Friday, November 21, 2008

Wall Street Woes- and what to do about it

I don't know about you but I am getting very tired of hearing about Wall Street woes; about executives who must sell their jets and how, somehow, that translates to average folks getting laid off. Its just fear tactics. The issue is Wall Street has only one metric - financial performance. So Wall Street is always overly emotional - down in the dumps or unnecessarily bullish, which leads to hyper-movements of capital. It is an overly constrained system. Wall Street has boxed itself into a single-bottom-line system and doesn't know how to get out. So folks, - if the system isn't working change the system - think out of the box.

Its time the financial wizards admitted they have no clue what to do and start learning from us research types. Wall Street has one metric - the bottom line - and the entire house of cards is built on that. In new product development, at a minimum we evaluate around three metrics - faster, better, cheaper - its the mantra that modulates expectations -maybe you hit one maybe you hit all three - at least there is room for experimentation and different vectors to push. If wall street followed an R&D model it would look for and formalize other metrics besides financial performance. That would allow social entrepreneurs to go mainstream instead of being boutique; get on Wall street and seek capital. allow diversification of capital instead of all based on profit. I don't know what the right answer is but here are some ideas:
- following the micro-finance model - rate a company on how many people are served (not just amount)
- Tax credits (like R&D credits) for companies that serve the BOP - after all they serve those whom the government serves
- IPO for social businesses except - instead of financial returns give voting rights on how to run the company
- New job creation - e.g green job creation gets points
When I first started at HP, we used to say - focus on the value you create not the stock price. If you create value stock price will follow - Value for us was high quality products and a satisfied employee base and a welcoming community wherever we operated. Yes - its time to get back to basics - its takes more than money to be a good capitalist.
I am glad the auto-industry is not getting a bailout; but I am not glad the Wall Street isn't thinking about more change itself.

Friday, November 14, 2008

Microfinance for Beggars?

Yesterday at SCU's event "Transformative Changes Through Science and Technology: The Role for Social Benefit Entrepreneurs" honoring the 2008 Tech Laureates I heard something new. It has made me change my mind. (In the interest of full disclosure, I hereby state that not much changes my mind these days).
Here is the story: I am just back in the US after six weeks in India. A common sight in India is women and children at stop lights- begging. There used to be a time when I would give some change but I have stopped doing it now; doesn't giving them money encourage them? Not much has changed over the years except now they often carry tissue boxes, balloons, magazines, hats, toys etc. to sell. Where did they get the money to buy the stuff? Some tiny children offer entertainment in the from of headstands or juggling or something. "The goods must be stolen; they are just an excuse for begging - whatever" I think. I look away. I can do nothing about this. I feel rotten for a while till I get over it.
Yesterday, I heard Mohammed Yunus talk about Grameen's new program in Dhaka, Bangladesh - "loans to beggars". He thought - why not do something for the beggar? and that's how the program started. They find a beggar and ask one question - at what time in your life did you become a beggar? And then they gave him/her an idea - continue begging, but why not carry some small article to sell- give their "customer" a choice - so as to speak - buy or give charity. If the beggar agreed, they gave an interest free loan with no time set for repayment. Whenever they are read to repay, they can come back to repay. That he said was key. Enablement- a person who tries cannot fail. In fact, they said - take your time to repay. To keep their own costs low, Grameen provides no other service, just trusting the person to come back. Loan amount is $15 flat. So far there is $100K in the program and 11,000 people are not begging anymore. Most others are only part-time beggars and some are successful entrepreneurs.
So next time I am stopped at a light in New Delhi - I will roll down my car window. I may not be in a position to start a loan program but I can buy a box of tissues. Who knows? It might make a difference. Why had I never thought about this before? Why did I assume the goods were stolen? The kids wanted to trick me?
Why? Becuse I still have a lot to learn.