TEDxUCLA 2014: Open 2.0

The social change agent factory


About Martin

Martin Loeffler is the Director of the California Institute for Social Business (CISB). As part of the California State University Channel Islands, the CSU Channel Islands is the first university to offer a minor in social business as defined by Nobel Peace Prize Laureate Prof. Muhammad Yunus and combines social business education with social business creation and incubation.


So I’m here today to talk about the social change agent factory. And I’m going to talk to you about how we can use the concept of social business to change the world and to solve social problems.

So if you’ve just now, you cringed a little bit when you heard the word “social business” or the two words “social business,” and that’s a very normal reaction because usually we don’t put together social and business. It’s kind of like saying, “Oh, Yoda is living on the Death Star” or something like that. It just, just doesn’t seem to fit, right?

But we’re going to do it. And I actually thought the same way that you did just a few minutes ago and just a few years ago. And because I used to be a pure business guy, I studied business in Germany and in France, then I became a top management consultant for six years working in Munich. My last project was to save a billion Euros in the research and development department of a large car manufacturer in Germany.

And then I became a business intelligence guy, using data to measure a person’s or a company’s performance, measuring a person’s performance, even ranking people and displaying those results on the walls every month. So it was a pretty tough business thing to do.

And after all that, I was missing something. I just meant, thought I probably need to start something else. So what I wanted to do is take a year off. And what I did, I did my own little version of Eat, Pray, Love. Many of you will know it.

And I just, no I didn’t go to Italy to eat a bunch of pasta. I went kite-surfing in the Caribbean, I went hiking in the Himalayas. I also went to meditate, actually. I spent three months in India. And that really changed my perspective.

In the last three months that I spent in Tahoe, actually, just being a ski bum skiing every day, I was looking, what can I do next? I wasn’t ready to go back to corporate America and corporate Europe. And don’t get me wrong, there’s nothing wrong with corporate America or corporate Europe, businesses do create a lot of social value as well. But I wanted to do something else. I wanted to focus on actually creating social value completely.

And I was looking for a while, and doing volunteerism wasn’t really my thing. I thought, you know, being sent to Africa to build homes, first of all, it doesn’t really use my skillset as a business guy. And second, I kind of believe that those people should probably, you know, create their own homes and construct their own homes. They don’t need me. I want to take their employment away. And I was actually getting frustrated trying to find it.

And then I met this guy. Have you heard of this guy? Professor Muhammad Yunus. He’s actually the Nobel Peace Prize winner of 2006. He started the microfinance movement, or was one of the person, persons that started Grameen Bank. He’s the person who started Grameen Bank. And that bank gives little loans, microloans to people in order to help them start their own little business. And little by little, this lift themselves out of poverty.

Now what I really found fascinating, though, working with those poor people, he made it a habit in his life to identify social issues, understand the causes, and then create a business around, a business model around these issues in order to eliminate them in the long run, in a business format.

And what he personally told me in that talk — not personally, but you know what what I took away from that talk that he gave — was I can use my business skills not just to make money. I can use my business skills in order to solve a social problem.

So what really is social business and that concept that he came up with? You know, it’s funny because when I first started in social business, then people ask me, “So Martin, what are you doing now?” I said, “Well, I work in social business.” And everyone was like, “Oh, really? Me, too!” And I was like, what? Really? I was really surprised, I thought it was something new. And they were like, “No, no, no, really, I work in this bar. It’s super social. We make tons of money. That must be a social business, right?” Well, not quite.

If you wanted to put this in one sentence, social business, it’s a no-loss, no-dividend company with the only purpose of solving, solving a social problem. So the only purpose of solving a social problem means we’re not trying to make any money with it, but we’re really trying to dedicate the business completely to the social value creation.

No loss means that any business makes a loss — or most legal businesses at least — make a loss at the beginning. But we want this business to actually reach the breakeven point and be profitable in the long run, because any stable business needs to be profitable.

But now comes in the no-dividend part. We can pay the initial investment on back, but once that’s done, what we do is all the profits will always be completely reinvested into the business in order to maximize the social value. Okay?

So you can use this, and let’s use a little example of a business that I created in Colombia, that we created in Colombia, and that was among the, within the first four years of my career in social business.

And one social issue that we found there, and one cause for poverty, was malnutrition of children. When they’re malnourished, they don’t develop the brain and they don’t develop the body that will help them be productive in their lives. So being less productive means ending up in poverty again. So we thought, let’s try to solve that issue.

And we knew that if we wanted to sell a product, vitamin pills are not going to be something that those people are going to spend money on, so it’s not going to work. So we looked at what are those people actually consuming today? And we found panela. It’s a sugar-cane-based juice was something that all the Colombians — young and old, rich and poor — consumed all the time.

And then we started to work with a nutrition company called DSM and developed a panela that tastes the same, smells the same, looks the same, almost costs the same. And we started selling it to school cafeterias that give this panela today already to those children.

So it’s great for the school cafeteria because they can add value to the children without actually making a lot of change in their processes, nothing. It’s great for the children because they actually reach their genetic potential and are not hampered by malnutrition. And it’s good for us because we are not just depending on donations, we are making money and we can actually do this in a profitable manner. And if we make profit, then we can use that to expand the business, to maybe have additional products, or maybe have a better fortification formula.

So this is one of the social issues that we have. A social problem in business that we have. And we can use that in, for many social issues that exists out there. Y’know, 800 million people or more are actually already suffering or today suffering still from hunger.

But you don’t even have to go that far. You can go to the States and we have 46 million people that live below the poverty threshold. And there’s many other social issues that we need to tackle like pollution, childhood obesity, domestic violence, you name it.

So we have a tool out there today, and this is kind of like an agent vehicle, right? We have a tool out there today that is ready to use in order to change the world. And this has specifically two features that I’d like to highlight.

One, it runs itself sustainably as a business so it can scale up. That’s a big difference to a nonprofit, it can actually scale up and reach more people. And what I said before, it actually pays back the initial investment amount. So if you’re a social investor, you can invest, get that dollar back, that same dollar, recycle it, invest it into the next social business. So suddenly that dollar has endless life.

So now we just have to find somebody that’s actually going to drive that car, right? And there’s so many change agents out there. You’re probably many of them already. But there’s university students, there is nonprofit leaders, there’s people, there’s a lot of people in corporations and businesses that actually want to be social change agents.

And I want to show you, so our mission now for this social change agent factory, is to mobilize, to train, and then to support those social change agents that want to use social business and that want to drive that car — there’s probably a lot of people want to drive that car that I just showed — in order to drive social change.

And we started that at a university, of course. Professor Yunus, actually together with President Rush, the president of that university, they decided that they wanted to create the California Institute for Social Business, an institute fully dedicated to teaching, researching, and creating social businesses.

So how does this training center, how does this training actually work? And we’re going to use an example. Please meet Greg. Greg is also here in the audience, by the way. And he’s one of our toughest social change agents. And what he does is he signed up for the California State University Channel Islands because it had this program of the California Institute of Social Business. And he wants to be a social change agent. And he’s taking today a minor in social business.

It’s a three-semester program. First semester, you understand the concept, and you ideate and you meet some social business entrepreneurs that have done it already. So you’ll learn from them directly. Second semester, you take an idea of a social business and you make a plan around it. You actually create a business plan. And then the third semester you go ahead and implement a pilot of this social business.

So it’s really not just sitting in a classroom, but it’s really going ahead and trying to do something that is a learning experience on one hand, and that really generates the social value that we’re looking for.

So he’s not going to do this by himself. He has a lot of supporters, and these are our frightening drill sergeants for our change, for our social change agents. Of course, he has three different types of people that support him in this process.

First, of course, the professor at the university. They are taught in a theoretical basis in the classroom, what they need to know about social business and about business in general and about entrepreneurship so they can actually fulfill their mission.

But then second, we split up the class, each class of let’s say 25 people in five groups. And for each group they pick a nonprofit organization, one of the university’s community partners, in order to work as a consulting team and a social business creation team to help these nonprofit organizations become self-sustainable, to become closer to what a social business is, or even become a social business, or directly with social business entrepreneurs. So they learn from them. And they help them.

Now, what we learned in the process is that these entrepreneurs and the students, they have a ton of energy. But we need to channel that energy in a little bit, a little bit more. So we started a corporation with SCORE, which is the Core of Retired Executives. So there’s a bunch of people in there that have 20, 30 years of business experience. And now we have one mentor for each team of five that is working with that team to share their, their business experience.

So suddenly you have a team of, you know, the professor, the entrepreneur, and a really seasoned executive that is working together on solving a social problem together, first in the classroom and then actually in real life. So this is really good for, well first of all, the students’ learning experience and it helps the community because other community partners get this, this help.

So let’s say Greg has graduated now, he’s mission-ready. Now what does he do next? Of course, he could put on his resume, “Well, I created a social business during my studies,” that’s one thing. And it really helps, probably. And he’s already worked with a business that’s about to be created and that has been piloted already, so maybe he can work there. Or he even decides that, you know what? I now have the knowledge and I want to be a change agent. I can actually take this very social issue and design my own business plan around it.

And if he does that, can you imagine that suddenly students like Greg would not go out and try to look for a job, but they’re actually now creating jobs in not just any company, but a company that will tackle the social issues that you find in your community?

Now, after he graduates, what we still want to do, of course, is we want to stay in touch with them, we want to help him and accompany him while he’s creating that business. So we created an incubation center there as well, and that incubation center brings together a whole bunch of social business entrepreneurs or social change agents so they can interchange ideas that can work together and they can get the support that they need, like office space. And at some point — we’re working on this — even funding. We want to create a social business creation fund.

Now, if we managed to do this with one person, maybe we are able actually to do that with a whole bunch of people. And we already found a whole bunch of people that actually want to be those social change agents, that have taken the training.

Now if we actually manage to create this institute at a university that uses its resources to understand the social issues and then reaches out and creates one social business after the other in order to tackle a — yeah, that community’s social needs, then we can just replicate this, let’s say 23 times in every California State University that’s out there. But it doesn’t have to be a California State University, it can be many other types of universities as well. And then suddenly we cover the entire state of California, maybe the U.S. and maybe even the world.

And if we actually managed to do that, then we can maybe create that dream that Professor Yunus has. He’s written a book that’s called A World Without Poverty. And this world without poverty, he often describes as a world in which people don’t even know anymore what poverty is. So they actually need to go to this thing, a poverty museum, to understand what poverty actually means.

And I believe that if we managed to go to a point where we actually create this poverty museum, then all our social change agents that we’ve trained, gathered, and supported can truly say mission accomplished. Thank you very much.