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--></style><title>Making money WITH the poor (Iqbal Quadir
talk)</title></head><body>
<div>Kevin Kelly's summary:</div>
<div><br></div>
<div>When Iqbal Quadir applied to US colleges from his home town in
Bangladesh he was surprised to discover that not all American
universities were found in Washington, DC. That's how it was in
Bangladesh, where everything of importance was centralized in the
capital city, Dacca. He later realized that Bangladesh was not unique;
in most developing countries, the infrastructure is concentrated
in one or two cities, leaving the rural areas almost blank. As he
acquired degrees and experience in finance, he realized that this
centralization is not only a mark of poorer countries, it is probably
a cause of their poverty.<br>
<br>
Quadir presented this broad outline of development in order to give
context for his belief that technology can alleviate poverty. He
reminded us that 500 years ago, when the western countries were still
"developing" their own societies, their political systems
were no better, and often worse, than the instable corrupt regimes of
many developing countries today. England had a series of kings who
were impeached, arrested, ousted, or beheaded for their crimes. It was
only after citizens were empowered by economic markets did the balance
of power shift from the central king to decentralized citizens. All
steps that devolve power away from a central authority -- including
laws, trade, and education -- will raise democracy.<br>
<br>
In Quadir's view, it's not that centralization per se creates poverty.
Poverty is the natural beginning state of all societies, east or west.
Rather, decentralization is the engine which removes poverty and
brings wealth. To the degree that infrastructure, education, and trade
can be decentralized, wealth will rise in proportion. To the degree
that infrastructure, education and trade are centralized, poverty will
remain.<br>
</div>
<div>Whereas many of us in the west, particularly the digital west,
agree with this intuitively, we act contrary to this observation when
we give large-scale aid to poor countries. As Quadir's colleague
Wiliam Easterly argues in his book<i> The Elusive Quest for
Growth</i>, the billions and billions of dollars spent on aid for
developing countries has not only *not* helped, it has set them
back decades. Aid, as we know it, kills development. This harm occurs
because almost all previous aid has funneled through a central
government or semi-governmental organizations and that official route
tightens centrality. Even if the governments were saintly, and they
are definitely not, the scale of money flowing through these
centralizing nodes prohibits the distribution of resources,
infrastructure, trade, and education. The more aid that arrives, the
less development can actually happen.<br>
</div>
<div>Technology is the escape from this quandary. Quadir came to see
that "technologies that connect" could liberate
productivity. He matched his experience in Bangladesh as a 13-year-old
boy having to walk 10 kilometers to get medicine, only to find out the
medicine man he sought was not home, and then walking back empty
handed, having wasted a day -- all because there was no connection
between his home and the pharmacist. Many years later in New York he
wasted a day at work when there was no electricity to run phones or
computers. Productity required connectivity. If connectivity could be
decentralized then it would lead to increased wealth.</div>
<div><br>
Quadir settled on the cell phone as a way to decentralized
connectivity. In the early 1990s cell phones were big, dumb, and very
expensive. Calls were $3 per minute. Only the rich could afford them.
But he wanted the poorest people in the world to get them. How would
this be possible?<br>
<br>
First, he believed in Moore's Law: that the phones would decrease in
price and increase in power every year. That seemed inevitable to him.
He said he could see "micro-chips marching toward the poor."
He was right about that. Second, he piggybacked his hopes on a
remarkable invention of another Bangladeshi, Mohammad Yunus, who
developed micro-financing (and later won a Nobel prize for this
invention). In Yunus' scheme a woman who owned virtually nothing could
get a loan of $200 to purchase a cow. She would then sell the surplus
milk of the cow to pay back the loan, earn both milk and an income for
her family, and maybe buy another cow. Ordinarily, no bank would have
lent her this trifling amount because she had no collateral, no
education, and the costs of overseeing such a small loan with small
gains, would have been prohibitive. Grameen Bank, Yunus' creation,
discovered that these illiterate peasants were actually more likely to
repay these small loans, and were very happy to pay good interest
rates, and so that in aggregate, these micro-loans were more
profitable than loaning to large industrial players.</div>
<div><br>
Quadir proceeded to ask, what if the women could rent a cell phone
instead of a cow? Grameen Bank could make a micro-loan to the poor for
the purchase a cell phone, which they then could sell/rent minutes to
the rest of the village. The enterprising phone-renter would benefit
and more importantly, the entire village would benefit from the
connectivity. It did not really matter if the minutes were expensive,
because when you have no connection, you are willing to pay dearly for
it. Quadir started off his Grameen Phone with 5 cell towers, and
eventually GrameenPhone erected 5,000 towers.<br>
<br>
In 1993 when Quadir began, Bangladesh had one of the lowest
penetrations of telephones on the planet -- only one phone for every
500 people. GrameenPhone project unleashed 25 million phones. Today
there are 100 times as many phones, or one per 5 people. Just as
Quadir had envisioned, this decentralized connectivity has increased
productivity. Without connectivity people waste a lot less time on
economic errands. With cell connectivity farmers maximize their
profits by getting real-time prices at distant markets; shepherds can
call a vet, or order medicine. One study concluded that the total
lifetime cost of an additional phone (including the cell tower and
switching gear) was about $2,000, but that each phone enabled $50,000
of increased productivity. And surprisingly, the poorer the country to
begin with, the greater the increase in wealth from connectivity.<br>
<br>
A lot of myths cloud the good intentions of developmental aid, Quadir
says. Myths such as: poor countries have no resources, or that the
poor don't have discretionary spending, or aren't concerned with
brands,or aren't good credit risks, and so on. All these assumptions
have been proven untrue over and over again, and especially so with
GrameenPhone. The chief myth it dispelled was that government needs to
subsidize technological development, when in fact there is good money
to be made enabling the productivity of the poor. As Quadir says,
"You don't make money on the poor, but with the poor." At
dinner I asked Iqbal what he would have done differently with
GrameenPhone. He replied, "Kept more shares."<br>
<br>
Quadir is now searching for other technologies to decentralize, and
thereby become a tool to erase poverty. He is director of the Legatum
Center for Development and Entrepreneurship at MIT, which has been
funded with $50 million. He is investigating whether energy can also
be dethroned from its current mode of extremely centralized
generation. Only 10% of the electricity produced at its source remains
at the end of the wires as they reach homes and factories. Perhaps
there are ways to decentralize its generation, which would trigger
connections at the local level, and in his scheme, elevate wealth and
democracy. If it worked, decentralized energy might also work in rich
countries, increasing wealth and democracy in our part of the world as
well.<br>
<br>
Throughout his talk, Quadir reiterated: "To raise productivity
(and wealth), raise connectivity. It's that simple."<br>
--<br>
-- KK<br>
_______________________________________________<br>
Kevin Kelly * kk@kk.org</div>
<div>Senior Maverick for Wired * Author of The
Technium</div>
<div>149 Amapola Ave, Pacifica, CA 94044 USA</div>
<div>My Lifestreams Blog = http://www.kk.org/kk/</div>
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