Adam Smith is one of the most famous Economist and Philosopher. He was Scottish by origin. He is famous for his book “The Wealth of Nations” published in 1776. Adam Smith’s writings are studied by 20^th and 21^st century philosophers, writers, and economists. Smith’s ideas of free market and their importance, assembly-line production methods, and gross domestic product (GDP) has formed the foundation for theories of classical economics.

The term “invisible hand” first appeared in Adam Smith’s famous work, The Wealth of Nations, to describe how free markets can incentivize individuals, acting in their own self-interest, often selling products and services not necessary for the society. The unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically is the invisible hand. The invisible hand is a metaphor for the unseen forces that move the free market economy. The constant interplay of individual pressures on market supply and demand causes the natural movement of prices and the flow of trade.

For example, pharma companies constantly identify new ailments. They describe the ailment generically making feel each one that they have it. The biggest example is “restless leg syndrome” it’s an irresistible urge of leg movement.  It’s not a serious condition. The pharma companies fund studies to make the ailment prominent. After they release the study, the hungry media catches it and spreads it on all media channels. The company uses this wild-spared study as promotion.  Now let’s see why it works. Drugs are easier than exercise. People prefer gulping a tablet than exercising. Psychologically it gives them the feeling of relaxation from the imagined condition. The customers of pharma companies are doctors, when they prescribe any medicines, we don’t question them, we buy them. A mild opiate-based painkiller, such as Codeine, is prescribed to relieve pain associated with restless legs syndrome. This interdependence incentivizes Pharma companies to make what is “socially” necessary, they are only bothered about filling their cashbox and their own well-being.

Critics argue that the invisible hand does not always produce socially beneficial outcomes, and can encourage greed, negative outwardness, discriminations, and other harms. The invisible hand is part of laissez-faire, meaning the “let do/let go,” approach to the market. In other words, the approach holds that the market will find stability without government or other interventions forcing it into unnatural patterns.

Cosmetics

Launched in 1952, Lakmé is the first home-grown successful cosmetics brand in India. The common Indian woman is expressive, confident and redefines the definition and meaning of beauty. The key factor driving the Indian beauty and personal care market is the growing focus among individuals on personal hygiene and skin health, flawless skin, trim and slim figure, hair care etc. This is especially true for the country’s large population of young people, who are increasingly becoming conscious about their looks. In addition, the availability of a wide range of affordable and effective beauty and personal care products is also helping to drive growth in the market. The major players in the market are focusing on product innovation and new product launches to meet the changing needs of consumers.

The Indian youth gives more importance to face and body image. This fact has forced boom in cosmetics and grooming products. The Indian cosmetics products market size is estimated at USD 1.35 billion in 2023. Consumers are discovering products and brands via advertisements and promotional campaigns on various social media platforms, including Instagram and Facebook. Before purchasing, they consider product reviews, other consumers’ recommendations, celebrity endorsements, expert blog posts, and social media comments. In addition, with the increasing internet penetration, the online market for purchasing cosmetics products has seen rapid growth in India in recent years. Furthermore, the demand for luxury cosmetics is increasing among millennials and Gen Z consumers, owing to their preference for grooming up regularly to look tidy and fashionable.

Bottled Water

One more example is of bottled water. Scary health studies gave messages to stay hydrated always. Big promotional amount was spent on municipal water called “mineral water”. What worked? People gave importance to keeping themselves hydrated. Bottled water are available everywhere conveniently. The water is affordable to all at 1000 times markup price.  Bottled Water’s story began with a humble cause. It was once considered a luxury item, reserved for special occasions or travellers in need of hydration. In the early days, people relied on tap water for their daily drinking needs. The idea of purchasing water in a plastic bottle became a trend.

The turning point for bottled water was the convenience it offered. Busy urban lifestyles and the on-the-go culture of the late 20th century created a demand for portable hydration. Plastic bottles, lightweight and easy to carry, quickly became the everyone’s choice. Suddenly, quenching your thirst became as simple as grabbing a bottle from the nearest store or vending machine. It was a revolution in hydration convenience.

One good thing happened. People started choosing bottled water over sugary drinks and carbonated sodas in their pursuit of a healthier lifestyle. The perception that bottled water was purer with mineral in it and safer than tap water also contributed to this shift. It became a status symbol of sorts, with brands touting their water’s source and purification methods.

Conclusion

The idea in invisible hand in market economy is that competition and self-interest will drive to offer the best products at the lowest prices to attract consumer demand, essential for securing profits. All this will contribute to raising social welfare. However, the reason behind this betterment of the human condition is ultimately selfish. Hence competition and self-interest will create a productive society contributing to the economy.

As a nation today we need many social entrepreneurs. We need a revolution from people in different walks of life in creating and implementing effective, innovative, and sustainable solutions to battle social and environmental challenges. These solutions include services and products for profit or as non-profit initiatives. India needs numerous social entrepreneurs with innovative solutions to society’s most pressing social problems. Areas such as sanitation, education, water, gender bias, primary health, female feticide, environmental problems need attention because these problems are persistent in nature.

Usually, people leave the societal needs to the government or the business sectors. Nevertheless, social entrepreneurs tend to identify areas that are not working efficiently in the current system and try to solve the problem by changing it, spreading the awareness about the solution, and influence people to be a part of the change. For example, let’s look at Dr. Govindappa Venkatswamy’s Arvind Eye Hospitals. Its business model is highly social yet sustainable. It runs on its own revenue. The founder’s mission was to eradicate redundant blindness among the poor population in India especially in rural India living with a minimum daily wage and who can’t afford medical treatment. Arvind Eye Hospital provides large volume, high quality and affordable care. 50% of its patients receive services either free or at steeply subsidized rate, yet the organization remains financially self-sustainable. Much importance is given to equity – ensuring that all patients are accorded the same high quality care and service, regardless of their economic status. The model’s core is economies of scale.

As a common trait, social entrepreneurs are passionate with their ideas and commit their lives to change. They are visionaries since they envisage a society without problems. They almost dedicate their lives for a social cause. They also present ideas which are user-friendly, ethical, and easily understandable engaging widespread support. This ensures that local people stand up, grab their idea and implement it. In simple words, every leading social entrepreneur is a mass recruiter of local change makers. He is a role model who tells people that their action can do anything. In the last two decades, social entrepreneurship has grown based on the understanding that a new idea in the hands of a good entrepreneur is a powerful tool.

Octogenarian Aabid Surti is a national-award winning author, cartoonist and artist. He has 80 books to his credit. On every Sunday morning he visits the topmost floor of his apartment complex in Mumbai’s Mira Road district. He rings the doorbells of all 56 apartments in the complex, asking residents a simple question: “Do you have a leaking tap in your home?” Aabid is accompanied by a plumber and a volunteer. The plumber gets to work, plugging leaks in the homes of those who answer with a yes. Aabid apologizes to those who say no. Over the years, Aabid Surti’s efforts have helped save 10 million liters of water. He is obsessed with the cause of saving water!  

While most entrepreneurs are motivated by the potential to earn a profit, for a social entrepreneur the profit does not come as the first motive. As Adam Smith explained in The Wealth of Nations (1776), “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.” Adam Smith believed that when individuals pursued their own best interests, they would be guided toward decisions that benefited others. The baker, for example, wants to earn a living to support his family. To accomplish this, he produces a product, bread, which feeds and nourishes hundreds of people.

How social entrepreneurs play the role of change agents? They adopt a mission to create and sustain social value (not just private value). Further, they recognize and relentlessly pursue new opportunities which serve the mission. Santosh Parulekar another social entrepreneur worked to create job opportunities for the unemployed youth in rural India. He started ‘Pipal Tree’, a company that aims to impart formal training to the youth and provides them with reputable jobs in companies across the country. Operating since 2007, Pipal Tree has trained over 1,500 workers and intends to open training centers pan India in the coming years. He engages in a process of continuous innovation, adaptation, and learning.

Social entrepreneurs act boldly without being limited by the resources in hand. But they do exhibit heightened accountability to the community served and also the outcomes created. Examples of social entrepreneurship ventures include microfinance institutions, educational programs, providing banking services in underserved areas and helping children orphaned by epidemic disease. Their efforts are connected to a notion of addressing unmet needs within communities that have been overlooked or not granted access to services, products, or base essentials available in more developed communities.

Shirish Apte has successfully rejuvenated a traditional water system in Maharashtra which is caught in between the Malguzaars (the local Zamindars or landlords) and the state government, the Malguzari tanks were left to die many years ago. Shirish Apte decided to change the situation and, since 2008, he has been successfully rejuvenating these tanks. His efforts and hard work have made the district administration restore 21 more such tanks. This project has helped many local people get employment, the irrigation output has increased in the area, the farmers have reduced the use of fertilizers in the farms and, above all, you now get to witness a great sight as many animals come and quench their thirst at these tanks.

A social entrepreneur might also seek to address imbalances in such availability, the root causes behind such social problems, or social stigma associated with being a resident of such communities. The main goal of a social entrepreneur is not to earn a profit, but rather to implement widespread improvements in society.

Oddoor farms near Mangalore, Karnataka, provides an inspiring example of the efforts made by Rajesh Naik to transform 120 acres of barren land into a lush green farm through his persistent efforts of creating a 2 acre wide and 50 feet deep lake, which has not only transformed the surrounding area, but has also helped in improving the water table in the surrounding village, besides helping in the development of a self sufficient organic farm and a dairy. It took a lot of financial resources and time to create a lake that gradually started filling up with water and now it generates around 40,000 litres of water that is used for irrigating the whole farm. This has not only helped in creating and developing greenery in the area, but has also helped in increasing the water table in the surrounding areas of the farm.

Contemporary economists and management writers like Baptist Say, Joseph Schumpeter, Peter Drucker and Howard Stevenson have defined entrepreneurship with slight variance but the same perspective that entrepreneurs are individuals who create value, those who are innovators, those who are change agents in society etc. Social entrepreneurs are close to all these definitions created by various economists. The only difference being that of social entrepreneur is entrepreneurs with a ‘social mission’, for a social entrepreneur social mission if explicit and central theme.  This affects how they perceive and assess opportunities. 

In India social entrepreneurs face some critical problems such as: enterprises need a strong grounded business plan to help achieve milestones. The rigor of building and following a plan that is based on market realities and customer insight is critical, they need support of lawyers, chartered accountants, senior entrepreneurs to help them develop good business plan. We have all heard of a great social enterprise doing good work, but limited to specific geographies. The primary reason they are not able to scale up is lack of funds or the founders’ limited bandwidth. I appeal readers of this article to strengthen hands of social entrepreneurs in whatever way we can.

Adam Smith (1723 – 1790) identified the division of labour and specialization as the two key means to achieve a larger return on production. Division of labour  is an economic concept which states that dividing the production process into different stages enables workers to focus on specific tasks. If workers concentrate on one small aspect of production, this increases overall efficiency. When employees concentrate on a specific task, with time they improve the necessary skill which is useful for a specific task and they perform better and faster which saves time and money, and enables increased production levels.

Smith found that factories in which employees specialized in only one or a few tasks had greater performance. In his famous example of a Pin Factory which he visited, each employee performed all 18 pin-making tasks. In fact, Smith found that 10 employees specializing in a particular task could, make 48 000 pins a day, whereas those employees who performed all the tasks could make only a few thousand at most. Smith reasoned that this difference in performance occurred because the employees who specialized became much more skilled at their specific tasks, and, as a group, were thus able to produce a product faster than the group of employees in which everyone had to perform many tasks. Smith concluded that increasing the level of job specialization, the process by which a division of labour occurs as different employees specialize in different tasks over time, increases efficiency and leads to higher organizational performance.

Fredrick Taylor (1856 – 1923) aimed at continuously increasing the efficiency of the production process. He divided labour into an elementary division of labour in which every worker was allocated their own tasks that had to be repeated constantly. Everyone was assigned their own program that consisted of successive actions and this was aimed at worker’s levels of knowledge and skills. This brought about considerable time savings and because of this routine, productivity increased rapidly. Taylor felt it was important to select the right person for the right job and to leave the planning and thinking to the specialists.

Division of labor allows economies of scale (ES). Economies of scale are the reduction in per unit cost of production as the volume of production increases. In other words, the cost per unit of production decreases as volume of product increases. Costs per unit can decrease as the volume of production increases for different reasons. ES helps at increasing cost advantages that a business obtains due to more units of output.

Division of labour allows specialization. Firms producing at a large scale employ a large number of workers. This allows the firms to practice specialization by splitting jobs into smaller tasks. These individual tasks are assigned to separate workers. In this way workers spend all their work time on the part they know best and it also allows them to perfect their skills. Overall result of this is that an average unit is produced at lower cost. Specialization also works at management level. For example in an organization you will find Marketing team, Human Resource Management team, Finance team, Operation team, Risk Management Team, Procuring team, Information Technology team etc, etc. On a small scale, a Civil Contractor while construction a house divides the work into civil engineer, supervisor, masons, and site labour, welder, plumber, electrician and interior designer.

Henry Fayol (1841 – 1925) recognized that division of labour leads to specialization and that specialization is considered as part of “the natural order” comparing it to the organs of the body. For example the GI tract (Gastro Intestinal which is responsible for digestion in body) are the mouth, esophagus, stomach, small intestine, large intestine, the rectum and anus. Food enters the mouth and passes to the anus through the hollow organs of the GI tract. The liver, pancreas, and gallbladder are the solid organs of the digestive system. Each of the organs listed herein is responsible for diction of food once it enters our body.

The object of division of work is to produce more and better work with the same effort, Fayol described. Fayol also said that division of labor helps in learning. As business firms grow, they learn from both experience and research. Firms gradually learn-by-doing and become more and more efficient. Firms also learn from research which results in better processes and new formulas pushing their production cost per unit even lower.

This very objective has not been altered in today’s modern business world. In a sense this principle is the fundamental feature of modern economy, allowing for the largest increases of productivity. Peter F. Drucker (1909 – 2005) said that the 20th century has seen a rate of 3% productivity increase per year, hence productivity rose 50 fold since the time of Frederick Taylor, who acted as a catalyst in the development of division of work.

An example of this fact can come from early industrialization, namely the Ford motor company, where Taylor’s system of a scientific approach was applied. Fredrick Taylor was interested in skill development by means of standardization and functional specialization. One worker would assemble the dashboard, another would assemble the wheels, and yet another would paint the exterior. The effects of the division of labour are well known and lead to Ford becoming not just the predominant car maker but also the inventor of the conveyer-belt production system- revolutionizing many industries.

However, one could argue that extremes of division of work could lead to undesired effects. Division of labour can ultimately reduce productivity and increase costs to produce units. Several reasons as causes for reduction in productivity can be thought of. For example, productivity can suffer when workers become bored with the constant repetition of a task. Additionally, productivity can be affected when workers lose pride in their work because they are not producing an entire product they can identify as their own work.

On the flipside, Douglas M. McGregor (1906 – 1964) cautioned that people would get bored doing the same job again and again. Repetition of same work bores people and kills enthusiasm. Fayol probably had recognized this fact earlier in his work. He stated that the division of work has its limits which experience and a sense of proportion teach us may not be exceeded. In more recent years management thinkers have recognized and addressed this issue more intensely.

Karl Marx (1818 -1883) warned that repetition of work leads to process of disaffection. In his view, workers would become more and more specialized, and work would become more and more repetitive, until eventually the workers would be completely estranged from the process of production. While it can have benefits on productivity, the specialization of labour can lead to workers with low overall skills and low enthusiasm.

Leo Tolstoy said that division of labor is a justification for sloth (laziness).