No. 1 With 36% of the vote, online bookseller Better World Books led the pack. The 200-person company makes money selling books it gets for free from a network of individuals and institutions across the country. Co-founder Xavier Helgesen says the Mishawaka (Ind.)-based company has donated over $6 million to literacy programs and libraries around the world since it launched in 2002. “Right now, one out of seven people has the economic means to buy books from us,” he says. “If we can bring people up to levels of equivalent literacy, we’re helping our long-term business model.” Helgesen expects Better World, which has secured around $4 million in equity investment in total, to bring in $30 million in revenue this calendar year and be profitable in 2010. The company sells about 10,000 books a day.
In the past few years I have gone from not knowing much about climate change to believing that it will bring about the end of the world to being skeptical about what exactly all this is about. This does not remove the need for “sustainability” which is far more than carbon emissions but I am starting to question the amount of effort to be focused on this single issue.
As a non-scientist I have nowhere near the knowledge and skill level needed to understand the science. What I can do is understand basic logic and have a feel for how things work in the world. However, it is important to have a philosophy. A basic understanding of how various things will impact the world and what is important. History has taught us that we cannot really predict the future into 100 years. That is exactly what the climate change models do. Using current scenario, they take a linear model of growth into the future.
I am not saying this. James Lovelock, the celebrated author of the GAIA theory is saying this.
In The Vanishing Face Of Gaia, Lovelock argues that model projections of the climate a century ahead are of little use. The models of the Intergovernmental Panel on Climate Change (IPCC) extrapolate from a smooth trend of warming, yet the real climate system, complex and fully coupled to the biology of land and ocean, is unlikely to change in this simple way. It is more likely to flip from one state to another, with non-linear tipping points that the IPCC models are too simplistic to capture. Lovelock fears that the climate will shift to a new and considerably hotter regime, and that once underway, this shift will be irreversible.
Non-linearity and complexity are the hallmark of the world we live in. In this scenario, the predictions of IPCC, especially in terms of their timeframes are not relevant.
Lovelock paints a scenario where things go horribly wrong in terms of the social aspect of climate change due to this non-linearity. However, is this true?
To understand this I think a good example would be the work of Stephen J. Gould, the evolutionary biologist. His explanation of evolution is more complex than “natural selection”.
In his article, “The Evolution of Life on Earth”, Gould traces back to the history of the earth and explains the finer points of how we have come about.
Quoting Charles Darwin, “I am convinced that Natural Selection has been the most important, but not the exclusive, means of modification.”, he sees more to the evolution of life.
Theory, of course, is relevant to explaining the pathway (nothing about the pathway can be inconsistent with good theory, and theory can predict certain general aspects of life’s geologic pattern). But the actual pathway is strongly underdetermined by our general theory of life’s evolution. This point needs some belaboring as a central yet widely misunderstood aspect of the world’s complexity. Webs and chains of historical events are so intricate, so imbued with random and chaotic elements, so unrepeatable in encompassing such a multitude of unique (and uniquely interacting) objects, that standard models of simple prediction and replication do not apply. History can be explained, with satisfying rigor if evidence be adequate, after a sequence of events unfolds, but it cannot be predicted with any precision beforehand. Pierre-Simon Laplace, echoing the growing and confident determinism of the late 18th century, once said that he could specify all future states if he could know the position and motion of all particles in the cosmos at any moment, but the nature of universal complexity shatters this chimerical dream. History includes too much chaos, or extremely sensitive dependence on minute and unmeasurable differences in initial conditions, leading to massively divergent outcomes based on tiny and unknowable disparities in starting points.
He comments that“Humans arose, rather, as a fortuitous and contingent outcome of thousands of linked events, any one of which could have occurred differently and sent history on an alternative pathway that would not have led to consciousness.”
In fact, according to him “Bacteria represent the great success story of life’s pathway” and “We cannot even imagine how anthropogenic intervention might threaten their extinction, although we worry about our impact on nearly every other form of life.”
We should be rest assured that life in its many forms, foremost being Bacteria will survive the climate change doomsday scenarios. The earth does not need saving at all, if anybody it is us humans need it. Life and Earth will be fine.
Being a young father I am amazed at the fact that humans have been actually successful as a species. My daughter needs amazing amount of caring, love, attention and resources to stay alive and grow. She needs a myriad of things to be taken care of till she is about 18 years old and is “free” to live on her own. In evolution terms, that is a big negative for success. However, we have developed complex relationships of marriage, family and community to help in this process. We have developed agriculture to solve the problem of food. We have invented tools like fire and wheel to become productive. We have developed complex institutions like hospitals, schools, democracy and banks to sustain this long march of development of 18 years.
As Gould says, “History includes too much chaos, or extremely sensitive dependence on minute and unmeasurable differences in initial conditions, leading to massively divergent outcomes based on tiny and unknowable disparities in starting points”; it is even amazing we are alive as a species leaving aside the bit about thriving in this world.
Combining these two aspects, the non-linearity of the world, the way humans have adapted and are successful I believe that we will develop the solutions to solve the problems that we will face in the coming 100 years. As the problems are non-linear, so will be the solutions.
All the doomsday predictions believe that we will not make a evolutionary jump in the development of clean and cheap energy from the sun or that we will not develop low resource intensive and recyclable products or that we will have another jump in agricultural productivity which will solve all our food problems.
History however, shows us that this is possible. We can make this jump. When and how is not that clear.
All this brings us to the question, what should we be doing.
The first thing is what can be do now. If climate change is non-linear and unpredictable, what is the basic thing that we can do to be well adapted to its consequences.
Thomas Schelling, the nobel prize winning economist, suggests that economic development is the biggest solution to climate change. He says, “The sooner Malaysia can become like Singapore, the sooner it can worry less about the impact of climate change on health, comfort, and productivity.” Read more about his views here.
The second thing is about the basic economic question of allocation of scarce resources.
Bjorn Lomborg, another economist, is the director of the Copenhagen Consensus. He argues that “the Third World suffers more from malnutrition and H.I.V./AIDS than it is likely to suffer from global warming.”
He argues to relook and understand our priorities. Check out this video from TED.
Global Warming is not at the top of the list in terms of benefits from solving it. An updated version is the 2008 list – here or PDF version.
Concluding the post, the climate change problem is non-linear, so are the solutions. Humans are highly adaptable and will change and manage.
The focus should be on economic development and there are other priorities above climate change that can bring in better benefits now.
Sustainability is a better focus overall than simply climate change.
Today I met with Sam Wells. Sam is the MBA Director at the Adelaide Uni and teaches the Sustainability course for MBA students.
A couple of my friends have completed his course and their reviews have been brilliant. It would have been great if I had a similar chance when I did my MBA.
Sam is a very approachable person with a down-to-earth attitude with a great passion for Sustainability and Base of the Pyramid ideas. John O’brien acted as the conduit to help me meet up with Sam.
He gave a long and detailed insight into one his pet projects, Just Peachy which is built on the ideas of creating capital (human, economics, social and environmental) or what he calls common-wealth through collaboration, community and capitalism principles.
I will write about Just Peachy more in the future.
Interestingly, he is the brother of Geoff Wells, a sustainability lecturer at UniSA and a good friend of mine. The world is a small place, especially in Adelaide!
The Base of the Pyramid concept was first suggested by Prahalad and Hammond as a way to tap into the consumer power of the poor people around the world.
Atanu Dey provides a good summary of the paper and the possible solution.
The consumption issue:
Karnani’s paper argues against the BOP proposition. He summaries the BOP proposition as: there are profits to be made by selling to the billions of the world’s poor, and by doing so, bring prosperity to them, thus alleviating poverty, and that multinational corporations (MNCs) should sell to the poor to do good while doing well for themselves.
Production opportunity:
Karnani denies that the BOP claim that there is untapped purchasing power at the BOP. He says that the way to help is to raise the real income of the poor. The poor must be seen as producers, rather than as consumers. That is, buy from the poor instead of selling to them. He cites Amul and ITC e-Choupals as examples of more efficient markets–where the poor are the producers—that increase real incomes. And if you have to sell to the poor, then make available lower quality goods which can be priced lower so that the poor can have greater choice along the price-quality spectrum.
Possible solution:
I agree with Karnani that you have to increase the real incomes of the poor by seeing them as producers. This I believe can be done by two ways. First, the “distribution” route: produce (possibly more) stuff, and give them a larger share. This lump-sum transfer will increase their real incomes. Second, the “production” method: help them produce more and also become more productive. The former is unlikely to appeal to the rich.
To do the latter, you have to make markets for the production of the poor more efficient so that they retain more of the value they produce. To make them capable of producing more, you have to educate them. There is where I believe the fortune at the bottom of the pyramid lies. Education has positive returns in today’s world. The return on investment in education is positive. That means, the cost of the education will be more than paid for by the subsequent increase in the real income. But the poor are credit-constrained. So the way to help the poor is to release that credit constraint through financing education. How to do that is a different kettle of fish which we will leave for a later date.
1. The productive capacities of the poor are organized, developed and leveraged as inputs to business;
2. Such process contributes to creation of commercial value for business;
3. Such commercial value yields economic surplus i.e., the commercial
value exceeds all costs involved in its creation, and / or strengthens
the competitiveness/growth of business; and
4. The poor are remunerated in a fair manner for the goods/services that they provide.
Consequently, the poor do become an important part of the definition of business, to the benefit of business and themselves.
It should be a very clear case that consumption decreases incomes. It is work and production that can produce income. Then, the challenge is to create a way to facilitate this income generation for the poor.
The Financial Times business education section has a small video lecture series from the Indian School of Business on the “base of the pyramid“. Reuben Abraham, a friend of mine, is a Professor at ISB and Director of the Base of the Pyramid Learning Lab. He provides the introduction and has some interesting ideas.
Reuben Abraham points to an article in Knowledge @ Wharton on Euvin Naidoo, president and CEO of the South African Chamber of Commerce in America where he talks about the potential of Africa in terms of business and new technology.
…with the world pushing for alternative sources of energy such as windmills or geothermal power, it will be easier to develop and implement these new technologies from scratch in Africa than to impose them on the entrenched power grid in the West. “The key about disruptive technology is that it really has a chance to innovate at the base of the pyramid,” Naidoo said in his keynote address at the 15th annual Wharton Africa Business Forum. “The base of the pyramid is the bottom — the millions who are underserved.” [...] Naidoo showed his audience a map of global Internet connectivity, with bloated depictions of web-savvy western nations from Japan to Portugal to the United States. But the massive African landmass is virtually invisible. He insisted that the African void today represents a massive future opportunity for an entrepreneur who can develop a scalable solution for multiple nations on a continent that is currently divided into 53 different governments.
“Africa is in … a unique position. It almost has a competitive advantage due to that very situation of not having the connectivity, of not having the electricity grid,” Naidoo said. He cited the example of windmills as a low cost and innovative power solution that would work better in a local, start-up situation, such as a remote African village, than it would in the West, with all its regulatory and economic obstacles.
Like the previous post on Africa it provides a good example of business opportunities. More importantly, Naidoo provides a framework in which to capture the opportunities by connecting Africa’s lack of electricity and connectivity as opportunities.
This is true to most other bottom or base of the pyramid markets. Like the example of Harish Hande who provides the numbers where solar energy is cheaper to poor people than the current prices they pay. Disruptive innovation makes sense in “base of the pyramid markets”. (BOP)
Disruptive Innovations compete against nonconsumption – that is, they offer a product or service to people who would otherwise be left out entirely or poorly served by existing products and who are therefore quite happy to have a simpler, more modest version of what is available in the high-end markets.
- Stuart Hart and Clayton Christensen (Sloan Management Review)
If any technology entrepreneurs are looking for new markets, they should check out the BOP markets.
In the current Climate Change talks in Bali, there is a great debate about the role of India and China in cutting down their greenhouse gases. This story provides a good viewpoint of the current problem facing India.
The Mint has an interview with Harish Hande, the founder of SELCO-India and the winner of the 2007 Social Entrepreneur of the Year award in India.
The problem: In a country where we spend thousands of watts of electricity for a day and night cricket match, use the power greedy heater to ward off the winter chill, there lies another India where villages are dimly lit by paraffin lamps and dim lights battling darkening chimneys. For this cash-strapped India an ignited filament powered by current is a rare luxury, for they cannot even afford electricity.
Finding basic electricity is still an issue in India. How do you convince those people that they need to cut down their carbon emissions?
Hande is working towards building solar home systems for poor people in India with technicians on the ground understanding the actual requirements. He is collaborating with banks to provide an affordable way to own these systems.
In terms of economics, Hande has some interesting cost figures.
For example, there are 20 million street vendors in the country. In Delhi, a street vendor pays Rs15-20 everyday for an incandescent light. We do not pay Rs600 a month for a single light, neither do we pay Rs2,400 a month for four lights. That means poor people pay more for energy. It is the same case with Bangalore street vendors who pay Rs15 every evening for a kerosene lamp they use for four hours whereas solar costs Rs5-6, that too for five to six hours. It is a grave reality that the poor end up paying more for energy. Surely, this needs far more serious intervention.
And on the role of government.
In terms of central and state governments, the biggest plus is that they are not interfering. I have seen it in other countries like Dominican Republic where the government suddenly appeared on the scene, subsidized it, and spoiled the whole programme. However, the government can help by replicating our work on a mass scale. For that, we need many similar social enterprises and government policies that can creating caps in financial institutions, in much the same way as they did for agricultural financing 40-50 years ago.
The Mint reports on D.Light and its plan to provide LED lighting to Base of the Pyramid markets in India.
‘We don’t think it’s right that families are using kerosene in 2007,” said Tozun, who added that kerosene and candles are polluting, bad for respiration, can cause fires, and often have very dim lighting. “With today’s technology available, it is possible to have safer, better lighting. We want to provide that.” The product, called Forever Bright, will have a retail value of about Rs500 and is small enough to hold in your hand, said Tozun.
Uused in modern appliances such as the numbers on digital clocks, images on a television screen, and traffic lights, LEDs are tiny light bulbs that fit into an electrical circuit, but unlike ordinary bulbs, they don’t have a filament or get too hot.
According to Light Up The World, an international humanitarian organization whose goal is to light up the world’s poor, benefits of LEDs include ultra low power usage, durability and extended lifetime.
[...] The for-profit company was formed a year-and-a-half ago, after Tozun and a few colleagues took the “Entrepreneurial Design for Extreme Affordability,” class at Stanford University’s design school. They learnt to design for folks who earn a dollar or two a day.
D.Light’s plan is a good example of socially motivated, highly educated entrepreneurs to target a base of the pyramid market. And it’s just not easy.
Sam Goldman, the CEO and founder, is sharing his experiences on his blog.
There’s plenty of budget airlines and a quarter million cell phones being made a day. India is ‘calling all entrepreneurs.’ And yet its not that easy. Razor thin margins, an older bureaucracy, whole neighborhoods of C&D (copy and develop instead of research and development), and the little things – like trying to get a cell phone present constant challenges. I was shocked by how demanding the Indian consumer is – requiring high quality, low price, and service guarantees even or $10 purchases. If we can crack this market – we can crack any.
[...] India is the ultimate retail market and quite a challenge. As far as base-of-the-pyramid and rural marketing is concerned, I have found a few surprises. The first is how sophisticated the market has become. For example, the Chinese imports coming in as emergency lights have received a terrible reputation for low quality, and although they are still sold by the tens of thousands, newer Indian brands are springing up. Although the Indian brands are higher priced (often 2X) they come with guarantees (6mo-1yr) and often service warranties (up to 3years). Consumers are not only demanding high quality at low prices, but they want to be able to easily and inexpensively repair their products. If you are offering products that cannot be easily repaired – it is going to be hard to crack this market.
Bill Drayton: these “hybrid value chains” are a no-brainer; the divergence of the consumer and citizen sectors was a “nonsensical historical accident” in the first place, and their reintegration is “profoundly important for the health of both.” Business must use social networks to reach new markets. And the citizen sector needs the marketplace to gain financial sustainability.
