Archive for the ‘social enterprise’ Category

Rest in Peace, Verghese Kurien

September 12, 2012

The news this week in India is full of tributes to Verghese Kurien, the father of the “white revolution” there. Thanks to his life’s work of helping form milk cooperatives throughout the country, dairy farmers thrived, and India went from milk deficiency to production titan over the last several decades.

Kurien’s death on September 9 even caused the Amul girl to shed tears — she’s the cartoon mascot of the Gujarat Cooperative Milk Marketing Federation who anyone who’s bought butter in India knows well.

The Jester believes the story of Amul is exactly the kind that the development community needs to tell more of: helping those at the roots of the global economic tree self-organize so as to improve their bargaining power with respect to those who control the trunk. It’s notable that in awarding him the World Food Prize, the committee cited “his recognition that feeding the world’s citizens includes coordinating breakthroughs in production with effective management and distribution strategies” (NYT Sept. 10, 2012). The Jester can almost hear the sound of one hand slapping… the collective palms of the WFP officials striking their foreheads when they realized it’s not just chemicals, new seeds, and artificially inseminated cows! You need effective management and distribution strategies! Whoa, what an idea! Did you hear that, Rich Philanthropists and Multilateral Policy Makers?

Apparently, Kurien didn’t stop at milk: In the 1980s, he began working to expand vegetable oil cooperatives. If there were a Kurien for every smallholder farm product, “international development” might very well go the way of “groovy” and “far out” in the American lexicon.

“Thanks, Jester, for stating the obvious,” the old-hat reader might say. “But why is this topic of interest to the Jester?”

What caught the Jester’s eye was a little sentence buried in an obituary by the New York Times (thanks to Melissa Ho for sending). It said, “Mr. Kurien returned from doing graduate work in mechanical engineering… and began working at a government research creamery.” That’s right — Kurien studied mechanical engineering!

Looking back from 2012, it’s incredible that Kurien didn’t feel the crushing internal pressure “to put his technical skills to use for society” as the Jester all-too-often hears from idealistic technology graduates (who are obviously not reading the Jester’s archives!).

It’s amazing that he didn’t decide to design a fancy-but-affordable contraption to milk cows more efficiently (cow-milking machines designed in the developed world are not sensitive to the subcontinent’s local context — there are lots of buffalos in Mother India, don’t you know? And, buffalos from different states respond to different languages, to say nothing of the varying dialects from district to district.).

And it’s absolutely, positively stunning that he didn’t invent a wireless udder monitor that sends cattle owners an SMS when their cows are due for a milking, thus saving dairy farmers the arduous task of squinting to see if an udder is full. (Then again, Kurien had the great advantage of having been exposed to the challenges of dairy farmers well before time division multiple access communication protocols.)

Yes, that’s right — it is actually possible to apply the problem-solving skills that one hones through a good engineering education towards helping people organize, own, and manage their own production capacity, as opposed to helping design fancy gadgets that streamline production capacity that otherwise barely exists.

This week, the Jester’s hat flies at half mast. Verghese Kurien — the Jester wishes that you are resting in a deep, profoundly well-deserved peace.

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Posted in agriculture, economic development, Not Quite ICT4D, social enterprise | 1 Comment »

Where Should Your Dollars (and Hours) Go?

February 26, 2012

Speaking of 99%, although the Jester does find himself repeating much of what he says on panels and other public forums, he does try to find at least 1% that is novel.  This he does not so much because innovation is an unqualified good, as everyone seems to believe these days, but because otherwise, he and any returning members of the audience might, like some Edward Gorey character, die of ennui.

At the Mobile Disconnect panel at the New America Foundation, the discussion took an interesting turn around the use of public and donor funds. At one point, the Jester’s doppelganger felt the need to say something along the following lines: “It’s not that I’m against the existence of the technology itself, it’s more a question of how public and donor funds should be applied.”

The first half of this statement need not be explained to careful readers of the Jester. (For the rest: technology amplifies human intent and capacity; so, technology’s net impact might be good, bad, or zero, depending on the context.) The second half, however, deserves more explanation.

How exactly should public and donor funds be applied in international development? Well, one answer that seems hardly radical is to suggest that they be used to support efforts that other sources of money, i.e., that from the private sector, neglect. That is, to address market failures.

The private sector, of course, is renowned for spending its money on technology, but rarely does it fund the development of human capital. In fact, it wouldn’t be too great an exaggeration to say that the private sector hates to invest in human capital. For example, when the Jester was in the employ of a large technology company, he used to hear this bit of corporate mumbo-jumbo: “Your career development should be 70% on the job, 20% from others, and 10% from formal learning programs.” Translation: Any learning you do is incidental, except for a nominal amount we’ll spend on formal training. Even 10%, though, is a considerable overestimate – assuming people work a conservative 250 days a year, does any company actually pay to have 25 days of professional training for every employee?

Otherwise, most corporations do not pay for any significant portion of the schooling of the employees they hire, or for the education of their communities. Even job training is avoided unless absolutely necessary. Examples like India’s Infosys sending their fresh hires to several months of training are exceptions that prove the rule. (They’re also, incidentally, a sign of how poorly the educational system up until that point is meeting the demand for skilled labor.)

In development, this fact is even starker because the people concerned are so often unemployed by the formal sector. Thus, even corporations that might choose to invest in their own employees would have to be spectacularly foolhardy to contribute to the education of those not in their employ. (The Jester will not bother explaining why corporate social responsibility [CSR] initiatives hardly qualify, but readers are welcome to ask – there hasn’t been a Fool for the Day for some time.)

Of course, at this point, some readers will raise the question of privatized education. The Jester could go on and on about how efforts to privatize public schools have failed repeatedly, or that the famous low-cost private schools of India are still out of reach for many despite their ridiculously low tuitions, or that private tertiary schools tend to scam many of their students, but instead, he will cut through all such objections with one stroke: Let’s grant that some portion of education is privately run.

That still leaves the question of who will cater to the hundreds of millions of school children for whom education is a distant dream or a terrible joke. That still leaves the question of who will provide vocational training to the hundreds of millions of adults who could benefit from it. That still leaves the question of who will cover the basic healthcare for billions of those without.

Actually, the idea that public and donor funds should cover certain basic things for the least privileged members of global society is hardly new. But in this age of confusion about the capabilities of the private sector, there’s a tendency to forget that the private sector not only has strengths – of focus, of mission, of efficiency – but that it also has certain glaring weaknesses. The private sector, for example, swims upstream where the money is and towards products people like to pay for (which, alas, are not in health and education, especially among the undereducated). There’s always some line of household income below which the private sector fails to find profit. And, the private sector’s primary response to someone with subpar capacity is to fire them and hire a replacement. That’s right, if the private sector were in charge of development (even more than it is), it would fire the world’s smallholder farmers and their non-literate children.

In short, there are billions of people who could benefit from a boost in their human capital, and that boost is not coming any time soon from the private sector. Thus, for anyone even remotely charity-minded or progressively inclined, it makes sense to put resources not on what the private sector will take care of anyway – e.g., in the case of mobile… mobile handsets, mobile networks, mobile money, mobile apps, mobile start-ups, mobile mobile – but for those people, and towards those things, that the private sector routinely avoids.

And, this applies not just to public and donor funds, but also to public and donor efforts. Is it really worthwhile for people who care for the poor people of the world to invest their efforts helping mobile operators figure out yet cleverer ways to extract disposable income from their consumers? The private firms will do that themselves.

Meanwhile, there remain close to a billion people who are illiterate, whose illiteracy isn’t going to go away just because they can exchange money over their phones or contact friends on Facebook.

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Posted in conferences, mobile, social enterprise | 1 Comment »

ICT *or* Development, Part 3: The Jester Meets the White African

November 7, 2011

A blog post by the White African attacks the term “ICT4D.” As a card-carrying citizen of ICT4Distan, the Jester takes offense! No, wait, the Jester agrees with White African! Actually, no, the Jester still takes offense! Throwing pies at ICT4D is the Jester’s job!

How very confusing.

Never fear – whenever the Jester is confused, he takes a few deep breaths, practices mindful self-awareness, centers himself in a place of deep humility, and then looks for other people to blame. In this case, the White African is a convenient Fool for the Day (FftD®)!

It should first be noted why he is not Fool for the Year (FftY®): The White African is absolutely right when he says that “ICT4D” is a terrible term. As communication researcher Jonathan Donner notes, critiques of the term abound. Among the most stinging critiques is one by the Jester himself, that the abbreviation sounds too much like a coinage by the dyslexic cousin of rock/pop singer, Prince.

In fact, when the Jester was thinking about what domain name to purchase for his blog, he considered many slicker, more appropriate names such as “TBBITW” (The Best Blog in the World) and “Un-OLPC,” but a book on branding strategy noted that if one is handsome enough to turn heads on the street, sexy names are superfluous; it’s better to go with an accurate descriptor. The Jester chose “ICT4D Jester,” because “ICT4D” is the most recognized of the many bad buzzwords circulating in the field. “Japan,” too, is a Western mispronunciation of a word that means “the source of the sun,” which is ridiculous from many perspectives, but the word is too thoroughly ensconced. The country is not about to change its name to something more appropriate such as “the source of really sexy people.”  

So, ICT4D remains a terrible non-acronym whose only redeeming quality is that it is a lot better than ICT4E, ICT4A, ICT4YAT, (“Yet Another Thing”) M4D, YAT4D, RHOK, OLPC, and BOP. The FftD White African is right to call out its patronizing, condescending tone. (Though, that particular accusation coming from a man who calls himself “White African”… well, let’s just say it gives the Jester a new blog idea: “Yellow American” – a blog highlighting technologies invented by clever white Americans. Tagline: How did they manage to invent those things on their own?!)

But paternalism can’t be helped in development, as the Jester believes. When rich, powerful, educated people interact with poorer, less powerful, less educated people with the intent to somehow help them out, it is necessarily paternalistic and condescending, even if one learns a lot more from the spear-chucking natives than the converse (a cop-out defense that competes with “Some of my best friends are X!” for the world’s least-convincing excuse). If we really wanted to avoid paternalism and condescension altogether, we’d stay out of international development entirely. But even the Jester doesn’t have that level of wisdom.

So, if the White African is right to criticize the term, why should the Jester call him confused?

 

This question dovetails nicely with the other series of blog posts that the Jester has been remiss in completing (labeled ICT *or* Development and ICT or D, Part Deux). In those posts, the Jester has been trying to explain why it is so difficult to succeed at making a profit and serving poor customers with the same activity. Due to a karmic connection, those posts are based on a talk the Jester’s alter ego gave at the iHub, home of the White African.

The underlying issue is a deep one that goes straight to the heart of economic development. To compress the last century of economic history into a nutshell,* countries that attempted centralized socialism lost to capitalist countries in the contest to make as much money as possible as quickly as possible. That is to say, the United States won the Cold War. The victors and their economists then proceeded to commit the classic error of overgeneralization and extrapolated the lesson that free-market capitalism is an unalloyed good (buoyed by another overgeneralized hypothesis known as the Kuznets curve).

In the last few decades, however, countries like the United States have been running the experiment of rampant free-market capitalism. Among other things, this led to the dramatic financial crash of 2007-2008, a population unable to wean itself off of resource consumption, and increased inequality, not only economically but also in terms of health, education, and well-being. If that’s what happens under what could be argued is the closest thing to a “pure” free-market capitalism, any reasonable person should be reconsidering the lesson of the Cold War victory.

While capitalism is terrific for economic growth, something else must also be present to ensure other values we care about. In the context of international development, for example, we particularly care about mitigation of inequality. In that context, the something else that is necessary to counterbalance capitalism is progressive activity – which the Jester defines to be any activity that provides more for people who have less. Thus, a progressive tax is progressive activity, because it taxes poorer people less. Also progressive are additional educational resources for children of less educated families and free healthcare for those who can’t afford private care.

Capitalism grows the whole pie, so that there is more for everyone, but it also tends to concentrate wealth, so that only a few actually get the additional slices. Progressive activity distributes wealth and capacity more evenly, but in and of itself fails to generate growth.

And, here is the big secret that everyone knows deep in their hearts, but few seem able to articulate: Both capitalism and progressive activity are good and important; the key is a delicate balance. (The reader who understands this is certain to have an IQ with at least one more digit than that of the average American politician.)

This delicate balance is at the heart of good international development, at least in an economic sense.** Developing countries need a healthy capitalism to grow their pies. Being without a capitalist engine dooms a country to an empty crust. But developing countries also need healthy progressive activity, or the existing inequalities will compound, just as is occurring in countries like India.

ICT4D, being a subset of international development activity, theoretically includes the promotion of both capitalism and progressive activity, but in practice, it tends to embrace the progressive side of things. (The Jester would argue that it is right to do so – business will take care of itself in the end, but progressive activity always needs more allies.) Few people consider that when Infosys – India’s most successful IT company  – uses computers, it is engaging in ICT4D. Yet, the company is undoubtedly contributing to India’s development at a scale far greater than any non-profit ICT4D project, and it is doing so with ICT. It’s contribution, however, is solely on the growth side.

Balance requires weight on both sides, and it’s the difficulty of splitting one activity to serve two purposes that makes it exceedingly difficult to make a profit while serving a poor population. ICT4$ is needed, but someone also needs to focus on D. (The Jester, of course, does not necessarily say that D should proceed via ICT4D!)

 

And, this brings us to the point of confusion of our FftD. In his activities, the White African splits his time between progressive activity and for-profit capitalism. In projects like Ushahidi, he is explicitly using donor money and self-subsidized labor to create software and adapt it for explicitly progressive use, such as crowdsourcing for Haiti. (Self-subsidized because he and his colleagues could conceivably be earning a lot more if they applied their energies towards purely for-profit ends.) On the other hand, at the iHub, he is trying to encourage African technologists to grow for-profit businesses. Among them are folks who’d like nothing more than to become the next Bill Gates.

Much of the developing world needs both – capitalism-fed economic growth and progressive activity catering to its least privileged – and the White African is laudably contributing to both sides. His difficulty with the term “ICT4D” is not due to terminology, however, but rather because of confusion caused by engaging in both types of activity without keeping them conceptually separate. To this day, the White African is juggling two spheres in the same space – the iHub grew out of his success with Ushahidi, and Ushahidi still operates out of the iHub.

Since juggling is something the Jester knows a lot about, here are some unsolicited suggestions, not just for the White African, but for anyone caught with one foot in development as progressive activity and another in development as economic growth…

The Jester notes first that the White African should acknowledge the value of being associated with ICT4D. Ushahidi is a non-profit effort that runs on grants from donors such as the MacArthur Foundation, the Knight Foundation, Humanity United, and the Omidyar Network. Its renown is intimately tied to its non-profit goals; map-and-mobile mash-ups are otherwise a dime a dozen. It’s the progressive use to which Ushahidi is put that makes it unique and why wealthy philanthropists want to make grants to it. Without the ICT4D face of Ushahidi, there would be no Ushahidi.

The iHub, on the other hand, is all about incubating for-profit technology companies. This aspect of the White African’s double life is all about start-up companies and capitalist growth. Of course, no one who wants to make money wants to hear about ICT4D – investors want profit, and the successful ones have long recognized that the most profitable ventures cater to rich people, maybe middle-class people, but definitely not to poor people, or heaven forbid, charitable causes. (Impact investing and the World Bank’s infoDev notwithstanding – those folks (1) lower their return-on-investment expectations, because they know they can’t make as much profit as otherwise, and (2) are anyway living in some la-la land where oil is unlimited and poop doesn’t smell.) To make the iHub successful as an incubator, the smart thing would be to dissociate it from Ushahidi. The Jester would go as far as to get Ushahidi staff a different office, so that their do-gooder ways don’t taint the ambitious capitalists. Maybe one day, cohabitation will work, but it’s not easy when at least one party is struggling to establish itself.

As to the White African’s complaint that foreigners pouring in money towards development efforts are killing the local business scene, that would hold only if they were aiming for the same target market. But, they shouldn’t be. Foreign aid money aims for the bottom of the pyramid, yet it’s the middle and the top of the pyramid that African start-ups should aim for — that’s where the disposable income is (ignore C. K. Prahalad). It’s important to keep business goals separate from doing-good goals. (The White African’s comment  that foreign aid is a cause of atrophy of local governments is closer to the mark, as Dambisa Moyo and others have noted. But, the issue here is not in the giving or accepting of aid, as much as how it’s done. The Chinese often took foreign aid, but then did the hard work themselves with good results.)

Along similar lines, the Jester would advise keeping all other social-impact activity separate from for-profit activity. Conferences should either be about social impact or for-profit start-ups, but not both. Evening mixers should involve development organizations or high-tech entrepreneurs, but not both. Branding should make clear which goal is served, with clarity either on business or social impact, but not both. Staff should be hired by one or the other kind of organization, but not both (the last thing a start-up needs is the anchor of non-profit salaries for its staff). Even dress can conform to the stereotypes of each community: T-shirt and cargo pants might be okay for the dusty development types, but start-up geeks ought to consider at least dress shirts and slacks.

To sum up, the Jester says to the White African: “Yes, ICT4D is a four-letter word (with a number), but wear it proudly in your progressive technology activities, and cast it off – way,way off – for your for-profit ones. Meanwhile, don’t forget that the world needs both types of activity. Of course, the one thing you can’t do is split yourself in two.  And, that, perhaps, is another reason why it’s so difficult to make a profit and serve a poor population simultaneously.”

(*) It’s good to be the Jester!

(**) The Jester does not attempt here to answer the very relevant and extremely hairy question of whether international development should support the economic growth of developing countries when we all know that will only add to the world’s resource crunch and accelerate our date with global economic crisis. The Jester’s hunch is that we should do so, anyway — the demographic transition is our best hope, and not doing so is morally hypocritical. But, that’s just a hunch.

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Posted in economic development, rhetoric, social enterprise | 3 Comments »

ICT *or* Development, Part Deux

August 22, 2011

“It is very difficult to make a lot of money by selling goods or services to poor people in a way that has meaningful, positive impact on their lives, particularly with ICT,” quoth the Jester in a previous post. In this post, the Jester explains why.

 (The Jester imagines a day when millions of college students will learn to quote the Jester when they take the mandatory course, “Technology and Society: How to Avoid the Mistakes of Your Technologist Parents, Grandparents, and Great-Grandparents,” but for now, he will have to be satisfied with quoting himself.)

The Jester suspects there is another Top Ten List in here somewhere, but for now, his meager brain can think of only six reasons why it is so difficult to make a lot of money and serve the poor by selling them stuff. And, here they are…

  • The “Two Birds” Problem: In general, it is much more difficult to simultaneously meet two goals, rather than just one, especially when there is a tension between the two goals. It is hard enough making a healthy profit by itself (ask any Silicon Valley venture capitalist). And, it’s perhaps even harder to have meaningful impact in development. So, setting the goal of both making a killing and having positive impact makes things much harder than either goal by itself.
  • The Ethics Problem: Selling to poor customers raises the question of what to charge them. In making this decision, one can lose money, break even, or make money. Obviously, the first two options do not make anyone a lot of money. If, on the other hand, one makes money, then it leads to the same question faced by Compartamos Bank and SKS Microfinance: Are they laying the conditions for commercial investment, or profiting off the backs of the poor? Muhammad Yunus says of them, “I never imagined that one day microcredit would give rise to its own breed of loan sharks.”
  • The Cost-of-Business Problem: Prahalad pooh-poohed the “poverty premium” – the higher prices that poor communities often pay in comparison to rich ones. Clean drinking water is widely considered “free” in the United States, but anyone living in Kibera will tell you it costs money and/or effort. But, he was wrong to think it represented a major money-making opportunity. The poverty premium exists exactly because poor communities are harder to serve (e.g., bumpy roads to rural villages), riskier (e.g., no credit history), and more likely to buy in small quantities (e.g., sachets). All of these factors contribute to a higher cost of doing business, and while there might be value in trying to shave off every shilling in the cost of a product, shaving is exactly what it will be.
  • The Competitive Pressure Problem: Given the above, any social entrepreneur will be at a disadvantage in the market against not-so-social entrepreneurs. Who will win the fight in the long run? The social entrepreneur tying one hand behind their back so that they can have a positive impact on their poor customers, or the pure entrepreneur ruthlessly chasing higher margins and greater share? The Jester cannot think of a single category of product in which the industry-leader is a social enterprise. (Readers are encouraged to submit exceptions that prove the rule.) Then, guess what industry leaders do to their slower counterparts?
  • The Branding Problem: In the Akshaya telecenters mentioned earlier, the entrepreneurs often faced a branding dilemma: Do they swim upstream and market to wealthier clients who are seeking a higher-class product? Or, do they target their advertising to the very poor as a social service? The dilemma is that it is difficult to both convincingly at the same time. Poorer customers are often scared off by glitzy things that seem out of their reach, anyway. Meanwhile, the last thing that the rich customers want is a product associated with poor people. Don’t believe it? Continuing the unfortunate stream of references to Snooki, the Jester happened upon a news article, which claims that luxury brands send Snooki competitors’ products as a way to lower their appeal. (The Jester refuses to divulge how he came upon this article, for fear or incriminating himself.) The lesson? It’s not easy to market the same product the same way to rich and poor.
  • The “It’s Good for You” Problem: Finally, the Jester arrives at his favorite claim: Given the choice (and there’s always a choice), most people – rich or poor – tend not to purchase things that are “good for them.” How many needs assessments in international development come back with healthcare, education, and skills training as desperate needs of poor people? Almost all of them. And, how many poor people actually pay beyond what they’re already paying for better versions of these goods? Almost none of them. And, this point is doubly true for information, that stuff that is channeled through ICTs. Normally, human beings are precariously perched between self-improvement and sloth. Then, when you have to pay for it, sloth looks pretty good.

This last point touches on the harebrained idea that poverty is something that is alleviated through consumption. Of course, consumed goods can add convenience, pleasure, and some other good things to life. And, sometimes, there are products or services that help a person earn more. But, consumption is the result of having the ability to consume, not the primary cause of that capacity. What matters in development is increasing that capacity, not selling people stuff. In short, you can’t consume your way out of poverty. (Incidentally, this is a major error in standard economic thinking, which routinely conflates the metric – amount consumed – with its underlying cause, which is income and, further, the means to earn income. Consumption correlates with income, but they are not the same!)

In the next post, the Jester outlines his simple-as-possible-but-no-simpler view of development as a way to explain that selling people things and doing development are two very distinct, even opposing, activities.  

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ICT *or* Development

August 14, 2011

[The Jester is in a rambling mood. Those who wish to get straight to business should skip to sixth paragraph, just after the break.]

It’s been over two months since the Jester last wrote, and he returns with renewed amazement at bloggers who blog every week, Facebookers who update each day, and Twitterers who tweet once an hour.

It’s not that those two months have been without comment-worthy incident. The Jester’s notebook is filled with notes to self: “write post on ridiculous belief that associating with a for-profit guarantees breaking even”; “blog about non-profit crisis of faith in non-profit model”; “add Seva Mandir to list of NGOs keeping their eye on the real target of human growth”; “do Q&A entry for people thinking about an ICT4D PhD”; “spank Thomas Friedman for superficial analysis of role of IT in global problems”; etc.

So, the intention to write those posts was all there, and so was the technology. So, the Jester is left to conclude that it’s his own lack of capacity that is at fault. He will conveniently place blame on his advancing age.

Instead of starting with his backlog, which would (in the manner of the Indian rail system) cause all entries to fall behind by two months, he will instead reschedule his backlog to some as-yet-unknown future date (also in the manner of the Indian rail system), and continue with his most current thoughts. (To be fair to the Indian rail system, their on-time rates, particularly on express trains, has improved dramatically in just the few short years the Jester has known it.)

This week, the Jester finds himself in Nairobi, where he will debut a new act titled “ICT or Development: Why It’s So Difficult to Get Rich and Help the Poor Simultaneously.” Those fortunate enough to be in Nairobi can catch the talk at the iHub on Aug. 18. (The announcement does not yet indicate the time of the event, but not to worry – the Jester doesn’t know, either!) Throughout this week, the Jester will, if his advanced age doesn’t prevent him, post portions of the argument. So, to begin…

*

In 2004, the Jester visited some of the Akshaya rural telecenters in the Malappuram district of Kerala, India. These centers were initiated and subsidized by the state government, who sought “100% computer literacy” for the state, meaning that one person in every household should learn the basics of PC operation, e-mail, and Internet browsing. The state saw it as a development project, but unusually for communist-leaning Kerala, the telecenters were meant to be run as for-profit businesses by local entrepreneurs.

The telecenters the Jester saw on that trip varied in their apparent success. One had a row of shiny new PCs in a swanky air-conditioned office space and bustled with customers furiously working through a computer-literacy curriculum. The owner boasted that he was already making a good profit. Another stacked computer equipment floor to ceiling, so that at most one PC was actually usable. The owner said that he dragged members of low-income families in his village to his center to learn about PCs, even if they kicked and screamed. When asked about breaking even, he demurred, “What I care about is the development impact of this project.”

A year or two later, then-PhD-student Renee Kuriyan went back to the same district to explore in depth, and among other things, she confirmed what the Jester had seen informally – that most Akshaya entrepreneurs fell into one of two categories: Those who made money by marketing to richer clients, and those who had some impact on poorer clients, but made little money. A very small minority made money and served poor clients.

Since then, the Jester has seen or heard of myriad attempts to make a profit by serving the poor, or as C. K. Prahalad put it, “eradicate poverty through profits.” Yet, despite the ongoing excitement around social enterprises and the bottom of the pyramid, in actuality, it is very difficult to make a lot of money by selling goods or services to poor people in a way that has meaningful, positive impact on their lives, particularly with ICT. The Jester made a similar point last year as ICT4D Myth 4, and will delve further this week, by explaining why impact through profits is so difficult, why the development world should stop being distracted by this mirage, and what the alternatives are.

But, before he does so, he will insert a few clarifications for those contentious readers who have cued up potential counterexamples. The hope is that this will save the Jester from having to name more Fools-for-the-Day than are strictly necessary.

First, the statement contains a hedge: The Jester only says that it is very difficult, not that it is absolutely impossible to make a lot of money by selling meaningful goods or services to poor people. One or two counterexamples do not falsify the assertion. Even with the hedge, though, the Jester pushes back against bandwagon-jumpers who assume every development challenge can be solved with a for-profit solution.

Second, the thesis is about making a lot of money. A little money is easy. Of course, what is a lot depends on the eye of the beholder, but it seems reasonable to suggest that “a lot of money” is not what microentreprises make when they primarily serve poor communities. There are also some interesting social businesses, of the kind that Muhammad Yunus advocates. For example, Yunus says that microfinance organizations should charge no more than 15% above operating costs (that does not allow for profits a la Compartamos Bank in Mexico). Another example is Aravind Eye Hospital, whose sincere focus on ending preventable blindness keeps the owners from becoming Sir Richard Branson.

Third, the claim is about profit and impact made by selling goods and services to poor customers. Specifically, it excludes instances where the buyer is not the beneficiary. The most prominent cases of this are when governments or charitable donors purchase goods or services on behalf of poor customers. Here, it’s possible to get rich, as some “beltway bandits” do in the United States – these firms, so called for the circular highway that runs around Washington D.C., earn their primary income by winning development contracts from USAID, the World Bank, and other large funders. Bandits raise two kinds of issues: One, do they deserve credit for serving the poor, if someone else is footing enough of the bill to make them rich? If a Good Samaritan pays full price for a loaf of bread to feed a hungry child, does the baker get to claim to have aided the child? The Jester thinks not. Two, if the beneficiary isn’t paying, then does it count as social enterprise or public service? The Jester says public service. The only enterprise in such cases is the outsourcing of a task – that part of it is not social. Conversely, the social intent lies between the funder and the beneficiary. Anyone getting rich in the middle is a profiteer.

Fourth, the net impact must be meaningful and positive. Coca Cola is certainly making a lot money by selling to poor clients, but is their impact positive? Does the joy from carbonated sugar water outweigh the consequences of lost teeth? Is the cost of changing a ring tone really worth the money spent?

The Jester has so far avoided the possible counterexamples of the mobile phone (voice call) and M-PESA, both of which appear to be making lots of money and serving the poor. Indeed, if their net impact on the poor were conclusively positive, the Jester would concede that they are valid – and powerful – counterexamples. But, the Jester would not be the Jester if he accepted conventional wisdom without a fight. He denies, rather, that all the evidence is in yet.

He can’t help but think of the case of television, once hailed as the means to bring education to millions, but now the means by which millions self-lobotomize by watching Snooki. Mobile-watchers rhapsodize about the rapid proliferation of GPRS and the ironically named smartphone, but won’t they just become another channel for Snooki? And, what will corporations with large marketing budgets do when the world’s least educated people can transfer money by phone? It’s almost enough to make this nut long nostalgically for market imperfections.

In any case, the Jester’s core point is a warning for those hoping to get rich by selling to the poor and a caveat for those thinking breaking-even is the only, or the effective, route to scale. In the next post, the Jester will enumerate why it’s so difficult to make a lot of money by selling goods or services to poor people in a way that has meaningful, positive impact on their lives, particularly with ICT.

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Posted in Myths of ICT4D, rhetoric, social enterprise | 5 Comments »

Schadenfreude for Google

January 31, 2011

The New York Times published an article titled “Google Finds It Hard to Reinvent Philanthropy” (the Jester thanks Bill Thies for forwarding). The Schadenfreude in the title permeates the entire article, and the Jester will join in the Freude. Not so much because an entity with deep pockets failed to do something good for the world (that would only merit Traurigkeit), but because that entity started it all with so much hubris… perhaps the greatest sin of international development. Larry Page wanted Google.org to “eclipse Google itself in terms of overall world impact,” and to somehow do it with only 1% of its profits.  

The Jester Googles just like anyone else, and has few doubts about the company’s smarts as a technology company. The Jester’s previous employer viewed Google as a competitor, and so he had reason to keep an eye on Google’s attempts to engage the poorer parts of the developing world.

The Jesterial conclusion is that Google’s strength as a Silicon Valley juggernaut is exactly its weakness in the developing world, and this is a lesson not just for Google, but for other technology companies. Google has a tendency to see everything as a technology problem. Lawrence Simon, a Brandeis professor who is quoted in the NYT article, puts it perfectly: “They were looking for something like a new algorithm — but there isn’t any algorithm that’s going to eradicate guinea worm.” Google, however, persists in the illusion: The title on www.google.org reads, “Technology-Driven Philanthropy.”

Anyone (that may include the reader) who thinks the differences between the developed and developing world can be solved through engineering is overlooking a very obvious flaw with that thesis: The world already has all of the technology it needs for the developed part of it to be developed. The problem isn’t that poor people need culturally appropriate climate control systems. The problem is that the ability to acquire, produce, support, and capitalize on technology is unequally distributed in the world. It’s not a technological challenge, any more than the uneven distribution of gold in the world is an alchemy challenge. (And, the Jester hasn’t even mentioned physical and infrastructural problems, which are decidedly not challenges of bits.)

The corollary of Google’s techno-fetishism is that the company abhors paying for non-creative-class human labor. Google has succeeded in the developed world largely by hyper-automation, by removing or avoiding human labor as much as possible. It all started with Page Rank, which brilliantly recognized that people’s ideas of webpage importance were already embedded in the hyperlink structure of the web, and that that knowledge could be automatically crawled and analyzed. This inclination also explains Google’s beta-itis, where products are left in trial state for centuries. What better way to keep customer service costs low? Even when it does have to pay humans, like the ones who monitor illegitimate content on YouTube, it does so with shame and secrecy.

In the developing world, though, this tendency is the exact opposite of what is required. Google’s attempts to win more eyeballs in poor rural areas, for example, consistently try to bypass intermediary human beings in the communication chain, whether it is delivering health information by SMS in Uganda or setting up rural announcement boards in India. But, as readers of the Jester know, information isn’t the bottleneck! (As proof of that thesis, note that Google’s one attempt to work with live human intermediaries was a telecenter project. If the world’s supposedly smartest company can’t be bothered to learn from the vast critical literature on telecenters, then what chance does an undereducated wage worker have with information dribbling in over SMS?)

Even where information is immediately helpful, it still requires human mediators in the “last mile” who can establish trust relationships, work the human-computer interface, manage cash if necessary, and possibly even provide a little education. That would mean hiring human labor, though, and Google doesn’t want that line item. (Meanwhile, a clever service called “Just Dial” in India uses a variation of Google’s revenue-sharing business model, but over voice calls and with a human-operated call center. Just Dial has turned it into a useful, lucrative business.)

As a result of its developed-world attitude to solving developing-world problems, Google has taken to offering what the Jester calls “thin technology” in the vain hope that just putting good software in the cloud will transform the developing world. Thin technology is technology that isn’t thickly integrated into a working institution. It’s mobile search without trained healthcare workers who can interpret medical information for undereducated patients. It’s Google apps for schools without any attempt to support teachers, administrators, or students. It’s crisis response tools without crisis response teams. To the extent that thin technology is for a world that uses Google and Gmail, some of it might be useful. But, that’s not the vast majority of the developing world.

So, what should Google, or any technology company, do? Strategically, here are the Jester’s recommendations:

  • Ringfence resources, so that the company’s primary business considerations don’t influence what is done. Specify the budget up front, then don’t touch.
  • Allow for a separate goal and strategy. In another technology company the Jester is intimately familiar with, one DotOrg-like group couldn’t decide whether they were philanthropy or business or PR or incubator. Pulled among different objectives, they had difficulty achieving any of them, and the group folded.
  • Disregard mumbo-jumbo about fortunes at the bottom of the pyramid or eradicating poverty through profits. If revenue is the goal, don’t bother with the poor world. Even if revenue flowed in, it will be by profiting from poor people. Is that the real intent? (For more, see the Jester’s post on the BOP.)
  • Emphasize impact over scale. Scaling something with impact makes sense, but shooting for scale before impact is confirmed is pointless, and possibly evil in development, where resources are scarce.
  • If any of the above don’t appeal, stay out of the game. Match employee donations, sure, but don’t pretend to do good while “increasing shareholder value.”

Next, more tactically…

  • Recognize that a technology company’s biggest asset isn’t its technology. It’s its people. What the world needs is more people nurturing, and less technology to solve their problems. Send out engineers to train engineers, managers to mentor managers. Etc.

The Jester doesn’t believe that providing technology solutions is effective in long-term development. In the end, it’s just another kind of charity — instead of giving money, it’s giving technology. However, the Jester is fully aware that technologists desperately want to prove their ingenuity. (Why they aren’t excited about mentoring others to be brilliant is beyond the Jester.) If this is the case…

  • Find organizations that are already effective. (Note here that “well-known” doesn’t necessarily mean “effective.” Any fool can have good PR.) Partner with them in the full, messy sense of the word. Thoroughly understand what they do and see whether anything can be done to contribute to their goals. Technology amplifies existing intent and capacity.
  • Set up (pro-bono?) consulting services for any tools built. Free software is useless to most non-profit organizations unless it comes with training, engineering, and support.

Not a lot to excite a profit-maximizing CEO, alas, but any CEO with real intent in philanthropy should consider pulling a Bill Gates: drop the technology job and move to philanthropy full-time.

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Posted in Q&A with the Jester, social enterprise | 3 Comments »