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Creative Ways to Solve Development Problems – Can We Still Trust Markets?
Efosa Ojomo and Jacob Fohtung are associates at the Christensen Institute. They have a very simple goal. Let’s stop managing poverty and start stimulating prosperity.
For Efosa, True Wealth is when an individual is content physically, economically, spiritually, emotionally, and socially… the spiritual component is key.
Jacob admits this is a developing reality for him. Before he joined the institute, his definition of success was more indexed to financial success. A typical MBA graduate and the mantra is that how much money you make defines your identity in some way.
Market Creating Innovation
“Innovation” is defined as a change in the process by which we transform inputs of lower value into outputs of higher value.
However, the outputs of higher value are rarely available for everyone. “Price” makes them only available to a select number of people in the world who can afford the innovation. Complicated and expensive products are often only available to the richest members of society.
“Market Creating Innovations” transform those products into simple and affordable products to give many more people access to the same innovations.
When you go into a poor community (even within a rich country), you are slapped with the lack, it just hits you in the face. There is just so much LACK. People don’t have access to education, healthcare, no access to healthy food.” And there is this incredible desire to help – it’s a human desire.
With most philanthropic work, we identify a need and we PUSH the resources that the community needs. If there is a lack of education, we push the schools. If there is a lack of healthy food we push better farming techniques. We push new technology and institutions into a context that is not ready to absorb and receive.
“Market Creating Innovation” creates a PULL effect.
When you start a market based entity to solve a problem, it PULLS the other resources into existence.
“They all makes sense, roads make sense, schools make sense… all these things make sense. When they are detached from the struggle or the market that can leverage them really well, they are really, really hard to sustain. When they are connected to a market, they become a lot easier to maintain.”
Not every problem in the world needs to be solved with a market oriented approach. But I will say, that no problem can be solved – directly or indirectly – without a market.
When you consider all the non-profits in the world… where do they get their funding? Ford? Gates? Buffett? Behind every non-profit is a profitable enterprise.
Pulling in ESG Investing Dollars
There are big risks in the developed world, but they can get away with it.
The developed world lets companies (and individuals) get away with things that would completely tank an undeveloped economy.
Ask yourself, would the stories around WeWork or Theranos (both of which were basically fraudulent) be different if they happened in Nigeria? We accept this risk as part of doing business in the USA, but when we see the same level of fraud in a developing economy, our judgments may fall a lot harder.
Cannot say that the risk isn’t there, but have to realize that in those places where the risk is great – the opportunity is also great. This is even truer for Market Creating Innovation.
The demographics in places like Africa are similar to the demographics of the USA 200 years ago.
The big question is: how do we connect the investor with money to the entrepreneur with the “Market Creating Innovation.” There is much infrastructure set up for me to give money away. But where is the infrastructure to enable me to support entrepreneurs in developing countries???
The Failure of Philanthropy
IF my goal is to alleviate a particular pain (hunger, lack of water, lack of energy, etc.). Let’s say that Jacob comes to me with some pain and I resolve that pain for a short period (without fixing the underlying problems)… I can then write an annual report expressing how successful we are.
They are successful because they are asking the wrong question.
Of course, when you donate mosquito nets and give free cash transfers, you will have impact. But, what is the goal here? Is the goal to alleviate the pain and struggle a little bit or is the goal to fundamentally transform peoples lives and help them become independent beings?
A lot of the funding fails in my opinion because I am assessing success differently. For a lot of the funders, they are having the impact they want. If the goal was huge – An Africa that doesn’t need AID anymore. What is the path to that goal? We’re all going to die someday. While we are alive, let’s spend our time on things that can fundamentally transform lives. Let’s let go of the marginal improvements.