Win-win chicken and egg story.

When it comes to chicken and egg stories, John Wood's is hard to beat. His `small-is-beautiful' economic ideas have transformed the lot of Malaysian farmers--and created a whole new `finger-licking good' taste in chickens for the Malaysian palate.

Wood is Managing Director of Sonodyne International, an Australian company involved in high technology transfer, particularly in Malaysia. But in the early 1970s he was enjoying the high life in Hong Kong as a highly paid accountant for the firm of Peat Marwick. There he was in charge of the totalizator at the Happy Valley Racecourse, during which time the turnover increased from HK$3.5 million per race day to HK$35 million per race. He thought he was `very happy being completely self-indulgent'.

But then, as he puts it, `I encountered trouble'. Friends encouraged him to examine his life `in the perspective of absolute moral standards'. As a result, he gave 12 months' notice to his firm and the Jockey Club. At the age of 36 he entered Monash University in Melbourne to study economics and the Malay language. His teacher happened to be Tengku Kammaruddin, a member of one of Malaysia's royal families.

Four years later, Tengku Kammaruddin, by then head of Dunlop Australia's rubber gloves division in Malaysia, invited Wood to visit the country. Tengku introduced him to the Lau family of seven brothers, who raised chickens and sold their eggs in the markets of Johore. Meeting them gave Wood an idea of how to apply the economics of income redistribution which he had studied at university.

He suggested to the senior Mr Lau that instead of selling eggs at 60 cents each, he should buy an incubator and sell the day-old chicks for M$3 each. Mr Lau promptly purchased six incubators. Wood then suggested that instead of selling the chickens, the Lau brothers should give them away free to local farmers on a `buy back' arrangement. The Laus would buy back the chickens, fully grown after 28 days, and sell them on as table birds. Soon they had signed contracts to supply chickens to local hospitals and military camps.

This, says Wood, created a `classic micro-economic win-win situation'. The farmers were happy they had no capital outlay before earning a good income, and the Lau brothers were now selling chickens at 20 times the profit they had been making on the eggs.

However, `the major benefit came from the macro-economic situation,' says Wood. Other groups began to follow the Laus' lead and the system became widespread throughout Malaysia. Chicken, once regarded as a luxury, became relatively cheap and accessible to everyone, just at a time when fish, a previous staple diet, was rising in price due to depleting stocks.

The Lau brothers now own around a third of Malaysia's entire Kentucky Fried Chicken chain, and are supplying chickens by the million each month. Their company has been successfully floated on the Malaysian Stock Exchange, and all seven Lau brothers are now millionaires.

Wood concludes that he saw the Laus' situation as `an opportunity to fill an economic need for the benefit of Malaysia'. He acknowledges the different motivations at work: `the Lau brothers' motives were simple--increased profits. The farmers' motives were simple--better living conditions for their families. Mine was also simple. I was able to demonstrate, at least to myself, that good profits can be earned from good principles, in this case financial aid to the farmers and cheaper protein to the population.' Wood asserts that `an enterprise can adopt ethical, moral and honest principles and not suffer as a result. Just the opposite in fact: principles put into practice can increase profits.'