Monday, April 19, 2010

Driving socioeconomic change by making women more dependent

Yes, I meant to type dependent. Here’s why.

One of the great drivers of mankind’s progress has been our ability to specialize in our knowledge and functions, organize as groups or entities that share knowledge and create amazing things that no individual could do on his or her own. Done well, the outcomes of organizations are far greater than the sum of its parts. The most awesome things that mankind has created – jet planes, space stations, the power grid, they are all borne of interconnected, highly dependent networks of people. Our (Madura’s) women micro-entrepreneurs are the antithesis of this dependence. They are highly unspecialized and operate independently (women, only because that’s who we serve, but this applies to men too). These micro-entrepreneurs strategize, produce, market, manage accounts and do everything on their own. This means that they rarely have the opportunity to benefit from the knowledge of others and rarely have the opportunity to gain deep functional expertise as they are so busy doing a little of everything. That’s a huge limitation on what they are able to achieve. It is remarkable how few of our women borrowers think to band together and create something bigger than any one of them could do alone and I often wonder why this is. Most of the women I have talked to who have grouped in twos or threes have only done so in order to pool their loans to afford an asset, not for aspirational reasons. I’ve been thinking about what drives organization in society and not coming up with a satisfying hypothesis yet. If we could figure this out, it could be very powerful. Ideas folks?


  1. That's certainly a headline that grabs you.

    No question that specialization is an engine for efficiency and advancement... but it's also an enormous task. Does specialization necessarily follow surplus? It seems to me that it might. It certainly can be a multiplier of surplus, but you might need to gain some headroom before you can apply specialization. After all, if everyone is farming just enough to feed themselves, no one can stop to balance the books for the payment of a little food. Someone has to have an initial surplus to get starting.

    So... you can perhaps use microfinance a sort of prime-mover in this scenario. Perhaps this is already your explicit aim, and perhaps, now that I'm writing it, that's what all healthful loan programs are for... I can't afford my house today, but a loan affords me the headroom to start to own it.

    Unhealthful loans allow a person to subsist. This only creates a feedback loop. Perhaps you need an education program along with your loans. You may be doing this already, of course, but perhaps a formal loanee education program can help. A specific topic you could hit would be how to pool assets and increase specialization. You might need to import some help to talk about agricultural co-ops and such that already do this very thing. Should you be able to pool several borrowers into a co-op, you might create a powerful economy of scale, and specialization may be the natural evolution.

  2. Hmm, is there not a large body of work on what drives organisation in society? I'm not saying I know, I'd just be shocked if there wasn't.

    What types of coordination are familiar to these business people? Are there traditional forms of cooperation in their villages? In the Midwestern United States of my Grandfather's day, the communal barn raising or harvesting of crops was common. Do they have such traditions, but see commercial ventures as different and only about competition?

  3. There probably is a large body of work on what drives organization in society that I just haven't found yet. The only book I have read that sort of relates was way back in business school called The Evolution of Cooperation by Richard Axelrod which uses various examples to suggest that (I quote)"For cooperation to prove stable, the future must have a sufficiently large shadow . . . the importance of the next encounter between the same two individuals must be great enough to make [noncooperation] an unprofitable strategy.”

    People also use game theory with various prisoners dilemma kind of scenarios to predict when cooperation will arise. If you assume these theories of cooperation translate to organization, by this reasoning it would suggest that you would have the highest level of organization in villages where they all have long continuity living alongside one another. But this is not so. So I think cooperation and organization are not the same thing.

    The suggestion that surplus might drive specialization is interesting. I can see surplus driving organization, for e.g. by allowing you to hire someone, which in turn would drive specialization, for e.g. by allowing you to focus your time on fewer aspects of your business. And this can be a self perpetuating cycle up to some limit.

    On the other hand I can also see benefits to pooling time and energy to start something up even when there isn't surplus to start with and this doesn't seem to happen effectively in villages. I wonder if lack of specialization is what deters this - since no one is very specialized there are few people who could do something you couldn't so why bother teaming up?

  4. I wonder if lack of specialization is what deters this - since no one is very specialized there are few people who could do something you couldn't so why bother teaming up?

    This is an important line of investigation. Which come first, specialization or surplus? They certainly co-evolve after some initial period. So how can we get co-ops of rural businesses to the stage where there is some surplus and some specialization?

    This is why I suggested some borrower education. Does this happen currently? Can co-ops and specialization be taught at such events? I kind of envision groups of micro-loans to several businesses that agree to team up and reach for an economy of scale.

  5. So I think cooperation and organization are not the same thing.

    Interesting. I haven't thought much about the differences between cooperation, collaboration and organization.

    I see what Matt is saying about borrower education, but whenever I hear that the answer is to educate the end user, I am pessimistic. It might be the only answer, but its hard and I've never been satisfied with the return on investment in cultivating informed users.

    Maybe you could develop some kind of franchise or business-in-a-box that had partners built into it, and seed it throughout the communities. There is nothing like a good example.