Social Business – Possibly a New Way for Capitalism

After my last blog on TOMS shoes and their social business concept, I had several discussions about this idea of a ‘social business’. While I don’t want this blog to get a general educational twist, there was so much confusion about this that I’d like to use this blog for a short insight.

What is important, first, is that social business like we talk about with the shoe manufacturer TOMS has nothing to do with IBM’s ‘social’ business. IBM is all about making their electronics social, in the sense of focusing on connecting people, facilitating communication and exchange. The ‘social’ in ‘social business’ is directed at a wider societal dimension, aiming at improving the lives of individual or groups of people.

The general idea was developed by Muhammad Yunus, who won the Peace Nobel Prize in 2006. In a nutshell, instead of being only driven by profit maximization, social busniesses are supposed to be geared towards the improvement of society, fighting poverty and being sustainable. Therefore, investment in such a business should not gain interest but be paid out 1:1 and all profits should be invested either in the business or into other social businesses. The target markets are usually education, housing, other welfare provisions but can also include infrastructure etc.

Muhammad Yunus, Inventor of Social Business

Now, the idea sounds really good but, as I wrote earlier in my blog, there are some shortfalls. In particular, the principles of being a social business are rather vague and nearly anyone can claim to be a social business. But, possibly, this is a way forward as old-style capitalist mechanisms that are so dependent on everlasting economic growth run out of steam.