Can Business Do Good? You Bet It Can!

This morning’s reading was informative and stimulating. Asmus and Grudem, “The Poverty of Nations: A Sustainable Solution,” were discussing the European Welfare state. “The continent is now populated with people who believe their governments owe them a list of human rights: education, secure jobs, long vacations, early retirements, generous pensions, subsidized housing, and free health care.” This is very similar to Franklin Delano Roosevelt’s second bill of rights. However, FDR did not propose generous pensions, subsidized housing, and free health care.

I do think a government’s responsibility over and above protection from enemies, clean water, and waste disposal, involves a good educational system and supporting an economic system that provides opportunities for people, but providing long vacations and early retirement, although nice, is not its responsibility. I think we see the results of excessive government fiscal promises in the city of Detroit and now San Bernardino, Calif. Detroit has declared bankruptcy and San Bernardino has been cleared by the courts to declare the same.

Niall Ferguson, who is fast becoming one of my favorite economic writers notes in his book, “Civilization: The West and the Rest, that “Europeans not only work less; they also pray less – and believe less. There was a time when Europe could justly refer to itself as Christendom. Europeans built the continents loveliest edifices to accommodate their acts of worship. . .As pilgrims, missionaries, and conquistadors, they sailed to the four corners of the earth, intent on converting the heathen to the true faith. Now it is Europeans who are the heathen.”

Don’t get me wrong, European colonialism and forced adherence to the faith is not a good expression of what a missionary is, but the move from achievement and initiative to entitlement can have a huge cultural impact.

On the other hand, more and more business people as they take initiative to build their business to provide higher value for their customers recognize they must look at the triple bottom line of sustainability. These new business leaders create business models that focus oon people, planet, and profit. They know they must be economically profitable. If they are not they will not be in business long. They also recognize that the earth is warming, ocean temperatures are rising, thus as they pursue economic results they must be environmentally sensitive. And, they intuitively recognize they have a responsibility to care for the social needs of society.

In the WSJ this morning there was an article entitled “Startup With A Cause.” A Venture Capitalist, and two business owners discuss how to design social good into a small business’s plan right from the beginning. Rather than trying to add it later, social good becomes a part of the business plan.

Kevin Colleran discusses that many large companies struggle with social good, but argues small companies today are being led by people who see social good as important and have a strong desire to leave the world a better place through their business. Thus these business leaders are creating both social and economic value for society. Not relying on entitlements.

Liz Elting, co-CEO of Transperfect New York, says “infusing social good into your operations model unifies teams, gives employees a sense of greater purpose and helps them to form strong ties to their local communities.” And Maynard Webb, founder of Webb Investment Network, states, “Any startup can – and should – incorporate social good into its business model.”

What is my point? A free market that allows perfect competition can and should create systems that enhance social good. European systems of excessive entitlement can lead to loss of leadership, innovation, and initiative. The government’s role is to provide educational systems and economic systems that allow people to take initiative. There are many people who have been marginalized by life’s circumstances. These are the ones that we need to create systems that allow them to learn how to take the initiative to move forward, instead of allowing someone else to take care of them. I think this is what most people want, they want a chance, and I think we need to help them get there, not make them dependent on social entitlements.

And that is my thought for the day!

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First Day Of The New Major

Yesterday was day one of the new major – Social Entrepreneurship. I had twelve students in the class, and all seemed to be engaged with the topic. I explained the format of the class, and all seemed to be enjoying the discussion and structure of class.

SE101 is an introduction to the subject of Entrepreneurship that focuses on social revolution. As a major it fits the ethos of our school as I mentioned previously. I explained yesterday that when they get to their senior capstone project they will be creating a business plan and introducing it to an Entrepreneurial Advisory Board (EAB). This board will then choose which student will win a cash award to help start the endeavor. The students seemed very impressed.

I also told the students that Warner Pacific received a $120,000 grant from Miller Trust to help start this major. The students seemed to be very impressed by this, as they should be. Ted Miller has been very engaged with this concept, and has supported us.

The EAB currently has six members. They represent the best of business in the Portland/Vancouver area. Tom Mears, chairman of Burgerville, is on the board, as is financial advisors and business owners from the community. These individuals have committed to helping our students become successful entrepreneurs.

One of my early lessons while on this entrepreneurial road is the importance of selling an idea that is scalable to investors. These are people who are willing to financially partner with you to implement your idea. Miller Trust believed in us, and anyone that is starting their own business will need to find those friends, family, and investors who believe in them. Most of the time free marketers will say keep the government out of this process. But, that may not be a wise move in this modern age.

R&D Magazine has tracked the top 100 innovations over the last ten years. Two Economic Sociologists wanted to explore the details associated with these events. They explored the data by asking a question “where did these award winning innovations come from?” One of the reasons for doing this was to see who funded these innovations.

Fred Block and Matthew Keller found seven different categories of innovators. Fortune 500 companies, small and medium enterprises, collaborations among private entities, government laboratories, universities, spin offs, and a category they called other. This meta-analysis identified two very interesting data points, innovation in Fortune 500 companies has steadily declined, and innovations in federal laboratories has dramatically increased. William Galston concludes in his article discussing this process that the government may be a good venture capitalist.

“Lawrence Summer once called the government a crappy venture capitalist,” but this may not be the case anymore. It appears that the government is getting better at funding new innovation. Although I am a free marketer I do recognize the role of government in the market. When there is an asymmetric condition within the market where one party has more information than another, then yes the government needs to be an arbitrator. There needs to be fairness within the market. I also recognize the importance of government supporting an economic system that supports innovation, which it appears they are doing.

Is this anything new? Industry in the past has been positively affected by NASA research and military contracts. Boeing especially has benefited from this capital investment by the government. Innovations garnered by the military work that Boeing has done was then transferred to its commercial side. This is the essence of Airbus’ complaint against Boeing at the World Trade Organization. Airbus calls this a government subsidy.

However, the concern one should have with strong government funding of innovations is the possibility that government would then choose winners and losers.  This warning was very clear in William Galston’s article in the WSJ this morning. “It is one thing for government to correct market failures, and to reflect economic externalities in its policy judgments, quite another for government to pick winners and losers. Government may intervene to save particular companies and industries, but only when the alternative is unacceptable systematic risk. There is a case for this view, especially when the political risk of crony capitalism is taken into account.”

Government investment in entrepreneurism is critical for our country to maintain its competitive edge, but it often comes with a price. We need to wise about this, and proceed cautiously.

And that is my thought for the day!

The Power Of Business

In my new position at Warner Pacific College I have been thinking quite a bit about business, programs, and assessment. What are the nuts and bolts of a good business program? How do we properly assess whether the students are learning something? Is our program effective? Making a difference? Meeting its mission? These are all valid and relevant things to ponder.

This morning though I woke up thinking about the power of business. If, as the UN has announced, extreme poverty has been cut in half around the world, and economic action in China and India was the casual events for this reduction, then it seems to me that business has a great power for good. However, business has the ability to do great evil too.

At one point in time in the world’s history slavery was a universally accepted business practice. It was an important economic force within numerous societies throughout history. Egyptians and Greeks both sanctioned slavery, while “The Islamic slave trade had thrived since the eighth century and. . .millions of Africans had been captured for sale to Egypt, Arabia, Mesopotamia, and the Ottoman Empire.” Many of these slaves ended up in America.

Today slavery is not accepted as a valid business practice. First, because of moral reasons, “slavery is dehumanizing and fails to recognize the full dignity of every human being as someone created in the image of God.” Second, “slavery was profitable up to a certain point for a slave owner, but the benefits did not accrue to the whole population, especially not to the slaves.”

Karl Marx recognized the propensity of Capitalism to exploit workers for the benefit of the few. Therefore, business can be a power for evil because human kind has a propensity to evil. Therefore, there needs to be a mitigating force, one more spiritual. As a Christian I see my relationship with God as the force that will help turn my ideas of business from exploiting people and the environment to doing good.

Asmus and Grudem, in their book “The Poverty of Nations: A Sustainable Solution,” ask the question “If a country decides to move from poverty to ever-increasing prosperity, what kind of economic system best brings about regular increases in gross domestic product?” Excellent question, one that will help us see how business can be a power for good.

Asmus and Gruden surprisingly state, “Monocausal explanations will not work. This means that the solution to poverty can never be merely a free market, private property ownership, the rule of law, government accountability, the absence of bribery and corruption, a good work ethic, or superior education.” This is a strong comment, however, the authors drop the ball by pointing to the next three chapters of their book instead of forcefully telling us what is needed at the point of making the forceful statement. I guess they wanted to make sure I was going to read the next three chapters. However, in my opinion there needs to be a strong why behind the elements listed in this paragraph.

What this means is a why that is greater than profit. Don’t get me wrong profit is important and allows people to climb out of poverty situations. Profit allows companies to continue investing in growth mechanisms, which allow them to hire more people. So profit is good. However, if profit for the sake of profit is all you are in business for it will lead you to exploitation of the various systems associated with your business. However, if you are in business to create value for your stakeholders, then there is a cause greater than yourself, greater than just money.

What does this mean to the business program at Warner Pacific College? Warner is rooted in the traditions of John Wesley. Wesley believed in divine justice and subsequently social justice. Wesley felt that feeding the poor, visiting the sick, etc. was a critical ministry of the church, and he called these works of mercy. But, the reason for doing this involved God’s justice and mercy.

We are a fallen race and as such we need God’s grace to not receive what we deserve, judgment. Therefore, as a Christian, one who has received God’s mercy, I am to express mercy to those I come in contact with. This is the purpose behind our action in this world.

Business can be a power for good, and those companies that have learned that creating value is more than just creating profit may have learned the lessons that Wesley preached. The why behind what we do is important. So I go back to my statement, what does this mean for the business program at WPC?

First, it does not mean that we change the critical elements required to be taught within any reputable business program. These are management/leadership; Accounting/Finance; Entrepreneurship; Marketing; Ethics; and Economics.  But it does mean we make sure we are telling our students the why behind business. It is not just about making a profit, it is about serving God in the area that God has called us to, the area of business.

And that is my thought for the day!

 

 

 

Is Social Entrepreneurship Just About Jobs?

I have worked in Seattle, but I would never want to live there. I am not trying to denigrate the people that live and love Seattle; just stating my opinion that it is a little wetter and cooler than here, and it is much too crowded. Some people love Seattle, and that is ok, I just happen to like Vancouver, WA a little better.

One thing that Seattle has going for it right now is the balance of large employers, which has resulted in a 5.9% unemployment rate. This means that the Seattle economy could be considered at full employment. The Seattle area has Starbucks, Nordstrom, Amazon.com, Microsoft, and Boeing; all large employers who are hiring. “The secret to Seattle’s success is its mix of industries.”

Boeing seems to be leading the hiring charge at this time. With its burgeoning order books, Boeing has a lot of work. It also has a very old workforce. Subsequently, many of its employees are/will be retiring, and thus the large need for new hires. As I read the article this morning about the good times in Seattle, I began thinking about Social Entrepreneurship, and Entrepreneurship in general. I kept thinking about the why, is it just to provide jobs, or is there some other more esoteric reason?

Microenterprise is about jobs, but the Entrepreneur is not one who cares as much about jobs, as she does about revolutionizing some process. Jean Batiste Say and Joseph Schumpeter both described the passion behind entrepreneurism. Say, an 18th century economist, stated that an entrepreneur is one who can see how a process is performing at a low level, but knows how to make it perform at a higher level.

Today there are many serial entrepreneurs who are passionate about creating value. It is not just about jobs, but jobs do come, it is about creating value for the market and for themselves by developing higher performing processes.

Schumpeter, another early economist, saw the entrepreneurial activity as creative destruction. Marx saw capitalism as an ultimately destructive process, Schumpeter saw the destruction as creative improvement. Building upon the ideas of Say, Entrepreneurism creates a new paradigm which eventually destroys the previous belief replacing it with the new.

The horse and buggy is replaced by the automobile; Lotus 123 is replaced with Excel; and Microsoft is replaced by Apple (this statement was made for hyperbola). History demonstrates to us the reality of Schumpeter’s creative destruction. Now we focus just on Social Enterprise. Now we are talking about the creation of businesses that revolutionize society; these social enterprises can be for-profit or not-for-profit, it doesn’t make any difference. A social entrepreneur is someone who can see the inadequacies of a current process meeting a social need, and has the passion and ability to create a new, revolutionizing process to meet that need more effectively and efficiently.

Social Entrepreneurship takes the best of business, and applies to the social need of our communities, nation, and world. I am a free marketer, and will always be a free marketer. I can see the efficiencies and deficiencies of the market. So framing free enterprise within the higher calling of social good will mitigate the obvious excesses of Capitalism.

I for one am very excited about the new major that Warner Pacific is offering, actually starting today. Here we go, using our business program to make things better. I for one am very excited.

And that is my thought for the day!

 

 

 

 

 

 

Entrepreneurial Action

I am now convinced that I am addicted to buying books. I am still working through Cannibal Capitalism and True North, but I felt the need to buy two other books, The Poverty of Nations and The Design of Business by Roger Martin (not me the one from Canada). I have a voracious appetite for detail that explores the why behind business. Is this why just to line one’s own pocket with profit, or is there a higher cause, one of creating social and economic value?

The one thing I have discovered is that giving someone a bunch of money will not lead them to financial independence, and I know that nations who are dependent on foreign aid are countries that are not learning how to be self-dependent. James A. Robinson, an MIT economics professor, has studied data and concluded “that no poor nation in history has grown wealthy by depending on donations.” He also argues that many countries that have large amounts of poor people are dependent upon “extractive institutions.” These institutions take advance of people due to a “lack of property rights, law and order, or well-functioning legal systems.”

William Easterly, professor of economics at New York University, commented recently on “the tragedy in which the west spent $2.3 Trillion on foreign aid over the last five decades and still had not managed to get twelve-cent medicines to children to prevent half of all malaria deaths.”

Dambisa Moyo, an Oxford trained African economist, from Zambia argues that foreign aid is why Africa is still impoverished. “But has more than US $1 Trillion in developmental assistance over the last several decades made African people better off? No. In fact, across the globe recipients of this aid are worse off; much worse off.”

The UN has what it calls Millennium Development Goals. Goal number one is to eradicate extreme poverty and hunger in the world. Target 1A was to cut poverty in half by 2015. The UN announced that the one half goal was met on 2010. The question then is how was the goal met earlier than forecasted?

Most of the reduction has occurred in Asia via China and India via economic growth. It is an entrepreneurial spirit that is helping people improve their economic standing all over the world. Does this mean that all these folks have moved into a middle class standing? Not in the least, but through economic advancements people are improving their standard of living.

Micro-financing, western businesses investing in the developing world, and educators helping people learn how to start and run businesses are definitely part of the improvement. These are not programs creating dependency on the givers, but programs that teach people how to creatively engage in productive endeavors.

“Taking a long view of history, the dramatic fall in poverty witnessed over the preceding six years represents a precursor to a new era. Fundamentally it’s a story about billions of people around the world finally having a chance to build better lives for themselves and their children.” This is not occurring through handouts, but by systems designed to help them become economically active.

And that is my thought for the day!

 

 

Obama Rating Colleges And The New Business Department

Yesterday I ranted a bit about the thousands of pages of regulation that our government has imposed on business. Although higher education has had multiple layers of regulation in the past, it appears it is going to be even more regulated in the near future. Starting sometime before 2015 the government will be rating colleges on affordability and graduation. “Metrics like how much debt does the average student leave with, how easy it is to pay off, how many students graduate on time, how well do graduates do in the workforce.”

I am not one who likes to have government get into my business, but these questions are relevant. Any higher education institution of worth is concerned with these elements, so having government tell us what is important is unnecessary. However, taking responsibility for these elements and making sure there are assessments of whether a college program is effective or not is critical.

The Business Program at Warner Pacific is going through a major overhaul. I am affectionately calling our situation the creation of the new business department. This morning I am reflecting on what this means? Obviously our department has done certain things well over the years, but where do we need to go.

I think we have faculty, both professors and adjuncts, who care about t the students. Therefore, the new business department does not want to change that, but I think we can improve the communication between traditional and adjuncts, and the adjuncts can have more of an impact on our programs.

I think historically our curriculum has been fine, but is it still relevant? The new business department needs to look at the curriculum and revise it to meet the student’s need to be employable.

One thing our department has not done as well as it could is function as a team. The new business department will be collaborative, communicative, autonomous, and accountable. No one person will make all of the decisions, but the team of business faculty will work together and determine what needs to happen. Obviously, there are times when one person needs to make a decision, but that occurred a bit to much previously.

The reason I am calling this the new business department is the need for a fresh start. I want to generate excitement and engagement with the faculty of other departments, students, and staff. Our program has been stale and isolated from the rest of the college. It is now time to move the business department into the middle of the ethos of the school. We need to engage the mission of the college, and live it out in front of our students.

It is truly a new day, and when I say our team is up to the challenge, I am not just using the royal team. We are going to be a team. We will step up and accomplish this.

And that is my thought for the day!

Milton Freidman To The Rescue!

I am appalled at the thousands of regulations that have affected the ability of people to start small businesses. In this morning’s WSJ Thomas Stemberg, founder of Staples, writes “Nearly 30 years ago, I started a company called Staples, Inc. that went on to do pretty well.” He then continues to argue that it may not have been the case if the amount of regulations currently in place were in existence 30 years ago. “All told American businesses face 46, 758 pages of rules to live by.”  Stemberg ends his wonderful article by saying, “In 1986, we founded Staples in large part because of what used to be an enormously productive American financial system. The system that fueled entrepreneurship 25 years ago is now being regulated to death under the Dodd-Frank financial overhaul, which requires as many as 398 new regulations.” He then emphasizes his comments with “The next Staples, and its 50,000 jobs, may not happen because of this burden.”

Scary stuff, but business kind of brought this on itself. We as managers and business people need to take some level of responsibility for this because of how we did business. “Business ethics is considered by some as an oxymoron, much like jumbo shrimp.” However, that said our government’s attempt to regulate and attain some level of wealth redistribution is having the opposite affect than what they had hoped. Thus, Milton Freidman to the rescue.

I read two Freidman comments this morning that I think we need to ponder. First, “A society that puts equality before freedom will get neither. A society that puts freedom before equality will get both.” Whether it is business regulation, NSA surveillance, or stop and frisk the break down of our personal freedoms should alarm us.

The second Freidman quote should motivate our thinking powers. “In 1960, the earliest date for which I have been able to get statistics, the average per capita income in Hong Kong was 28 percent of that of Great Britain; by 1996, it had risen to 137 percent of that in Britain. In short, from 1960 to 1996, Hong Kong’s per capita income rose from one-quarter of Britain’s to more than a third larger that Britain’s.”

What can we learn from this? Barry Asmus in his book “The Poverty of Nations” states, “All of these nations [like Hong Kong] have risen from poverty to increased prosperity through the same process: continually creating more goods and services.” This equates to more jobs and ultimate more per capita income.

I think we need to heed from Freidman has to say. If, as authorities have announced, poverty has decreased in the world by 50%, then we need to review how that happened. I think we will find that what Freidman said was create. We’ll see increased freedom and increased opportunity to create goods and services providing value for society. I hope our country does not degenerate to the point where we need revitalization in this area of philosophy.

And that is my thought for the day!