I don’t want to sound like Scrooge, but I can’t help myself after reading the cover story of last Sunday’s (Dec. 17, 2006) New York Times Sunday Magazine. “On Giving,” written by Australian philosopher Peter Singer (Princeton University), who suggests that world poverty could be elimninated if only Americans donated more of their money to the cause.

I mention the article here because the theme of You Can Hear Me Now is that private enterprise that sparks grassroots entrepreneurship is a better long-term solution to poverty eradication than foreign aid or charity, which inevitably end up in the hands of a narrow elite and enrich those who are powerful enough to grab the spoils.

Singer begins with this “textbook” dilemma: If you, a rich American, saw a poor Bangladeshi child drowning in a pond, do you have a moral imperative to soil your shoes and save the child? The answer, in case you are struggling, is YES! The author moves from this slam dunk to the problem of world poverty, which he claims is largely the fault of developed nations, and thus seeing that and knowing that, do we not have the same moral imperative to come to the aid of the poor as we do to the aid of the drowning child? Again, the answer is YES!

Now comes the fun — collecting the money from rich Americans. Starting at the top of the totem pole and moving down, the author looks at income groups in the 90th percentile and above, and decides how much of their money they should donate. For the top .01%, 33% of their income; for the top .1%, a mere 25%; and so on down to the top 10%, who average $132,000 per year. They are “required’ to donate the “traditional tithe,” or 10%.

Now come the questions that the editors apparently forgot to ask, or the author refused to answer:

• To whom should this money be given?
• How would it be used?
• What’s happened to the billions in foreign aid and charity given over the past 50 years?
• What if someone in the top 10%, who makes $95,000 a year, has a mortgage, two children in college and two cars, which is not an unreasonable assumption? Should he or she take $9,500 off the top and send to — oh, there is no address.
• What if all the money — which Singer figures would total $404 billion from the top 10% of American families — lifted everyone out of poverty for a year, but then the same people sank back into poverty the following year?
• Worse, what if the $404 billion were misappropriated, human nature being something even philosophers cannot control or change, and corrupt governments becoming even more heinous and hateful to their people, and the poverty rate actually increased?

I am sounding like Scrooge, aren’t I? I guess I just need more data. Data, say, that shows that adding 10 phones per 100 people adds .6% to the national GDP (from the London Business School). Stuff like that. I don’t think philanthropy or charity are necessarily misguided, any more than I think that free enterprise or markets are the solution to poverty. But I am appalled that a cover story in a widely read Sunday news magazine could be so illogical and unpersuasive.

From issue #39 of Ode magazine, which has done a great job of reporting on the Grameen empire over the years, a cover story on Muhammad Yunus, with some insight into what makes the Nobel laureate tick: 

In his phenomenal book The Tipping Point, journalist Malcolm Gladwell discusses how “social epidemics” come into being, whether the trend involves the miraculous comeback of outmoded shoes or a seemingly inexplicable increase in suicides among young adults in Micronesia. Gladwell distinguishes among three types of people, all of whom play a crucial role in helping bring an idea into the world: connectors (who have the right contacts), mavens (knowledgeable people with a strong need to help others make an informed choice) and salespeople (who influence people to buy certain things or behave a certain way).

Muhammad Yunus embodies at least two of these types, according to Iqbal Quadir, who took the initiative to establish a nationwide cellphone company in Bangladesh with the help of Grameen Bank, what later became known as GrameenPhone (see Ode, April 2005).

“Yunus is a super connector. He knows exactly what to say when he is with people like Bill Clinton, who helped Yunus be known around the world, or when he is talking to poor people in the villages in Bangladesh. He can connect with people easily.” And Yunus is a salesperson par excellence in a positive sense, says Quadir: “He can convince people easily.”

But there’s an even more important factor at play, according to Quadir, founder and director of the MIT Program in Developmental Entrepreneurship. Yunus is “a very practical man,” he says. In other words: Yunus gets things done.

The simmering dispute between the two shareholders of GrameenPhone, Norway’s Telenor (62%) and Bangladesh’s Grameen Telecom (38%), is about more than business and money–it’s about national identity.

From the bangla_ict Yahoo Group today, a pointed comment from Sayeed Rahman about Telenor replacing the red-and-green GrameenPhone logo with Telenor’s corporate logo about a month ago:

GrameenPhone is extremely successful in doing business in Bangladesh, with the previous Red and Green logo. The previous logo was consistent with Bangladeshi Flag. So now the necessity of changing logo is yet to be justified. People of Bangladesh used to love the logo, the brand name. In Bangladesh, GrameenPhone is not just a mobile company, its more than that. It’s a story of connecting the rural people with the world, revolutionizing the communication in a country like Bangladesh, contributing to the society in various helpful ways.

Meanwhile, Norway’s Aftenposten reported the day before the Nobel award that the dispute over majority control was not a clear-cut case, and was causing “embarrassment” for Norway’s politicians (Telenor Conflict Puts a Damper on Peace Prize Ceremony):

One of the co-founders of GrameenPhone supported Telenor, telling newspaper Dagens Næringsliv over the weekend that the firm’s shareholder agreement was “vague.” He also said that Grameen Bank failed to buy additional shares in GrameenPhone when offered them and didn’t protest when Telenor bought them up and raised its initial stake of 51 percent to the 62 percent it holds today.

Several Norwegian politicians have called the conflict “embarrassing” and the secretary of the Norwegian Nobel Committee tried to keep it off of the agenda at a press conference on Saturday.

I realize this is inside baseball, but it is highly unusual to have a Nobel award ceremony devolve into mulitnational boardroom politics. And I must say that when researching my book, the issue of Telenor’s “intention” to reduce its shareholding to 35% was a very loose thread, which now appears will shortly be snipped off or tied up.

An excerpt from Muhammad Yunus’s Nobel Peace Prize acceptance speech, in which he publically prods majority owner Telenor to cede majority control to Grameen:

“Grameen Phone is a joint-venture company owned by Telenor of Norway and Grameen Telecom of Bangladesh. Telenor owns 62 per cent share of the company, Grameen Telecom owns 38 per cent. Our vision was to ultimately convert this company into a social business by giving majority ownership to the poor women of Grameen Bank. We are working towards that goal Someday Grameen Phone will become another example of a big enterprise owned by the poor.”

I wonder how this went over in Norway, where Telenor is the largest telecom company?

Based on my discussions with principals of GrameenPhone and Grameen Telecom, I don’t see this happening. But I do see a possibility that GrameenPhone, or some portion of it, will be listed on the Dhaka Stock Exchange, which would add 30% to the overall market cap and open up ownership opportunities for the people of Bangladesh, although not necessarily the Grameen borrowers. When? Who knows?

Muhammad Yunus, en route to Oslo to collect the Nobel Peace Prize for his pioneering work with microcredit in Bangladesh, has let it be known that he has a side agenda in Norway: challenging Norway’s Telenor to cede majority control of GrameenPhone.

GrameenPhone is a partnership between Telenor and Grameen Telecom, an affiliate of Grameen Bank, but Telenor holds 62% of what is the largest phone company in Bangladesh. Yunus insists that Telenor made a legally binding agreement in 1996 to give up majority control within six years. Yunus would like to turn GrameenPhone into a “social business” that reinvests profits in the company and its customers. Telenor, for its part, says that it has reinvested most of the more than $1 billion in profits and has yet to recoup its initial $87 million investment.

Yunus told Fortune in Dhaka ahead of his departure: “There’s tension between us and Telenor. There’s a philosophical difference. They’re oriented toward profit maximization. We’re oriented toward social objectives.”

Says Telenor CEO Fedrik Baksaas: “Different opinions are part of daily business life. We have never committed to reducing our share in the company.”

Two stories outline the core arguments on either side.

Nobel Peace Prize Winner Itching for a Fight (Fortune.com) presents Yunus’s case on behalf of Grameen–essentially that Telenor is depriving the poor of Bangladesh of their rightul spoils.

Telenor Says No Quarrel with Nobel Peace Laureate (Reuters) presents Telenor’s response–in essence, that it is willing to talk, but that GrameenPhone is a business that has done more to aid development than all development programs combined.

It’s going to be dark in Oslo on Sunday. It also could get a little hot.

One of the key themes of You Can Hear Me Now is that private investment is a better route to poverty eradication than World Bank loans and programs. A new report from the World Bank reaches that same conclusion, as reported in today’s Washington Post.com. Private investment that sparks indigenous entrepreneurship which in turn leads to creation of millions of rural income opportunities is by and large a better way to drive GDP growth than loans to govenments that don’t effectively deploy the funds or distribute the money.

The Bank’s Independent Evaluation Group looked at 25 countries into which the World Bank had poured nearly $10 billion between 2001 and 2005.

“Achievement of sustained increases in per capita income, essential for poverty reduction, continues to elude a considerable number of countries,” the report declared, singling out as particularly ineffective programs aimed at the rural poor. Roughly half of such efforts from 2001 to 2005 “did not lead to satisfactory results.”

Overall, since 1990, the incidence of people living on less than $1 a day has dropped from 28% of the world’s population to 19%. But most of that drop has occured in China, which has experienced the fastest rate of economic growth in human history–and taken virtually no World Bank money. Do you see a pattern here?

What if that $10 billion had been privately invested in local businesses that were productively using the money? Peter Goodman, who wrote the article, concludes:

“Some of the report reads like an amalgam of the sorts of criticisms that have been leveled against the World Bank for years by activists who accuse it of an ideological bias toward market reforms and a callous disregard for the people bearing the brunt of such policies. The report chides the bank for failing to help cushion poor people against price and currency liberalizations; for focusing on the fiscal sustainability of pension systems to the deriment of the poor; for promoting the privatization of power industries without thinking enough about wiring up the indigent.”

The World Bank calls the report “overly bleak.”

I just returned from the Emerging Markets Private Equity conference in London, where VC and private equity fund managers and investors from around the world gathered. Lots of talk about returns in emerging markets, which are outpacing those in the U.S.–by a long shot. The other big news, at least for people investing in Africa, was the recent announcement of a $5 million prize for “good governance” instituted by Mo Ibrahim, the founder of Celtel. The Mo Ibrahim Prize for Achievement in African Leadership is touted as the largest monetary prize in the world.

Celtel is the sub-Saharan African cellphone company that was bought by Kuwait’s MTC in May 2005 for $3.4 billion. That made good money for the investors, some getting spectacular multiples in return–and within Celtel created nearly 100 milionaires, many of them African. Dr. Mo, as Ibrahim is fondly known (or “just Mo” as he prefers to be known), is using some of his proceeds to encourage good governance in Africa.

The prize will go to elected leaders who eschew corruption, according to the Ibrahim Index, as designed by Prof. Robert Rothberg at Harvard’s Kennedy School of Government. The winner, upon leaving office, will receive $500,000 a year for 10 years, and $200,000 a year thereafter as long as he or she lives. The Ibrahim Foundation calculates that the prize will more likely be worth in the range of $8 million, assuming leaders live 20 years after leaving office.