One Lesson from the Spiritual Gurus

13.10.2016 • Emerging Markets

From Vivek Kaul – Vivek Kaul’s Diary –

Sometime back I got talking to a business school professor. He told me he was researching the lessons that we could learn from spiritual gurus who had turned entrepreneurs and were doing very well. He was planning to write a case study on it.

As we talked the professor went on to explain lessons in branding, motivation, human resources management and finance, that could be learned from spiritual gurus turned entrepreneurs.

When it came to branding he felt that the gurus were personal brand ambassadors of their products. Hence, there was a thing or two, CEOs of other firms could learn from them, by trying to become personal brand ambassadors of their products. “They should wear their brand on their shirt sleeve,” said the business school professor. This was something, along the lines of the late Steve Jobs at Apple.

When it came to human resources management, the professor thought that it was amazing how these gurus could command an army of volunteers to get a lot of work done. Again, something that CEOs could pick up from, he felt. He even planned to look at their finances to figure out on how the businesses were growing at such a fast rate.

And so, our conversation went for a while. Nevertheless, at the end of it, I think there was one very important point that the professor did not make. And I think that is the only point that matters because everything else follows from it.

What does a new entrepreneur need to start a business? For one, he needs an idea-an idea around which he can build his business. Then he needs some naive optimism that makes him believe that what he is about to start, will work in the days to come.

As Robert H Frank writes in Success and Luck-Good Luck and the Myth of Meritocracy: “Naive optimism, within limits, can be adaptive. If people had realistic estimates of the magnitude of the hassles they’d face upon starting their own businesses, few would have the courage to go forward. But having launched such ventures, people typically do everything within their power to make them succeed. Most of those who make it may thus owe their good fortune in part to naive optimism.”

Hence, if people had a clear idea of how difficult it is to start a new business or knew in advance the kind of problems they are likely to face, they wouldn’t take the risk of starting a new business, in most cases, and stick to doing what they already where.

Other than an idea and naive optimism, an entrepreneur also needs capital i.e. some money with which he can get his business up and running. Further, as things progress he will need working capital. The working capital will help him get over a situation where his payments from his customers are due because he has to sell on credit, but he needs to make payments to his employees, his suppliers and so on.

So the question is where do the spiritual gurus turned entrepreneurs get the initial capital to start their businesses from? The capital comes from donations made by devotees. As Somasekhar Sundaresan wrote in a column in Business Standard: “The gurus deploy funds raised from followers who are either paying for services they consume or are simply donating their savings to men (or women) they love.” The question is that do these devotees donate money, so that spiritual gurus could start businesses? Furthermore, the gurus are basically crowd-sourcing funds to get a business going. The law of the land on this is very clear. As Sundaresan writes: “The law on “collective investment schemes” (defined as any collection of funds to the extent of Rs 100 crore) would deter crowd-funding for a business idea that openly says it is a business seeking money.”

Further, by using money donated to them, gurus have access to capital which they need not repay. At the same they don’t need to pay any interest on it as well. Hence, this means that effectively their cost of capital is zero.

What this means is that a major reason for the success of spiritual gurus turned entrepreneurs is the fact that they have access to capital which they do not have to return. And they did not have to pay any interest on it.

This is the only lesson that can be drawn from the spiritual gurus turned entrepreneurs. Everything else they have excelled at and is being offered as things that we can learn from them, has been because of this one reason. If they did not have access to the capital that they did through their followers, they wouldn’t have been able to start a new business in the first place.

It’s a pity that CEOs can actually learn nothing from the success of spiritual gurus turned entrepreneurs. For CEOs to have access to capital on which they do not pay any interest, they would have turn into spiritual gurus for starters. And that is not going to happen anytime soon.

-Read more at www.equitymaster.com (English)-

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