ARUN - Social Investment Platform | Seiichiro Yonekura “Social Investment Viewed from the Social Business Standpoint” Part 2 

Seiichiro Yonekura “Social Investment Viewed from the Social Business Standpoint” Part 2

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We shared Professor Seiichiro Yonekura’s message entitled “Social Investment from the Viewpoint of Social Business” partially as a pre-seminar reading for the NPO ARUN Seed Seminar on July 15, 2014. As it turned out, Professor Yonekura’s speech on July 15th was full of new episodes that delighted the audience. Here we share the previous message in its entirety.

■Why now is social innovation necessary?

Why is social investment necessary? I’d like to talk from the viewpoint of macroeconomics.

Currently, Japan has a deficit of quadrillion. This is the result of neglecting the status for over 10 years. I apologize to the younger generation.

In the past few decades, “small government” has expanded globally. By sifting from the big governments such as Thatcher in England and Ronald Reagan in the United States to the smaller governments, it was hoped that the social security can be managed more efficiently.

 

The small government theory brightens the world momentality. However with the advancement of globalization, in turn, the global economy as a whole fell to the “worldwide recession.” Each country took Keynesian-istic fiscal measurement and it resulted in the current status of each country carrying a large budget deficit.

While each government’s financial status worsens, some started to recognize the necessity of the business forms that serve as the purpose for social business.

In other words, social business means how businesses can bear the public role that the government cannot.

 

The first person to actualize this is Mr. Yunus of Grameen Bank. He has been at odds with the government in recent years, because he has long been criticizing the government for the problem that they could not solve no matter how much money it poured in. He had proven that a loan of just $30 could create a huge impact while making for a successful business. At present, it finances a total of a trillion yen to eight million people. Close to 20% in interest in Japan might be considered as a loan shark, but the bank won the Nobel Prize because it was so successful as a business in the poverty-stricken areas.

 

As you can see, the role of social business is to solve public problems that have been borne by the taxes, and the innovation that comes out of the process is social innovation. Mr. Yunus in recent times defines social business as the reinvestment of the profit.

■Speaking of Innovation

Japanese newspapers still think innovation equals to technological revolution (gijutsu kakushin). When a company established the innovation research center, someone said that the name should be Technology Revolution (gijutsu kakushin) Research Center. Innovation, however, is not technology revolution. Innovation is a process.

 

For example, to create a system for the next day delivery to all 150 cities in the United States, how many cargo aircrafts are needed? In normal calculation, you may think 150 x 149,  around 23,000 aircrafts. The answer, however, is 149. An aircraft loads at each city, arrives at Memphis by midnight, then returns to the original city with the cargo for the destination.

Mr. Frederick Smith started Federal Express based on the paper he submitted in an economics class in his junior year at Yale University in the U.S. on the hub-and-spoke theory. This idea is not a technological revolution, but “an innovation of a process” itself.

Similar to FedEx’s strategy, Korea is using the hub strategy and producing amazing results. Japan has not embraced the importance of having a hub. Korea is aiming to become a hub of the world by establishing FTA (Free Trade Agreement) with many countries.

 

Looking domestically, the case of the Eagle Bus in Saitama is interesting. Most people never thought of why a bus stop was where it was. It is there because it was always there. But shouldn’t there be other reasons? The Eagle Bus contracted the bus operation, changed the location of the bus stops, and created a hub bus station. Just like Korea’s hub strategy. As a result, the bus service that used to run one in an hour now runs one in 15 minutes.

■About Venture Investment

Why do people buy lottery tickets? If a ticket costs 3 million, nobody would buy it. Lottery is based on the idea of Low Entry Risk, and because the amount is small, it gathers a large sum of the risk money.

In the United States, due to the regulations such as ERISA (Employee Retirement Income Security Act), institutional investors’ investments had flowed to risk money. Two trillion 4 hundred billion as risk money is amazing. After that, in 1980, NASDAQ was born and the variety of exit options became available.

 

Even if the investment doesn’t work, the responsibility of the failure is shared by both the investor and the investee. By creating such an opportunity, however, talented human resources come together.  It is necessary to create such a system in social investment. It is indeed difficult to gain returns in social business. But there is no time to just keep saying it’s difficult.  Even a 2% financial return is 200 times more than the Japan Post Bank. I want social business to create at least something of that level.

 

This is my advice.

 


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