Leaders In London

This is a provocative post just to get you thinking differently on a Tuesday morning…

There’s a new economics of capitalism. It’s been emerging for a while, but the clearing away of the weird world of financial derivatives that looked like the new capitalism - but has turned out not to be - has cleared the air.

Investment banks are almost no more (their financial model, it seems, doesn’t work…yet was seen as the engine of capitalism until a year or so ago).

So, let’s do what leaders are supposed to do, and look away from the slow motion car crash that is transfixing us all, and look to the edges to see what’s emerging.

And here it is. Here’s the one surprising thing that is moving to the heart of economic thinking. Here’s what Kofi Annan, who spoke at Leaders in London last year, calls “the single highest returning social investment in the world today”.

It’s what drives the success of GrameenBank and the other pioneers of the multi-billion dollar microlending form of new banking that is thriving while largescale investment banking is disappearing as a business model. Muhammad Yunus, founder of GrameenBank, who was granted the Nobel Prize for making it work, is coming to Leaders in London to help us define the new economics.

‘ It’ could be the mythical lever big enough to move the world (”Give me a lever big enough and…”) out of poverty. And, as economists have noted resoundingly recently, move Africa in particular out of poverty to become self-sustaining and capitalism has a Continent-sized new engine.

Tom Peters, another of our past Leaders in London speakers, has for long plugged away on a variant of this insight, pointing out that the second biggest economy in the world by size of purchasing power after the US isn’t China, it’s….women. (See what he did there? ‘Reframing’, our NLP-er friends call it: leaders see differently; that’s where insight comes from).
The actual lever, that is most likely to have the most positive effect on the world economy, according to Annan and economists who back him up on this, is educating women.

The Financial Times says today that women’s education has moved from ’sandal-wearing’ fringe issue to the heart of economic thinking.

GrameenBank only lends to women, because they pay back, whereas their husbands don’t. Female education is the variable most highly correlated with improvements in social factors. Women typically spend their income on food and healthcare for their children, leading to an upward spiral of health and wealth.

Move on to the wider issue of women as consumers and Tom Peters has an eye-opening set of slides he goes through that shows that in the US, women are the decision-makers on buying almost everything, including ride-on mowers, the ultimate in boys’ toys.

In what way is this mainstream or linked to your leadership agenda? Well, it takes an investment bank to notice it first, oddly. In March, Goldman Sachs said it would invest $100m in 10,000 women from developing countries to improve their access to entrepreneurial education. They can see a return on investment by thinking differently. Can you? (PS Interesting to see if they are still making that investment or if they have changed their minds as $100 m suddenly became real money that they might not have available…)

There’s more here:
FT on the impact of developing developing women on world economics

And here’s Tom Peters $5 booklet ‘Women Roar’, which starts off with this rant from Tom: “The evidence is clear!
(1) WOMEN ARE BETTER LEADERS THAN MEN (under the conditions of the New Economy).
(2) WOMEN ARE THE WORLD’S BIGGEST MARKET OPPORTUNITY (BY FAR) … and are wildly underserved. The stakes amount to TRILLIONS of dollars. Our story: WOMEN ROAR. WOMEN RULE. Believe it!”

OK, as Lehman crashes and other big banks look shaky, and the FT banner says ‘Wall Street Bank’s Black Monday’, I just have to pull up this post from July to remind us all how to be a good banking leader:

“If you don’t fully understand an instrument, don’t buy it.

If you would not buy a specific product for yourself, don’t try to sell it.

If you do not know your customers very well, don’t lend them any money.

If you do these three things, you will be a better banker, my son.”

- Emilio Botin, 73-year-old Chairman of Spanish bank Santander, which has emerged unscathed from the credit crisis and was named ‘World’s Best Bank’ at this year’s Euromoney Awards.

PS So Lehman Bros, which has a customer base concentrated in the richest country in the world, can’t handle its debts and goes belly up, while GrameenBank, whose customers are among the poorest in the world, is a multi-billion dollar profit-making success story. When Muhammad Yunus tried to get traditional bankers to lend to the poor they laughed at him and said they’d go bankrupt as the poor never pay back what they borrow. Turns out Grameen’s micro-customers (Yunus leant them the money himself to start with, to prove his idea worked), who live on less than $2 a day, are less likely to default on their bank repayments than European and American middle class borrowers. His new model of banking pulls them out of poverty AND makes a profit. Compare that with the mess Western banking’s old model has got itself into and it’s really time we challenged our assumptions, isn’t it?

The Nobel prize winner is coming to Leaders in London in a couple of months to help us do just that.

We hear so many tails of failed bankers, in their dual role as perpetrators and victims of the credit crunch (’the biter bit’ we used to say in journalism) - apart from Banco Santander, just voted best bank in the world by Euromoney and largely untouched by the crunch: kudos to them - that we should pause and remind ourselves of the banker who had Tom Peters dancing around the room at 6 in the morning.

Tom, a past speaker at Leaders in London, of course, said this on his blog when Muhammad Yunus and his GrameenBank won the Nobel Prize:

“I danced around the kitchen! Though alone at 6 a.m., I pumped my arms skyward again and again! ‘Yes! Yes! Yes!’…

“I stumbled across Yunus & Grameen about 5 years ago. I went bananas! The story, of course, is amazing. Moreover, it dovetails with all of my Primary Biases…

I poured over Yunus’ book, Banker to the Poor; and also became immersed in David Bornstein’s The Price of a Dream: The Story of the Grameen Bank (University of Chicago Press). As usual, I put together a wee slide show, which we include here (NB Goes to the post on Tom Peters’ site, where you can download the Powerpoint) as it was in 2001 (with slight 2006 additions).

Glory Hallelujah!!

Yes!
Yes!
Yes!”

Phew! you can see how he energises a room, can’t you. I look forward to seeing him back at Leaders in London some time in the future. In the meantime, Muhammad Yunus himself will be with us at Leaders in London 2008. You can find out more and download the brochure on the link below.

Posted on behalf of
Leaders in London
by
Phil Dourado