Interview: Narayana Murthy’s Compassionate Capitalism
When N.R. Narayana Murthy walks into a room, you notice his smile. With none of the glamour of a billionaire—dressed in a simple old-fashioned suit—he carries with him the purpose and clarity of a successful businessman. He is approachable and speaks with ease and sincerity.
Murthy founded Infosys in 1981 with $250, after converting his “confused leftist” views to “determined compassionate capitalism” while on an eleven-month hitchhiking trip from Paris to Mysore in the late 1970s. He had his epiphany during a trying freight train ride out of a communist European city (now in modern Serbia) where he was forced to go without food for almost five days.
In August of this year, he retired from Infosys, now a six-billion-dollar company (with $70 billion in revenues). An IIT alum, Murthy serves on an exhaustive list of boards of banks, the UN and Ford Foundations, and most of the elite business schools in the U.S. He identifies himself as a “compassionate capitalist” and was in Atlanta promoting one of the nonprofits he supports.
Akshaya Patra is an interesting food-for-education venture between the government and some of the biggest names in Indian business with advisory boards full of CEOs and celebrities like Deepak Chopra, Narayana Murthy, and Fareed Zakaria. A recent event in Atlanta that featured Murthy raised over $250,000 with people coming forward at the event to write checks for $10,000 or larger amounts. It was hard to say whether they were moved by the stories of the hungry children or the operational efficiency of the organization (which claims to feed over a million children every day) or simply want to be in the elite company of those like Murthy or his brother-in-law and serial entrepreneur Gururaj Deshpande, who chairs the U.S. board and has made it to the Forbes richest list a few times. It is too early to assess and quantify the long-term merits of this program on education, but for now Akshaya Patra is stepping up to provide much needed clean and healthy meals for poor children and encourage them to attend schools.
While in Atlanta, he sat down to talk with Khabar.
Congratulations on your recent retirement. Are you enjoying it?It’s still new, and I’m still busy.
In 1981, when I founded the company, we wrote down these rules, one of which was that I would walk out at 65. Therefore, it was more like an axiom. So there was no surprise, no sentiments about it. It was routine, in that sense.
So you knew what you would do when you retire?I didn’t think I would have a second inning, because doing anything that required the kind of energy that Infosys required, I knew wouldn’t be possible. I had no expectations about that. But I do have a venture capital firm. We need to see how smart we are. But that’s another five or six years from now. Until then it’s all theoretical.
So it’s a traditional venture capital firm?In India, we have a wide portfolio of investments. We have made investments in education, health care, e-commerce, etc. My wife said, “Just because luck was on your side with Infosys, don’t think you’re that smart, and don’t take other people’s money!” (Laughs) Because there were many people willing to give money. So I said, whatever I do, I’ll do only with my money. It’s a small VC—about $175 million. It’s not a lot of money, so if I blow it, that’s it.
Are the businesses you are supporting all for-profit?They’re all for-profit, but my philosophy has always been that you invest in for-profit companies, and they’ll hopefully use a percentage of the profits they make for nonprofit activities—like we do at Infosys. Every quarter we give 1% of our net income. In addition, of course, we have our personal contributions to nonprofit, which is a much larger percentage.
Your wife has played a very important role in the nonprofit aspect.Yes, she chairs the Infosys Foundation. I was also talking about our personal efforts.
What motivates you to make giving back to the community a part of your mission?There are multiple reasons. In a country like India, where a section has done well in the last 15 years or so, there is also a section that has not done well, most of it touched by public governance. Therefore if you want inclusive growth, if you want to bring happiness to everybody, the best way is to take part in nonprofit activities. That’s number one. Capitalism is still very new in India. It’s still not truly appreciated. Therefore, those of us who are evangelists for compassionate capitalism or decent capitalism will have to conduct ourselves in a manner that people don’t lose faith in capitalism. One of the ways to do it is to contribute to nonprofit activities.
What kind of upbringing did you have?
My father was a secondary school teacher for most of his career. And we were eight children. So I came from what could be termed lower middle-class. Comfortable enough to eat and clothe ourselves, but nothing more. I was the fifth of eight children. My father died pretty early, in 1974, when he was 61. But my mother is living, she is 90 now. The milieu that I came from has not placed too much emphasis on money. The people are happy with a reasonably good quality of life, but cannot understand the need for a lot of money.
How do you define success?Success to me is the ability to bring a smile to the faces of people when you enter a room. You don’t have to be rich or beautiful to do that. All that you need is for the people in the room to feel that you care for them. That to me is success.
Other than your retirement at 65, what did you have on your list of axioms?We had many. They all seem very axiomatic from the perspective of corporate governance here in this country. Though I must say in the past few years they’ve been violated here. But for us in India then, it was new. We said we’d strictly maintain the separation between ownership and management. We said we would not use any corporate resources for personal benefits other than the salaries we get. All these things are nothing virtuous in the West, because by and large, until recently, that was the way everybody did it. It was like breathing. But in India it was not so.
Do you think your axioms have influenced other businesses in India?In some ways, yes. We communicated the power of market capitalization. Before us, the model for many industrialists was to use corporate resources for personal convenience. And then not to be too much bothered about profits. Even those companies that were listed. But when we got listed, our market capitalization started improving, when the price-to-earning ratio started improving, that’s when people started saying, “Look, if I improve my profit by one dollar, actually my wealth goes up by 20 or 25 dollars.” Many people tell me that the spouses of some of these people, who were earlier insisting that they spend corporate money for their luxuries, were now saying, “No, no, don’t spend corporate money—save it, because I want my wealth to grow.” Wealth through market capitalization became very fashionable, thanks to companies like Infosys.
And you consider this to be a more fair system?This is a fair way of doing it, because at the end of the day, when you’re a listed company, if your wealth goes up my wealth goes up too, and there’s nothing unfair about it. Whereas in the earlier model, people were creating an asymmetry of benefits. If three or four of us formed a company, I would be using company money for my travel, stay, and whatever else. That meant that you were not getting that benefit proportionately.
What about the corruption embedded in the public sector?I would say we must give credit to this government and this judiciary for all the good things that are happening in combating corruption. When else did we hear of a minister or a secretary to the government being arrested and being in jail? When ever did we hear of a chief minister just being able to get bail? We have made some progress and thanks to Anna Hazare, there is now a tremendous sense of fear in the minds of politicians that they have to be very careful in conducting themselves. A lot of good things are happening, and therefore I’m quite optimistic.
As our prime minister has often said, the need of the day is inclusive growth. We have to enhance the faith, hope, and confidence of the poorer sections of the society. A sure way of doing this is making sure that children get education. Today, about 26 million children don’t attend schools because they have no decent nutrition. There’s no way they can sit in the classroom and understand what’s going on. Akshaya Patra is helping with this. Second, Akshaya Patra is an absolutely secular organization. It serves children from all religions. Third, it’s a rare example of a successful public-private partnership. The government contributes 60 percent, and thanks to people like Desh [Deshpande] and others, they’re able to generate another 40 percent. So this is a very efficient, transparent and accountable public-private partnership. It’s a model for that. Fourth, it has scaled up so well that in a matter of seven or eight years, they’ve gone to a level of serving 1.3 million children in 8600 schools in eight states, and they want to extend it to five million children. Fifth, this is a wonderful example of what good engineers can do. The engineers at Akshaya Patra have designed this entire system whereby 1.3 million meals can be cooked in 19 kitchens, providing piping-hot food to children. All these are extraordinary pluses.
Is the vision for Akshaya Patra to go beyond feeding children? For example, what about the quality of education?I think Desh should answer that.
Deshpande: A lot of this is about bringing the proper discipline into the nonprofit sector. If you have a company, and the company sells cameras, you can ask, is the camera enough for everything? No, because there are a lot more things. But you’ll get distracted if you try to do everything. Sometimes people get all worried, “Is just food good enough?” I think it’s a part of it. We are also working with a lot of other organizations to bring other pieces to the solution, whether it’s teaching English, science, math, or physical education. It’s pretty good, what’s happening in India right now.
Are you looking to expand to other parts of India? Do you feel certain states are easier to work in?Deshpande: We’re already in eight states. All the states we’re in so far are mostly by invitation.
What do you think is the secret of your success versus all the other organizations that have tried school lunches and meals?Deshpande: It’s execution excellence, and they have to do it every day.
How well is the public-private partnership working?Deshpande: Very well. A big chunk of the funding comes from the government.
But you run it, and the government is only involved in the funding?Deshpande: Yes, but they’re very supportive. The elected representatives really appreciate that their constituencies are getting this kind of good, rich food.
Other than contributing financially, what are some ways for people here to get involved in this program?Deshpande: It’s amazing how hard it is to spread the word. In any organization it takes a lot of effort from lots of people. We’re also working hard to get the kids involved. Kids here need to appreciate how the kids live in India. Just appreciating what hunger is like, how a quarter can feed a kid for a whole week, is something they can really get into.
[Alka Roy is an Atlanta based writer and performing artist, with daytime gigs in business strategy and technology.]Enjoyed reading Khabar magazine? Subscribe to Khabar and get a full digital copy of this Indian-American community magazine.
