What I Learned Teaching Business Behind Bars

By Jon Huggett, MBA '85

Published in Stanford Business on August, 2003

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’ve been a partner with Bain & Co. and run a startup, so I thought I could offer something. I also was intrigued, as I’d spent a week in prison myself 25 years ago. What I did not expect was to be inspired by inmates whose enthusiasm and smarts for business reminded me of my Stanford Business School classmates.

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 passionate about 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. (Their responses were very Rudy Giuliani.)

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 to the medium-security group 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. My own business education has been with business people. I started working in retail 30 years ago, got an MBA from Stanford, and have received and given training at various companies, including P&G, BCG, and Bain & Co. But over the years, I’ve not had much success explaining the basics of capitalism to my friends outside business, many of whom retained deep suspicions of the profit motive. This class of 15 men in their 20s was serving sentences of 5 to 10 years for armed robbery, car theft, burglary. Most were high school dropouts, and all had learned English as a second language.

Two experiences helped me, though. Years of presenting to CEOs had taught me about getting to the point. I also could make some guesses about my audience, as 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, not unlike the job interviews I have given since to students in business schools. They were disappointed that I did not know how to break into a house or a car and taught me by the case method. No, I have not used these skills on any property but my own!

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. They have energy, smarts, and little respect for rules. I’ve also seen this in prisoners and ex-convicts, and in an old friend who is now inside. I knew him 10 years ago in San Francisco and just read that he got arrested for dealing in a huge amount of drugs. He always was very entrepreneurial.

I decided to use the first class to teach basic principles and the second to discuss 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 10 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 10 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.

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.

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. Even today “tsotsi-taal” (thief language) is the hip slang of the country.

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.

Pravin Gordhan, the head of the South African Revenue Service, remarked to me on the paradox. An ANC leader, he was tortured by the apartheid police and now heads the transformation of part of the government. He was so successful in improving tax collection that last year the government was able to reduce tax rates and increase spending while cutting the deficit. But he says that he still has a long way to go. Many South Africans do not yet see paying taxes as a civic duty.

I asked the class what they would do to cut crime in South Africa if they were president. What came back was similar to the changes that have transformed New York: Prosecute all crimes, big and small; keep the police honest; and improve the schools.

One retired armed robber educated me on the scarily attractive economics of his business. He made about $900 per robbery and could do about eight per year. This is good money in South Africa, where $2,000 is a good annual wage for the lucky ones who have work, and he had never managed to get a full-time job. On his 15th robbery, he was betrayed by a former accomplice, caught, and convicted. He was relatively unlucky. In 19 out of 20 carjackings, for example, the criminal is not caught. Many who are arrested get off. He served six years.

Prison itself is a scary prospect in South Africa, where 30 to 35 are crowded into a cell. Gangs rule. Estimates for HIV infection rates vary from 45 to 75 percent. I was told that gangs sometimes punish prisoners by deliberately raping them to infect them in a process called “the slow puncture.” Forget trying to get drugs for treatment.

Most of my students are still inside, but they are getting out one by one. They are lucky to be a part of Khulisa’s program. It has helped many of them graduate from high school while in prison and to learn other skills. When they get out they join a reintegration program to stay out of crime, rather than just go back to their old friends and old ways.

Their business plans were impressive and, frankly, they need to be. Few employers want to hire ex-convicts in a country with 40 percent unemployment. Starting an honest business would keep them out of crime, provide a bit of money and dignity, and maybe employ a few of the millions of unemployed. If they fail, I’m convinced it will not be for the lack of energy or a nose for business.

That’s why teaching the class took me back to the GSB. 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. Anyone with the experience of Silicon Valley would have recognized the entrepreneurial talent. It’s a pity that they spent their first 25 years without good education except in crime.

I hope I helped them. The class gave me so much, too. I learned something about how not to get my car stolen (again). But most of all their eagerness to learn and their passion for business energized me. So many business people I see lack this. I wish them every success. And I hope that they can keep inspiring people!

New Beginnings
Since they were released from a South African prison last year, Ben Maphosa, Thabo Hermans, and Humphrey Shongwe have founded a venture with partner Catherine Wreyford of NKS Consulting. Called Sisonke, a name that means “together” in four South African languages, the business provides outsourcing services such as data capture, warehousing, and analysis, and technical assistance to labor unions.

“We have developed a program called Ilungawise [meaning “member wise”] to capture more than 800,000 members’ details,” Maphosa said. “We charge for the software and for data entry.” The hardest part, he added, is marketing, but the group hopes to expand and employ other ex-offenders within five years.

Maphosa, Hermans, and Shongwe are graduates of Khulisa, a program founded in 1997 by South African Lesley Ann van Selm to rehabilitate prisoners. Largely staffed by ex-offenders, the organization offers weekly workshops in creative writing, personal transformation, group therapy, and vocational skills development to inmates with good prison behavior records. My business plan class was part of that program. On release, Khulisa links participants to jobs and self-sustaining opportunities pledged by local businesses. Fewer than 20 percent of its graduates have been rearrested after their release compared with more than 80 percent for the prison population overall.

“I got involved with Khulisa, not really knowing what it was,” says Hermans, who had landed in prison after starting a life of crime: stealing cars and burglarizing houses as an adolescent member of a gang. The workshops allowed him to see himself in a different light. “I realized I was a talented person and acknowledged that I could—and must—set myself goals in life.”