TEDxUChicago 2011 - Jonathan Greenblatt - Revolutionizing the World Through Social Responsibility
## Speaker Context * Speaker: Unnamed speaker (implied expert on economics/business models). * Audience: Attendees at tedx U Chicago. * Setting/Occasion: Last session at tedx U Chicago. * Framing: The speaker is going to talk about charting the impact economy, stating it is the most singular important transformation of our economy today. ## People * Gabrielle: Gave a nice introduction. * Gabriel: Mentioned by the speaker; gave an introduction. * Julia: Thanked by the speaker for making the day possible. * Students: Thanked by the speaker for making the day possible. * Milton Friedman: Fashion Icon Trailblazer of the runway; important economist of the 20th century. * 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. ## Organizations * University of Chicago: Where Milton Friedman was associated. * Fortune 500: Contains leading lights often involved in scandals. * Zipcar: A business model example; shares cars; has been around for about 10 years. * Monitor Institute: Issued a report regarding impact investing. * J.P. Morgan: Issued a report last December; discussed impact investing. * NASDAQ: Where Zipcar had a successful public offering. * SBA (Small Business Investment Corporation): Founded in the 50s to provide capital to small businesses. * Yale School of Management: Was the first graduate school in America to give tuition relief to graduates who went to public service. * L3Cs: A form of business structure mentioned in relation to purpose-driven businesses. * ey contact: A small software business in the Research Triangle in North Carolina; had about a $40 million revenue and 34 million customers. ## Places * High Park: Location where the speaker is presenting. * Evon: Where the speaker attended school. * New York Times: Published an essay in 1972. * China: Mentioned as a market to access for US companies. * India: Mentioned as a market to access for US companies. * Cupertino, California: Location of a garage where two hackers worked. * Los Angeles (405 freeway): Used as an analogy for incentives. * Research Triangle, North Carolina: Location of ey contact. ## 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; has a disruptive business model. * FASB (Generally Accepted Accounting Practices): Evolved as a result of the Great Depression to allow for comparison of firm profitability. ## Concepts & Definitions * Impact Economy: The topic of the talk; 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 used by purpose-driven businesses. ## Numbers & Data * 12 to 15 years: Period over which the speaker notes buffeting by scandals and fiascos involving large corporations. * 1962: Year Milton Friedman wrote "Capitalism and Freedom." * 1972: Year Friedman filed the essay "The Social Responsibility of Business" in the Sunday New York Times. * 1.8 trillion dollars: Amount of exports last year to markets around the world. * $25 billion: Amount funded by EXIM Bank in the last year (via loans and some Equity). * 10 years: Approximate time Zipcar has been around. * 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. ## Claims & Theses * The impact economy is the most singular important transformation of our economy today. * Milton Friedman wrote in 1962 that the role of government in the marketplace is to create a monetary policy, to enforce contracts, and to support and encourage competition. * Milton Friedman wrote in 1972 that the social responsibility of business is to generate profits. * The assumptions that the marketplace can solve our problems and that the private sector can work it out are being challenged every day. * Businesses that deliver superior value are mindful of their social impact, and this mission is encoded in the DNA of the business. * These businesses are about building new equilibria. * The impact economy is where supply and demand converge on the notion of a world changing Mission. * We need a new social compact and a new era of cross sector collaboration between government and business, between philanthropy and non profits. * Impact investing is the idea of purposeful Investments made by committed capitalists or passionate philanthropists who are trying to drive economic return and create social benefits. * You do not have to have a trade-off between meaning, money, profits, and purpose. * Government has a role to play a constructive role, a facilitating role, an important role. * International trade requires government involvement to create conditions for success. * Government's role is not prescribing solutions, but creating rules of the road. * The government can facilitate the adoption of common metrics. * GIARS provides a common set of metrics to evaluate firm performance and determine the social good a business creates. * Government can help by facilitating the access of entrepreneurs and investors to gain entrance into the impact economy (i.e., capital). * The SBA program has facilitated the ability of private investors to put billions of dollars into affordable housing and Social Services. * The government can create incentives rather than force people into a lane. * The lasting government has to do is stand back and let this impact economy change our lives for the better for generations to come. ## Mechanisms & Processes * Milton Friedman's view on government role (1962): Create monetary policy, enforce contracts, and support/encourage competition. * Milton Friedman's view on social responsibility (1972): Generate profits. * Business 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. * Flow of capital into demand: Capital flows from impact investing (supply side) into social enterprises (demand side). * Process for GIARS: A standard-setting body comprising academics, business people, and non-profits work together collaboratively to update and iterate the standard. * Government action in trade: Creating conditions in which international trade can succeed (e.g., by creating the US Export Import Bank). * Government action in impact economy: Creating rules of the road in which firms and investors can succeed (e.g., facilitating access to capital). ## Timeline & Events * 1962: Milton Friedman wrote *Capitalism and Freedom*. * 1972: Milton Friedman wrote "The Social Responsibility of Business" in the Sunday New York Times. * Last 12 to 15 years: Period marked by scandals and fiascos involving large corporations. * In the 30s: FDR created the US Export Import Bank. * Early 70s: Nam Fred Smith started FedEx in Tennessee. * Since the 50s: SBIC program has been lending money. * Last year: Zipcar generated 190 million in revenue. * Last week: Zipcar had a successful public offering on the NASDAQ. * 2008: Yom was the first graduate school in America to give tuition relief for graduates who chose a path of purpose-driven business. ## Examples & Cases * Zipcar: Disruptive business model example, sharing a car for a short time. * Good magazine / Honest Tea: Examples of businesses creating superior value products. * The US Export Import Bank: Created by FDR in the 30s to provide capital to businesses that wanted to export but couldn't get commercial credit. * The New Markets Tax Credit: Facilitated private investors putting billions of dollars into affordable housing and Social Services. * The SBA program: Provides capital (debt or equity) to small businesses. * FedEx: Example of a company whose access to capital was facilitated by the government. * Matt Copac's MBA journey: Example of Yale's tuition relief supporting graduates entering purpose-driven businesses. ## Trade-offs & Alternatives * **Marketplace Solution vs. Impact Solution:** The notion that the marketplace can solve problems vs. the need for a world-changing Mission focus. * **Pure Profit vs. Social Impact:** Traditional focus on profit vs. businesses encoding social impact into their DNA. * **Regulated vs. Unregulated Markets:** Comparison of government intervention (like the MI system) versus allowing processes to self-regulate. * **Incentives vs. Mandates:** Using incentives (like HOV lane access) versus forcing compliance. ## Counterarguments & Caveats * The speaker admits the proposed idea of the impact economy "might not be a term that you've heard before." * The speaker clarifies that the government does not tell us exactly how fast to go or dictate our route, only ensuring we can get to our destination. * The speaker anticipates skepticism regarding GIARS by noting, "you can't really calculate social good doesn't make any sense." ## Methodology * Drawing comparisons to historical events: Comparison to the development of GAAP after the Great Depression. * Pointing out an analog: Comparing modern trade issues to historical commitment to free trade (using the US export/import history). ## References Cited * Milton Friedman: Source for historical views on government/business roles. * The Monitor Institute: Source for impact investing data (report mentioned). * J.P. Morgan: Source for impact investing information (report mentioned). * Franklin Roosevelt (FDR): Creator of the US Export Import Bank. ## Conclusions & Recommendations * We need a new social compact and a new era of cross sector collaboration between government and business, between philanthropy and non profits. * Government should support the development of GIARS. * Government can facilitate the access of entrepreneurs and investors to gain entrance into the impact economy (i.e., Capital). * The lasting government has to do is stand back and let this impact economy change our lives for the better for generations to come. ## Implications & Consequences * If the impact economy fails to develop, we miss "what might be the biggest challenges answers to some of the biggest challenges facing Humanity." * If the government fails to provide necessary "rules of the road," it hampers the impact economy from reaching the heights of the export economy. * Failing to protect public interest when regulators fall asleep at the wheel is a severe consequence. ## Open Questions * What is the modern role of government in our economy and how should it 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"