Defending self-interest in business and entrepreneurship

1,750 views

Published on

My slides from a speech today at the Sadhana Center for Mgmt and Leadership Development in Pune, a seminar titled learning from Leaders. The premise of the conference was to measure success in social responsibility terms. I posit that some of us can focus on social services directly but others need to focus on generating wealth that can then finance sustainable development.

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,750
On SlideShare
0
From Embeds
0
Number of Embeds
46
Actions
Shares
0
Downloads
22
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Defending self-interest in business and entrepreneurship

  1. 1. Defending self-interests in business Shyam Kamadolli Entrepreneur, Venture Capitalist and Private Equity Investor
  2. 2. Food for thought In theory: Socialism is the most efficient economic paradigm The state decides who produces what and to what extent The state makes optimal capital allocations Every resource available is dedicated to production Every production unit is expected to perform at a certain level in exchange for not having to compete Every producer survives And Capitalism is the least efficient Competitors fight over scarce resources: capital, talent Every market is open to new entrants: lucrative markets get more entrants Game theory and micro economic principles ensure that few survive Resources consumed by all those that did not survive were wasted So which paradigm would you bet on in 1900? Today? © 2010 Shyam Kamadolli. All opinions and views expressed here are my own and not those of my employers, investee companies or others 2 unless explicitly ascribed to them.
  3. 3. Pillars of Capitalism Investors Provide capital to the firm Seek financial returns commensurate with risks they take Entrepreneurs Provide intellectual and spiritual leadership to endeavours that create value Seek financial and emotional returns Professionals Provide services to the entrepreneurs Seek monetary compensation, learning and career advancement Consumers Provide a market for goods and services Seek the best product at lowest price Institutions Provide a security blanket: the law, governments, regulators, public opinion, the press together create an environment so the above can thrive Seek relevance, independence and respect None of these is selfless! Why? © 2010 Shyam Kamadolli. All opinions and views expressed here are my own and not those of my employers, investee companies or others 3 unless explicitly ascribed to them.
  4. 4. Thesis: self serving pursuit of happiness is a necessary condition for human development Every pillar of Capitalism maximises its own return, but in the process: Creates more wealth Creates more jobs Creates more talent Creates more innovative products Creates more civilized society A virtuous cycle is a rising tide that floats all boats Trickle down effects have translated broad GDP growth into improvements of quality of life for lower income groups as well (e.g. India of 1992-2010) Certain segments of society have been left behind – these are structural issues that need to be addressed – but they are not a counter argument © 2010 Shyam Kamadolli. All opinions and views expressed here are my own and not those of my employers, investee companies or others 4 unless explicitly ascribed to them.
  5. 5. Case study: Rural micro loans (1) Traditional option: loan sharks Product offered: unsecured or secured loans at over 50% interest Collateral offered: meagre personal effects, indentured labour Issues: usurious rates, risk Consequence: used only for dire situations despite easy availability, does not create wealth Benevolent option: charitable grant/loan Product offered: outright grant or low/no-interest loan Collateral offered: usually none Issues: demand far outstrips supply Consequence: does not scale, very limited availability © 2010 Shyam Kamadolli. All opinions and views expressed here are my own and not those of my employers, investee companies or others 5 unless explicitly ascribed to them.
  6. 6. Case study: Rural micro loans (2) Capitalistic option: micro finance Product offered: small unsecured loans for specific purposes, interest rates over 30% Collateral offered: assets if purchased with loan, group commitments Issues: some reports of misuse (structural) Consequences: – Excellent financial returns to investors have resulted in massive equity and debt investments in the sector – Widespread availability of micro-loans in Bangladesh, India, Africa, Latin America – Viable micro-businesses and wealth creation where ROCE is over 30% and can service debt including farming, dairy, horticulture, etc. – Lower default rates than traditional lending (<5%) – IPO of a micro finance lender in Mexico, more imminent in India Why is micro finance working? Entrepreneurs, equity investors, banks, micro-entrepreneurs are all chasing profits for themselves a lot more money is available to borrow than for charitable grants “Self-interest” in business can do good, as long as it does no evil “benevolent capitalism” © 2010 Shyam Kamadolli. All opinions and views expressed here are my own and not those of my employers, investee companies or others 6 unless explicitly ascribed to them.
  7. 7. Benevolent Capitalism Capitalism: Where every stakeholder maximises creation of economic and/or emotional value (e.g. wealth, fame) Operates fairly and within limits of morality and the spirit of the law Benevolence: Value creation directly or indirectly benefits lives beyond the principal stakeholders (e.g. job creation, employee welfare) The good news: most businesses are already practicing benevolent capitalism! The bad news: a few bad eggs are giving the rest a bad name. Enron, Satyam etc.: are weeds that do not justify maligning the grass. Weed them out and move on! © 2010 Shyam Kamadolli. All opinions and views expressed here are my own and not those of my employers, investee companies or others 7 unless explicitly ascribed to them.
  8. 8. What can YOU do? Today: practice benevolent capitalism in your daily lives Be the best at what you aim to do: work hard, take pride in your work Compete, fiercely, but fairly Seek to maximize your returns, so you survive to do more on a later date Share your experience, touch as many lives as you can Tomorrow: achieve and then give back Amass wealth: economic, spiritual, fame Invest in future entrepreneurs – keep the cycle going Give to the needy who cannot join the system: “teach a man to fish” Warren Buffet and Bill Gates ARE making a difference. $40 Billion! But first they built great businesses that enriched them and millions of shareholders and employees who are all making an impact © 2010 Shyam Kamadolli. All opinions and views expressed here are my own and not those of my employers, investee companies or others 8 unless explicitly ascribed to them.

×