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Creative Capitalism

August 4, 2008

The Times just recently published an article by Bill Gates, based on a talk he gave in January about what he termed “Creative Capitalism”.

I find it very interesting and a worthwhile listen.

You can also take a look at this article in the Wall Street Journal from January in which some of the sources that Bill Gates was influenced by are mentioned.

First of all he starts out by saying that he thinks the world needs system innovation, not just technological innovation.

Next he says that he thinks that the world has become a better place and that it is continually improving.

According to him there are a billion people who live for less that a dollar a day, who don’t have clean drinking water, electricity and other things that we take for granted.

He then points to something peculiar, namely that people benefit i inverse proportion to their need. The rich get richer and the poor get poorer, because the way the system works, in a capitalist society, the incentive is to serve those those who are richest is higher than to serve those who are the poorest.

Now the first statement that really made me think, was when he said that he thinks that capitalism actually has a potential to also serve the poor, as long as we change the system.

If this is to work, businesses need to realize that serving the poor isn’t always going to yield profits. Instead, he says, it can yield recognition.

He goes on with a number of examples of initiatives which might fall under his categorization of “Creative Capitalism”.

Then he starts talking about how he hopes that corporations will set aside a percentage of time from their top innovators to try and figure out new solutions that might help those in need in the world. This, he says, is more effective than simply donating money or allowing people in the company to do volunteer work, because it allows the company’s specialists to do what they are best at.

Examples given by Bill Gates of Creative Capitalism falls into four categories:

1. Adjusted pricing
This means that corporations adjust their prices so that consumers in poor countries can afford them. The example which is mentioned is a meningitis vaccination that is offered at a much lower price than other vaccines.

2. Governmental support
Governments can help by legislating in favor of initiatives that help the poorest and those in need.

3. Allow access to markets in developed countries
To support the livelihood of people in third world countries, initiatives can be taken which ease the access of products from these countries to western markets.

4. Consumption-based philanthropy
Giving aid can be tied together with consumption of goods. The Product (RED) campaign is mentioned as an example of such an initiative.

There is a great blog post here which is much more elaborate: http://creativecapitalism.typepad.com/creative_capitalism/2008/08/the-gates-found.html

I agree in many ways with the views presented, but I don’t have any illusions about creative capitalism or social entrepreneurship being easy.

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