Audio & Video: Google Zeitgeist

Chrystia Freeland: We are joined by Jessica Jackley of Kiva and Ken Banks of Kiwanja and Minouche Shafik, our government representative. I’m going to start with Jessica and with Ken, and then we’ll hear from Minouche. And I hope that Howard will jump into the conversation also because, as he mentioned, he personally and Starbucks as a company is really engaged in these issues. So, Jessica, maybe you could tell us a little bit the story of what Kiva does and also interestingly the way that you have extended what you do in the NGO space into the for-profit space using the way you learned how to raise money for NGOs, to raise money for small businesses.

Jessica Jackley: Sure. So for those who have not been to the Web site Kiva.org, it is a peer-to-peer microlending platform. Kiva let’s anybody who has an Internet connection and a credit card or a Paypal account go online, browse profiles of entrepreneurs all over the world that need a small loan, usually just a few hundred dollars, and then lend $25 or more to that entrepreneurs. And then over time you get updates on how that entrepreneur is doing and you get paid back. Kiva began, gosh, just over 4 years ago, 4 1/2 years ago and today facilitates a little over a million dollars a week on average, sometimes much higher, from lenders to entrepreneurs and back in 196 countries. So it is growing very rapidly. It was born out of a desire to tell a new story about the poor. So I was thinking about this. I grew up — I grew up in Pittsburgh, Pennsylvania. And most of the stories of poverty that I heard in my life were ones focus on sadness and suffering. And most of the ways that I was invited to engage were ways that made me feel really bad or guilty or shameful. I don’t know if the Sally Struthers infomercials were popular here. But for less than a cup of coffee — no offense — you could do so much more, right, with that money? No, no, no. I actually remember thinking, like, okay, but I really like my coffee. Can I do both? Should I just give, like, a little bit more than my cup of coffee? So I remember growing up thinking about — and only having these emotional reactions of guilt and shame interacting with the poor. For me, I think that’s a really screwed up false dichotomy that is perpetuated by a lot of organizations that ironically actually seek to alleviate poverty. You get into this sort of donor/beneficiary mentality and it’s not healthy. I can talk about that more if that’s interesting. I stepped away from Kiva several months ago to do a new startup. It is very similar in nature.

Chrystia Freeland: Except it is going to make money for you?

Jessica Jackley: We’ll see. I think it is a tax code, not a religion. Kiva is a 501(c)(3). But, desirably, it’s been more profitable as a non-profit than it would have been as a for-profit. I don’t have the money in my pockets. That’s fine. But we were able to do what we needed to do by being that tax structure. So, yes, Profounder is the new startup and it is a crowd-funding platform that just launched last week privately for U.S. entrepreneurs to raise money, investment capital from their friends and family. So it turns out that the vast majority of small businesses in the U.S. actually raise their funding, find their funding, whether it is the beginning to launch or later on to grow, from their friends and family. But there is no really easy way to do this in terms of an investment. There are loan opportunities, and obviously I am a fan of that. There are a lot of donation platforms. But there is no way to raise investment capital online from your community. So we figured out ways to do this.

Chrystia Freeland: This will be a way around the credit crunch and the lack of lending by U.S. banks?

Jessica Jackley: I hope so. That’s the goal. That’s the goal. Yeah, lots — I mean, I can talk a lot. And I am well caffeinated so I’m thankful for the whole coffee thread in this story of mine. We are really looking forward to having a public launch where anybody raising up to $1 million can do that through our platform from an unlimited number of friends and family investors and supporters.

Chrystia Freeland: I would like to bring Ken into the conversation, and Kiwanja. Kiwanja, I should call it a company.

Ken Banks: Organization is probably sufficient.

Chrystia Freeland: And brings together anthropology, conservation and development. This is a exciting way, particularly in Africa, to use social media. Tell us about it.

Ken Banks: Sure. First of all, it is great to be here. Some fantastic names as I recognize most of them, unlike most of you don’t recognize mine probably.

Chrystia Freeland: We recognize you, too.

Ken Banks: Maybe you do a little bit. I think for me I’ve got a number of passions in the world. And when I was younger, picking one to pursue as a career was almost impossible. So I decided the best thing to do was create the job that didn’t exist. So my background is I.T., 25, 26 years in I.T. I have been doing work projects in many African countries for about 17, 18 years. My degree is social anthropology. I stumbled into mobile. And they all kind of mixed together really quite while. I think if we think about technology, there is often a tendency to think about it from a technological standpoint. I think, in the west, we’re all very excited about iPhones and GPS and all the amazing things that mobile technology can do. But there is actually a divide in the world, and there is actually a very different world out there for people who don’t have the luxuries of that, not just in terms of not having access to technology but also not having the income to be able to browse the Web freely and to tweet and to go on Facebook and so on. I was very lucky to get into mobile at the beginning of 2003, and things were just really starting to happen then. It was very early days, and people were thinking that there might be something in the development community that actually might be useful in terms of promoting better conditions for people in a developing world. The anthropology is really interesting because it actually brings the focus back to people. We do tend to get very excited by the iPhone 4G and all the others, the iPads and all this type of thing. But actually, at the end of the day, people do use the technologies that we’re building. Sometimes I think we forget that. A user in developing country on $2 a day will have very different needs out of a mobile phone than we will. There are a couple of pictures actually which, if this works, if I click this — I think if we look at how mobile phone companies even market to these people, this is a picture taken in Uganda about three years ago when I was working on the Google project, actually an early Google project. It is an advert for a torch primarily, but it happens to be a mobile phone. And people that are buying these devices have big problems at home with power. They can’t see around their houses. They can’t find things at night. So selling this device with a big emphasis of it being a torch is actually a very interesting way of thinking about how you market to people in these kinds of areas. And the anthropology helps you understand how these things are needed and how you go about thinking about how mobile technology actually should be and can be developed to be slightly more relevant to different markets.

Chrystia Freeland: And tell us about Kiwanja.

Ken Banks: kiwanja.net is really just another name for me. It is just an address. Kenbanks.com had gone in 2003. Kennybanks.com is an evangelical Christian singer, so I couldn’t take that one. So I picked a name that sounded non-technical. I was very keen not to register tech365.com. Hopefully nobody in the room has actually got that URL. And just have something that was tech neutral. So kiwanja.net is just another name for me, but we do have a U.S. foundation called the Kiwanja Foundation which is a 501(C)(3). All the money that we raise is U.S. based. We were chatting earlier about it is so hard to find money in the U.K. for the kind of things we do. U.S. investors or U.S. foundations seem —

Chrystia Freeland: Or even U.S. companies.

Ken Banks: Right. So we have some very good donors in the U.S. And, luckily, the dollar rate is going in our favor when we bring the money back, which I think is important. The organization is, basically, trying to focus on how we take mobile technology and make it more useful. Mostly it is in non-profits in developing countries who are doing the work that we try to do often directly in error, I think. I think we need to think more about how we empower the people on the ground already rather than all jumping on a plane and trying to fix the problems ourselves because we usually don’t have a clue how to do that.

Chrystia Freeland: Okay. That is a perfect segue into what Minouche wanted to at least begin her comments on. Minouche is the Permanent Secretary of the Department for International Development. I was going to ask her, these are great ideas. These are great projects. How do you get scale, though? If the problems are really, really big, how do you make a difference?

Minouche Shafik: Maybe I will start by saying what I do. I manage a U.K. government department which manages the U.K.’s eight overseas offices of entrepreneurship, you may think. But I hope I can persuade you that that is not the case. There is a huge role for government support in making a lot of these kinds of things possible. All of you know the revolution about telecommunications in Africa and Asia. There are more mobile phones in India today than there are toilets. In Africa, mobile telephony has completely revolutionized communications across the continent. None of that would have been possible if those governments hadn’t changed their regulatory environments to make it possible for mobile phone operators to operate. So a huge role in a previous life when I was at the World Bank, we advised maybe 100 countries around the world how to liberalize their telecom market and make it possible —

Chrystia Freeland: The first job of government is don’t get —

Minouche Shafik: Create the right environment. Make sure you regulate in a way that makes these kind of innovations in technology possible. Second, to invest early in some of these innovative ideas before they are scalable. So the department I run has invested in a huge number of these mobile technologies to enable poor people to get access to them. So just as an example in Kenya, we fund a program called M-Pesa which has provided mobile telephony to 8 million people. Now, the next generation issue is using these in new and interesting ways to reduce poverty. A little bit what you were talking about with Kiva. So branchless banking, suddenly we can think about banking and financial services in a whole new way without having to create bank branches. And in many countries, mobile telephony has absolutely reduced the cost of banking for millions and millions of people. If you are a poor woman without a bank account and running a market stall in Africa, if you can do all your banking by your mobile, it is phenomenal in terms of the impact on your costs, your marketing capacity. If you are a rural farmer in Ghana, there are now systems whereby they can — rather than take their crops to market when the price is low, they can call. They can find out when the price is right, where the most profitable deal is and take their crops there instead. Maybe I will just say one more thing. It has now come full circle. So in many countries in the world, governments — and we’re funding a lot of them — are actually using branchless banking and mobile phones to deliver welfare payments to the very poorest people in their population. In countries like Brazil, India, South Africa, governments are now delivering to 170 million poor people around the world very small cash payments for widows, orphans, people with H.I.V. who are receiving small benefits from government using mobile telephony. So it has come full circle, whereby now governments, by creating the right regulatory environment, are actually using those new innovative, private-sector, mobile branchless services to deliver social welfare payments and deliver government services dramatically more cheaply than ever more.

Chrystia Freeland: Minouche, I was in Tanzania last week. And this sort of critique that we are starting to hear from Africans about the whole notion of aid, a lot of people were very excited about and said, You know what? That’s absolutely right. And this idea that aid has actually been really bad for us has made us dependent. And the main beneficiaries of it this sort of western aristocracy of aid workers who live in houses with swimming pools and seem to have a great exotic life. How much sympathy do you have with that idea? And if you do, how should it be shaping all of these projects?

Minouche Shafik: I think there is some truth to that because some kinds of aid are very badly managed. And it is aid that’s tied to buying the goods of the country that sent it, for example. So I will give you my aid but you have to spend it on my consultants and my products. Not good aid.

Chrystia Freeland: What Archbishop Tutu had to say about western cows this morning.

Minouche Shafik: For example. But, on the other hand, there are some kinds of aid — I like to think the kind of aid that we give which is actually consistent with rather than imposing the donor’s priorities and the donor’s assistance and the donor’s products is about working with countries to support them on their priorities using their systems and spending it on the things they want. I also have to say that I think there’s no escaping the fact that there’s some things that governments have to do, harking back to the health care discussion earlier. You know, my department paid for 5 million kids to go to school last year, and we did that at a cost of about 60 pounds or about $100 per child. We are talking very large scale. Things like that, you know, it is great if the private sector wants to have charities that promote school structure. But in the end, there is some core functions that governments have to do; and good donors have to work with governments to provide financing to do those things.

Chrystia Freeland: So, Howard, your perspective on that?

Howard Schultz: I think one thing that’s going to happen as a result of what’s going on throughout the world in terms of the debt that these governments are under is that corporations are going to be asked to do more. And I think the expectations of society is going to be that business is going to have to contribute more. So there is, I think, a seismic shift about to occur as a result of the social issues that governments are going to face that they are not going to be able to fund. So I think companies that have this already built into the DNA, into their fabric, will have an advantage. And those companies who I think turn away and either don’t do it or not authentic about it, the consumer and their people will recognize this is not a company that’s consistent with the values that I want to live by. But I think it is going to get more expensive for business as a result of the needs that society has that government is not going to be able to fulfill.

Chrystia Freeland: When you say “it,” you mean just operating will be more expensive for business?

Howard Schultz: Yes, yes, yes.

Chrystia Freeland: How is business going to be making the decision about helping people at home and helping people around the world, especially, you know, at a time, when, you know, say you said double-digit U.S. unemployment as far as I can see.

Howard Schultz: Well, I think that’s a very difficult question to specifically answer. I think the companies of tomorrow will find a way to successfully balance profitability and benevolence and having a social conscious. If a company is doing work or getting resources abroad or from developing countries, they have an inherent responsibility to make sure that they’re not just taking from those countries. Starbucks buys coffee from 28 producing countries. We’ve been doing things in those countries for almost 40 years but not for the sole purpose of issuing a press release and telling the world we do it but doing it for the right thing. The partnership that we developed in Rwanda with President Kagame is a co-author partnership from day one which is not aid driven but creating sustainable trade and sustainable jobs. And the other thing I’d say is it costs a child in Rwanda $350 a year to go to middle school. And we should be able to galvanize some efforts to be able to send kids to school at a cost of $350 a year as opposed to many of the things we do that really just throw money against a wall and don’t work.

Chrystia Freeland: Such as?

Howard Schultz: I think, you know, we’ve given a fair amount of money to Katrina. We gave a fair amount of money to Haiti. And then you hear terrible stories about whether or not the money was used in the proper way because you can’t follow it, can’t track it.

Chrystia Freeland: I think Minouche wanted to jump in.

Minouche Shafik: I think also public opinion has changed. I mean, we observe in the U.K. for example, that if you look at — it has been tough economic times. But sales of fair trade have actually held up incredibly well, and they have gone up in the U.K. Sales of organic has actually taken a hit, which I think is very revealing. Organic is about taking care of yourself. Fair trade is about sharing with others. I think it is quite interesting that in really tough economic times fair trade has fared well.

Chrystia Freeland: Have you seen that? More people worried about fair trade but people less worried —

Howard Schultz: I didn’t know the statistic about organic. But fair trade products have gone up. Fair trade coffee at Starbucks has gone up here in the U.K. because primarily people want to support those organizations that they believe in and that they trust. It is very revealing.

Jessica Jackley: I liked what you were saying about, you know, perspective in Tanzania and elsewhere and in Africa and all over the world of maybe traditional ways of doing aid work not really working out. So I’m not always — I think a lot —

Chrystia Freeland: You are representing an alternative model, right?

Jessica Jackley: Yeah.

Chrystia Freeland: Instead of me giving my money to the widows and orphans-type charity, I could fund some great business that I like specifically?

Jessica Jackley: Exactly, exactly. I think given that option — I believe the ways that we — the ways that we have out there to get people involved, they really actually do matter a lot. If you are used to donating — Again, I like to think in terms of the person-to-person, peer-to-peer model. So that’s where my mind it. But a government is a bunch of people elected by a bunch of people, individuals. And there are corporations, right, that are a bunch of individuals? They have their own intentions. It is easy to talk about things at a high level. And, well, maybe not always that easy actually. I like to talk about them in the person-to-person way. So I think about when I donate or when I invest, whatever it is I’m doing with my money and my time and my other resources and whatever it is I’m getting back, that sends a really big message both ways. And so Kiva is just one that’s not the silver bullet, but it is something I believe in because it is a 0% loan. The way it works, to just explain a little bit more, lenders go to a Web site. They find an entrepreneur. Those entrepreneurs have been posted there, their pictures, their stories. Their profiles have been posted by a micro-finance institution out there in the world. The Grameen Banks of the world. Many of you know that organization. They post that information, and then over time, as the loans are paid, updates go back and forth as well; right? And lenders can say hello to the entrepreneur, and the entrepreneurs will provide updates back and photos and things like that. That exchange of money and information that very particular way, it’s a zero interest loan between lenders and entrepreneurs, so they are not making money and they are not writing it off as a tax deductible donation, but they are getting their money back. And at 25 or 50 bucks, financially speaking that’s actually fine, a good thing, but they are also getting this interaction that is of an equal partnership connection, and that is huge. And in fact, that’s the thing I think that does make Kiva unique in the world. And I think more tools like that, more mechanisms like that should exist. Because to be able to say to a woman living in SubSaharan Africa not I am the donor that’s going to swoop in and save you; right? That’s not good. And not necessarily always I am the investor that’s only out to serve you if I think I can make money off you and you have bottom of the pyramid type thing. That’s not always great either. But to say, look, I trust you, I believe in you, your story is important, and I want to participate in the next chapter, and then just pay me back and we’ll call it even, that’s a really beautiful connection and that’s what I care about a lot. The work being done out there by micro finance institutions, there are thousands of them that exist, is lovely and is amazing, and I have been very privileged to get to be a part of some of that. What I really get excited about is changing the way lenders think and changing the way — I talked a lot about growing up with these stories of sadness. Maybe there’s a little girl growing up in Pennsylvania today where I grew up and instead she is learning for the first time about a woman living in SubSaharan Africa as a smart, strong hard-working entrepreneur, not as somebody whose only story to be told is one of sadness and suffering. So that’s what I care about. I think that can trickle up not from just how we think and believe in the possibilities and potential of one another but in how we design the organizations that we work for, the companies that we work for and run, and how the governments that we elect do their things, too.

Chrystia Freeland: I can see that Howard really wants to hire you right away because I think you are a great sales woman. And that insight that people like stories, which also Professor Kahneman was talking to us about, is really psychologically acute. But do you worry ever that there is a certain kind of beauty contest phenomenom that happens on Kiva and that maybe the people who are most attractive to us when we are wanting to feel good about ourselves, wanting to find someone to give money to, that maybe we don’t give money to the right people.

Jessica Jackley: Yes.

Chrystia Freeland: Maybe we give money to the lovely lady with the story that feels good to me but not to the person who needs it the most.

Jessica Jackley: No, that’s a really fine question. I guess we get into debate about who does need it the most and what are you measuring on and who is to say what’s the best. I don’t believe there are a lot of “shoulds” in life. In Kiva, I talk to classrooms of first graders who have all brought in a dollar and then lend to the picture of the entrepreneur with a fluffy sheep because the sheep are cute. That’s fine. Good for them. There are some people that are hard-core capitalists that talk about interest rates and talk about — there are some people who say, look, I’m a single mom with three kids, and this woman that I have loaned to is a single mom with three kids. I don’t think there’s a — I personally don’t want to be proscriptive.

Chrystia Freeland: Is there a particular group that has the hardest time attracting money?

Jessica Jackley: It depends on how you slice it. So I can tell you for sure that — this is little anecdotal stuff. So I know that a woman, an African woman raising money for an agriculturally based business at least a few months ago, and, looking at this —

Chrystia Freeland: That raises money —

Jessica Jackley: Right, right. And actually, there’s other stuff, too. You’re right. There are some funny, quirky things, like are they smiling in the picture and other stuff. — things like that. But then, yeah, a Bulgarian man will get his loan funded ten times more slowly than that woman. There are all kinds of qualities and characteristics.

Chrystia Freeland: Ugly Bulgarian.

Jessica Jackley: Bulgarian man with no agriculture.

Chrystia Freeland: But the creepy thing is —

Jessica Jackley: Actually, it depends. What does the scene look like? Are they in a very rural setting? Are they in an urban setting? Is it a taxi driver that has, like, a car? That seems different, that feels different than the woman with a fruit stand sitting on a pile of — a very makeshift sort of fruit stand that she has made out of sticks and some plastic and stuff. But again, I certainly have my own opinions on this stuff, but I think it’s more important to engage with people now than to shape their own opinions. And what’s been really interesting is the key to the biggest problem historically has been running out of loans. So it’s not exactly like the poor Bulgarian man isn’t getting funded. He is getting funded in a day instead of a few hours. So it’s all working out just fine so far.

Chrystia Freeland: Ken.

Ken Banks: I think the wider discussion about aid and how it’s delivered, and the model we have is very much a pull model. So over the last 17 years or so working in various African countries, you get a sense that people actually know how to solve their own problems. And they don’t need people flying over and really taking control of it. We think about development from the ’70s, think about early sort of development where dam building projects and large infrastructure projects. Development was kind of the — it was the realm of governments and large international vendors.

Chrystia Freeland: And World Bank.

Ken Banks: Right. But mobile phones have actually — a teenager in a bedroom can write a mobile-based application and within hours it can be on the Web and it can be used by people all around the world. And it’s actually not that hard to do. The hard thing is finding out what you fix and understanding what the problem is and the better way of doing it. But the technology is there to allow people to do this. And I think mobile technology has probably done more for development than a lot of aid has done. If you also look on the ground at how entrepreneurs are using the technology and the businesses they are building up, there is no manual for a lot of this stuff. People are just figuring it out. And the NGOs that we work through, it’s all very much a pull. So we make the software available. It’s called FrontlineSMS. It’s a piece of software you put onto a laptop, you attach a mobile phone with a cable, and it does two-way group messaging. So once you have downloaded it off the Internet, you can move away and anywhere there’s a mobile phone signal. You can do can do two-way group messaging with health-care workers, farmers, human rights activists, NGO staff.

Chrystia Freeland: In disaster situations very effectively.

Ken Banks: — disaster situations. That’s right. It’s been used in over 50 countries now. Late last year we won an award, a tech award in Silicon Valley, and it was great to win it. No one had ever heard of tech awards, so that was only the down side. When I went to actually pick up the award they said can you send us a pictures of you in the field with the users, and I actually have none. We have been doing it for five years, we have users in 50 countries, 8,000-odd downloads, and I have never been to do any of the installations. Because for me it’s about making the tools available. Let the people on the ground find them, and that’s part of the challenge, how do you promote and market to grass-roots NGOs who don’t spend all day on the Web. But once they find it, let them download it, let them install it, let them put their names and contacts in, let them figure out how to use it and how they apply it in their work. And you will be amazed how empowered those users feel when they are able to do all that without a white guy having to fly over and do a couple of weeks of consultancy. It’s not a revelation, I don’t think, to do it that way. It’s just a different way of doing it. And I think we have to try and think a little bit more about how we genuinely empower people with the technology. And I think mobile is probably unique, really, in what it can do. Because people can literally just take things. And African developers are building all sorts of things on their own backs. We have M-Pesa, which you have already mentioned, which did get funded. But if I was in Nairobi now, I could pay for a cab home with my mobile phone. We can’t do that here. You can buy mobile phones with solar panels on the back. They charge them through the sun. Why don’t we have these things? So we’re actually seeing innovation now going two ways. And I think that’s what makes it really, really exciting for me. We are actually learning from them, rather than us having all the answers and sort of just flying around and telling people what to do. And of course local NGOs understand the culture, the language, the landscape, the geography. They know if women are allowed to use phones before you spend a million dollars on a project to give women phones. You know, they kind of understand all these things. So let’s focus more on how we build tools that genuinely allow them to take them and do their own thing and just act as sort of a supporting role. And I think it’s working well for us but it’s challenging. But for me I just feel —

Chrystia Freeland: We have heard from Minouche clearly is with the program. Are governments, though, and world banks, are they sufficiently feeling this way or do they still have a way to go? Is it still a top-down approach?

Ken Banks: Regulation as you said is hugely important. I think you have to remember that mobile phone technology, it’s the private sector that’s created what we have now. If mobile technology in developing countries was an aid project, we probably wouldn’t have anything like the kind of coverage we have now, because it just wouldn’t have happened. So the private sector are jumping all over it because you can make money very, very quickly. And of course the environment has to be right. I was speaking to somebody who was trying to monitor the Sudanese elections with our software, and they decided against it in the end. It was just too dangerous to expect people to send people information in to a central point and be detected by the government and potentially get in big trouble. So there are situations where the environment has to be conducive to this kind of thing happening. And certainly regulation is a big one. In opening up competition. We’re not in Uganda where the picture was taken of the phone. They introduced two new operators in those two or three months I was there. Prices came crashing down. All sorts of people started panicking in the mobile world. But it actually was good for the consumer. So in those examples I think regulation is a key driver. And in countries with only one operator, which is usually government run, prices are usually high, it’s very hard to get SIM cards, infrastructure is poor. So, yeah, I am all for the private —

Chrystia Freeland: Government operators are rich.

Ken Banks: They are also slow. If you look at the land-line infrastructure in places like Nigeria where I spent a year, it just doesn’t work because there is no real incentive to do anything with it.

Chrystia Freeland: Okay. We’ll take questions from the audience in one minute, so please come to the mic. While you do that — come on, I know it’s the last session of the day, or second to last session of the day. Yes, there’s one more left, but a little more enthusiasm, please. And I’m just going to ask Howard, you are an entrepreneur, but now you run a really, really big company. How do you incorporate the kind of entrepreneurial stuff in your social engagement that we have just been hearing about? Are you too big to do that now?

Howard Schultz: No. There’s no bifurcation between our efforts entrepreneurially to give back or engage in helping others who have been left behind versus what we are trying to do for the consumer. I think it’s wrapped into the way in which we just do our business. I think if you look at the last two months of what happened with Toyota, what’s going on with BP, what happened to the banking sector in America, there’s a fracturing of confidence. And this is a time where I think there should being no dilution whatsoever in terms of what companies stand for and what they are willing to do, and their efforts in terms of consumer facing versus giving back should be the same. And I think that adds up to an enduring company doing the right thing.

Chrystia Freeland: Do you ever worry — I mean, you emphasize this idea of being authentic in what you do.

Howard Schultz: Yes.

Chrystia Freeland: Do you ever worry that a cynical journalist type person might say, well, that’s great that you do this fair trade stuff but it’s just to get people to buy more coffee?

Howard Schultz: You mean like yourself?

Chrystia Freeland: One might say that, but it’s just another form of marketing.

Howard Schultz: I think there’s always danger when you raise your head. We live in an, unfortunately, in a gotcha environment where everyone is looking to find something wrong instead of finding something better. But in the same courage it takes to do the right thing for the consumer, you have to keep going. The other thing I would say is that we have all have responsibility not to be a bystander. And when you see something that you know isn’t right, and you see people being left behind and you have resources or advantages, we have got to bring those people along. And if we don’t, our station in life is not going to last. And that’s why we have this unrest right now between the haves and have-nots in certain countries around the world. Look what’s going on in Thailand as we speak right now. The civil unrest in Greece just two weeks ago. There are really some very serious issues that have to be addressed, and we can’t ignore it, as entrepreneurs, as business people. There are some very serious, significant challenges that have to be looked at for the first time in a very, very real way.

Chrystia Freeland: Question, please.

Zahara Scott: Zahara Scott from B Media. Mr. Schultz, I just wanted to thank you for your comments. I think it’s a refreshing, I think, perspective, primarily from someone with such a large corporation, a multinational corporation. But I want to press a bit because I think if you had thought bubbles of some of the companies in the room, the language and discussion around how you are growing your company and what’s needed to be competitive in the marketplace; i.e., using authenticity, using values as a core may not be as aligned. I guess my point is, how much are you an anomaly versus sort of the way sort of things are headed in terms of how CEOs are thinking about how to create competitive advantage in their companies?

Howard Schultz: I don’t think we are an anomaly. I am more encouraged than ever with regard to people who are running small and large companies recognizing that — first of all, Starbucks doesn’t own this model, and we are not a perfect company. We make mistakes every single day. But we want to lead with our heart. And I think because we’re in such a consumer-facing business, it requires this kind of mentality. It’s who we are and who we always have been. But I am encouraged by many, many companies and people in big areas of responsibility who understand that success has got to be shared, and that you can not build an enduring organization or enterprise by solely chasing profit. It’s shallow, and it’s not sustainable.

Chrystia Freeland: Has the financial crisis changed people’s attitude?

Howard Schultz: Oh, I think it becomes harder for people to stand up and defend these kind of things. You know, the one thing which we didn’t talk about is you have to perform. I mean, the price of admission, with what I have described, is you must perform. And that is — that’s just a must. But —

Chrystia Freeland: And by perform you mean make money; right.

Howard Schultz: Not at the expense of your people and not at the expense of your values.

Ariel Eckstein: Ariel Eckstein with LinkedIn. First of all, I would like to thank the panelists for a very thoughtful panel. A question for any or all of the panelists is what is the one thing that both the private sector and the one thing that governments that are in the developed world can do to help the developing world to continue to develop, or if not continue, to help them to continue to develop in a sustainable fashion?

Chrystia Freeland: Okay.

Jessica Jackley: Again, just to throw the extreme, like, individual perspective out there, imagine if anyone in those categories you named — the developed world, governments and businesses — what if every individual in that set of people made a commitment to one other individual on the other side of the planet or just downtown or wherever there is poverty and there are people living with needs that are going unmet and actually made a commitment to another human being in a way that allowed them to kind of start to slowly change the game and change their trajectory. We’d be okay. And maybe that would actually play out in policy, maybe it would play out in what companies are doing. But if we did that, it’s pretty — I think it always comes back to sort of what we are intending to do as individuals.

Chrystia Freeland: And guess what? You can do it via Kiva.

Jessica Jackley: That’s also true.

Ken Banks: I would say there are a couple of points that I can very quickly touch on. The first one is that I think many developing countries are more sustainable than we are, actually. So I don’t think we should be thinking that we have the right way of living and we should be taking it out there. Look at agriculture in the west. It is hugely demanding on the environment and on energy. I think the Netherlands is the world’s largest grower of peppers and it’s done under masses of green houses that burn up thousands, millions of tons of gas a year. And that’s not sustainable. So I think the first thing —

Chrystia Freeland: Just to play back to you something that Carl-Henric said this morning which is as the standard of living rises in the developing world, they will become as great consumers of natural resources as we are now.

Ken Banks: I think one of the worrying things this morning that came out of the chat was this thing about how to stimulate consumption. And I think we are probably consuming enough as a planet. So I am slightly uncomfortable with the model that we can keep growing and that we seem to have the right way of doing things. I see much more sustainable practices when I travel around developing countries and I see here where people have to drive 100 miles to get to work this, type of thing. But I think also in terms of the businesses, I think —

Chrystia Freeland: I can’t resist asking Howard for an instant response to this. So this is really a central —

Ken Banks: I am not talking about Howard at this time. I am talking about peppers.

Chrystia Freeland: But we have a consumer industry person here. This is a central issue; right? Do we want more growth in the world? Is that necessary for capitalism? Is it sustainable for the planet? What do you think?

Howard Schultz: Should I answer his question first?

Chrystia Freeland: No, answer this one first. Ken has said maybe we don’t need more consumption.

Howard Schultz: I don’t think we need — you know, it’s like growth — you don’t grow a company to get bigger. You grow a company to get better. So consumption for consumption sake is not an enduring quality. So in a way, yes I agree with you. But let me just — if I can answer something he asked, which I think is very important. We think that when we go to these developing countries, the primary reason we are going is to give back. And what I have found — we have a reason to go to Africa continuously, and every time I go to anywhere in Africa, what I find, and I’m not just saying this because it’s the right thing to say on a panel like this, is I receive much, much more than I give. And the take-away value that I’m able to share with people in our company about what it is I witness, what it is I saw, and the residual value of that is significant. And the thing that surprises me the most is that when we go to these developing countries, we, as Americans, have so much, and yet we’re anxious, we’re depressed, we’re not happy. We go to Africa, they have nothing. They live in mud huts, they don’t have electricity, they don’t have water, and they have so much joy and hope. And they are so happy. There’s something wrong.

Ken Banks: That’s the point I was making. I think our model isn’t actually the model we should be necessarily sharing, because it’s — there are some pretty bad things. And I think our model might be flawed. Maybe they’ve got the right model.

Chrystia Freeland: And I cut you off, Ken, before you gave your one thing that we should be doing to make the developing world better.

Ken Banks: In terms of businesses, I think businesses who operate in developing countries clearly have a better opportunity to make a difference. I think from the perspective of what we do, mobile operators are present and manufacturers are present, and I think many could probably do more, lowering prices and so on, to actually help people. I think when a product clearly can empower people, as mobile phones can do, and a fair trade is done properly and people, you know, coffee businesses source their coffee more fairly, it can increase incomes, and kids go to school, and it makes things better for people. So it’s probably easier for to you do good than some people because of your market. But I think companies that operate in these spaces, many that I see can do more than they are actually doing. And they can also offer more in-kind support for nonprofits.

Chrystia Freeland: Minouche, the one thing?

Minouche Shafik: The one thing. I guess my answer would be to — for political leaders and business leaders to understand and convey a sense of interdependence. The one thing this crisis of the last couple of years has taught us is that people defaulting on their mortgages in Midwestern states in the United States could bring the entire world economy down. And the decisions that are made in China about every power plant that they are building every day, a new power plant every day in China, will have huge consequences for flooding on the coast of the U.K. and for 25% of the land mass in Bangladesh in the next decade. So the degree to which we are interdependent is extraordinary. And it in many ways this is both the up side and down side of globalization. And I think the more we, as citizens of the world, realize that, the more we will want our leaders, both political and business leaders, to have policies that recognize that interdependence. And so that’s policies around trade, around aid, around fair trade, around the environment, that recognize that new reality of interdependence.

Chrystia Freeland: Okay. And just before you take the next question, I can’t resist pointing out that Professor Kahneman did actually tell us that having more money makes us happier up to —

Minouche Shafik: Up to a point.

Chrystia Freeland: — $80,000. How much? $80,000 in America. How much in the world?

Daniel Kahneman: No idea.

Chrystia Freeland: $10,000?

Minouche Shafik: Roughly 10,000, I think the curves of happiness start to come down.

Audience member: Thank you, my name is (saying name) I come from Barcelona Spain. I am still one of the few Spaniards who is fortunate enough to have a job. Because I work for Planeta, which started as a publishing company, a book publishing company, and has become a media company. And my thoughts, basically addressed to Mr. Schultz, have to be with, first, starting with Maslow, Maslow Pyramid. We just think that Maslow basically established that according to our level of wealth, our needs or the way we define our needs, change a lot. My question relating Maslow Pyramid with Ubuntu, the concept that this morning’s Archbishop Desmond Tutu basically shared with us, is that it seems that today it changes not according to wealth but according to countries. It’s to say, I guess, that Starbucks sells unique experiences in drinking coffee, in having social networking and many things. Poverty, the type of segmentation you do in the U.S. market, is pretty different than the one you do in the Chinese market and some African markets. So it seems that people looking for the same feelings are of a social extraction, on what extraction quite differently. That is basically related as well with another concept, which is some marketing concept which I think today is getting more sophisticated. Henry Ford established like 100 years ago that you could have a car, a Ford car, as long as it was black and Ford T. Today, I was fortunate enough to hear from you that your menu list does not bring that much information from the Web. You basically establish what the products you are going to offer and those are the ones you offer. Before we had a session called “The Power of Data” which we didn’t address quite well. I think what we addressed was the acquisition of data and its ethical consequences, which was somewhat different. From a business perspective, you have established that for marketing, you are not also doing traditional marketing, but you basically infer what your customers want from different things. I would like you to discuss what the right balance for a company like yours, between push strategies and pull strategies. Is to say I think your menu list is a push strategy, whereas all the environment, the social environment you provide for customers, is more pull. Thank you.

Chrystia Freeland: Okay. Take that one.

Howard Schultz: Thank you for your question, I think. I don’t know if I am smart enough to answer that question, but I will take a shot at it. You mentioned Henry Ford, and there was a great Henry Ford quote. He said if he would have asked his customers what they wanted, they would have told him a horse. So there’s a real balance, and not through arrogance or hubris between an intuitive sense of what you think your customer wants and trying to provide them what they want. We have always been an intuitive company and not very marketing-research driven. And so the imprinting of the company has always been more or less we will provide our customers with an experience and we think they will respond. Now, having said that, one of the things that I think we’ve learned over this last year and a half during the cataclysmic financial crisis is we had to create a dialogue with our customers, the likes of which we have never done before. We went to a company called salesforce.com. Michael Dell introduced me to them, and they created for us an open dialogue with our customers, which we never did before, Web based, in which our customers would give us comments and suggestions and ideas. Now, there was an outcry of concern within the company culturally that we would do this. One, people were afraid that we would hear things from customers that we didn’t want to hear, and then that we would not be able to respond. It created a tidal wave of communication and insight that we did not have, and it turned on a whole new way in which we would listen to our customers. One of the core things we did really well this year is we developed this very unique loyalty program based on the Starbucks card, which is 20% of all transactions in the U.S. That entire loyalty program came from our customers.

Chrystia Freeland: The salesforce.com thing?

Howard Schultz: More or less, yes. So I think like anything else, there’s always a balance between an intuitive sense of what you think your customers want, developing empathy and listening really hard. And I think in this environment, especially, there has to be more of leaning towards and leaning into the customer where they certainly understand and hear that you are responding to them as opposed to you driving what you think they want. I hope that answers your question in a way — the question was much more well phrased and intelligent than my answer. I apologize.

Chrystia Freeland: Okay. I think this is going to be our last question unless anyone has any really passionate thing they need to know. So, please.

Amanda Jobbins: Thanks. I have a couple of comments. First of all, Amanda Jobbins from Cisco. And first of all, on happiness, I read a great study, actually, that said that happiness is defined by the distance between your house, your school and your work. So that’s probably something we should all think about. Second of all, Starbucks to me is a lovemark. I have been going there pretty much every day since I think you opened, and my son would like a decaf frappuccino, please, so if you can put that on your menu and maybe some healthier food, then we’d be very happy. Smaller things, not the 400 calorie muffins. Slightly smaller maybe, and some other good things.

Chrystia Freeland: I agree.

Amanda Jobbins: I know their body fat.

Howard Schultz: I knew you would.

Amanda Jobbins: I’m in marketing so I can’t help. But on the giving-back topic, first of all it was really, really inspiring to hear from all of you, and I think the key of the model is absolutely fantastic. I have to say, people to people, collaboration, innovating together, and I think you are really on to something there, and I think there’s something we could all learn from that model. But my question for all the panelists is what advice would you give all of us in business about the most apt initiative perhaps we could kick off in our own organizations to help developing countries and to help give back. Thank you.

Chrystia Freeland: Okay. We sort of answered that, but this should be focused on inside your company, and we have no time left. So very quick answers?

Jessica Jackley: I have a 30-second response. You were saying there is kind of this spectrum of doing market surveys or even being very, very intuitive about reaching out to customers. At Kiva and at companies that I admire a lot there are tools that are for feedback loops, tools built where people can actually not just be studied or observed and responded to but actually be co-creators of the initiatives in the project. So I don’t know the people in your company — I know some of them actually, but not all of them, and I don’t know what they are thinking what they are excited about. But I think that something that’s something imposed versus something that’s —

Chrystia Freeland: — what to do.

Jessica Jackley: Yeah, and give them the tools to do it. And actually give them the control and the researchers to do it, too, which is really scary but it, I think, works.

Ken Banks: A very, very quick one. There’s a scheme called Hope Phones which was launched by somebody who is running a project using our software in health in developing countries. And health-care workers can do amazing things if they have cell phones or mobile phones, just text and communicating through rural health networks. So if you want to run a mobile phone recycling scheme in your company, get all those phones together, they can actually be reborn in a developing country in the hands of a community health-care worker who can deliver very, very effective health care to some of the poorest people on the planet. So that’s something very, very easy to do. We take iPhones as well and Blackberries, and all that kind of stuff.

Chrystia Freeland: iPads.

Ken Banks: And Androids. Yes, of course.

Minouche Shafik: Two things. One, corporate social responsibility is nice, but look at your core business and look at your supply chain, look at the actual operations of your company and see how you can promote reducing poverty and promoting development in the core business, not on the side. And the second thing is small is beautiful but big is necessary. So look at costs. Only do stuff that’s sustainable. Because the next time there’s an economic crunch, it will be the first thing to get cut. So focus on stuff that’s cost effective and you can scale.

Howard Schultz: We do a cultural survey at least once a year with all our people, and consistently the number one attribute that they give the company highest marks for is giving our people an opportunity to give back on company time. Well, thank you all very, very much. So now help me in thanking our really fantastic and open and innovative panelists.

Transcript edited from the video’s captions for accuracy.