Thursday, October 26, 2006

Social Entrepreneur -a wacky idea turns into a Nobel Prize

Recently, as many of you might know, the Nobel Peace Prize was awarded to Mohammad Younus, from Bangladesh.

Mr. Younus, whose nickname was "banker to the poor", was the founder of Grameen bank, which started experimenting with a system of lending very small amounts of money to the poor, particularly women, in rural villages in Bangladesh. In doing so, Mr. Younas pioneered a system of "micro-credit" which has been implemented in many countries and is credited for lifting many millions out of poverty across many continents.

I was excited to hear about the granting of the prize to Mr. Younus for several reasons, not the least of which is that I'm from that part of the world (I was born in Pakistan around the time that Mr. Younus was starting his business).

I think entrepreneurs and aspiring entrepreneurs here in the US and around the world should be interested not just in his Nobel Prize but in his story - how he did what he did and what obstacles he faced.

In short, I think that it provides another story of how a "crazy" idea can grow to have unintended, positive consequences - not just financial, but also social and environmental. When Mr. Younas first started making his loans, which included amounts as little as one dollar, everyone told him he was crazy and that business model couldn't work. After all, bankers are taught to think in terms of large loans, hundreds of thousands of dollars for mortgages, and many millions of dollars for other loans.

He finally got so tired of the criticism that he decided to ignore the "traditional wisdom" and started making these loans without requiring any collateral. This was a key part of his model and exactly what most banks won't do.

Many of the women he loaned money to were referred to as "telephone women" because they would use it to buy a phone, which in many cases was the only phone in the village. The women would then offer phone services to the rest of the people in the village, starting their own "micro-businesses" which eventually grew.

This illustrates one important point - that entrepreneurship can be a force for social change - these entrepreneurs improved life for themselves and for their fellow villagers. The telephone calls established contact with the wide world beyond since calls would eventually start coming in from aroundt he world.

It also illustrates a second, equally important point: when people (experts, bankers, venture capitalists) tell you you're crazy and that your business idea / business model can't work, they may not know what they're talking about because your business model may be entrirely new.

This is doubly true when they tell you that "your market is too small" - in my opinion, this is the 'clue' which reveals that you may be on to something - i.e. you may have found a nice which others aren't able/willing to fulfill - one of the keys for successfully starting a bootstrapped business.

Remember that most investors (VC's, bankers, etc.) don't really do much innovative thinking themselves - they rely on so-called experts who may have no idea that there is an untapped potential in your target market, partly because it's "too small to pay attention to".

But, Mr. Younus, rather than relying on the experts, looked at what he was seeing in front of him: women who wanted to borrow money, had no collateral, and traditional banks wouldn't help them. I like to think of this as a 'clue' that's staring you in the face - and who are you going to believe - what the "experts" tell you, or your "lying eyes"??

I'll write more about "clues" that you see in front of you and how they can help you to start a business in later posts. You can also check out my book, Zen Entrepreneurship ( , which talks a little about this process, which involves the co-inciding of serendipity with your own preparation and desire to start a business.

Having been involved in high tech software startups and venture capital for so long, his story was an eye opener for me about the value of Entrepreneurship not just for the individual but for society as a whole, even when it's done on a very small scale that won't interest traditional investors. Last year I attended the MIT Global Startup Workshop in Abu Dhabi.

What surprised me wasn't that there were business school students there looking to start competitions which mimicked some of what we'd been doing in the MIT 50K (now 100K) business plan competition; what surprised me was that these efforts were being encouraged by the governments in places as far away as the Phillipines, United Arab Emirates, and Ivory Coast. What I had taken for granted (i.e. starting and growing companies) was something they wanted to institutionalize in order to jump-start their economies. It was one of those "aha" moments for me, since Entrepreneurship had always been a very personal journey for me. I'll be writing more about Entrepreneurship as a force for social change, and also how successful I think governments can be in "institutionalizing innovation" in later posts.

In the meantime, whenever someone tells you your market is "too small" or the "financial model" for your business idea will never work - remember Mr. Younus and his Nobel Peace Prize!


Anonymous Theo Tonca said...

Great post! Truly inspirational, it just goes to show that anybody, anywhere in the world, can do anything.

1:52 AM  

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