Transcript

TEDxUChicago 2011 - Jonathan Greenblatt - Revolutionizing the World Through Social Responsibility

[Applause] thank you very much Gabrielle for that nice introduction and thanks to all of you as Gabriel mentioned I uh went to school at some small College up the road in Evon and it's not lost on us that we're batting cleanup here today at tedx U Chicago but I'm really excited to be here in High High Park and you know I think I would be remiss and we'd probably all be remiss if before we get started for this last session we didn't take a deep breath and thank Gabrielle and gimar and Julia and all the students who made today possible so what I'm going to talk about today is charting the impact economy and this might not be a term that you've heard before but you will because I think this is the most singular important transformation of our economy today the Imp its transition into an impact economy now I'm sure many of you recognize this man Fashion Icon Trailblazer of the runway Milton Friedman who had a side career I think here at the University of Chicago really as one of the most important economists of the 20th century and in 1962 he wrote a landmark book called capitalism and freedom in which he wrote that the role of government in the marketplace is to create a monetary policy to enforce contracts and to support and encourage competition and that's it and then he filed that up in 1972 with a really important essay in the Sunday New York Times magazine called the social responsibility of business in which he wrote that the social responsibility of business is to generate profits period end of story but in fact I don't think that's the end of the story at all and I think In This Moment In This Place of all places it's appropriate to revisit that question what is the role of government in our modern economy today and how should it interplay with the marketplace now I'm not going to wade into those Waters myself I'm not going to argue for or against but I will point out that we live in a moment of great cynicism about the role of business and in the last 12 to 15 years we have been buffeted about by a range of scandals and fiascos involving some of the best known corporations of our time some of the leading lights on the Fortune 500 and whether it's been recklessness or whether it's been negligence or whether it's just bad taste uh just side note the cure for breast cancer is not fingerlicking good I'm sorry but nonetheless there is a pervasive sense of mistrust of big business and this notion that we've had for a long time that the marketplace can solve our problems that the private sector can work it out those very assumptions are being challenged every day now I actually think there's a lot of good news on the horizon so to speak we are seeing the Advent of new kinds of companies in media and Publishing in food and beverage in housing and shelter in Footwear and apparel anyone here in this room have a pair of Tom shoes in their closet raise your hand so there are a range of businesses who are created to do several things number one to deliver Superior value these are businesses which create products like good magazine or honest te which are as good if not better than the competition on the shelf or on the new stand they drive margins and create profits but at the same time they are mindful of their social impact this doesn't cause marketing bolted on after the fact the mission is encoded in the DNA of the business because it sets out not just to drive margin but to create they start out not just to drive margin but to create movements these are about trying to repair a broken status quo these are about building new equilibria and what are these businesses they are representative of the impact economy where supply and demand converge not on a notion of a market clearing price but on the notion of a world changing Mission and we need this we need this now we need this because we have seen the limits of our ecosystem we have seen the Perils of globalization we have seen the remarkable velocity of technology and we've also seen the challenges of inequity as the gap between the halves and the Have Nots continues to grow and we've seen the burden of public deficits that seem yawning never to end we need a new social compact a new era of cross sector collaboration between government and business between philanthropy and non profits because guess what guys none of us can do this alone so what are those forces that are going to drive this new movement well first on the supply side there's the capital and I'm talking about what's gaining traction a term impact investing this is the idea of purposeful Investments made by committed capitalists or passionate philanthropists who are trying to drive economic return and create social benefits and don't see a tradeoff between the two so you've got this remarkable inflow of capital the monitor Institute issued a report recently that said this field is about $50 billion today but could reach up to half a trillion dollars within the decade if we can get the policies and the procedures right and in fact JP Morgan last December issued a report with the name of their head of Finance on the Mass head talking about impact investing as the next asset class for managers to be looking at both a little scary and a little exciting now this Capital then flows into the demand and why I'm talking demand here I'm talking about the firms and I will call them today social Enterprises these are those businesses that are trying to drive meaning and money profits and purpose and my personal experience tells me you do not have to have a trade-off in fact you can get a more durable value proposition you can drive toward competitive advantage and you can bring those things together and there are an increasing number of examples one I'll point out quickly is this business Zipcar I know they're here on campus who here in this room is used Zipcar raise your hand so Zipcar is a remarkable business now it's been around for about 10 years it's not exactly new but it is exactly the kind of disruptive business model that will power the impact economy it's not renting a car you can go to Herz or Enterprise for that this is sharing a car for a half an hour or an hour or maybe an afternoon and the economics of that are better for you the renter the sharer and guess what it's better for the planet they say there'll be something like are you ready for this half a billion cars on the road in China Alone by 2050 almost the same number in India if we're going to I don't care how many of them are Priuses if you will if we're going to solve this problem we need disruptive models like this that take cars off the road rather than putting more cars on zip car is not just a fanciful idea last year they did about 190 million in revenue and just last week they had a successful public offering on the NASDAQ they open the day at 18 they close the day at $28 a share not bad raised 175 million bucks their market cap is now a little over a billion dollars and maybe they set the table for some other IPO that's some Chicago Company some online coupon kind of thing I've heard a little bit about that well what's making this work now is this demand is meeting the supply but we need to make sure that these Capital markets function effectively that the gears underneath the system help it to continue to grow and to go effectively now then the question becomes how can that happen well I would argue here today that government has a role to play a constructive role a facilitating role an important role if we don't get this right we miss an enormous Economic Opportunity and frankly guys we miss something even bigger we miss what might be the biggest challenges answers to some of the biggest challenges facing Humanity now again if you think you don't like government if you think government doesn't have a role I think we can just look to our recent memory and see what happens when the Regulators take their hands off the wheel or when the air traffic controllers fall asleep in the tower right now there's an interesting analog here if we just look at the world of international trade I don't think there's anyone in this room who dispute the importance of exports and the data backs that up but businesses here in this area are some of the most successful exporters in the country last year we had $1.8 trillion dollar in exports to markets around the world this is the fastest growing segment of our economy today growing much quicker than domestic consumption and how does it happen government's involved guys like it or not for better or worse it's been a commitment by government to make sure that they could create the conditions in which International Trade could succeed it started with Franklin Rusev now inter internal trade is timeless but FDR in the 30s created something called the US export import Bank to provide Capital to businesses who wanted to export but couldn't get the commercial credit because of country risk or credit risk so Banks had tightened up the spigots weren't getting money out does that sound familiar today the last year exm funded provided loans and some Equity $25 billion doar contributing to hundreds of thousands of us jobs XM Works we've had presidents on both sides of the aisle for decades who've maintained a commitment to free trade and who've worked hard to open up markets for us firms even this president has used the power of his office to Advocate on behalf of commercial interests to create opportunities for us companies trying to access once closed markets like China or India or others so what is government doing in this case it's not prescribing Solutions it's creating rules of the road in which firms can succeed in which investors and entrepreneurs can Thrive and that's what the impact economy needs it needs rules of the road now mind you the government when they get involved it's scary right markets are complicated they're interwoven unintended consequences often are the result of even the best intentions but the fact of the matter is government doesn't tell us doesn't design our cars for us doesn't tell you what kind of vehicle you have to take on the road though I wouldn't get on the loop on a segue if I were you but government doesn't tell us exactly how fast to go doesn't dictate our route what government does is it takes simple steps to ensure that you can get to your destination in the manner of your choice that's what we need here for the impact economy so it can reach the heights of the export economy that I just mentioned so let me give you a couple thoughts on the role the government could play number one encouraging standards helping to facilitate the adoption of common metrics now mind you we know what happened when the government told us we had to go to the metric system remember how well that worked out how many kilometers take any of you to get here today but it can play a role if not to pick the winners to allow business to self-regulate into support that process and guess what in the world of social good it's already happening I don't know whether you've heard of it or not but I think one of the most important phenomenon in the capital markets of the impact economy today is called gears stands for the global impact investing reporting standard think of it for those of you who've taken your accounting classes in the room as gap for good in this country now some of you may say you can't really calculate social good doesn't make any sense how can you say say one thing is better than the other how can you say one business generates more good than another business fair question guess what the same questions were asked 70 80 years ago after the um the Great Depression we didn't have common accounting standards in this country and the generally accepted accounting practices emerged as a result so we could compare the profitability of firms in different Industries different categories that's what gears does a common set of metrics to evaluate firm performance an audible means to determine the social good that a business creates and it's developed by a standard setting body academics business people nonprofit types work together collaboratively to update and iterate that standard and it's not just an idea it's not just a theory late last year 25 private Equity firms representing about 1.2 trillion assets under management announced that they were going to use gears to rate the firms in their funds so suddenly we have something happening here something taking steam these are over these are hundreds of companies that invested in across 30 different countries standards matter we manage what we measure and social good is on the verge of an important breakthrough and government should support it now government also typically does a pretty good job in helping us find our way onto the highway right creating those entrance ramps government can do that here by facilitating the access of entrepreneurs and investors to gain entrance into the impact economy and in this case it really means Capital how many of you have tried to get access to capital for your small businesses or your ideas it's hard isn't it it's not easy particularly in this climate today government can help and it has before so the new markets tax credit which was passed toward the end of the Clinton Administration it's part of a landmark piece of legislation has facilitated the ability of private investors to put billions of dollars into both affordable housing and Social Services to support underprivileged communities creating hundreds and thousands of jobs and enabling people to enjoy better livelihoods as a result and I I think another interesting example is the small business Investment corporation the SBA if you don't know about it you should learn one of their most interesting programs the sbic program was founded in the 50s to provide capital in the form of debt or equity of small businesses get all out of this for those of us who decry the federal government say it doesn't generate any good well the sbic program in since the 50s has Lent over $30 billion to funds which they've used as leverage to raise more equity and what have these private Equity firms done with that money well they funded roughly 990,000 businesses and some of the best known brands of our time some of the real success stories businesses like like Staples Sports Authority Jim B or a little postage delivery company s a guy Nam Fred Smith in Tennessee in the early 70s that we now know as FedEx or two hackers named Steve in some Garage in Cupertino California the government facilitated their access to Capital and we need government to do the same to support the impact economy today third thing the government can do is create incentives not force people into the HOV lane but if you want to get in that lane you can get heck a lot faster that's my life on the 405 freeway in Los Angeles every single day but it works and incentives can be very powerful and I'll tell a quick story to make that point Matt copac Midwestern kid uh from Wisconsin from rural Wisconsin after he graduated from Madison he joined the Peace Corps in served in benine went to Washington to work as a public interest lobbyist and then ended up getting going to Yale School of Management to earn his MBA now Yale is a really interesting school one of the reasons is because they were the first graduate school in America to give tuition relief to graduates who went to Public Service help them pay down their relieve some of that tuition burden and I'm guessing there are a couple people in this room who can relate to a tuition burden right so he went to ALS and he as a student body president Lobby the dean and Lobby the administration to update that rule not just for alum who would go to into government or nonprofit but to Alum who would go to work graduates who go to work in Missi driven businesses businesses that are trying to drive meaning and money trying to make a social impact in 2008 Yom was the first graduate school in America to give tuition relief for graduates who indeed chose a path of purpose-driven business graduates who went to work for certified for benefit corporations or another form called L3 C's in fact Matt was then the first graduate of lomom to go to one of those companies he joined a small software business in the Research Triangle in North Carolina called ey contact about a $40 million Revenue company about 34 of a million customers looking at a public offering uh next year hi Gabrielle so I will I seem like those all those musicians got a lot of time I'll say in closing there are two more there's one more thing we do need to think about which is government also needs to erect the guard rails to protect the interest of consumers we see what happens when Again The Regulators fall asleep at the wheel and preserving and protecting the public interest is vital if we can create the conditions in which business can succeed if we can clarify the market with the mix of incentives and protections allow the the social entrepreneurs in this room and the wouldbe impact investors in this room to thrive the lasting government has to do is stand back and let this impact economy change our lives for the better for generations to come thank you very much terf was