What I Learned Teaching Business Behind Bars

Jon Huggett

Dear GSB Classmates: When I was asked to teach a class on writing a business plan to a group of inmates in a prison outside of Johannesburg, South Africa, I expected it would be, well, educational. I was intrigued to teach the class as I had spent a week in prison myself twenty-five years before. What I did not expect was that it would remind me of our experience together at the GSB. Once again, I was surrounded by energetic students with enthusiasm for business.

The prison itself has the charm of a subway tunnel. Drab hard surfaces echo. Prisoners walk languidly and view visitors cynically. As my first class gathered, however, I noticed a brisker pace and sparkling eyes. A few minutes into the session, I could see these inmates were into business. Using strategic principles and the case method, we discussed the economics of armed robbery (scarily attractive), some moral issues (whether car theft is a legitimate form of income redistribution), and what could be done to cut crime.

It all started for me when I saw a presentation by Khulisa, a nonprofit in South Africa doing rehabilitation programs for prisoners. They only admit a select group of well-behaved inmates in a handful of prisons around Johannesburg. Once the students are on parole, Khulisa helps them get established and not fall back into old ways.

At the end of his excellent presentation, one speaker announced that he had done time for car theft; another said he had served eight years for armed robbery. They invited us to attend their classes in prison, and I accepted. In Leeuwkop Prison the inmates quizzed me about what I did for a living and what car I drove. One asked me to help him with a business plan he was writing.

After a few days, Khulisa asked me to teach a two-part class on how to write a business plan. “The guys in prison would really appreciate it,” I was told. Flattered, I accepted, without thinking through how I would do it. I was nervous as over the years I’ve struggled to explain the basics of capitalism to some of my friends outside business, many of whom retain deep suspicions of the profit motive. This class of fifteen men in their twenties was serving sentences of five to ten years for armed robbery, car theft, and burglary. Most were high school dropouts, and all had learned English as a second language.

I wondered if my students might be like the criminals I had met 25 years before. I had spent a week in a prison in the United Kingdom as part of a program for Oxford undergraduates. The inmates I met there were bright but not well-educated. They were not short of creativity and flair, and took great delight giving me tough cases to analyze. They were disappointed that I did not know how to break into a house or a car and taught me by the case method. They prepared me well for GSB cold calls and consulting interviews.

People have told me there is a strong correlation between juvenile delinquency and successful entrepreneurship. Personal experience bears it out. I’ve worked with more than my fair share of founders and entrepreneurs, and been one myself. They have energy, smarts, and little respect for rules. I’ve also seen this in prisoners and ex-convicts, and in a friend, who spent time inside after being a very entrepreneurial dealer in San Francisco.

I decided to hope for the best: treat the classes as if we were at Stanford. In the first class I laid out some basic principles, and then in the second we discussed the prisoners’ ideas for businesses they wanted to start after release. As soon as I started, I realized that it was going to be fun. This was a bunch of guys who wanted to learn. Their notepads were ready. I was getting questions from all angles. Everyone was very polite.

I took them through the ten principles I had picked for their business plans: vision, customers, competitors, capabilities, costs, partnerships, profits, people, capital, and action priorities. I’d planned on talking a while on this before taking them through a case to make it concrete. But the theory went quickly. The looks on faces and the questions asked suggested that they got the concepts. Somewhat nervously, I asked them for suggestions of businesses that they knew. “Let’s leave the ones that you want to do for the homework. What businesses have you already worked in?”

A forest of hands shot up. “I’ve worked in a shop.” I wrote it on the whiteboard. “I’ve worked in a factory.” Again, up on the whiteboard. “I sold vegetables.” Written up. “I sold cars.” The class laughed. I looked around and asked: “Did you sell them or steal them?” The reply came back: “Yes.” More laughter. We completed our list of businesses and picked the first to analyze. The winner by acclamation was car thieving.

I was a bit concerned that I might be helping them be better criminals, but I hoped this discussion would give them a chance to understand the principles they would use in legal businesses. In any event, there was nothing I could teach them about car theft. They taught me a lot, actually. Prisons are huge colleges of crime, which is why so many prisoners come out better criminals. As we went through each of the ten principles I had picked, the discussion dove into much more than I had expected.

Segmentation came up as the critical issue when discussing customers. “There are different kinds of customers. Some want cars with keys while others will take them without.” In South Africa, cars are stolen either while parked or by holding up a driver and taking the car with the engine on. “With keys” requires carjacking.

Custom ordering came up, too: “The best [customers] are the ones that give you a specific order, you know, for a red BMW 3 Series convertible, or something like that. They pay well if you deliver exactly what they want. But nothing if it is not exactly right.” Only the week before the newspapers had reported that car thieves had driven a car back to its owner and told her, “It’s the wrong color.”

Discussion of costs took us into risk and return. I asked the class what was the biggest cost of business in stealing cars. “You might get shot.” Curiously, they reckoned that the risk of getting shot was less if you were carjacking than stealing from a lot, as the car was ready to drive away.

On the spot I remembered what Q Belk had taught me about risk when he took me white water rafting. And I remember his retort about understanding risk when someone asked him what climbing Mt. McKinley had to do with investment banking. We had a very rich discussion, as my class also appreciated risk on so many levels.

I brought up strategic partnerships with trepidation because it’s a slippery concept that the best business minds have trouble gripping. “If you are a car thief, who might you want as a partner?” I asked. Multiple voices answered together: “The police.” I learned more about corruption.

After car theft, we had good discussions on running legal businesses, including a bar and a factory. Then I gave the class its homework: Develop a 10-point plan for a business they would like to start when they got out.

The one thing that prisoners do the world over is to dream about what they will do when they get out. This group wanted to run businesses legally, so they had thought through their ideas well by the second class.

One of the quieter students said: “I want to open a bookstore.” Everyone looked at him curiously. “In my township there are 600,000 people, 12 schools, and no bookshops. People have to travel 15 kilometers by taxi to buy books for school.”

Another had put together a detailed spreadsheet of his cash flows for the first year by hand. (There is no Excel in prison.)

Yet another had some interesting ideas on hiring. “I’m going to hire ex-convicts. They will work harder, as they have something to prove. And I know the tricks so I can make sure that they don’t steal.”

The students were very helpful to each other, asking, “How will you make money with that?” and in offering good support. The class praised the aspiring custom furniture maker for his talents with wood. The potential wholesale grocer was acknowledged as being very sharp with numbers. How the class treated each other reminded me our time at the GSB. They were collaborative, kind, and always encouraging each other.

We also touched on ethics. When discussing car theft, two visions were proposed: to make money and to redistribute income. The class agreed that car theft is no longer a legitimate form of taking from the rich to give to the poor. But in apartheid days “tsotsis” (thieves) had acquired a certain cachet as guerrillas against the police and therefore the apartheid regime.

This is a bigger issue in South Africa than in most countries. The strategy of the banned African National Congress under apartheid was to make the country ungovernable. Taxes and rents went unpaid. The police were disrespected and disobeyed. The ANC, which came to power in the 1994 elections, is now on the other side of the fence.

I was in South Africa as a partner for Bain & Company, and was lucky to have as my client the South African Revenue Service, then headed by Pravin Gordhan, who later became the Finance Minister. As an ANC leader, he was tortured by the apartheid police. As a tax collector he enabled the government to reduce tax rates, increase spending, and cut the deficit, all in the same year.

I asked the class what they would do to cut crime in South Africa if they were president. What came back was remarkably simple: prosecute all crimes, even when committed by white people; keep the police honest; and improve the schools.

That’s why teaching the class took me back to the GSB. Once again, I was in a room full of bright folks with a passion for business who brought a wide range of experiences and backgrounds to discussing the concrete and the abstract.

My students wrote impressive business plans and graduated high school while in prison. I’m grateful that one has kept touch with me over the 18 years since I taught that class. He emailed me yesterday, funnily enough. After he got out of prison, he started a business called Sisonke with three others to provide outsourced data services to labor unions. That business struggled, so he worked at a bank for a few years where he once won “Employee of the Month” and a trip to Italy with his wife. He bought a house and saved up to buy a truck. He hired a driver, found customers, bought another truck, and then left the bank to run his trucking business. Over the years he has developed a very dry sense of humor. You would all enjoy meeting him.

I’m still in touch with Khulisa, too. In 2011 I helped the found Khulisa UK, and served four years as board chair. We took programs from South Africa to the UK where they worked like a dream. It can be hard to raise money for “criminal justice” so I tried a fundraiser where we mixed friends from business (think of how curious and charitable our class is) and graduates of the program (think of ex-convicts). We had a room full of bright, curious entrepreneurial people. We realized that we had more in common than we thought. It even inspired a book. You would have enjoyed being there.

I could not have done it without you. Thank you for what you all showed me at the GSB, and for being such good friends since.