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  • I think we're all aware

  • that the world today is full of problems.

  • We've been hearing them

  • today and yesterday and every day for decades.

  • Serious problems, big problems, pressing problems.

  • Poor nutrition, access to water,

  • climate change, deforestation,

  • lack of skills, insecurity, not enough food,

  • not enough healthcare, pollution.

  • There's problem after problem,

  • and I think what really separates this time

  • from any time I can remember in my brief time

  • on Earth is the awareness of these problems.

  • We're all very aware.

  • Why are we having so much trouble

  • dealing with these problems?

  • That's the question I've been struggling with,

  • coming from my very different perspective.

  • I'm not a social problem guy.

  • I'm a guy that works with business,

  • helps business make money.

  • God forbid.

  • So why are we having so many problems

  • with these social problems,

  • and really is there any role for business,

  • and if so, what is that role?

  • I think that in order to address that question,

  • we have to step back and think about

  • how we've understood and pondered

  • both the problems and the solutions

  • to these great social challenges that we face.

  • Now, I think many have seen business

  • as the problem, or at least one of the problems,

  • in many of the social challenges we face.

  • You know, think of the fast food industry,

  • the drug industry, the banking industry.

  • You know, this is a low point

  • in the respect for business.

  • Business is not seen as the solution.

  • It's seen as the problem now, for most people.

  • And rightly so, in many cases.

  • There's a lot of bad actors out there

  • that have done the wrong thing,

  • that actually have made the problem worse.

  • So this perspective is perhaps justified.

  • How have we tended to see the solutions

  • to these social problems,

  • these many issues that we face in society?

  • Well, we've tended to see the solutions

  • in terms of NGOs,

  • in terms of government,

  • in terms of philanthropy.

  • Indeed, the kind of unique organizational entity

  • of this age is this tremendous rise of NGOs

  • and social organizations.

  • This is a unique, new organizational form

  • that we've seen grown up.

  • Enormous innovation, enormous energy,

  • enormous talent now has been mobilized

  • through this structure

  • to try to deal with all of these challenges.

  • And many of us here are deeply involved in that.

  • I'm a business school professor,

  • but I've actually founded, I think, now, four nonprofits.

  • Whenever I got interested and became aware

  • of a societal problem, that was what I did,

  • form a nonprofit.

  • That was the way we've thought about how to deal

  • with these issues.

  • Even a business school professor has thought about it that way.

  • But I think at this moment,

  • we've been at this for quite a while.

  • We've been aware of these problems for decades.

  • We have decades of experience

  • with our NGOs and with our government entities,

  • and there's an awkward reality.

  • The awkward reality is we're not making

  • fast enough progress.

  • We're not winning.

  • These problems still seem very daunting

  • and very intractable,

  • and any solutions we're achieving

  • are small solutions.

  • We're making incremental progress.

  • What's the fundamental problem we have

  • in dealing with these social problems?

  • If we cut all the complexity away,

  • we have the problem of scale.

  • We can't scale.

  • We can make progress. We can show benefits.

  • We can show results. We can make things better.

  • We're helping. We're doing better. We're doing good.

  • We can't scale.

  • We can't make a large-scale impact on these problems.

  • Why is that?

  • Because we don't have the resources.

  • And that's really clear now.

  • And that's clearer now than it's been for decades.

  • There's simply not enough money

  • to deal with any of these problems at scale

  • using the current model.

  • There's not enough tax revenue,

  • there's not enough philanthropic donations,

  • to deal with these problems the way we're dealing with them now.

  • We've got to confront that reality.

  • And the scarcity of resources

  • for dealing with these problems is only growing,

  • certainly in the advanced world today,

  • with all the fiscal problems we face.

  • So if it's fundamentally a resource problem,

  • where are the resources in society?

  • How are those resources really created,

  • the resources we're going to need to deal

  • with all these societal challenges?

  • Well there, I think the answer is very clear:

  • They're in business.

  • All wealth is actually created by business.

  • Business creates wealth

  • when it meets needs at a profit.

  • That's how all wealth is created.

  • It's meeting needs at a profit

  • that leads to taxes

  • and that leads to incomes

  • and that leads to charitable donations.

  • That's where all the resources come from.

  • Only business can actually create resources.

  • Other institutions can utilize them

  • to do important work,

  • but only business can create them.

  • And business creates them

  • when it's able to meet a need at a profit.

  • The resources are overwhelmingly

  • generated by business.

  • The question then is, how do we tap into this?

  • How do we tap into this?

  • Business generates those resources

  • when it makes a profit.

  • That profit is that small difference

  • between the price and the cost it takes to produce

  • whatever solution business has created

  • to whatever problem they're trying to solve.

  • But that profit is the magic.

  • Why? Because that profit allows whatever solution

  • we've created

  • to be infinitely scalable.

  • Because if we can make a profit,

  • we can do it for 10, 100, a million,

  • 100 million, a billion.

  • The solution becomes self-sustaining.

  • That's what business does

  • when it makes a profit.

  • Now what does this all have to do

  • with social problems?

  • Well, one line of thinking is, let's take this profit

  • and redeploy it into social problems.

  • Business should give more.

  • Business should be more responsible.

  • And that's been the path that we've been on

  • in business.

  • But again, this path that we've been on

  • is not getting us where we need to go.

  • Now, I started out as a strategy professor,

  • and I'm still a strategy professor.

  • I'm proud of that.

  • But I've also, over the years,

  • worked more and more on social issues.

  • I've worked on healthcare, the environment,

  • economic development, reducing poverty,

  • and as I worked more and more in the social field,

  • I started seeing something

  • that had a profound impact on me

  • and my whole life, in a way.

  • The conventional wisdom in economics

  • and the view in business has historically been

  • that actually, there's a tradeoff

  • between social performance and economic performance.

  • The conventional wisdom has been

  • that business actually makes a profit

  • by causing a social problem.

  • The classic example is pollution.

  • If business pollutes, it makes more money

  • than if it tried to reduce that pollution.

  • Reducing pollution is expensive,

  • therefore businesses don't want to do it.

  • It's profitable to have an unsafe working environment.

  • It's too expensive to have a safe working environment,

  • therefore business makes more money

  • if they don't have a safe working environment.

  • That's been the conventional wisdom.

  • A lot of companies have fallen into that conventional wisdom.

  • They resisted environmental improvement.

  • They resisted workplace improvement.

  • That thinking has led to, I think,

  • much of the behavior

  • that we have come to criticize in business,

  • that I come to criticize in business.

  • But the more deeply I got into all these social issues,

  • one after another,

  • and actually, the more I tried to address them

  • myself, personally, in a few cases,

  • through nonprofits that I was involved with,

  • the more I found actually that the reality

  • is the opposite.

  • Business does not profit

  • from causing social problems,

  • actually not in any fundamental sense.

  • That's a very simplistic view.

  • The deeper we get into these issues,

  • the more we start to understand

  • that actually business profits

  • from solving social problems.

  • That's where the real profit comes.

  • Let's take pollution.

  • We've learned today that actually

  • reducing pollution and emissions

  • is generating profit.

  • It saves money.

  • It makes the business more productive and efficient.

  • It doesn't waste resources.

  • Having a safer working environment actually,

  • and avoiding accidents,

  • it makes the business more profitable,

  • because it's a sign of good processes.

  • Accidents are expensive and costly.

  • Issue by issue by issue, we start to learn

  • that actually there's no trade-off

  • between social progress

  • and economic efficiency

  • in any fundamental sense.

  • Another issue is health.

  • I mean, what we've found is actually

  • health of employees is something

  • that business should treasure,

  • because that health allows those employees

  • to be more productive and come to work

  • and not be absent.

  • The deeper work, the new work, the new thinking

  • on the interface between business and social problems

  • is actually showing that there's a fundamental,

  • deep synergy,

  • particularly if you're not thinking in the very short run.

  • In the very short run, you can sometimes

  • fool yourself into thinking

  • that there's fundamentally opposing goals,

  • but in the long run, ultimately, we're learning

  • in field after field that this is simply not true.

  • So how could we tap into

  • the power of business

  • to address the fundamental problems

  • that we face?

  • Imagine if we could do that, because if we could do it,

  • we could scale.

  • We could tap into this enormous resource pool

  • and this organizational capacity.

  • And guess what? That's happening now, finally,

  • partly because of people like you