Blue Collar Rocket Science

This is my Reflection Paper for week two of the Emerging Markets in Digital Media class.

In the first three chapters of “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits,” C. K. Prahalad proposes that the best path out of poverty in developing countries is the same path most of the developed world has taken: wealth creation through capital investment in supplying consumer goods. Prahalad recognizes flaws that have historically accompanied this route, such as wasteful use of resources, and even presents them as opportunities for progress that could pay off in developed economies as well. Primarily, however, the first part of the book is concerned with promoting the understanding that social, economic, and infrastructure conditions in the developing world mandate different business approaches from those that succeed in the developed world.

In their paper “The Case of the Occasionally Cheap Computer: Low-cost Devices and Classrooms in the Developing World,” an international team of researchers looks into computers in primary education in developing countries. They examine not only cost, but also form factors, technology, and social attitudes. In many respects, their conclusions mirror Prahalad’s point that solutions built for developed countries don’t necessarily meet the needs of developing ones.

Having read only part of Prahalad so far, I find myself fully in agreement with his belief in the capitalist structure as a creator of wealth, but wondering if he will explore forms of capitalism other than the multinational corporation (MNC) model he frequently references. If Prahalad taught at the University of Washington, instead of the University of Michigan, would his regional exposure to such long-lived cooperative businesses as REI, Group Health, and PEMCO influence his arguments? The regional coops that were formed during, and immediately after, the Great Depression were attempts to find a middle ground between socialist aims and capitalist efficiency, which clearly parallels the paths many developing countries seek today.

Prahalad demonstrates that there is a premium placed on sales to the poor. Someone who earns a little money every day, then spends that money on immediate needs, does not benefit from the bulk purchasing power that drives a company such as Costco, not to mention coops such as those I mentioned before. He argues that product producers should recognize this fact and introduce new form factors, such as the single use packet of shampoo, then shift their profit model to a low-margin, high-volume approach.

Once my mind turned from a horrifying image of India buried under used shampoo packets, I wondered why Prahalad is seemingly so quick to write off economies of scale in developing countries. Certainly the hand-to-mouth poor won’t be driving their Hummers to load up at Costco, but in a world connected by digital media, they might not need to. He cites how delivery drivers for Mexico’s Bimbo Bakery are entrusted with the keys to local stores and their cash boxes. What if that relationship extended to deliveries of essential goods at a price point set by group purchasing power?

A “basic needs” coop member in a developing country could place an online order for, say, a one-week package of shampoo, some underwear, and a washcloth. The package would be delivered to a corner grocery store, where the coop member is known by sight. This solves identification challenges, reduces delivery overhead, and encourages ancillary sales at the store, which is already being compensated for being a drop-off point. Perhaps a kiosk at the store accepts orders as well. The member may have purchased more than they can pay for at the time, but the difference is covered by the credit extended to the coop at rates lower than those available to individuals, and by not letting members place more than one credit order at a time, they are unable to get too far behind in payments.

While reading “The Case of the Occasionally Cheap Computer” I was nagged by a similarly fundamental question: What is the purpose of computer-aided primary education in developing countries? The researchers look at how well different use patterns impact learning new words on computers, but is that the best use of the technology?

To my mind, the most empowering use of computers in developing world classrooms might be to encourage a deeper understanding of them. In the developed world, this happened through school computer clubs, and the gradual dissemenation of computer knowledge through use as a work aid. But there’s an underlying tension at work there. A historic picture of Bill Gates and Paul Allen as teenagers using a Unix mainframe terminal at their school serves as an exhibit in the eventual rise of Windows to dominate Unix in market share. But with the spread of Unix’s open-source doppelganger, Linux, a picture taken today of two Indian teenagers using a Windows desktop could prove to be a key exhibit in the future dominance of Windows by a free GUI-based operating system, running on chips made by a company that hasn’t yet been thought of. The strategies pursued by hardware and software companies in developing countries seem geared towards making consumers, not competitors, which may impact their effectiveness.

A complicated web of knowledge transfer, intellectual property rights, and software business models entangles the uses of computers for education in the developing world. This particular study looks at important factors, but in the end it seems the decision on how children learn to use computers in developing countries may be shaped more by what individuals spend their money on than on grand educational visions.