TEDxUChicago 2011 - Jonathan Greenblatt - Revolutionizing the World Through Social Responsibility
The speaker argues the Impact Economy represents a crucial economic shift where supply and demand focus on a world-changing Mission rather than just market prices. This transformation requires a new social compact, facilitated by government setting "rules of the road" to support purpose-driven business. To succeed, this economy needs common metrics, exemplified by GIARS, and mechanisms like the SBA to channel capital. ## Speakers & Context - Unnamed speaker (implied expert on economics/business models). - Audience: Attendees at tedx U Chicago. - Setting/Occasion: Last session at tedx U Chicago, presented in High Park. - Speaker thanked Gabrielle, Gabriel, Julia, and the students for making the day possible. ## Theses & Positions - The Impact Economy is the most singular important transformation of our economy today. - Business must be viewed as building new equilibria by creating superior value products that are mindful of social impact, embedding the mission in the DNA of the business. - The core concept is where supply and demand converge not on a notion of a market clearing price but on the notion of a world changing Mission. - A new social compact and a new era of cross sector collaboration between government and business, and between philanthropy and non profits, is needed. - The government's role is not prescribing solutions, but creating rules of the road to facilitate success. - The lasting government has to do is stand back and let this impact economy change our lives for the better for generations to come. ## Concepts & Definitions - **Impact Economy:** Characterized by supply and demand converging on a world-changing Mission rather than a market clearing price. - **Impact Investing:** The idea of purposeful Investments made by committed capitalists or passionate philanthropists who are trying to drive economic return and create social benefits without seeing a tradeoff between the two. - **Social Enterprises:** Businesses trying to drive meaning, money, profits, and purpose. - **Global Impact Investing Reporting Standard (GIARS):** A standard for measuring social good in the capital markets of the impact economy. - **L3Cs:** A form of business structure mentioned in relation to purpose-driven businesses. ## Mechanisms & Processes - **Model for Superior Value:** Creating products that are as good if not better than competition while being mindful of social impact, with the mission encoded in the DNA. - **Capital Flow:** Capital flows from impact investing (supply side) into social enterprises (demand side). - **Government Role in Trade:** Creating conditions for international trade success, as exemplified by the US Export Import Bank established by FDR in the 30s. - **Government Role in Impact Economy:** Creating rules of the road, which includes facilitating the access of entrepreneurs and investors to capital. - **GIARS Process:** A standard-setting body comprising academics, business people, and non-profits collaborate to update and iterate the standard. ## Timeline & Sequence - **1962:** Milton Friedman wrote *Capitalism and Freedom*, arguing government's role is to create monetary policy, enforce contracts, and support/encourage competition. - **1972:** Milton Friedman wrote "The Social Responsibility of Business" in the Sunday New York Times, arguing the social responsibility of business is to generate profits. - **Last 12 to 15 years:** Period marked by scandals and fiascos involving large corporations in the Fortune 500. - **In the 30s:** FDR created the US Export Import Bank. - **Since the 50s:** The SBA program has provided capital to small businesses. - **2008:** Yale School of Management became the first graduate school in America to give tuition relief for graduates who chose a path of purpose-driven business. - **Last year:** Zipcar generated $190 million in revenue. - **Last week:** Zipcar had a successful public offering on the NASDAQ, closing at $28 a share. - **By 2050:** China is projected to have around half a billion cars on the road, compared to a similar number in India. ## Named Entities - **Milton Friedman:** Important economist of the 20th century. - **Gabrielle, Gabriel, Julia:** Individuals thanked at the event. - **Matt Copac:** Midwestern kid from Wisconsin; attended Yale School of Management; served in the Peace Corps in Benin; worked as a public interest lobbyist in Washington; earned an MBA from Yale. - **University of Chicago:** Institution associated with Milton Friedman. - **Zipcar:** Business sharing cars; has been around for about 10 years. - **Monitor Institute, J.P. Morgan:** Institutions that issued reports regarding impact investing. - **SBA (Small Business Investment Corporation):** Program founded in the 50s to provide capital to small businesses. - **Yale School of Management:** First graduate school in America to grant tuition relief for graduates pursuing public service. - **Research Triangle, North Carolina:** Location of ey contact. - **Franklin Roosevelt (FDR):** Creator of the US Export Import Bank in the 30s. - **China, India:** Markets mentioned as locations to access for US companies. ## Tools, Tech & Products - **Tom Shoes:** Example of clothing/footwear in a closet. - **Good Magazine / Honest Tea:** Examples of businesses creating superior value products. - **Zipcar:** Shares cars; a disruptive business model. - **US Export Import Bank:** Created by FDR in the 30s to provide capital for international trade. - **FASB (Generally Accepted Accounting Practices):** Evolved after the Great Depression to allow for comparison of firm profitability. ## Concepts & Definitions - **Impact Economy:** The convergence point for supply and demand focusing on a world-changing Mission. - **Impact Investing:** Purposeful Investments by capitalists or philanthropists aiming for economic return and social benefits simultaneously. - **Social Enterprises:** Businesses integrating meaning, money, profits, and purpose. - **Global Impact Investing Reporting Standard (GIARS):** Common set of metrics to evaluate social good created by a business. ## Numbers & Data - **12 to 15 years:** Period noting scandals and fiascos involving large corporations. - **1962:** Year Milton Friedman wrote *Capitalism and Freedom*. - **1972:** Year Milton Friedman wrote "The Social Responsibility of Business" in the Sunday New York Times. - **$1.8 trillion dollars:** Amount of exports last year to markets worldwide. - **$25 billion:** Amount funded by EXIM Bank last year via loans and some equity. - **10 years:** Approximate time Zipcar has been in operation. - **$190 million:** Revenue Zipcar generated last year. - **$28:** Price Zipcar closed its day on NASDAQ. - **175 million bucks:** Amount raised by Zipcar. - **Little over a billion dollars:** Zipcar's current market cap. - **30 different countries:** Number of countries where private equity firms invested using GIARS. - **$30 billion:** Amount the SBIC program has lent since the 50s. - **990,000:** Number of businesses funded by private equity firms using SBIC money. - **2050:** Year by which Chinese cars are projected to reach half a billion. ## Examples & Cases - **Zipcar:** Disruptive business model example of car sharing, with better economics for renter, sharer, and planet. - **Good Magazine / Honest Tea:** Examples of businesses creating superior value products that are as good if not better than competition. - **US Export Import Bank:** Created by FDR in the 30s to provide capital to exporters who couldn't get commercial credit. - **The New Markets Tax Credit:** Facilitated private investors putting billions into affordable housing and Social Services. - **SBA program:** Provides capital (debt or equity) to small businesses. - **FedEx:** Example of a company whose access to capital was facilitated by the government through the SBA. - **Matt Copac's MBA journey:** Illustrates Yale's role in supporting graduates in purpose-driven businesses. ## Trade-offs & Alternatives - **Marketplace Solution vs. Impact Solution:** The challenge to the assumption that the marketplace can solve problems by establishing a focus on a world-changing Mission. - **Pure Profit vs. Social Impact:** Moving beyond traditional profit focus to encode social impact within the business DNA. - **Incentives vs. Mandates:** Preferring incentives (like HOV lane access) over forcing compliance. ## Counterarguments & Caveats - The speaker notes the proposed term "Impact Economy" might be unfamiliar to the audience. - The speaker clarifies that government's role is not to dictate routes or speed, but to ensure the destination is reachable. - Skepticism regarding GIARS is addressed by drawing an analogy to the emergence of GAAP after the Great Depression. ## Methodology - Drawing comparisons to historical economic development, such as the evolution of GAAP after the Great Depression. - Utilizing historical examples of government intervention in trade (US Export Import Bank) to explain necessary infrastructure. ## References Cited - **Milton Friedman:** Cited for his historical views on government's role in the market (1962 and 1972). - **The Monitor Institute:** Issued a report detailing the potential size of impact investing. - **J.P. Morgan:** Issued a report last December addressing impact investing as a potential next asset class. - **Franklin Roosevelt (FDR):** Creator of the US Export Import Bank. ## Conclusions & Recommendations - The goal is establishing a new social compact and a new era of cross sector collaboration between government and business, philanthropy, and non profits. - Government must support the development of GIARS. - Government should facilitate the access of entrepreneurs and investors to gain entrance into the impact economy, particularly through capital access. - The government should focus on providing guardrails and incentives rather than dictating specific business models. ## Implications & Consequences - Failure to adopt the impact economy means missing "what might be the biggest challenges answers to some of the biggest challenges facing Humanity." - Without government assistance creating necessary conditions, the impact economy cannot reach the heights of the export economy. - Failing to protect public interest when regulators fail to intervene is a severe consequence. ## Open Questions - The modern role of government in our economy and how it must interplay with the marketplace. ## Verbatim Moments - "charting the impact economy" - "the most singular important transformation of our economy today" - "generate profits period end of story" - "we need a new social compact a new era of cross sector collaboration between government and business between philanthropy and non profits" - "where supply and demand converge not on a notion of a market clearing price but on the notion of a world changing Mission" - "we miss what might be the biggest challenges answers to some of the biggest challenges facing Humanity" - "it's not prescribing Solutions it's creating rules of the road" - "we manage what we measure and social good is on the verge of an important breakthrough" - "stand back and let this impact economy change our lives for the better for generations to come"