17 Mar The future of Investing: Social & Entrepreneurial Innovation

‘Success is not counted by how high you have climbed, but by how many people you brought with you.’ Dr Will Rose.

We need to do more to help more people. The world needs to develop and move forward, it is that simple. So how do we become the beacon of light thats stands out in stormy weathers? Business models need to change, doing ‘well’ is simply not enough, they also need to do ‘good’. Success should not be measured but how fast a company has grown, how big its last funding round was, but should be measured by the number of lives that have ben improved.

Black and white economic and business models such as Capitalism and Socialism could potentially be merged to create a fairer and better society. If we don’t progress, the world we love and adore, may not be around when our grandchildren mature. The good news is that technology can help bring about those changes and that is why I am wildly passionate about it. What I love about Innovation, is that at its very core, it is about driving positive change. If we can just make that focus equally about having a ‘social element’ pretty soon, we can bring about immense change.

Enter the concept of ‘Social and Entrepreneurial Innovation’. Social innovation refers to the process of developing ‘policies’ to provide solutions to social and environmental issues. Examples can be seen in such initiatives as Fair Trade, Emissions and Carbon trading as well as social housing and charter/grammar schools. This is often achieved through government reforms, as well as NGO’s & private/public partnerships. Government initiatives are all valuable, strong and reliable sources of social innovation. However we need to globally evolve from the notion of poverty fighting policies and initiatives to system that is focused on a fair creation and distribution of wealth.

Entrepreneurial innovation, from the context of how I personally define it, is the process of solving social and environmental issue through business and product development and more specifically in my case, technology. Think along the lines of banking the unbanked, building houses for the less fortunate through new production methods and supporting environmentally friendly power sources.

We at the Emerald Group are in fact so focused on it that we have coined the term ‘Sovation’. And this forms part of our investment analysis when we analyse companies to invest in. If we look at the current wealth gap, climate change impact and demographic boom in emergent markets, particularly in Africa and Asia, it guides us to ask the right Environmental Social and Governance (ESG) questions.  Does the company perform a social function, is it enhancing lives, is the organization governed by ethical and moral principles, does the market it performs in also provide a social function?

These are questions that should be raised at an early stage. In the UAE, we are maybe more acutely aware of this trend as Shariah investing considers these points very early on and they are instilled as part of the guiding ethos. ESG, whilst it is growing in trend, is by all definitions a new kid on the block in the West. I think however, this trend will excel with a change in mindset that the younger generations bring. My children for example, the environment and social responsibility is at the forefront of their thinking and I believe ESG and ‘Sovation’ will be imbedded solidly in everything they do as investors.

One of the wonderful possibilities with blockchain is that wealth can be dispersed and spread amongst followers and customers. Rewards schemes for customers can be monetized easily using smart contracts and other Distribute Ledger Technolgy (DLT) features via something know as ‘non fungible token’ or NFT for short. Imagine if a customer of Facebook, Google or Amazon, that ultimately generate much of the revenue, can be rewarded for the revenue they help produce.

They are also able to additionally control the information they sell and be part of the success of the organization. They can be justly rewarded and financially compensated for that. That’s a business model that works for everyone, that works for a better society as whole and creates a fairer wealth system. This not only reduces poverty, distributes wealth more evenly, but also creates societal equilibrium.

We really need both public and private sectors to focus on these core issues to help drive further change in the world. Let ‘sovation’ or social innovation be our salvation. Whilst poverty levels are decreasing globally and we are moving in the right direction, what we see under the magnifying glass more and more during the changes in economic cycles and recessions, is that wealth is being spread disproportionately. The re-emergence of a K-shaped economy and the growth of the excessively rich versus the struggling middle class is a growing concern. As this gap grows wider, the possibility of severe political up heavily grows greater.

I believe the old model of innovator takes all is also being questioned and I believe it’s important to create that fairer equilibrium form top down, before people simply force the model to change from the bottom up.

Let ‘sovation’ be our salvation.