A couple examples I’ve run across:
DataWind (http://en.wikipedia.org/wiki/DataWind), which is now at a more mature stage.
Went to a talk by one of the founders recently. They made a really cheap tablet and internet services that work over 2G, which opens up the market of large sections of India currently without internet access. I think they could end up being quite successful.
A early stage example is EyeCheck (http://www.eyechecksolutions.com/), started by a couple of engineers out of undergrad. They’re developing a tool to improve diagnosis of vision problems to increase efficiency of providing glasses (think they’re starting working with NGOs running vision camps).
This actually isn’t a bad idea, something like the IT industry in India. Dani Rodrik keeps making the point that the labor force in many developing nations is making the transition directly from low productivity agriculture jobs to low productivity service jobs without going through high productivity manufacturing jobs that have traditionally led to the formation of a middle class. Some way to get people trained for high productivity service jobs, like in IT, could be really helpful for economic development, although there is probably a massive educational gulf to cover. The power grid would need some work to build a steady IT industry, too.
Rodrik’s talk on this and some of his writings (1) are the most informative I have seen in a while.
Why would a country invest in lower-productivity industries? If a country is moving to low productivity service jobs it’s probably because high productivity jobs are not available.
It’s not that a country is investing in low productivity industries, this is just what is naturally happening. Poor people from the countryside are moving to cities for a marginally better life, but they’re selling trinkets on the street when in the past they may have been manufacturing the trinkets. The point is to figure out how to encourage high productivity jobs, not just observe that they’re unavailable.
My argument is that this is not really an accurate description. The difference between selling trinkets and manufacturing jobs is that the latter requires a large amount of upfront capital investment. If people are not doing this, we need to work out why and address it. Once it is viable, capital is naturally invested where its marginal product is highest, which in turn increases the marginal product of its compliments, like labour. As the wage rate is equal to the marginal productivity of labour, this ultimately increases the wage rate.
Once it is viable, capital is naturally invested where its marginal product is highest, which in turn increases the marginal product of its compliments, like labour.
I think the main challenge is finding out how to make investments viable, which is really hard for a number of reasons that are often grouped into the term “poor business environment”. It seems like the debate centers around whether anything can be done to improve the business environment, or if we’re better off treating the symptoms of poverty while economies sort themselves out.
What you describe above would happen in an efficient market, but stock markets barely exist in most sub-saharan countries so I think most SSA economies are operating far from efficiently. It seems like private equity deals, or doing due diligence for PE deals could have a big impact. Most private equity in SSA is growth equity rather than leveraged buyouts, and the counterfactual is probably some other risky investment that might not have as much development impact. This is an understudied area, but I’m excited to see the results of this research from IPA.
Perhaps Ben meant social entrepreneurship, which is often geared towards the developing world? Forbes 30 under 30 has some ideas for what those projects can be. If you don’t like those, I recommend filtering through the Ashoka fellows. The most recent Ashoka fellow started a foundation/for-profit combo called Soronko Solutions, which teaches kids programming and sells tech solutions to startups.
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In general, if you’re going to run a normal for-profit business in the developing world that sells products or provides a service, you’re probably not going to make very much money. Money goes further in the developing world because you don’t make as much.
If you want to help other people, the logic is to register as a non-profit and get some of those philanthropy dollars. Many non-profits work to cultivate entrepreneurship, with a few approaches:
What Givewell calls economic empowerment, e.g. providing capital, skills training, mentorship, government advocacy, etc. The Global Entrepreneurship Monitor has a long list of entrepreneurship indicators, and could be a starting point to inspire work in under-addressed areas.
What would a developing world start-up look like?
A couple examples I’ve run across: DataWind (http://en.wikipedia.org/wiki/DataWind), which is now at a more mature stage. Went to a talk by one of the founders recently. They made a really cheap tablet and internet services that work over 2G, which opens up the market of large sections of India currently without internet access. I think they could end up being quite successful.
A early stage example is EyeCheck (http://www.eyechecksolutions.com/), started by a couple of engineers out of undergrad. They’re developing a tool to improve diagnosis of vision problems to increase efficiency of providing glasses (think they’re starting working with NGOs running vision camps).
Are you trying to imagine like a silicon valley of the developing world?
This actually isn’t a bad idea, something like the IT industry in India. Dani Rodrik keeps making the point that the labor force in many developing nations is making the transition directly from low productivity agriculture jobs to low productivity service jobs without going through high productivity manufacturing jobs that have traditionally led to the formation of a middle class. Some way to get people trained for high productivity service jobs, like in IT, could be really helpful for economic development, although there is probably a massive educational gulf to cover. The power grid would need some work to build a steady IT industry, too.
Rodrik’s talk on this and some of his writings (1) are the most informative I have seen in a while.
Why would a country invest in lower-productivity industries? If a country is moving to low productivity service jobs it’s probably because high productivity jobs are not available.
It’s not that a country is investing in low productivity industries, this is just what is naturally happening. Poor people from the countryside are moving to cities for a marginally better life, but they’re selling trinkets on the street when in the past they may have been manufacturing the trinkets. The point is to figure out how to encourage high productivity jobs, not just observe that they’re unavailable.
My argument is that this is not really an accurate description. The difference between selling trinkets and manufacturing jobs is that the latter requires a large amount of upfront capital investment. If people are not doing this, we need to work out why and address it. Once it is viable, capital is naturally invested where its marginal product is highest, which in turn increases the marginal product of its compliments, like labour. As the wage rate is equal to the marginal productivity of labour, this ultimately increases the wage rate.
I think the main challenge is finding out how to make investments viable, which is really hard for a number of reasons that are often grouped into the term “poor business environment”. It seems like the debate centers around whether anything can be done to improve the business environment, or if we’re better off treating the symptoms of poverty while economies sort themselves out.
What you describe above would happen in an efficient market, but stock markets barely exist in most sub-saharan countries so I think most SSA economies are operating far from efficiently. It seems like private equity deals, or doing due diligence for PE deals could have a big impact. Most private equity in SSA is growth equity rather than leveraged buyouts, and the counterfactual is probably some other risky investment that might not have as much development impact. This is an understudied area, but I’m excited to see the results of this research from IPA.
One example is Segovia.
Neat!
If you’re looking for cool socially-oriented for-profits in the developing world, maybe we could open up the question to the FB group.
I know someone who would be interested in looking through a list of organizations like this right now (hoping to find places to work).
Not necessarily—just want to know more about what for-profit ventures in the developing world are like. Mobile phones seem to have done well.
Perhaps Ben meant social entrepreneurship, which is often geared towards the developing world? Forbes 30 under 30 has some ideas for what those projects can be. If you don’t like those, I recommend filtering through the Ashoka fellows. The most recent Ashoka fellow started a foundation/for-profit combo called Soronko Solutions, which teaches kids programming and sells tech solutions to startups.
--
In general, if you’re going to run a normal for-profit business in the developing world that sells products or provides a service, you’re probably not going to make very much money. Money goes further in the developing world because you don’t make as much.
If you want to help other people, the logic is to register as a non-profit and get some of those philanthropy dollars. Many non-profits work to cultivate entrepreneurship, with a few approaches:
What Givewell calls economic empowerment, e.g. providing capital, skills training, mentorship, government advocacy, etc. The Global Entrepreneurship Monitor has a long list of entrepreneurship indicators, and could be a starting point to inspire work in under-addressed areas.
Social franchising, whether it is re-selling micro irrigation systems or opening rural health stores.
For-profit / Non-profit hybrids like the Ashoka example mentioned above.
I’ve probably done a terrible job of introducing the topic, but I’m going to cut myself off before the rest of my day disappears.