// BY LAURA P. HARTMAN, PATRICIA WERHANE AND DENNIS MOBERG

Gates shared with his rapt audience a novel scheme he called, “creative capitalism.” According to Bill, creative capitalism is a system in which market and profit incentives drive a company’s principles and commercial competencies to do more for the poor.

Though he acknowledges one of the fathers of this movement, the University of Michigan’s C.K. Prahalad, he neglects to mention that scholars, institution builders and corporate innovators have been working to harness the power of creative capitalism for years. Instead, Gates introduces it as a nascent stage today, offering it as a personal gift to a spellbound audience of keen disciples. Indeed, if he was aware that creative capitalism is part of a now decade-long movement, he might have cited some of the lessons that have already been learned.

Creative capitalism is based on two ideas: (1) there are significant, unexplored markets in the poorest and most densely populated nations in the world and (2) these markets should be developed rather than exploited by empowering the poor and, in some cases, encouraging them to become capitalists themselves. Some of the wisdom scholars and practitioners of creative capitalism have already gained include the following:

• While the success stories of creative capitalism are inspirational, there are common-sense mindsets that prevent corporate leaders from committing to it—mindsets like, “we have to understand the roots of global poverty before acting.”
• Because markets accessible to the world’s poor are constrained by institutional structures rife with political instability, corruption and an absence of the rule of law,creative capitalism requires the bundling of strategies of market development with the products and services that are offered.
• Creative capitalism requires forging new partnerships between the corporate and NGO worlds (a point NGO-head Gates acknowledged).
• Fundamental to the idea of creative capitalism is solidarity—the spirit of accompaniment between producers and consumers in which the former do not attempt to help the latter but rather base their collective efforts on assiduously imagining the other’s experience.
• Creative capitalism requires corporate leaders who are both imbued with this imagination and also capable of enlisting others based on the sense of meaning that one gains by being associated with its initiatives (Bill talked about recognition, but that is more the egg than the chicken).

The wisdom above are examples of what can be learned from a deep exploration of models of morally imaginative corporate leadership. One relevant case example is that of Cemex, a global manufacturer of cement with headquarters in Mexico. Cemex leaders had the moral vision to distribute cement products to about 2.5 million impoverished residents of Guadalajara, Mexico, who live in extremely crowded and unfinished housing in and around the city. Rather than listening to the voices that warned them against involvement, they forged ahead with a program named, “Patrimonio Hoy.”

Before the program was launched, it would require a typical homebuilder over a year to construct a single room and over 13 years to finish a modest, four-room dwelling. But through “Patrimonio Hoy,” Cemex offered financing to very lowincome families to build or expand their homes. In order to qualify, customers were required to participate in savings groups, each with well-established rules to aid the group partners throughout the borrowing process. In return, participants in the program were offered technical assistance, educational programs, guaranteed quality materials and delivery, guaranteed prices and free storage of materials.

By creating this operation, Cemex has earned a foothold in a market previously unexplored by them, and in a market that will become increasingly critical as the markets at the top of the economic pyramid experience saturation. Low income homebuilders’ use of cement has tripled, from 2,300 pounds consumed once every four years to the same amount being consumed in 15 months. Originally, Cemex executives began looking for opportunities to respond to a desperate situation in a socially responsible ways, but also in a way that allowed them to survive, to flourish and to enhance their long-term financial performance. As a direct resultof its choices, Cemex reported a profit of $1.5 million by the end of 2005 and anticipated expansion into Colombia,Venezuela, Egypt and the Philippines.

Although he is late, Bill Gates is right. As Adam Smith recognized over two centuries ago, there are two great forces of human nature: self-interest, and caring for others. And creative capitalism involves not only drawing on both of these forces, but also imagining situations in which the poor draw upon them as well.