There are at least 7 billion different perspectives on morality, but the viewpoint I like best defines sin as the failure to reach your potential.
There are billions of definitions of morality, but a good one defines sin as the failure to reach your potential. Tweet This Quote
By this definition, we have at least 2.6 billion deep sinners—the 37 percent of people who live on less than $2 a day. They are the future Steve Jobs’, Mohandas Gandhis, Madame Curies and Pablo Picassos who will instead eke out a living as drug dealers, child soldiers, prostitutes and slum dwellers.
The $3 trillion dollars or more we have wasted in misguided development aid probably represent an even bigger sin. But, it seems to me that the worst sin of all is our abject failure to achieve scale for the handful of projects that have produced measurable positive impacts on the lives of poor people.
Over $3 trillion dollars has been wasted in misguided development aid. Tweet This Quote
How can we successfully achieve scale? It takes planning and designing from the beginning, and the unleashing of powerful positive market forces at the locations where poor people are buyers and sellers.
The only way to unleash those forces is to demonstrate to global businesses that they can earn attractive profits selling transformative products to poor customers.
Is it immoral to profit by selling to the poor?
This is exactly what I have dedicated the rest of my life to accomplishing. But, I am not an economist. How do some of the world’s leading economists view the prospect of earning sizable profits serving poor customers at scale?
“No!” says Milton Friedman, the celebrated free market economist.
Friedman believes that a marketplace of enterprises earning profit within the rules is the most powerful lever to improve society.
“Yes!” says economist and Nobel Prize winner Muhammad Yunus.
Yunus believes that investors in social businesses should only get their money back. In my view, that adds up to a sizable interest-free subsidy, which is a constraint to scale.
The only way to reach scale is to show businesses they can profit selling transformative products to poor customers. Tweet This Quote
My answer to extreme poverty
The microfinance movement and the work of iDE combined have probably helped about 50 million extremely poor people move out of poverty. Even if we have helped 100 million poor people move out of poverty, this amounts to less than 4 percent of the 2.6 billion people in the world who live on less than $2 a day. This is pitiful!
Even if we helped 100 million people move out of poverty, that’s less than 4 percent of the 2.6 billion people in poverty. Tweet This Quote
I define meaningful scale as any strategy or initiative capable of helping at least 100 million $2-a-day people move out of poverty by at least doubling their income. We desperately need to find ways to bring to scale the few comparatively successful models for development that are available.
What are the common features of initiatives that have truly helped extremely poor people move out of poverty?
- They begin by thoroughly listening to poor customers and thoroughly understanding the specific context of their lives.
- They design and implement ruthlessly affordable technologies or business models.
- Energizing private sector market forces plays a central role in their implementation.
- Radical decentralization is integrated into economically viable last mile distribution.
- Design for scale is a central focus of the enterprise from the very beginning.
It is clear that all of these factors are integral components of a business system, but this takes us back to the original question: should it be a business system that enhances the livelihoods of poor people without making a profit for outside investors? Or, should it make a profit for investors as well as the poor people served by it?
Design for scale has to be a central focus of an enterprise from the very beginning. Tweet This Quote
To me, the answer is obvious. The only way for a business to help at least 100 million poor people move out of poverty is to follow the laws of basic economics, which means providing an opportunity for both poor and rich investors to earn what they consider to be an attractive profit from their participation.
I have no doubt there are huge profitable virgin markets all over the world serving $2 a day customers waiting to be tapped. By the laws of economics, creating a new market requires taking a large risk, but the reward should be commensurate to the risk. If the new venture is successful, all the investors—the poor customer who buys the product, the shopkeeper who sells it, the company employee who makes or transports the product or manages the supply chain, and all the financial investors in the company—should make an attractive profit.
Providing all investors an attractive profit
Here is an example. Coal contributes 40 percent of global carbon emissions and releases millions of tons of heavy metals and other pollutants every year, worsening climate change and sickening people around the world. Properly carbonized biomass can be substituted for coal and co-fired alongside it in proportions up to 80 percent.
The only way for a business to help at least 100 million people out of poverty is to follow the laws of basic economics. Tweet This Quote
The world’s farmers produce four billion tons of agricultural waste each year. If 100 million tons of this agricultural waste could be effectively and affordably carbonized in decentralized rural settings, a multinational enterprise finding a cost-effective way to make it happen could reach global sales of $10 billion a year within five to ten years. Such a company would not only provide attractive profits to investors willing to take on the substantial risk involved, but would furthermore double the incomes of at least 100 million $2-a-day enterprise participants in developing countries.
The only way a company like this can reach scale is with the financial backing of for-profit venture investments. The only way to justify those comparatively high-risk, early-stage investments is if the company provides the opportunity to make exceptionally good profits if it succeeds. We have two options:
- One is to keep hoping that governments will come through with billions of new aid dollars, keep asking individuals to dig deeper for charity dollars, and hope that the low-or-no-profit venture capital space takes off and becomes a truly global phenomenon. We could plod along full of hope but low on results, celebrating increases in impact of fractions of a percentage point.
- The other option is to blend the designer’s sensibility, the artist’s creativity, the ground-level aid worker’s understanding of local context, and the entrepreneurs’ dynamism and drive for success, and create profitable global companies that serve poor customers with products and services that help them rise out of poverty. We could unleash the full power of the greatest force in human history – profit – and start ending poverty by the hundreds of millions.
It would be immoral to do anything else.
Update: Please watch this video to learn my thoughts on designing the future corporation.
This article published in March 2014. It has been reposted to inspire further conversation.