enough income to cover its own costs. Part of the economic surplus the social business creates is invested in expanding the business, and a part is kept in reserve to cover uncertainties. Thus, the social business might be described as a "non-loss, non-dividend company," dedicated entirely to achieving a social goal.
We can think about a social business as a selfless business whose purpose is to bring an end to a social problem. In this kind of business the company makes a profit---but no one takes the profit. Because the company is dedicated entirely to the social cause, the whole idea of making personal profit is removed from this business. The owner can take back over a period of time only the amount invested into the business, no more than that.
Once our economic theory adjusts to the multidimensional reality of human nature, people will learn in their schools and colleges that there are two kinds of businesses: traditional money-making businesses and social business. As they grow up, they'll think about what kind of company they will invest in and what kind of company they will work for. And many people who dream of a better world will think about what kind of social business they would like to create.