Business

Buffett’s Grandson On How ‘Social Value Investing’ Can Solve Some Of The World’s Challenges

Howard W. Buffett and William Eimicke, co-authors of “Social Value Investing,” discuss what is Social Value Investing and how they can apply the framework across the world. They speak on “Bloomberg Daybreak: Asia.” Presented without comment…

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Social Value Investing

How 'Social Value Investing' Can Solve Some Of The World's Challenges

Transcript

Let's turn now to what's called social value investing and the role of that concept in business and society here. Some leading private sector philanthropists are actually coming together to tackle the world's biggest challenges. These include of course Warren Buffett's grandson Howard who is out with a new book co-written by William AMIC social investing have a look at it right here. A management framework for effective partnerships in fact both authors join us right now. Scuse me live from New York. Gentlemen pleasure to have you on the program. Good morning from Hong Kong. Howard let me just start with you what is what is social value investing and who is it worth it. Great well thank you so much for having us on. We're really excited to talk about the book. Giovanni investing is a new book that's coming out and in it we tell the stories of CEOs and nonprofit managers and philanthropists and even community leaders who are coming together and working on really remarkable projects together to both serve their individual goals or organizational goals and also to serve society's goals at the same time and so by going through and talking about these really wonderful examples of success that people can see that there is an opportunity to make a big difference in the world while also doing good out there. We also and Bill talk more about this as well. We provide a framework almost like a handbook to guide people in replicating the success that we talk through.

So each one of our stories in case studies from India and what's going on with Digital India and telemedicine to Central Park in New York City we give a really good breakdown of how those partnerships have succeeded and how you can replicate that success as well through the social value investing framework. Yeah Bill chime in here because I see a lot of these diverse examples and Howard talked a little bit already about how diverse these Apple is going to be what would you say is a common denominator here across all of those examples in the book. I think the common denominator is that the big challenges that we face in the 21st century have risen to the level that they require more expertise than government alone can apply. And by engaging the private sector private sector entities can make money and be part of a major change in the way people live their lives. I think the India example the examples from Brazil and even the examples from here in New York City were things that are good for business are also good for people. And by combining the scale of government with the expertise in operations of the private sector you get much better outcomes Yeah. BILL FLETCHER The case study in India in particular which has really pertain to our Asia viewers here. I mean why do you think Digital India the telemedicine programs are so significant. Well I hope I hope people will read the book because it's almost like science fiction. In India you have a biometric ID system that's been set up. It was conceived of by the government. But over the number of years the government was unable to implement it. They brought in one of the leaders from the tech sector which as you know was very big in India.

And together they have registered in this system. Now almost one point three billion people who can access not only government records and government benefits but increasingly banking services even the most remote parts of India and diagnosis from one of the world's best hospital providers Apollo Hospitals in small clinics in rural areas of India. It is amazing. It is truly amazing and it's truly a partnership between the government the private sector and by the way local local entrepreneurs who are running these small centers where people come in and actually become diagnosed by major doctors who are in Mumbai. So it's just a great great story and something that can be replicated. Yeah quite fascinating in fact and how are you know and from a market perspective though.

I mean people have watched and looked into these ESG policies as a state before and they were kind of viewing them as concessionary mean that you can create social value but you have to sacrifice the cost you have to sacrifice returns. What do you think has changed now. Why do you think that investors are increasingly embracing these types of policies. Well that's a wonderful question and I don't think sacrificing returns ever has to be a required part of the dialogue.

But we're seeing some pretty significant shifts in society at large. First of all when you consider consumer demand you know millennials or by an overwhelming amount I think 94 percent of millennials will choose to buy a product that's associated with a social mission. You have 80 percent of millennials that prefer to have a social impact on their local community than they do to receive recognition through their professional work.

And then in 2013 you saw a pretty big shift happened when millennials that same cohort started defining the primary purpose of business not as just making profit but as serving society or creating social value. So those are pretty big indicators. But you know you also see it in terms of capital markets you see in 2016 one out of every four dollars invested under professional management had some type of social screen or social orientation to it and then more recently you saw with Larry Fink and the letter that he wrote coming out of BlackRock he had a pretty big call to companies and CEOs around the world saying essentially that if you don't have a social purpose with what you're doing you might lose your license to operate from society. And he argued essentially that when you look at the long term time horizon that your financial reward and social reward eventually converge so if you haven't seen that letter I really recommend reading it.

I think the other point the other point to be ahead in this without strong infrastructure government the private sector can't make money. So by helping on these infrastructure projects like we see in New York like we see in Brazil like we see in India maybe the returns might not be as great on those projects but they create a society with a digital highway throughout India where private firms can make lots of money. The example you're showing now on the air the parks in New York City not only benefit everybody with these beautiful public spaces but I have had a tremendous impact on the real estate market and on local businesses. So there's a symbiotic relationship between the sectors that benefits everybody.

Bill how do we marry the concept of a strong man no nonsense style leadership. And I look across the world you have Erdogan in Turkey have in the Philippines. Modi is obviously needed to a lesser extent or to some extent you have Trump in the United States Xi Jinping and China just to name a few there. Can these principles of cooperation actually exist without style of leadership where collaboration isn't actually the first thing that comes to mind. Well the the namesake of this station Mike Bloomberg is known as a pretty tough character as well. But he was democratically elected and operated in a very democratic very contentious political system here in New York but was able to apply the same principles through that political system and get it done.

I would also argue Modi operates in a democratic system. He too is a tough guy but he has been able to work with the vast majority of people and I think Howard is in his example about about Afghanistan shows that you have to engage the local community if you want to be successful. And I think whether it's a tough guy regime even look at the politics of China. They've been giving more and more freedom at the local level because without the support of the local community you can be as tough and strong as you want. You probably won't succeed. Yeah cross-sector partnerships that you say is key. Howard I really the question. Last question to you of course much of your framework I'm sure has been based on your grandfather's work at Berkshire Hathaway. Can you kind of go into more detail about that.

How big of an influence has Warren Buffett been in writing this book as well as your philosophy?

Thank you for asking that. You know my grandfather was remarkably supportive in working on this book and in fact when Bill and I started almost three years ago we thought this would just be a series of articles that we were going to put out we didn't even know it would turn into a book. And as I was going through drafting those and taking Bill's input and then getting Bill's pieces as well I shared them with my grandfather as we were writing them because we knew that his feedback would be so important and he was incredibly supportive really remarkably so. And you know one thing that's great is that if you want to know how he feels about the book there's a short piece that's written by him that opens up what we talk about really frames a lot of our messaging around optimism and what his hope and what our hope is for making the world a better place but really kind of zooming back a little bit I think part of what is so inspiring for us is to see through our students at Columbia and through others that the real definition of success for society is starting to shift and there is the old definitions of wealth and power and fame which are still relevant but that a lot of folks we're talking to again are students they really care about making an impact on the world.

And I think that my grandfather has been one of the biggest inspirations I've had for that is what a single individual can accomplish in one lifetime and it gives me the opportunity to hopefully share observations and lessons through social value investing with others so that they can see the opportunity they have to make the world a better place.

Social Value investing the book is here