Prof Hunter: The hypothetical is confusing to me. I don't understand what you mean when you say "create a high-protein breakfast for a poor farmer in a developed country." Does that mean that poor, foreign farmers are the only customers or that they are going to supply the grain to the MNC? And is MNC foreign to that country where the farmer lives or just doing business there? So when you ask " Where would the money be invested?" I can say that even without answers to the questions above, the answer is clear: invest it where you'll make the most profit.

And when you say "This is the essential point.", I must say that I agree. But I am not what you mean when you say it. Managers have a responsbility to act in the best economic interest of the firm's owners or shareholders. At least they do in the US. They can and should be fired for making investments that have clearly lower profit potential or expected returns when better prospects are known to exist. So in your example, the company in question should not invest in the product for the "poor farmer". Rather, some other firm should. And there is the essential point. In a properly functioning economy there will always be competition, that is to say, other firms who can also provide the same kind of goods and services. The important thing to keep in mind is that all such firms do not have the same incentive, cost, supplier, distribution, and resource structures. What is unprofitable for one firm can be profitable, even highly so, for another. In a competitive market, if one firm has no incentive to make the hypothetical cereal, another will. But without a competitive market and the opportunity to make profits, no one will have the incentve. That's when you have problems.

MBAStudent: One thing which has changed recently is the increasing adoption of the "bottom of the pyramid" idea. The decrease in population growth combined with slower and slower economic growth in the OECD countries have resulted in the corporations trying to find growth in less developed countries. This has resulted in more emphasis on providing services/products to the poor. The poor as customer is one of the highest respect given to these people at anytime in history. See, the idea that poor people are not intelligent is misplaced as you would know and so is the idea that they need support, aid etc. These ideas somehow show the poor person in a "weakened" state. However, the poor as customer is a state of strength. A state which shows buying power and demand. Which is readily understood by many people around the world who understand the language of incentives.

Prof Hunter: I am not sure what you mean to say. No one prefers a poor customer to not-poor one. Poor customers buy less and, more importantly, make economically sub-optimal decisions. For example, poor people will but one of several things- one tomato, one potato, one pint of milk at a time- and in smaller sizes, thus not enjoying bulk and volume discount available to someone who is not poor.

MBA Student: Earlier you said that "As I see it, the problem with poor countries is that they don't have enough people with the "misplaced emphasis on profits" as you put it. This is not just my opinion, there is substantial empirical evidence to support that conclusion." I am surprised at this conclusion. Coming from India I certainly believe this not to be true. There are many people in the poor countries who have "similar misplaced emphasis on "maximization" of profits". That is not the reason for the failure of development. It is more complex that what I can explain or understand but I do know that one of the main reasons is the lack of institutions and policies. Democracy which you have mentioned earlier is one such institutions. Capital markets, freedom of press, Education, Company Law, Justice system, law and order etc are some of the kind of institutions which are needed to make this happen.

Prof Hunter: Excellent points. Look at this list of countries ranked by GDP per capita. Start at the bottom of the list, i.e. where the poorest countries are, and begin working your way up. As you do, ask yourself this question: how friendly is this country to free market capitalism. Or ask a set of simpler questions: Does this country have a stock exchange? a central bank? How many business schools does it have per capita? What kind of property rights protection does it have? I think you'll see that at the bottom of the list the answers are: No; No; very few, if any; and very few if any. You'll also not that the higher you move up the list, the more the answers change to Yes; yes; many; and many. All of that is to say, poor countries are the ones that are least welcoming to or able to attract capital. Put quote simply they are averse to capitalism. The world is awash in capital waiting to be invested and, unfortunately, equally awash in countries that don't understand what they need to do to attract it. I know where I think the problem lies; it is as you say above- a lack of the appropriate institutions. I agree that there is a lack of the right institutions. But I I take issue with your conclusion that "misplaced emphasis in the poor countries on profits" is something that is a problem. But, if you'd like to blame someone, blame the leaders of governments of the poor countries. For they are clearly they are doing a poor job.

MBA Student: I believe that due to the nature of the success, money and power achieved by these corporations they are placed in a better situation to provide services to the poor, of course at a profit, then the multitude of small businesses in poor countries.

Prof. Hunter: One of the problems that MNCs face when entering under-developed and poor countries is the lack of infrastructure- everything from unpaved roads to inadequate telecommunications infrastructure, corrupt local governments and officials, lack of respect for the rule of law, lack of educated locals, antiquated laws and lawmaker who want money to change them, different work ethics, and so on. These are not the fault of the MNC. It is or should be the express policy of the home government to remedy these problems. That includes, above all, first making their economies hospitable to entrepreneurs and business people within their own borders. Look at that list again and ask yourself how many of the bottom countries - Myanmar, Burundi, DR Congo, Ethiopia, Uzbekistan - are doing that.

MBA Student: Think about it, the innovation, R&D, infrastructure, people skills etc required to create products and services are vastly different from what succeed in the developed world. The big corporations in the world have the power and money to make his happen.

Prof. Hunter: Big corporations and their managers are not omnipotent or omniscient or omnipresent. They only want you to think they are ;-) Once you've worked in them long enough, you realize they have very real limitations on what they can achieve and that what they do achieve requires sensible governments with whom they can cooperate. They are not laws unto themselves, though I suspect a few would like to be.

MBA Student: Anyways, I could be wrong in this. At the end of the day, systems and incentives make things happen I guess. I am not sure.... My thoughts, and I apologize for a longish mail. Cheers,

Prof Hunter: I am not entirely sure either and admit I have plenty to learn. Still, I enjoyed your email exchange immensely as it caused me to think harder about some ideas I hadn't lately given enough consideration. Here's something I think we can both agree on is a good thing: The Village Enterprise Fund.