four hands for a purpose

Encouraged by its market share of my personal collection, I thought i'd write about Austin-based Four Hands, a great business grounded by a higher purpose. Inspired by their travels in India and Pakistan, Brett Hatton and his wife founded the stylistic furniture concern in 1996 with the notion of importing eastern designs to the west while maintaining each piece's unique history by touching each one with their "four hands". They either manufacture, finish, or hand pick all of the furniture that they sell. They visit with specific artisans that craft the items all over the world, built manufacturing sites in India and elsewhere, and have paid great attention to supporting the communities that they affect in a positive way.

By any definition, Four Hands has been a commercial success. I estimate their sales are approaching $100M given what i've read (although its hard to say since they are private) and they seem to have a deployed a sound strategy of distribution deals and acquisitions to fuel their growth. Just over the past several months, they announced two acquisitions (a lighting designer and a specialty distributor of Hondurian artisan crafted items) and a partnership with an eco-friendly furntiture designer. They started by selling pieces to the likes of Neiman and Crate & Barrell, but hit the trade shows in a very big way to diversify its customer base and add to its chicqeness. Whats more amazing is that for such a highly complex, capital-intensive business, it does not appear they've incurred any debt or equity offerings. I'm sure it will be difficult to keep their uniqueness while continuing to expand so rapidly.

What's more compelling is that English-born Hatton has taken it upon himself to better the areas, particularly India, where most of Four Hands' pieces originate. In addition to the international charities the company supports such as UNICEF, Hatton has co-founded Miracle Foundation, a non-profit that builds and supports children orphanages, and Learn to Live, which educates young women in India. They also try to cut out middlemen importers by going straight to artisans and the source of their products (although not sure how scalable this is as they continue to grow). Four Hands also been listed in Business Week's listings of top companies that promote job growth in inner city communities (South Austin). I think this attention to a somewhat loftier goal has propelled the company through its profitable first 15 years. Close attention to the details, including the environment in which you operate, I feel is a recipe for great success in business.

I like to see good companies with innovative offerings, solid business strategy, and a 'good heart' enjoy growth and success. Its sort of the win win that helps fill unmet consumer demand while enhancing society overall. So I raise my (two) hands in approval for the company that has taken prominence in my living room.

microfinance in macro economies

Microfinance works. But can it in the US?

First off, I've always felt business-based principles are the best way to solve the world's problems in the long-term, and certainly microfinance has done its part. Bangladeshi economist Muhummad Yunnis revolutioned how we alleviate poverty by bringing microfinance to the masses in 2006 with the launch of the Grameen Bank (and he won the Nobel Peace Prize too). He created a system that provided loans to the poorest of the poor who had no access to capital, built sustainable small businesses around the world, facilitated oppressed women to gain financial freedom, and allowed financial instititutions to at least break even if not turn a profit. The net impact has been a self-sustaining model that has lifted millions of people out of poverty through a free enterprise, non-entitlement based system. People pay interest, face default penalties, but more incredibly, actually pay their loans off at a higher rate than traditional borrowers.

Despite the negative things you hear (ie. last week's news that the Indian state Andhra Pradesh's government placed a moratorium on repayments), by and large it has worked. The biggest drawback has been its reach. In emerging countries like India or Brazil which are capitalistic-centric, politically stable, and possess a self-contained economy, it has worked quite well. India itself is on pace to see $4B this year in microloans. That is alot when you consider most loans are less than $200. Culturally, the concepts of loan repayments are not novel and small businesses are the norm not an exception. In other places, it has been harder and less effective. Particularly in Europe and the US where the economics have just not worked out on a large scale.

I was happy to see last week one of my favorite microfinance efforts Kiva, announce two new microfinance initiatives in the US. For those that dont know Kiva, it is the ebay of microfinance (founded by former paypal execs): it allows anyone to make a loan around the world via an easy online transaction, track an entrepreneur's progress, and offers more visibility than has ever been offered through its rating system and grass roots due diligence. Transparancy and ease, my two favorite pillars.

But can microfinance work in the US? Kiva and Accion are offering microloans to fisherman and others affected by the BP spill. Is big business too prevalant for it to work on a large scale? How is a small loan going to really help someone in the long-term (versus a simple charitable donation) ? Does the math of a $200 loan just not work in high cost of living jurisdictions? Do we need specialty microfinance institutions from abroad who have the expertise to make it work at home ? I'm not sure what the answer is - but surely if it can work in poor areas of Asia that we have enough creativity to make it work in poor areas of the US. With the US economy facing a prolonged downturn, perhaps what we need most is for small, innovative businesses to grow and thrive when government and corporations cannot fill the gaps.