tag:blogger.com,1999:blog-61097756579123934692024-03-17T20:04:03.170-07:00The Physics of PovertyA science based approach to understanding povertyTara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.comBlogger72125tag:blogger.com,1999:blog-6109775657912393469.post-38445396221872247192013-03-30T20:10:00.001-07:002013-03-30T20:48:12.261-07:00Of Mind and Money<script type="text/javascript">
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<a href="http://www.ofmindandmoney.com"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8l5855mNaZt-zpV37lKBEJVXClHfDyWw6kqB2zLNNAicT5HnPA06qy0IgGqSZWFhmQNE4_a2UkSVl99UZsVciPyENMc-RfObq7bj1cGldNTsCpM385FW2s7mYSjQ9-TscleIldkL4A_qD/s1600/tarathiagarajanblog.jpg" imageanchor="1" ><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8l5855mNaZt-zpV37lKBEJVXClHfDyWw6kqB2zLNNAicT5HnPA06qy0IgGqSZWFhmQNE4_a2UkSVl99UZsVciPyENMc-RfObq7bj1cGldNTsCpM385FW2s7mYSjQ9-TscleIldkL4A_qD/s320/tarathiagarajanblog.jpg" /></a></a>Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com21tag:blogger.com,1999:blog-6109775657912393469.post-23649505740784516612012-04-06T08:58:00.007-07:002012-04-06T09:05:26.366-07:00The Hidden Key to ProductivityEvery company worries in some way about how to make people more productive. To do this, most companies normally focus on two things: training – building knowledge and skills, and technology. No doubt this does yield returns. However, there is something else, perhaps even more powerful, that is largely ignored.<br /><br />Productivity is how much you produce or create within a given period of time. Therefore, it has an implicit rate component to it. This means how productive we are depends on how fast and how effectively we act. Our knowledge and skills certainly play into how effectively we act and technology can speed it all up. The other hidden component, however, is how fast and effectively information travels through an organisation every day. Information about who else is doing what, information on resources in the company and the larger ecosystem, information on happenings in the market and about customers – the general buzz and chatter. If you don’t know about something, you can’t incorporate it into your planning or decision-making. You can’t act on it. This is true not just for companies but for societal productivity and progress in general. Still, the value of how information flows through the company seems sort of intangible. Just how valuable might it be to employee productivity? How do you put a number on it? <br /><a name='more'></a> <br /><br />Some folks in Boston from Massachusetts Institute of Technology and Boston University in the U.S. tried to do just that. <br /><br />In a study titled ‘Productivity Effects of Information Diffusion in Networks’, Sinan Aral, Erik Brynjolfsson and Marshall W. Van Alstyne asked the question: <br /><br />Does better access to information predict an individual's ability to complete projects or generate revenue? <br /><br />They did their study in a medium sized recruiting firm and looked at how news about events and discussions spread through email within the company over a 10 month period. And the answer to the question: Access to information strongly predicts project completion and revenue generation. Some of the things they found out were:<br /><br />• Each additional ten words seen were associated with an additional one per cent of one project completed. <br />• Greater mean rank (i.e. the rank order in the news chain among co-workers) and longer average times to receive words (how long it took to hear about it) were associated with fewer projects completed, holding constant traditional demographic and human capital variables. <br />• And, amazingly, an additional ‘word seen’ was associated with about $70 of additional revenue generated (that’s Rs. 3000 per word over a 10 month period). <br /><br />So, their conclusion:<br />Access to information diffusing in the network is a much stronger predictor of productivity than traditional human capital variables such as education or industry experience.<br /><br />From an organisational perspective, this means that if information could be made to flow more easily and effectively among people, it would have profound effects on productivity. What are some ways to make it happen? <br /><br />Some companies have begun worrying about this and solutions range from how office buildings are architected to internal social network platforms. Companies are looking for designs for buildings that force people across departments to cross paths frequently and come together in common spaces, or with a lot of glass so that people have visibility into what’s going on in other rooms and places. Did you catch that bit on the white board as you walked by? What are they up to?<br /><br />Social networking platforms such as Yammer and Chatter are like facebook for companies. Employees can get on and post about their activities and what they are working on. This is especially helpful for organizations such as mine, which have distributed field operations. At Madura Microfinance we have close to 200 branch locations, largely in small towns and rural areas. Typically in such a structure, flow of information occurs only in two directions from top to bottom or bottom to top. There is very little opportunity for information to travel laterally. At Madura we signed up for Yammer and had to take on the task of translating it into Tamil to make it a platform that met our bilingual needs. With just a little training we had rural branch managers ‘yammering’ about their activities with self-help groups, issues arising in the field, local events and industry news providing a steady stream of news on the goings on in the organization.<br /><br />The bigger question is, how can you track how well information is flowing or ‘diffusing’ in your organization and how it relates to productivity? If you can’t measure it and track it, you can’t know how effectively you are impacting it with your interventions. While there aren’t easy off the shelf methods or software products to help you (yet) there are certainly ways it can be done. You could, for instance, measure at regular intervals the probabilities of whether someone in one part of the organization has heard about an event or happening in another to see how it changes over time. You could also go through this exercise before and after an intervention such as introducing a new communication platform to see what its impact on information diffusion has been.<br /><br />As living organisms, how information travels through our neural networks is at the core of what we are capable of doing and what we actually do. In the future, when we talk about organisational structure, perhaps we will mean something different. Not who reports to whom but how information networks of the company are structured. And we might add new words such as organisational dynamics to our common business lexicon to describe how information flows on these networks. I predict that eventually, it will become essential to understand and track organisational dynamics, so that we can engineer our organisations for more spectacular outcomes. <br /><br />And the same principle holds for society at large. If society has better information dynamics it will produce more productive organizations; and more productive organizations make for a more productive society.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com4tag:blogger.com,1999:blog-6109775657912393469.post-75665259299765939072012-02-08T22:55:00.001-08:002012-04-06T09:05:04.033-07:00Microfinance: Time to move towards financial inclusion<a href="http://articles.economictimes.indiatimes.com/2012-01-27/news/30670560_1_financial-inclusion-wealth-creators-economy">As printed in the Economic Times</a><br /><br />The numbers that describe India's economy are mindboggling. Just one-tenth of the population participates in the formal economy. Of these, only about 35 million pay taxes. That's less than 3%.<br /><br />No wonder then that our economy produced a GDP of only $1.42 trillion at last count, about the same as that of the city of Tokyo which has a population of 35 million. There are simply too few producing value and wealth in India and so there is not enough to go around.<br /><br />The financial inclusion agenda so far has been largely focused on redistribution of wealth while what is required is inclusion in the creation of wealth. Financial inclusion so far has meant debt distribution and nofrills bank accounts.<br /><br />Microfinance has been one major channel of debt distribution to the poor. While the original assumption was that these loans were for investment in micro enterprise, the Malegam committee report in 2010 indicates that 75% of the loans went towards consumption. Contrast this with the distribution of bank debt in India where less than 20% were consumer loans.<br /><a name='more'></a> <br /><br />Debt on its own does not grow economies. This begs the question: what kind of financial inclusion agenda can enable participation of the greater population in the economy as wealth creators ? When the wealth and therefore total credit in the system is limited - and it is - it is most effective when it can be directed towards innovation and productive output.<br /><br /><br />Money is a catalyst of progress but only when placed in the context of the right reaction. In the informal sector this means directing it towards the genuine microentrepreneur , not just any self-employed person. Here's why: in developed countries only 6-7 % of employed adults are entrepreneurs compared to developing countries like India where it is between 30% and 45%.<br /><br />Developed economies are characterised by larger enterprises that take advantage of division of labour, specialisation and economies of scale. These synergies allow each participating individual to create more wealth such that revenues and even income per employee are far greater than what a comparable micro enterprise can achieve. The current model of microfinance lending focuses largely on two aspects: reducing the cost of lending and ensuring responsible repayment by using a group lending model with a peer pressure element.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfotLIEEOuahNVIed_dqckxvvqw_sK2hbocobBHTNKduNcLT7z5XB0az4Gzir-und_-7TnVd3REKDXvucAxLtPCyOwRLdAogDx2Unm2cBd2cBIAoI_pac9vjtYu5JvZe0Uy4sfP7IRJlLn/s1600/ET+Image.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 320px; height: 256px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfotLIEEOuahNVIed_dqckxvvqw_sK2hbocobBHTNKduNcLT7z5XB0az4Gzir-und_-7TnVd3REKDXvucAxLtPCyOwRLdAogDx2Unm2cBd2cBIAoI_pac9vjtYu5JvZe0Uy4sfP7IRJlLn/s320/ET+Image.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5707026850421721890" /></a><br />Unlike the formal economy where businesses are registered and documented, there are no records in the cash economy that can be used to evaluate business intent, asset ownership or track record. Consequently, the microfinance strategy has been to cast a wide net treating every borrower virtually the same. Those who are more successful are constrained in their access to credit by the lesser needs of the group.<br /><br />Furthermore, regulation caps their access to credit at Rs 50,000 with no easy passage into mainstream banking products. Microfinance lending in India is directed almost entirely at women. This has its benefits in empowering women in the management of household finances. In many parts of India men are thought to squander money more readily on vices while women tend to spend more responsibly for the family.<br /><br /><br />On the other hand, while some women are genuine entrepreneurs , many more of the entrepreneurs with the ability to scale are men. This is for the simple reason that historically and culturally men tend to have higher mobility and therefore access to markets. They should not be excluded. Mature microfinance clients represent a pool of creditworthy customers who could transition into the banking system. However there is no mechanism for such a transition.<br /><br />MFIs, while having no incentive to pass them along to the bank, also cannot offer them expanded credit. This can only be remedied if there is a progression of products for the microentrepreneur from a microfinance group loan to individual business loans that expand to meet their growth needs. This is best done if there is a close relationship between banks and MFIs where there is a sharing of customer credit history and profile data.<br /><br />Banks might set up or acquire as subsidiaries MFIs that operate as lower cost, outreach operations, sifting out the entrepreneurs from the consumers. The microfinance model itself needs to become more effective at identifying microentrepreneurs and micro enterprise risk. This could be done with approaches that understand the psychometric and behavioural profiles of entrepreneurs. It is when the potential of entrepreneurship among the other 1.1 billion is unlocked that the rest of the country can be productively engaged and therefore financially included.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com13tag:blogger.com,1999:blog-6109775657912393469.post-68466667031234019182011-12-28T01:37:00.000-08:002011-12-28T01:41:44.967-08:00Scrap the MBAPart of the Big Ideas Series for The Smart CEO<br /><br /><strong>What we need are Masters in Enterprise Building (MEBs)</strong><br /><br />Ask MBA (Masters in Business Administration) students what they want to do after they graduate and the answer is usually a variant of ‘Get a good job’. A good job, they will explain to you, is a job with a good salary, good personal growth opportunities, good work environment and good facilities. Large multi-national corporations will top that list. At the recent IIM-A Confluence, Satish Pradhan, executive vice-president, Tata Group likened business school placements to the Pushkar Mela. wherecandidates, like camels, are dressed up, paraded and sold to the highest bidder. . A student countered that they were ‘trained’ to find jobs.<br /><br />What’s wrong with that, you might ask. For a country, where less than 10 per cent is employed in the formal economy and where the college capacity extends to less than 7 per cent of the potential college age population, access to a higher degree like an MBA is competitive and coveted. It is natural then that people see this as a rite of passage to personal financial success. <a name='more'></a> <br /><br />But consider this: banks are reporting higher defaults from industry and India’s growth forecasts have been downgraded from 8.5 per cent to 7 per cent. We are hitting a wall. Financial wizardry might prop things up in the short term but for real growth we need to get back to basics. And the absolute basics are that it is the innovation, ingenuity and organisation of people that can ultimately produce the growth and value that is essential for a healthier more inclusive society. It is the very people who are educated, who have to step up to the plate. And the MBA is failing us.<br /><br />The Merriam-Webster dictionary defines business as a commercial or mercantile activity engaged in as a means of livelihood; also as dealings or transactions especially of an economic nature. Administration is simply the performance of executive duties. Masters in administering business or people performing executive duties pertaining to economic transactions for the sake of their own livelihood are not what we need. Scrap the MBA. What we need are Masters of Enterprise Building (MEBs). This is fundamentally different. <br />The dictionary defines enterprise as <br />1. a project or undertaking that is especially difficult, complicated, or risky <br />2. readiness to engage in daring or difficult action and <br />3. a systematic purposeful activity. <br />Building is the art of assembling materials into a structure. <br /><br />When you say someone is enterprising, you mean something entirely different than when you say someone is good at business. Building is entirely different from administering. Semantics matter. What you call it subtly primes the way you think about it, how you relate yourself to it and ultimately what you will do with it. Simply changing the name of the program from MBA to MEB would force a complete rethinking of curriculum and the perception among students of what one is expected to do with the degree.<br /><br />We live in a time and place with extraordinary challenges, both internally and globally, and nowhere in India is it simply ‘business as usual’. We operate in an unpredictable political environment where local governments can derail industry at the drop of a hat. We operate in an unpredictable economic environment where global competition and crisis inevitably rock our markets in broad sweeps in ways we cannot anticipate. We operate in severely resource constrained circumstances where basic services like power, water supply and communication cannot be taken for granted. We operate in an ecosystem of extraordinary culture and language diversity where chasms are wide. We operate in an ecosystem that is poorly educated and with few people operating in large scale formal structures. We have to go beyond administering and managing businesses to building enterprises with agility and ingenuity. <br /><br />Instead of courses like <em>Financial Reporting & Analysis</em>, <em>Financial Markets</em>, <em>Marketing</em> and <em>Microeconomics</em> which are typically core courses of the MBA curriculum, the MEB would have courses like:<br /><br /><em>Economic and Geopolitical Environment</em>: An understanding of the macroeconomic and geopolitical structure within which we operate and the role of enterprise in its ultimate transformation.<br /><br /><em>Operating in unpredictable environments</em>: A series of case studies of industries that have gone through dramatic shifts due to large policy changes and changes in regulation (like licensing in Telecom and regulation in Microfinance arising out of the Andhra Pradesh ordinance) and of companies that have survived incidents of geopolitical instability such as riots and bombing (like the Mumbai hotel industry post 26/11).<br /><br /><em>Building effective organisation structures</em>: An exploration of models and frameworks for scalable organisational structures. In India, over 40 per cent of employed adults are self-employed operating in microstructures of 1 – 3 people with extremely low revenue per person. In contrast, developed nations have fewer entrepreneurs (6 per cent – 7 per cent), who are more likely to create large organisational structures that can engage more people productively and result in multiplicative benefits of scale that becomes evident in increasing revenue per employee. Who does this best and how did they do it? <br /><br />Other course topics might cover Integrating people into the formal economy which would follow the challenges of companies in bringing in people hitherto employed in the informal sector into a corporate structure, and Planning and execution under resource constrained circumstances – clever ways to make more from less.<br /><br />I am certain that when you are acutely aware of the macro context in which you operate and are primed to understand and focus on the challenges of building, you will approach your career with a greater sense of outwardly focused responsibility and enterprise. When you ask an MEB what they want to do after they graduate, I would bet that they would be more likely to be looking for the right challenge and responsibility to be enterprising and build something. This might lead to the same job but with a whole different attitude where salary will be a by-product and not the Holy Grail itself.<br /><br />And if we are successful the result is faster and increasingly inclusive economic growth. And that means better jobs and higher salaries for everyone.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com8tag:blogger.com,1999:blog-6109775657912393469.post-85548156737685168102011-12-28T01:33:00.000-08:002011-12-28T01:42:16.592-08:00CityscapeAs posted on <a href="http://yourstory.in/2011/12/physics-of-poverty-cityscape/">YourStory.in</a><br /><br />There is a certain romanticism that we all carry about rural living. For many of us it represents the simple life, a place where you go when you need to slow down and not do much. And it is precisely that. The world’s relentless march forward occurs in the cities. Almost three quarters of the world’s productive output, its GDP, comes from its cities. There are simple reasons for this. When we cluster closer together into large agglomerations it brings us close to resources and information. City living is more expensive because we are willing to pay more for the choice and opportunity that this results in. For the entrepreneur, it allows you to access the resources you need quickly and efficiently from legal to administrative to people and gives you rapid access to a larger market. For the job seeker, thriving entrepreneurship means more jobs, more choice of jobs and therefore an implicit safety net that if one job doesn’t work out there are other jobs to be found. For the consumer it means more products available just outside your doorstep. There is immense value in all this. <a name='more'></a> <br /><br />But simple agglomeration is not all it’s about. There are so many elements to a thriving city. One of the advantages of people living in close proximity is that resources can be distributed efficiently. Geoffrey West and his colleagues for instance have studied cities in the United States and quantify how much electrical cable and pipe you need to reach power and water to people. They show that as city density increases, the kilometres of wire and pipes decreases in sublinear fashion allowing tremendous cost efficiency. Much more so if you bother to plan this. I recently met a former Chennaiite who works with a geospatial analysis company in the United States mapping city water pipes and modelling their flow. All this so it could be made more efficient and faults could be rapidly detected and repaired. <em>Thambi</em>, the Chennai water department told him when he went to meet them, <em>this is very nice but what can we do with this here</em>?<br /><br />Then there is another extraordinarily important element of how new migrants to a city are integrated. How easy it is to connect yourself when you get there – first to the wiring of electricity, telephone, water, gas and sewage and then to information about the cities resources. Can you arrive and just plug-in and play or do you wander around lost for days standing in unproductive lines? Can you easily find the resources you need or do you wander around alleyways searching for products and services? In cities, if you calculated travel distance to resources I imagine you would come up with extraordinary non-linear benefits as well, particularly if information were well organized and transport was efficient. And if people could plug and play quickly, they can move quickly and efficiently to productivity.<br /><br />In the world there are cities operating smoothly like a fit organism with strong circulation and fast nervous signalling allowing fast thinking and strong and quick responsiveness. And then there are disorganized dense masses of humanity that operate like broken creatures, frequently suffering from functional paralysis due to a breakdown in the supply of critical elements – like an organism suffering frequent heart attacks and strokes.<br /><br />Here in India, I wonder about the future of our cities as roads are increasingly choked and infrastructure is not well planned and unable to reconfigure to changing needs. In my crystal ball there are two things that I see: a migration of people to the more planned cities that are popping up on the outskirts of today’s big urban masses and new agglomerations emerging out of our rural landscape. With 700 million people now living in small fragmented rural communities, if we are able to make good on an agenda of inclusion, bringing knowledge, information and capital into these areas, we will find scattered villages slowly clustering together to become towns and then cities as people move to take advantage of the benefits of proximity. I’m betting that our urban landscape will reconfigure faster than we imagine.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com0tag:blogger.com,1999:blog-6109775657912393469.post-63884710697147037432011-12-28T01:20:00.000-08:002011-12-28T01:33:45.219-08:00Happy NationAs posted on <a href="http://yourstory.in/2011/11/physics-of-poverty-happy-nation/">YourStory.in</a><br /><br />Many CEOs and HR folk will tell you that happy people make for more productive employees. In fact there are even studies that demonstrate that when you are happy you are more productive. Therefore, the reasoning goes, it is important for companies to make employees happy so that they will be productive. Some even go so far as to say employees first, customers second. An article in the recent issue of Outlook on happiness made me wonder if they haven’t got it all backwards. <a name='more'></a> <br /><br /><br />The article reported on a survey of happiness among some 2000 people across India. In it they asked people questions about whether they were happy, what made them happy, and who they thought were the happiest people. What made people happiest was optimism about the future, followed by feeling fit and work success. Also, a sense of purpose. According to people’s perception, the happiest people were successful industrialists, doctors and politicians while the least happy were people doing nothing followed by housewives and bureaucrats. And the top three ways to get happy according to these folks were getting together with friends, meditating and working hard. Yes, working hard. So if we put all this together it is saying something. That at least here, today in India, presumably among English speaking folk, we are deriving our happiness from purposeful accomplishment, and that staying fit and working hard are paths to this. This is good news and bad news for the country. <br /><br />The good news is that happiness is not at cross purposes with productivity and progress but rather can be deeply connected to it. The excitement that we are as a country accomplishing something has been palpable in India the last decade and this is not surprising. There is headiness about being able to declare yourself globally competitive in different areas, about being able to be part of something growing and changing in a positive direction. That headiness is happiness. So it seems to be that it is not happiness that makes you productive but productive accomplishment that makes you happy.<br /><br />The bad news is that only 100 million Indians are employed in the formal economy and even have a shot at being part of this heady wave of growth and progress and the happiness that follows it. We are a country where almost a billion people fall into the category of not doing much beyond a subsistence context, and as Ruchir Joshi says in his article in Outlook, we used to think that rural people were happy because of their ‘pure’ and ‘simple life’, but today only the insane think that. This would suggest that we are probably a pretty unhappy nation in the aggregate and the rapidly rising crime statistics seem to support this. Across the country violent crime has grown about three fold since the 1950s, that’s way faster than the population. And this is by no means an urban phenomenon. In my own work we constantly encounter rural violence and have had to abandon field activities at least a few times in the past year due to village fights and murders.<br /><br />There is a lesson in this though. If we are aiming to be a really happy nation, then the solution is not in redistributing or distributing money but in creating frameworks that enable more people to experience productive accomplishment. To be happy we need to focus on enabling productivity rather than alleviating poverty.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com0tag:blogger.com,1999:blog-6109775657912393469.post-52321089583433968842011-11-07T07:28:00.000-08:002011-11-07T07:31:29.452-08:00One World, One (Giant) LanguageAs posted on <a href="http://yourstory.in/2011/11/physics-of-poverty-one-world-one-giant-language/">yourstory.in</a><br /><br /><em>Take a risk. Use your imagination. Transform your world. </em><br /><br />Try to say this in any Indian language. I challenge you. You will fall short. Short on comparable, easily accessible vocabulary, short on that easy feel of flow and short on memories of when you last heard something like it said. English is the language of progress and possibility. English is the language of technology. English is the language of change.<br /><br />To be progressive, therefore, one of the most powerful things we can do in this country is make English mandatory curriculum in every school, and then in the next generation just switch to English as the sole medium of instruction. One world. One language.<br /><br />OK, I hear the critics. Some of our languages are so beautiful. So much of our culture will be lost. Then quick, start translating. English is one of the fastest growing languages in human history. According to the Global Language Monitor, the number of English speakers has grown from 250 million in 1960 to some 1.53 billion today. In China alone there are apparently now 250 million English speakers. In India, 100 million.<br /><a name='more'></a><br /><br />But more significantly, consider this. From roughly half a million words in the English language in 1960, today English has over one million words. And, currently, a new word is added to the language every 98 minutes. That’s about 15 new words a day. To qualify as an ‘English’ word it must be appear in a consistent context in English books and articles some large enough number of times with some criteria of geographic breadth. Both Google and the Global Language Monitor have their own counting algorithms. The growing and evolving feature of the English language therefore allows us to carry with us those words and phrases from our own languages for which we cannot find ‘English’ equivalents that give us the same nuanced feel.<br /><br />Now, most human beings apparently have a vocabulary between 10,000 and 50,000 words. Only a small number of overzealous linguists can claim vocabularies upwards of 200,000. On the other hand, there are supposedly less than 2000 words that we use every day. The most recognized English word on the planet is OK. So what this means is that all of us English speakers get the benefit of a common linguistic structure and a handful of daily words so we can basically understand and transact with one another, but then diverge in our other vocabulary. Someday how widely you can communicate will no longer depend on how many languages you know but how many words you know. And this will be richer than having multiple languages because the richness of language comes from use. It comes from words traveling among people and building common memories and associations.<br /><br />So, the one millionth English word, which was announced on June 10 of 2009, was Web 2.0 which means “the next generation of the world wide web”. Coming in right behind at 1 million and 1 was Jai Ho! which means in the new English dictionary “accomplishment” or “victory”.<br /><br />So, <br /><br /><em>Take a risk. Use your imagination. Transform your world. Jai Ho!</em>Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com7tag:blogger.com,1999:blog-6109775657912393469.post-7635728388930475472011-11-07T07:19:00.000-08:002011-11-07T07:28:40.489-08:00Cigarettes and SwansAs posted on <a href="http://yourstory.in/2011/10/physics-of-poverty-cigarettes-and-swans/">yourstory.in</a><br /><br />In my last post, I mused about who actually knows what something is worth? Beyond survival, ‘value’ is simply collective perception, a construct of our collective mind. So what do we mean when we talk of ‘value’? What is our mind ‘valuing’ and for what purpose? For an entrepreneur this is a fundamentally important question. On a very simple level you could claim to be creating value so long as someone sees it as valuable enough to pay money for it. However, there are people willing to pay money for all sorts of destructive things like drugs and cigarettes and exorbitant amounts of money for completely worthless things like crystal swans. Of course that is my value judgement I’m imposing on it. I have friends that would argue me down that the drugs help their creative process and the cigarette smoking calms them and helps them be more productive. And as for silly looking crystal swans – some people derive happiness from having them perched on a shelf in their house. However, on the other hand, if you ask a large room full of people to name products that are of fundamental value to society, they will disproportionately name a few – two wheelers, mobile phones and internet access are ones that come up frequently.<br /><a name='more'></a><br /><br />In this are clues to the factors that define a more intrinsic value. We all see fundamental value in anything that enhances our capability. And this is not trivial. It is ultimately capability for survival, the need for which is implicit in the definition of life. We don’t use these every day for our immediate survival but if we have fast access to information, communication and mobility, we are better positioned to survive a number of possible calamities and disasters, if and when they do occur. Progress is about enhancing our capability and making it better, faster, cheaper and therefore more accessible. But what about all the other stuff – the drugs, cigarettes and swans?<br /><br />The other stuff is more tricky. The brain is capable of creating constructs that extend beyond the moment. So at any given time we are constantly making trade-offs of a ‘feeling’ of well being in the present for the promise of well being in the future. We all implicitly discount time differently and do so differently at different times. The more distressed we are, the more we might value the now over the future – the drug high or the cigarette calm. And as for the swan, there are those things that feed indirectly into our sense of well being – our position relative to others in society. An expensive crystal swan might sit on a shelf as a subtle and almost subconscious symbol of the prosperity of a household and therefore the marriage value of progeny. Or it may be a symbol of accession into a class of society that affords certain social privileges. These are extraordinarily relative value perceptions. No one would pay tens of thousands of rupees for a small crystal swan unless they had a complex set of associations tied to it that were formed from numerous interactions.<br /><br />So while some things have more fundamental and universal value propositions, for most things, value has to be defined not just by product but by the who, why and when behind the value constructs. Who would ‘value’ it and under what circumstances and why?Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com1tag:blogger.com,1999:blog-6109775657912393469.post-87241060778527606792011-10-10T09:09:00.000-07:002011-10-10T09:12:12.827-07:00What is it worth?In 1989 as a 17 year old college student I had a childish view of what it took to get by in the world. Foolishly, I thought that $150 (7,500 Rs.) was sufficient to spend a month in Greece (it was my own hard earned money and seemed a lot to me at the time). $150, I found out, is not a lot of money. It worked out to about $5 a day. In purchasing power parity terms it was somewhere below $2 a day in an India. What followed was hardly a sightseeing tour but an exercise in subsistence living. For $1 there were hostels that would let you roll out your sleeping bag on their roof. If it rained they would accommodate you in the corridors by the bathrooms. In Athens I could not afford the entrance fee to the Acropolis but discovered that if you climb the hill from behind the Plaka you can scale the wall and see it for free. On my budget bus travel was wildly expensive but if I spent long enough it was somewhat easy to hitch a relatively trustworthy ride. I had to save most of the money for food. On most days I used to buy a loaf of bread, a piece of cheese and a tomato and stretch it out for the day. <br /><br />For me it was a game, an experiment, but half the world lives in this kind of subsistence paradigm. In rural India, according to the NSSO studies, people use 50 to 70% of their income to buy food, to fuel the survival of the body. My statistics were virtually identical. Aggregated over time about 60% of my daily expenditure was for food. 30% for shelter. The remaining 10% for transport and for one 30 second phone call to my parents from a post office in Thessaloniki (Of course I’m fine, see you in a few weeks. Where am I? What does it matter? OK.. OK..don’t shout, I’m in Thessaloniki). A good part of my day was spent comparing the size and price of loaves of bread and pieces of cheese. Excuse me, please can I have that one instead? (It looks just a tiny bit bigger). At the end of the day I was always a bit hungry so I had an acute sense for the caloric value I needed to derive from the money. Under these constrained circumstances my value judgements were very self-centred and tangible. ‘Value’ was almost entirely a calorie conversion. <br /><br />When we operate in surplus of subsistence, however, there is a fundamental transition in our valuation paradigms. <br /><a name='more'></a><br /><br />Beyond the subsistence paradigm our perceived value becomes increasingly relative and not absolute. What I pay for anything has very little to do with my survival needs. It has everything to do with what other people think and get. Value judgement is no longer individual. It is a complex collective determination. You’ll pay what you think is reasonable by market perception. How much did you get your TV for? OK Sounds about right. You’re happy with what you paid for something until someone has paid less. You’re happy with what you got paid for something until you find out someone got paid more for the same thing. Job seekers set their salary benchmarks based on what their classmates are getting paid, or at least what they think their classmates are getting paid. It rarely has anything to do with an absolute ‘value’ of what they produce. The more geographically extensive the market, the less efficient the information of what others think. Who actually knows what someone or something is worth? <br /><br />If, beyond survival, ‘value’ is simply collective perception, a construct of our collective mind what do we mean when we talk of creating ‘value’? Is it about enhancing our capabilities of survival? Of our perceived happiness? What is your value paradigm? How do you know what something is ‘worth’?Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com3tag:blogger.com,1999:blog-6109775657912393469.post-83699731268256461312011-09-26T06:28:00.000-07:002011-09-26T06:31:47.188-07:00Relationships Not Productivity?As posted on <a href="http://yourstory.in/2011/09/physics-of-poverty-relationships-not-productivity/">yourstory.in</a><br /><br />Some weeks ago I received a rather acerbic email from a reader lambasting me for my relentless focus on productivity. Life is not just about productivity, he said. It is about relationships. Have I thought about this? Maybe people don’t want to be working day in and day out in factories or offices. People derive happiness from relationships not money and being poor doesn’t mean being unhappy. Our country will suffer because of people like me who come with western ideas to spoil the fabric of our society. And as I have come to realize, this particular reader’s opinion is a fairly common one.<br /><br />Last week I was going through the Kerala backwaters in a small boat with my kids and I almost could see his point. Life expectancy in Kerala is 78 compared to the 55-65 range in the rest of the country. Literacy is 100%. The villages we passed were clean and beautiful. What is it you would want to change about this scene? Is there some burning need for ‘progress’ here? <br /><a name='more'></a><br />The people in the villages sat in front of their houses watching us go by. As we came back around a few hours later, the same people, still there, smiled and waved to us. I wondered what it would be like to live that life, sitting for hours every day, chatting with your friends and watching boats go by. And here is my answer – for many it would be boring and unsatisfactory because the human mind has the intrinsic property of seeking out novelty. To live in the same paradigm day after day, year after year, leaves little to talk about. Should the fabric of our society be idle minds? Even in these villages in Kerala with good health and fish, fruit and grain within arm’s reach there is urban migration. Few people go the other way. <br /><br />When I talk about productivity it is not about mindlessly pursuing money but about engaging in creating and producing new value for the greater benefit of society. What is of ‘value’ is certainly debatable but what matters for the individual is if they feel what they are doing has value. There is pride and satisfaction in a valuable job well done – no matter at what level. And relationships are fundamental in this endeavour because we can create more together than each individually. In a productive society relationships don’t have to be less important but simply different in character. There is pleasure and happiness in productive relationships – the coming together of people to create value for society. <br /><br />In India family relationships have long been designed to maintain wealth within a family and community and to provide a safety net for the many unemployed. However if more people were productively engaged in creating value, then resources would expand and societal relationships would reconfigure naturally. For people like my cook who supports his family, his brother’s family and his parents, I imagine this might be a relief. And his unemployed brother might actually be happier having a job than not. These relationships may actually be more enjoyable and less stressful. For the people who spend their days sitting in the beautiful backwaters of Kerala watching the world go by, they might just find a different kind of pleasure in doing something more. At least they would have more to talk about with their friends. <br /><br />So while the pursuit of money or material gain for its own sake may not be the path to happiness, being productively engaged and valuable to society might do a better job. And if this is a western idea, so be it. A good idea is a good idea, wherever it’s from.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com6tag:blogger.com,1999:blog-6109775657912393469.post-5208669574917355152011-09-12T08:11:00.000-07:002011-09-12T08:17:48.386-07:00The Glitter of GoldA couple weeks ago my newly married maid came asking me for a loan to pay the rental deposit on her flat. I knew she had saved up much more than the amount she needed so I asked her what she had done with the money. She told me she had bought gold jewellery with it.<br /><br /><span style="font-style:italic;">With all of it?</span> I asked her. <span style="font-style:italic;">Why did you do that when you knew full well you had this expense coming up?</span><br /><br /><span style="font-style:italic;">I had to</span> she said, <span style="font-style:italic;">without gold they won’t let you get married.</span><br /><br /><span style="font-style:italic;">Who is ‘they’? </span> I inquired.<br /><br /><span style="font-style:italic;">Everyone</span>, she told me. <span style="font-style:italic;">All my relatives in my village</span><br /><br />At the time I told her she was foolish. Now I’m not so sure.<br /><a name='more'></a><br />Back in the old days money used to be linked to something of physical utility – typically gold. For every note issued, the government maintained gold bars of equivalent ‘value’. Today money is delinked from anything of actual physical utility. It is simply a piece of paper that we place implicit faith in. A piece of paper that we hope we are collectively making good on by creating adequate value to justify its printing. (For more about this read my earlier post Of Mind and Money). While the Governments have left behind the gold standard, Indians have not. India has the largest privately held gold in the world. And the rural poor, at least in Tamil Nadu, maintain a far greater fraction of their wealth in gold than the rest of us. This seems to suggest to me that they don’t have quite the implicit faith in our money system as we do.<br /><br />One big reason to keep gold rather than money, my maid and others from the villages tell me, is that paper money can just slip through your fingers. You will spend it on unnecessary things. In the case of Gold, you will think properly about what you need it for. When you finally go to sell it or pawn it, you will do it only for good reason. The easier it is to spend money, the more foolish uses we find for it. The more foolishly we spend money, the less real value we create and the worse off we all are collectively. Somehow they know this better than financiers and governments. Many governments try to spur growth is by increasing the money available for spending. But if more money means more spending on silly things, then it is simply pumping up the economy with hot air.<br /><br />Gold is not the only indication of the lack of participation by the poor in the government’s monetary system. Recently I met a woman who has developed a micronutrient fortified salt that she wants to market in rural areas. I asked her about the cost and how much more it would be priced relative to regular salt. She was in a bit of a dilemma. It was not the relatively lower price of regular salt that was the problem. Most of the rural poor did not ‘buy’ salt. Salt is still a bartered commodity. They will generally exchange cereal, rice, fruit and other such things for salt. This sort of exchange involves an agreement of value largely between two people that could change circumstantially. Paper money is reserved largely for purchases of urban factory products. The highly individual value exchange in barter is extremely different from the pricing set by collective markets.<br /><br />Bottom line, the economic and financial systems of the rural poor are entirely distinct in character from the government prescribed monetary system we subscribe to. It needs a whole different perspective of analysis and understanding.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com1tag:blogger.com,1999:blog-6109775657912393469.post-85602361246783154412011-08-29T07:27:00.000-07:002011-08-29T07:34:56.749-07:00What do you know about village life?As posted on <a href="http://www.yourstory.in/expert-talk/physics-of-poverty/6547-physics-of-poverty-what-do-you-know-about-village-life-">yourstory.in</a>
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<br />A couple weeks ago we surveyed readers like you to see what your perceptions were of rural India with regards to mobility and connectivity. We also wanted to get a sense for how different your own behaviour and access is from the villagers. We asked you to guess different parameters about infrastructure and behaviours in the region of Vadipatti (i.e. Vadipatti Taluk excluding the town) which is in central Tamil Nadu. Whoah! you guys were way off. Most of you guessed that the villagers had less access, mobility and connectivity compared to you but you just didn’t realize HOW MUCH less. Here are the results:
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<br />Who answered the surveys</span></span>
<br />125 people answered this survey online. 75% were from the major Indian cities. Of this half were from Chennai which is the closest major city to Vadipatti Taluk and the rest spread out across Bangalore, Delhi and Mumbai. 10% were from Western Europe and the United States and 5% were from small towns in India. In Vadipatti we surveyed 1000 people across 125 villages of which 540 were entrepreneurs running a business.
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<br />The results</span></span>
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<br />Excluding the town of Vadipatti there are 10 petrol bunks in Vadipatti Taluk which is 1 per 20 to 25 square km. Most of you underestimated the number of petrol bunks. Your median guestimate was 3 petrol bunks and average was 7. A large number of you guessed that your city had 100 Petrol Pumps (Median value). Your average guestimate was 340. For Chennai for instance, which is 164 sq km your median guess is that there is 1 per 1.6 sq km which is around 15 times the density. <span style="font-weight:bold;">This means a villager in Vadipatti Taluk has to travel about 15 times as far as you do to get petrol.</span><a name='more'></a>
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<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1Az9IzzTTpVuWlff1U2kw9cDloUiEC3HYNLnBZjoGXat03xsjauqUfsiG628PvrUQYkBJddp_r2puPv-sfs8NpIK0ymOR-ywrEMbCP6HvJPdAN_SVk1_UzAfVfHuWGraT69Qpnl9fgjgn/s1600/Mobility.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 320px; height: 152px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1Az9IzzTTpVuWlff1U2kw9cDloUiEC3HYNLnBZjoGXat03xsjauqUfsiG628PvrUQYkBJddp_r2puPv-sfs8NpIK0ymOR-ywrEMbCP6HvJPdAN_SVk1_UzAfVfHuWGraT69Qpnl9fgjgn/s320/Mobility.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5646285392947623890" /></a>
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<br />Excluding the town of Vadipatti, on average, a person has to wait 3 hours for a bus (This assumes a 12 hour wait for villages with no bus service). If we exclude villages with no bus, the wait is 2 hours. Most of you grossly overestimated the bus frequency. A large number of you estimated that a villager in Vadipatti has to wait 30 minutes (the median). The average guestimate was 60 minutes. Most of you reported having to wait 10 minutes (median) with an average of 12 minutes for public transport. <span style="font-weight:bold;">This means a villager in Vadipatti Taluk has to wait 18 times as long as you do for public transport.</span>
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<br />So how often does a village entrepreneur travel beyond a 5 km radius? Many of you guestimated that they leave once in three days (median 10 times a month) while the average of the guestimates was once in two days (15 times a month). In fact, entrepreneurs, on average, ventured 5 km beyond their village only once in a month. When we talked to non-entrepreneurs, we found that only 8% had travelled beyond 5 km in the last six months putting the average at well under once in 2 months. So you grossly overestimated (by over 15 times) the physical mobility of the average villager. On the other hand you all reported travelling beyond 5 km from your home at least every day. The median response was 30 times in a month and the average 34 times a month. <span style="font-weight:bold;">This means that a villager in Vadipatti travels beyond 5 km 30 to 60 times a month less than you do.<span style="font-weight:bold;"><span style="font-style:italic;"></span></span></span>
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<br />We also asked about tower coverage and call patterns and the results are similar. Like petrol bunks, you underestimated the cell phone tower coverage. In fact Vadipatti has almost complete coverage (>90%) as do your cities. And, while you reported making in the range of 10 to 15 calls per day, you guessed that they were making about 5 calls. The truth however is that it is more in the range of 1 or less, counting those who don’t have a phone and make any calls.
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<br />We will tell you more about their connectivity later. In terms of your mobility, however, I would venture to guess that if you had to wait 18 times as long for a bus or had to travel 20 km to get petrol, you would leave the vicinity of your home a lot less often.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com9tag:blogger.com,1999:blog-6109775657912393469.post-29634331028798523852011-08-16T04:14:00.000-07:002011-08-16T07:25:13.275-07:00From Subsistence to SuprasistenceAs posted on <a href="http://www.yourstory.in/expert-talk/physics-of-poverty/http://www.blogger.com/img/blank.gif6485-physics-of-poverty-from-subsistence-to-suprasistence">yourstory.in
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<br />Over half the world simply subsists – caught in a cycle of supporting ones immediate survival. More than half of India is a subsistence economy. The word subsistence is a derivative of the word ‘exist’ which comes from the Latin word existere meaning ‘to emerge’ or ‘to be’. But what does it really mean to subsist? Typically it is thought of in terms of poverty – some amount of money that people earn - but to me it is not equivalent – I think it is better defined in terms of an energy use cycle.
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<br />Here’s what I mean. In rural India, according to the NSSO studies, people use 50% to 70% of their income to buy food which means the majority of expenditure goes towards fueling the survival of the body. Compare this to the United States where it is around 20%. Similarly, an NCAER survey in the late 1970s showed that around 90% of fuel consumption in rural areas in India is used for cooking. I assume it’s improved now but venture to guess that it’s probably still in the range of 70% or more. In the United States only 15% of household energy consumption is for the kitchen. Furthermore, fuel consumption in rural India is still largely biomass – firewood ranks highest followed by dung and crop residue. An NIC report (I’m not sure which year) estimated that 89 million households spend 31 billion hours annually in biofuel gathering. That’s a lot of time. The subsistence cycle is thus to eat to sustain the body, use the energy to gather fuel and tend to the fields and livestock and then use the energy from these efforts to once again fuel the body. Petroleum, electricity and LPG together are minimally used not because of availability but because they must be paid for with money rather than time. And in this is an implicit judgement of human worth – that its value is little more than the kCalories expended per unit time to gather fuel or transform food on the cooking stove.
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<br />So what is the opposite of subsistence? What happens when you break out? I couldn’t find a term so I coined one: Suprasistence. The prefix ‘sub-‘ means below the opposite of which is ‘Supra- ‘ which is above. I define suprasist as creating value well beyond oneself, representing the capacity of the human brain to envision survival on larger scales in space (beyond family and community) and time (over many lifetimes) and to build new paradigms to enable this. The fuel of suprasistence is different. It is not food or fossil fuels but knowledge and information – a more complex form of energy. And the outputs cannot be measured in kilo calories or joules as in a simple transformation of matter. Rather its output is the creation of structure where there was none. It is entrepreneurship and innovation.
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<br />From subsistence to suprasistence is therefore not just a continuum in simple energy use. Food intake (one kind of simple energy) is a little different but not that different for people who subsist or suprasist. Fuel energy use is different but only to a point. Much of fuel consumption in developed economies goes towards maintaining environment (heating and cooling), and for transportation and more recently for electronic devices that enhance the flow of more complex energy – information and knowledge. However innovation is not simply a function of how much energy you spend on running your computer or ipad. The relationship between information input and creating new paradigms of structure and innovation is murky and not well understood. However, I imagine, if one were able to characterize it we would find that suprasistence is characterized by something qualitatively different than subsistence (for the physicists out there - a bifurcation in the system dynamics). These two ends of existence don’t operate on the basis of the same parameters. This is also why innovation is so hard to come by in subsistence economies.
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<br />Imagine however, instead of a world where most subsist, many exist and a few suprasist, if it were the other way around...Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com2tag:blogger.com,1999:blog-6109775657912393469.post-10337285708311015372011-08-08T05:24:00.001-07:002011-08-16T04:14:03.921-07:00What do you know about rural India?****This survey is now closed******
<br />We have some interesting results that will be officially announced in a ten days or so and not on the 15th as previously promised.
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<br />Think you know what rural India is really like? We are doing a short quiz to understand your perception of rural India and to get some information about your ecosystem that we will use as comparison. The survey will take you about 2 minutes and we will post the results next week along with what the real numbers look like.
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<br /><a href="https://www.surveymonkey.com/s/3ZBZSQW">Take the quiz!</a>*
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<br />Please do take 2 minutes to participate!
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<br />*For folks outside of India - 'Petrol Bunk' is India speak for 'Gas Station'.
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<br />Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com5tag:blogger.com,1999:blog-6109775657912393469.post-71453447534162787452011-08-01T02:36:00.000-07:002011-08-01T02:39:43.555-07:00A Different SpeciesThere is this strange sense of duality that India seems to bring upon you. On one hand there is this feeling of being on the cusp of something extraordinary. The giddy experience of watching something once so far removed from the developed world morph so rapidly and palpably into a modern society. The sense of possibility, the sense that something big is about to happen is now regular dinner party conversation.<br /><br />The journey of one generation to the next has been so fast that parents often have little context for the lives of their children. Particularly for the lives of the children who have been abroad and returned speaking, dressing and acting differently. This new India is English speaking, moves easily from one city to another, sometimes one country to another. It is hyperconnected and watches all the same TV shows as the rest of the English speaking world, hears the same news, and eats burgers and chicken nuggets almost as often as dhal and rice. This is more significant than you might think. “You know”, a friend tells me at dinner last week, “when I was young when we met kids who had grown up abroad we never knew what to talk about. We used to feel so awkward – they watched shows you never heard of, ate things you never heard of and talked about things you never heard of and had an accent you could never understand”. “But now it’s so different”, she says “recently my kids met some kids that had grown up in Singapore and the US and they got on immediately playing games with the same characters and constructs”. There is the feeling that we are increasingly becoming one world. Another friend who runs a global business and has lived in London, New York and Moscow has decided to now base out of India because its “here that its happening now and you want your children to understand it”. It’s easy to go to the US or Europe and get into the system in a few years, but to understand India is much harder, he contends.<br /><a name='more'></a><br />So true.<br /><br />And not least because there is the rest of India that evokes an uneasy fear. The thick mass of humanity that operates in a realm that is unaccounted and off grid, swarming every available space. They are unaware of the internet, speak no English and hold an entirely different world view. Almost like a different species. Literally.<br /><br />There are two ways in which the concept of species has been thought of. One view, which is in morphological terms, holds that members of a species are individuals that look similar to one another. The more widely accepted view, which is in biological terms, holds that a species is a group of actually or potentially interbreeding individuals who are reproductively isolated from other such groups. The process of speciation occurs slowly over time as one interbreeding group separates into two groups with an increasing rarity of interbreeding. While we typically think of this as occurring in the context of ‘postzygotic’ reproductive viability – or the failure to conceive viable offspring due to genetic differences that arise, speciation often arises because of ‘prezygotic’ isolating mechanisms – conditions that prevent the attempt to interbreed. In nature these can be due to groups occupying different habitats or engaging in distinct courtship and mating rituals.<br /><br />As one group of India changes so rapidly leaving behind the other on its slow journey (The internet is now even changing our brains, research says), the reproductive barriers are becoming a gaping chasm where interbreeding is increasingly rare and each group is more easily distinguished by visual cues – the clothes they wear and the habitats where they are seen. So much so that our mobile, connected group even has a name to refer to the other – we call them the Aam Aadmi - and we all understand. What will we be as a country and a planet when the process of speciation is complete? When the dichotomy that India carries is as large as it can ever be? It’s a thought experiment that would be an interesting theme for a film, I imagine.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com2tag:blogger.com,1999:blog-6109775657912393469.post-43236481860043466272011-07-17T23:20:00.000-07:002011-07-17T23:22:05.742-07:00Productivity LineWhen tackling any sort of problem, it matters immensely how you frame it. The construct and language you use to describe the problem will inevitably direct and guide how you formulate solutions. Let’s take a look at the economic topography of the world – there are places where a great deal of innovative products and services are created that many have access to and other places where much less is created and fewer people have access to the little there is. The medium of exchange for these goods and services being money, the issue of this global inequity among human beings has been constructed in the context of money. It has been framed as an issue of ‘poverty’, the lack of money and therefore the ability to acquire. With this framework lack of money becomes the central issue and we draw ‘poverty lines’ – how much money is reasonable to have and formulate solutions that focus on how to redistribute money and give people ability to acquire.<br /><br />What if instead we had framed the issue in the context of productivity – in terms of what you give or create and not what you take or acquire? Then instead of looking at the world and wondering why so many people are able to acquire so little, we would ask why so many are able to create so little and why we are so grossly lopsided in terms of productivity. Instead of seeing people as lacking enough money to be above some poverty line we would look at it in terms of people lacking in ability to be above a productivity line. If we saw it this way we would construct our solutions profoundly differently. Rather than focusing on money – which is simply a token of exchange – we would be forced to focus on human capability and the conditions that drive it.<br /><a name='more'></a><br />So let’s examine one of our primary solutions to the larger inequity in the context of productivity. If we looked at it this way rather than the context of poverty, would we still do it? Would we do it the same way? Let’s take NREGA – the National Rural Employment Guarantee Act. Its goal is to reduce poverty by providing livelihood security. The government site that tracks this provides details on how many persondays of work was done and how much was distributed in ‘wages’. It is however extraordinarily difficult to actually find a list of what was created with this scheme – if there is one at all. Rather the first link on the main page under ‘What’s new’ brings up a pdf of a letter to the Principal Secretaries of all States from the Joint Secretary Mr. DK Jain asking them to take the necessary action to produce photographs with latitude and longitude of ‘works’ done to ensure, no doubt, that wages were not handed out without some sweat. At least wages should be given out for digging ditches, moving dirt from one place to another and other equally extraordinary things even if they have no real purpose (check out the picture on the site). Has it succeeded? Well, if the measure is in wages – income - then perhaps it has.<br /><br />On the other hand, if we were to evaluate this in terms of productivity, we would need to report first and foremost what was created with the money. What was produced and what was the per person productivity? This means that we cannot get away easily by simply pointing to ‘wages’ and ‘income’ as measures of success. We would need to get in there and debate and figure out first how we would measure productivity and output and then track this. And to get a decent outcome we would have work harder to figure out how to drive productive output. We couldn’t just be lazy and let people do anything they can think of to work up a sweat, however useless. If we need people to cross a productivity line, it is a whole different ball game.<br /><br />Think about our other approaches - subsidies, foreign aid, microfinance, government spending - and you will see the subtle differences in approach that would emerge. So let’s forget about the poverty line and figure out how to construct a productivity line. What do you say?Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com9tag:blogger.com,1999:blog-6109775657912393469.post-37180730338689581372011-07-17T23:13:00.000-07:002011-07-17T23:19:44.298-07:00Microfinance 2.0As published in The Smart CEO as part of the 'Big Ideas' series<br /><br />The last decade has seen a sensational rise and fall of microfinance in India. After the crisis in Andhra Pradesh (AP) that claimed debt related suicides on account of exorbitant interest rates and high pressure collection tactics, the Reserve Bank of India (RBI) has finally put in place regulations based on the recommendations of the Malegam committee. With massive defaults to contend with and the new regulation that places caps on the rates and spreads, the industry is struggling to find its feet again. Many of the less efficient players are out of luck and out of business. Others are tightening their belts and getting more efficient in their operations. But, is microfinance 2.0 just about process efficiency? Or can it be something greater?<br /><a name='more'></a><br />Where it began<br /><br />Let’s start with the premise of microfinance and what it started out trying to solve over a decade ago. Back in the ‘70s and ‘80s, microfinance- ‘small loans to the poor’ - was the domain of the banking sector. First, the only reason they were lending was because it was the government mandate. The loans were so small that given the cost of servicing them, it was a losing proposition to begin with. To make matters worse, banks ended up with massive defaults, sometimes even up to 40 per cent. And when the borrower can provide no collateral and has no identification, how do you go after him? He can simply disappear and even if you find him there’s no guarantee you’ll get anything back.<br /><br />The microfinance industry in India began to take shape in the early ‘90s as banks pulled back from this customer segment, licking their wounds. The problem ‘microfinanciers’ stepped in to solve was to find a way to make credit available to the poor on large scale in a viable way. This meant finding cheaper ways of delivering credit and mechanisms to ensure repayment. On these counts the industry has had some fair success and some failure. The group lending model where members guaranteed one another’s loans created peer pressure that ensured higher repayment rates than the banking sector ever achieved. Also, the new ‘microfinance’ focused on women who turned out to be more reliable in the group dynamic. Further, many microfinanciers dared to lend at rates almost three to four times what their banking predecessors had and found that there was easy uptake in the market. This meant much larger spreads than the banking industry had ever enjoyed. This made not only for viable lending, but for a highly profitable business model. It was certainly not cheaper credit, but it worked.<br /><br />Into a crisis<br /><br />So, how did it go wrong? As investors and financiers flocked to the market to lay claim to their share of a high margin business, credit became an easy commodity. In some markets, like in AP, where most of the large players began, loans were easy to come by and people began to borrow well beyond their means. The peer pressure that worked so well when credit was scarce began to break down. Borrowers could default on one loan and still access credit from another lender. And the consequences to the defaulters? Nagging loan officers standing at their doorstep hurling threats. Pressure began to build in the system and the crisis began.<br /><br />Moving ahead<br /><br />But, what now? With the caps on interest rates and spreads, only those who can service loans viably at lower costs can survive. This will force greater operational efficiency in the model and borrowers will get credit at more reasonable rates. In the short term, credit supply to the poor will shrink which will reinforce the peer pressure. And there will be more measured, responsible growth. But, this isn’t just what all the fuss was about. The fame of microfinance wasn’t simply that it could make profit by lending to the poor. It was that this credit supply was touted as a path out of poverty. The question is, was it? And if it wasn’t, can it be?<br /><br />According to the Malegam committee report only about 20 per cent of the microfinance loans were used for income generating purpose, i.e. invested in a business. However, it is not known how many of those businesses did well and how many lost money. In our own studies at Madura Microfinance Ltd., we have found that many of these businesses are not successful. In this context much of the discussion around microfinance has been about how to help turn the poor into successful entrepreneurs through training and other means. However, while this is a necessary endeavour of the country, I would argue that it is not the job of microfinance.<br /><br />A new model<br /><br />So, what should microfinance 2.0 look like? The role of capital markets in general has never been to create entrepreneurs, but to find those who are, assess their potential for success and provide the capital to make it possible. It is when the banking system has been most successful at this that it is most beneficial to an economy. I would argue therefore that microfinance 2.0 should be about this as well - to not just get efficient at providing credit to anyone that is poor but to transition to identifying and financing genuine microentrepreneurs with the highest chance of success or conversely, the lowest risk of failure. This is no easy task however, but not impossible. Microentrepreneurs operate in a cash economy where nothing is registered and documented. There are no books to audit. How then can you figure out if they are genuine and if they can be successful? Traditional methods of risk assessment simply won’t work. Rather, we need a different approach, one that builds profiles of success that are easily measurable and can be translated into effective risk assessment tools.<br /><br />With microentrepreneurs, particularly ones in rural ecosystems, there are three key aspects to risk: the first is ecosystem risk -what environment do they operate in? Do they have access to electricity, transportation and communication? These factors play enormously into the possibilities for entrepreneurial success. Imagine being in an isolated village where there is no way to transport your goods outside. Your market is then restricted to the limited population of your immediate surroundings. For the rural poor, this is far greater a risk factor than any other. The second source of risk is business risk: what kind of business are they operating and how do ecosystem and individual risk parameters relate to their specific choice of business? For example, business risk for perishable goods is more sensitive to transportation frequency. The third source of risk is individual risk; not just parameters like literacy and education, but their profiles of social behaviour. Do they venture outside their village often? Have contacts in neighboring towns or villages? Have a cell phone that they use for business purpose? Read the newspaper? All of these factors determine how they will behave as entrepreneurs. The smaller their social and information networks, the fewer opportunities they encounter. Building these tools requires some analytical rigour. However, this is the age of analytics and this is where I believe the sector needs to head.<br /><br />The better we get at finding and funding the entrepreneurs with the greatest potential for success, the greater the return for every rupee – for the financiers, for the poor and for the country at large.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com0tag:blogger.com,1999:blog-6109775657912393469.post-14215253634343761702011-07-04T08:36:00.001-07:002011-07-04T08:39:13.753-07:00Gross Domestic PovertyAs posted on <a href="http://www.yourstory.in/expert-talk/physics-of-poverty/6261-physics-of-poverty-gross-domestic-poverty">yourstory.in</a><br /><br />For those of us with a memory of India in the 1980s and before there is no doubt at all that this is a country moving forward economically. From my schooldays when there were only two or three sub-standard brands of everything from soft drinks to soap to chocolate to cars, today’s India is remarkably different. It’s not just that there is every major brand available today. There is construction everywhere and sleek glass buildings are slowly but surely replacing old concrete structures. And there is a palpable feeling of change and a growing national pride. Incredible India. Every so often I get caught up in it and then I look at the numbers and I realize how easily we can distort our self-perception.<br /><br />Here are the facts. India and China are often compared as the Asian giants, both with over a billion people. But China’s economy is three times as big as India’s – a GDP of 5 trillion US dollars compared to India’s meagre 1.4. According to the Global Language Monitor, The Rise of China has been the most frequent news story for over a decade across over 75000 print and electronic media publications. India doesn’t feature among even the top 20. For further perspective, Tokyo, which is the largest city economy in the world, has an economy the same size as India – 1.4 trillion. Tokyo has only 13 million people though, which means that they are pretty hard at work there. About a third of them are either kids or old folk which leaves about 8.5 million people out there getting it done each day, producing an output as large as our entire country.<br /><a name='more'></a><br />Take a look at how GDP is calculated: India uses the expenditure method which is consumption + investment + (government spending) + (exports-imports). I’m most comfortable with the consumption and the export/import parts because I think people and businesses, especially in India, are pretty good at only buying and selling at prices they think reflect the value of the purchase or sale. The investment part is OK too but there is a bit of speculation about future productivity embedded in that. It’s the government spending that I would heavily discount. All the siphoned off money goes back into the economy as consumption I would think. But really, I can’t imagine that the government spend on the damn ditch outside my house that was dug for no apparent reason and never got filled back up was worth what they paid for it (sorry I got a little riled up there). And I’m pretty sure that like this, a large portion of the 27.2% of GDP that the Government expenditure accounts for, does not reflect any real productive value. So all in all, I’d peg the Indian economy as smaller than Tokyo's.<br /><br />Japan as a whole isn’t nearly as productive as Tokyo though. Tokyo is 10% of Japan’s population but produces 30% of its output. Similarly, Los Angeles accounts for 40% of the economy of the US state of California, which is roughly the same physical area as Japan. That large cities are far more productive per capita is no mystery. The density of cities allows for all sorts of efficiencies. It’s a whole lot easier to be productive in a city where the ecosystem allows you to do things faster and more easily – from hopping on frequent public transportation to finding any product or service you need to get your job done. Urbanization has enormous economic benefit. On the other hand, I shudder to think what a single massive earthquake right in the middle of Tokyo or LA would do – and both are earthquake prone. Such a tight geographic concentration of productivity has its enormous benefits but immense risks. In India the GDP (for all its meagreness) is far more evenly distributed with 50% coming from its six major cities in a fairly even manner.<br /><br />With 70% of our population in villages though, the challenge is to figure out how to enable circumstances of greater productivity for a distributed population. But just imagine, if every one of our working age population was as productive as the average Tokyoite, India’s economy would be 129 trillion, which is almost twice the entire world economy today.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com4tag:blogger.com,1999:blog-6109775657912393469.post-54572209483943824392011-06-20T00:14:00.000-07:002011-06-20T00:21:41.265-07:00Like a DiamondAs posted on <a href="http://www.yourstory.in/expert-talk/physics-of-poverty/6147-physics-of-poverty-like-a-diamond">yourstory.in</a><br /><br />About 200 years ago it was discovered that diamond, like graphite, was made entirely of carbon. One brilliantly reflective, the other black; one hard, the other soft. How was it possible that two things with properties so contrasted could be made of the same thing? With this discovery came an extraordinary insight: what mattered was not the element itself, for the single carbon atom in isolation had no particular properties. What mattered was the bond structure.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2DzSZLcpHgNHw3_3zUB7f0ay2E48Mr1HQ1ZVOnIkOvVOHY0qoAhOhyx_AZOOBBy7pknp6qwpfL4_CBD0vWFzJtQqFfKky2eS-XpMu3zy31_vy_xSufRDubDxva7zNVsswh3eK8Q4SMjJI/s1600/diamond.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 320px; height: 240px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2DzSZLcpHgNHw3_3zUB7f0ay2E48Mr1HQ1ZVOnIkOvVOHY0qoAhOhyx_AZOOBBy7pknp6qwpfL4_CBD0vWFzJtQqFfKky2eS-XpMu3zy31_vy_xSufRDubDxva7zNVsswh3eK8Q4SMjJI/s320/diamond.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5620198176906499234" /></a>So what does this mean? A chemical bond is simply a probability of how much time electrons from one atom spend hanging around in the space of another. In the case of the diamond the carbon atoms are strongly bonded to each of their four closest neighbours giving it the property of hardness. And so closely engaged are these atoms that when light energy enters it is not welcomed and it bounces around simply leaving the system giving it its reflective sparkle. In contrast, in graphite the carbon atoms are not all tightly bonded but rather some of them associate with one another in more fluid nature giving it softness and the ability to accept or absorb light energy to make it its own.<br /><a name='more'></a><br />Atoms are simple entities so the numbers of possible bonds are few and yet the possible outcomes can be as starkly different as night and day. We humans on the other hand are complex aggregations of atoms into macromolecules which in turn combine to form cells which in turn combine to form organs. At each level the elements of the system bond with a new order of complexity. The myriad of human bonds far outnumber the mere handful that atoms are capable of. But the principles are similar. When we are born, each of us on our own, we have few properties of personality and culture - rather these properties are descriptions of how we interact with one another and not properties of ourselves in isolation. The outcomes of society, therefore, like the properties of matter are the manifestations of our bonds or interactions with one another.<br /><br />And what are the bonds of rural India like? Take P.Manikantan from Vadipatti in Tamil Nadu. He has lived in the same village since birth and works as a Panchayat clerk. He interacts with only about 25 people, mostly his immediate neighbours. The last time he ventured beyond 2 km from his village was over a year ago, and that was a rare occasion. He has a phone but he mainly uses it as an alarm clock, calculator and camera. He only makes a few calls a year. And when asked what he’d like to achieve in the next five years, he shrugs. He doesn’t know. His bonds are few and strong as are the others in the village. It is slow to change, difficult to reconfigure. Hard like a diamond. And what happens to the energy in the system? Money for instance, is a proxy for energy, carrying the potential to change something. When it comes into his hands he uses it for his immediate purchases. It bounces around in the village from hand to hand – tea shop owner to shopkeeper – until it exits the system, as payment for a product or service from outside his village. It is not absorbed. Not used to create something new that stands as an emblem of new capability in the village. If we could see the village the way we look at matter, we would see it reflect rather than absorb the energy. Like a Diamond.<br /><br />To change such a rigid structure is not easy and yet it is not impossible. The challenge is to lose our enamour with the sparkle and find a way to reconfigure the bonds of society to make them more fluid and varied so that information flows more freely and energy is absorbed for productive purpose.<br /><br />Diamonds, contrary to popular belief, may not be forever.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com1tag:blogger.com,1999:blog-6109775657912393469.post-9375760398470642062011-06-06T18:19:00.000-07:002011-06-06T18:22:22.313-07:00Learning to OrganizeBack in 1996 when I was in business school we used to sit around and make fun of our organizational behaviour classes. Soft stuff. Not hard core like finance. Now I know better. Finance is the easy stuff. Organizational behaviour on the other hand is complex and can profoundly change socital outcomes.<br /><br />So what is organizational behaviour about? If you really think about it, it’s about how human beings come together to share their knowledge and abilities to create, build and get things done. And why should we do this? Because when it is done well, the outcome can be far greater than the sum of the parts.<br /><br />Paradigms of progress are exemplified by large scale organization. In the United States and most European countries, for instance, somewhere between 5 and 10% of working adults are entrepreneurs. In India it is almost 50%. What that means is that entrepreneurship in the developed world results in larger scale, more people coming together to get it done. Indian entrepreneurs, on the other hand, tend to operate in structures of 1 to 3 people. There are probably a great many reasons for this. Not least that most Indian entrepreneurs operate in micro scale markets – village communities of hardly a few thousand people that don’t provide an opportunity for scale. <a name='more'></a> Yet I believe there is more to it than this. Organization, even in small communities, can accomplish a great deal of efficiency – not just in terms of enterprise but in terms of public good. Organization is not just about a formal structure or hierarchy but about how we negotiate among each other in everyday situations – getting on a bus for instance. Do we all rush to crowd the entrance or stand in line?<br /><br />So why are societies so different in how they organize? The more I observe the more I am convinced that the ability to organize is not an innate human trait. Rather, I believe, organizational structures are innovations that are then taught and spread. Some become viral and some die out in the same way as products do.<br /><br />This struck me first as we followed the way our Self Help Group borrowers – illiterate and semi-literate women – responded to some simple exercises in our ‘mini MBA’ program. This is a video based training program that brings business education to the poor that has been developed in collaboration with Dr. Madhu Viswanathan at University of Illinois at Urbana Champagne and his Marketplace Literacy initiative. They tested with two different groups - one that was reasonably educated (10th or 12th grade) and one that was largely illiterate, and came back with some very interesting learnings. Here's one: There are a couple places where the video instructor asks them to pause the video, organize into groups of three or four and talk about some particular question or topic. The groups, particularly the more illiterate group were unable to carry out this instruction of organizing into groups. It had to be demonstrated explicitly before they were able to execute this simple organization.<br /><br />As I observe my kids watching western videos I realize how much these shows teach kids how to organize – from the very simple organization of standing in line rather than all making a mad dash together to forming and working in groups. Consciously or unconsciously these become part of curriculum and perpetuate. The challenge thus lies in finding those organizational structures that can be productive in the Indian context and perpetuating those.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com1tag:blogger.com,1999:blog-6109775657912393469.post-39179780409954778632011-05-20T14:25:00.000-07:002011-05-20T14:30:10.259-07:00Cumulative Advantage(As published on <a href="http://yourstory.in/expert-talk/physics-of-poverty/5839-physics-of-poverty-cumulative-advantage">yourstory.in</a>)<br /><br />The attraction of the United States for immigrants has been the hope of social mobility. That with some hard work and good ideas you have a shot at a better economic life. In India social mobility is far more elusive. For a long time there was little expectation of it. People knew and accepted their place. Today something is changing. Hopes are emerging. Aspirations are rising. But what does it take to create conditions that allow social mobility? Why is it so hard the world over to achieve and hold on to?<br /><br />Our biology and natural social structure works against social mobility. For starters, we generally pass on our wealth to our children rather than to society at large. In India a little over 80% of the rupee billionaires inherited their billionaire status (compared to 20% in the United States). But that’s only a small part. What we do for our children runs far beyond simply passing on wealth. More than any other species, we humans spend inordinate time and effort raising our young, struggling for 20+ years over where to live, school choices and how to get our kids to behave properly. And what we are doing is essentially working hard to integrate them into society – linking them into social networks as well as knowledge and information networks. Our children inherit not just wealth but relationships and access. <a name='more'></a><br />When we are wealthy, these relationships tend to be far more economically valuable. They are relationships typically to others who are similarly wealthy and most likely hold keys to opportunities such as jobs, business deals and large bank loans. And they are often relationships that come with social capital accumulated over generations. “You are so-and-so’s son? Please come in, I knew your father and grandfather very well.” We also pass on behaviours that signal our social standing. “You talk just like your father. Please come. What can I do for you?”. So also when we choose a more expensive “better” school we also place our children in social networks of higher economic value. “Hey, meet my friend. He’s also IIM-Microsoft.”<br /><br />In our generational effort to ensure the success of our DNA we offer up our cumulative social capital to our children. For some of us this is a cumulative advantage. And in India, like nowhere else, we have had a deep seeded respect for the entitlement of accumulated social capital as part of a natural social order. As a nation we have transferred our allegiance and loyalties from generation to generation of political and business dynasties with ease.<br /><br />For most, however, it is a cumulative disadvantage. There are few relatively wealthy in India - hardly a few percent. This means that entry into this world is extraordinarily hard for the poor. They are unlikely to know people in these networks and rather have economically disadvantaged relationships. “I don’t have a job myself. How can I help you?” Nor do they have the information networks that would lead them easily to larger opportunities. This means that the rich have a terrifically easier time getting richer than the poor. Social network scientists have been building models of this under various names such as ‘preferential attachment [into the social network]’ and ‘cumulative advantage’. In these models, with each generation, people grow wealthier with a probability that depends on ‘who’ they are connected to or how much social capital they have to start with. No surprise that these models produce results of wealth distribution and social mobility (or lack thereof) that can be highly similar to empirical measurement – highly skewed distributions where most of the wealth is held by a few for many generations.<br /><br />Yet it is not economic inequality that bothers most. What troubles young aspirants more is when there is little hope of socioeconomic movement, of social mobility. It’s OK if only a few are rich if I feel empowered enough to have a shot of getting there myself. So what are the keys of social mobility? We can’t change the way we inherit wealth and relationships unless we dramatically change our social structure away from family units. But we can find ways of creating more equitable access to knowledge and information to make good on the hopes and dreams of a new generation.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com2tag:blogger.com,1999:blog-6109775657912393469.post-88554719189258342952011-04-27T03:07:00.000-07:002011-04-27T03:10:41.934-07:00Branded by Poverty(As posted on <a href="http://www.yourstory.in/expert-talk/physics-of-poverty/5742-physics-of-poverty-branded-by-poverty">yourstory.in</a> and in SmartCEO under the title 'Brands for People, not Poverty')<br /><br />Over the last ten years, with the publishing of CK Prahalad’s book The Fortune at the Bottom of the Pyramid and with inclusion gaining ground as a national buzz word, companies have been looking in larger numbers at rural markets for all sorts of products. Yet for every success in rural India, the marketplace is littered with many, many failures. What has been the problem?<br /><br />From my vantage point inside a company that operates predominantly in villages, I have a first-hand view. Not a week goes by when we are not introduced to a company with a product opportunity that they would like us to help them market in rural areas. It is an innovative product they tell us, specifically designed to solve a problem, meet an urgent need. And it is affordable. Shouldn’t that be enough? People from the villages should flock to it.<br /><br /><a name='more'></a> <br />Obviously, we presume, when money is scarce, it becomes the defining factor. Poor people need something low cost that ‘fixes’ an aspect of their problem of poverty. After all, wasn’t Maslow right when he so elegantly constructed his hierarchy of needs? When you are poor, your entire focus is around tending to your basic physiological needs for food, clothing and shelter, followed by your needs for health and safety. Until you have fulfilled these, you can’t move on to greater pursuits or aspirations.<br /><br />Five years ago I believed that. After all, I had firsthand experience to know so. On a trip in west Africa from Dakar to Timbuktu by road I had eaten millet sauce and rice for weeks and been stranded on the roadside without food as our van driver vanished for 36 hours on foot to fetch a bucket of muddy water for the radiator. There was nothing anywhere in sight but an old lady selling a bitter root. I could think of nothing but food. Nothing mattered more than getting food. It consumed me completely. I had crashed to the bottom of the hierarchy of needs.<br /><br />Now, after five years of working in rural India, I know better (and it is not surprising that Maslow has never been proved right). There is the young man who would rather skip dinner so he can afford a cinema ticket. After all, what is life without some song and dance? The woman who takes in and raises orphans, even though she has so little herself. After all, what is a life without love and compassion? The couple that would rather wait and save for three years to afford the ‘right’ kind of floor tiles than construct with the low cost kind. After all, it still has to look good and it matters a lot what the neighbours think. And then there are some of our microfinance borrowers who choose to work in our part time field jobs because they feel it gives them a sense of fulfilment. After all, it matters what job you do and how you feel about it. Ask any of these folk to tell you about themselves and they certainly won’t begin with their income. They will define themselves in terms of their unique hopes and dreams, their personalities, preferences and lifestyle.<br /><br />And yet even as marketers segment away the urban population by lifestyle, preferences, and a host of psychographic and social characteristics, rural folk are defined entirely by their poverty - all 700 million of them. They are simply ‘the bottom of the pyramid’ or ‘BoP’ as it has become fashionable to call them (It’s not a pyramid, but that’s a different story). Price is important. But to the marketer who recognizes their humanity - the breadth of their dreams and aspirations, of their interests, lifestyles, behaviours, habits and psychographic characteristics, there will be success. You cannot simply brand by poverty.<br /><br />And in retrospect, thinking back to my days in West Africa, I remember that all it took was a few dusty packs of Nutella in a small shop, packaged over ten years ago to make me forget about food and begin dreaming again.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com2tag:blogger.com,1999:blog-6109775657912393469.post-8217350214345455312011-04-10T23:50:00.000-07:002011-04-10T23:58:22.389-07:00Wikiwhat?As posted on <a href="http://www.yourstory.in/expert-talk/physics-of-poverty/5663-physics-of-poverty-wikiwhat">yourStory.in</a><br /><br />The greatest differentiator of humans and our triumph as the alpha species on the planet has been our increasing ability to record and share our collective knowledge. With this ability, each new generation, rather than reinventing the wheel, can stand firmly on the shoulders of those before to reach further. Today with the internet we can do this better, faster and among more people than ever before. Wikipedia is an incredible example of this. Today Wikipedia has over 15 million articles contributed by several hundreds of thousands of people and is one of the largest and most actively accessed public repository of human knowledge. These articles are in 281 different languages. Yet almost 30% are in a single language – English. No surprise. The top ten languages – all western European with the exception of Japanese and Russian, account for almost 70%. I’m still not surprised.<br /><br />I scroll down the list of languages on Wikipedia, sorted by their article count, searching for Indian languages. Right away I pass Chinese (Mandarin) at number 12. With about 331,000 articles it is just close to 10% of English. But 12 is not a bad rank. I keep going expecting to find Hindi and Tamil in close succession....I see Ukranian (15), Vietnamese (17), Indonesian (21), Arabic (25), Lithuanian (28)..Volapuk (31)... I’ve never even heard of Volapuk. I click the link.<br /><br /><a name='more'></a><br /><span style="font-style:italic;">Volapuk is a constructed language</span>, Wikipedia tells me, <span style="font-style:italic;">created in 1879–1880 by Johann Martin Schleyer, a Roman Catholic priest in Baden, Germany. Schleyer felt that God had told him in a dream to create an international language....... In 2000, it was estimated that there were 20–30 Volapük speakers in the world</span><br /><br />How is it even possible that Volapuk is ahead of Hindi, a language with some 250 million native speakers? I keep going... Waray-waray (36), Croatian (37) and then finally, there it is: Hindi at 38 with about 90,000 articles. I breathe a sigh of relief. At least it’s there. Telugu comes in next at 53 with 47,658 articles, Marathi at 61 with 33,270 articles and Tamil at 68 with 30,082. In between are whole bunches of language I have never heard of.<br /><br />I'm not just surprised, I'm shocked! The Hindi Wikipedia is only 25% of Chinese. But I suppose I expected the Chinese to be ahead. What troubles me more are comparisons like these: Vietnam has a population equivalent to Andhra Pradesh (almost 80 million) and only slightly above Tamil Nadu (about 65 million) and a per capita GDP equivalent to India, but 5 to 8 times as many Vietnamese Wikipedia articles. And while there are about 200,000 Vietnamese Wikipedia users, there are only roughly 20,000 or 10% as many Telugu Wikipedia users, equivalent to just .02% of the Telugu speaking population. The fraction of Hindi speakers on Hindi Wikipedia is even lower. Yet there are an estimated 100 million internet users in India. That’s about roughly equivalent to the estimated English speakers. So by my best guess, the two – internet users and English speakers - probably overlap almost completely. The other 90% are shut out of an enormous knowledge base. We are more divided a country than I had imagined.<br /><br />I probe further. For Hindi and Tamil about half of the content or edits are contributed by a handful of people – four or five to be precise (I didn’t check out the other Indian languages). This is a tenuous link between a knowledge repository of enormous value and potentially hundreds of millions of people. It is disconcerting.<br /><br />The promise of the internet is the ability to deliver relevant knowledge and information fast. So as we get excited about the extraordinary potential of the Internet to change this country, we have to ask: what’s on offer on the internet for the 90% of India that don’t speak English? When Gulshan from Baganwala and Munnuswamy from Usilampatti log on for the first time bright eyed with anticipation of a great new world of knowledge they will be sorely disappointed.<br /><br />For the first time it strikes me that to deliver the promise of the internet in India, broadband penetration is not the biggest barrier. The barrier is far greater. It is language.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com3tag:blogger.com,1999:blog-6109775657912393469.post-22331991566751893472011-04-02T03:41:00.000-07:002011-04-02T03:47:53.878-07:00Hear Ye! Hear Ye!As posted on <a href="http://www.yourstory.in/expert-talk/physics-of-poverty/5591-physics-of-poverty-hear-ye-hear-ye">yourstory.in</a> (yes, it is adapted from an earlier post with the same title)<br /><br /><br />For tens of thousands of years of human history the world over looked like our village landscape - no running water, no electricity, no cars, no phones, no printing press and low literacy. You have to wonder then how all of a sudden some parts of the world experienced an explosion in innovation and enterprise over the short span of a few hundred years to bring this all about. What was the driver? Surely it didn’t happen because of a king handing out gold coins or jewels from his coffers to the peasants (‘financial inclusion’?).<br /><br />Some time ago I was lamenting the difficulty of getting new product information to people who live in the villages – no phone, poor road connectivity - and my husband very helpfully offered up that it sounds like we need to have heralds, messengers and town criers like they did in medieval Europe. That got me thinking.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNL3Mg66EOUomYpjlMZgLm3ZyedofW5AKnRIDzlbf06FzgG85BdX0XF6ZGPeSbwbUdoT2mI99zs_hMp4S-0eiCqffm-9zLxvO7-dQtc6awHerxS47VK-mzKmFFj3zx_FZiwKkNjqhfqYx3/s1600/town-crier.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 242px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhNL3Mg66EOUomYpjlMZgLm3ZyedofW5AKnRIDzlbf06FzgG85BdX0XF6ZGPeSbwbUdoT2mI99zs_hMp4S-0eiCqffm-9zLxvO7-dQtc6awHerxS47VK-mzKmFFj3zx_FZiwKkNjqhfqYx3/s320/town-crier.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5590935512940799346" /></a>A little bit of scouting turned up that in medieval Europe, messengers were hard-working, talented folk. They had to be excellent horsemen, able to travel up to 100 km in a day, skilled topographers able to navigate unmapped terrain and talented communicators; a tough combination. These were prestigious jobs, well paid and protected by official decree. ‘Don’t shoot the messenger’ was in fact law. And it wasn’t just the Royal government that employed messengers. Businesses employed them as well. Interfacing with the far traveling messengers were the town-criers, who shouted out news on everything from wars, taxes and jobs to local markets and events. What struck me was that in England and some other parts of Europe, Town Criers were a government position, appointed by the Mayor of each town, to keep the citizens informed of matters of both national and local importance. In fact, interfering with a Town Crier in the execution of his duty was once a serious offense. The British Empire apparently took the job of spreading news and information very seriously. It strikes me what an extraordinarily powerful system this was and I would be willing to wager that the rise of civilizations and the spread of empires were closely correlated to faster mechanisms of information flow.<br /><a name='more'></a><br /><br />I started to look back in history a little – what about the Ancient Greek and Roman empires? The Olympic marathon itself is a tribute to the system of message runners. Indeed, the first evidence of such messengers is from Ancient Greece in 500 BC. As the legend goes, Pheidippides, a Greek runner, ran all day and night from Marathon to Athens (the terrain was too tough on horses) to deliver the message of victory against the Persians, dropping dead of exhaustion as soon as his message was delivered. “No finer way to die” it was declared. Running messages was a highly prestigious, respected position. Information was King, literally. And the Persians? Even as they clashed with the Greeks they were at their peak and had expanded their empire widely. As early as 500 BC Cyrus the Great, and then Darius, extended the road network and set up the first postal system, posting stations where new men and fresh horses would be available at any moment to carry a message further on. Information traveled at the fastest documented speeds of the time – up to 350 km a day. In the 1800s the Pony Express of the United States set up the fastest postal system from coast to coast that operated year round, come rain or snow, paying its horsemen 25 times that of an unskilled labourer.<br /><br />When the messenger got paid so handsomely and so much importance and emphasis was placed on information flow in the west, it is no surprise that it gave way to the subsequent innovations of things like the printing press, the telegraph and ultimately modern telecommunications. Here in rural India finding out what’s up in the next town or anywhere else is clearly not an organized priority, neither of the people themselves nor of the government. Imagine if there was a way for people to know what was up! That’s really powerful for enterprise, for collaboration, for progress. So instead of financial inclusion, I think the new mantra should be information inclusion.Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com2tag:blogger.com,1999:blog-6109775657912393469.post-78807485884071300212011-03-22T21:04:00.000-07:002011-03-23T07:55:32.631-07:00Who cares about the average income!as posted on <a href="http://yourstory.in/expert-talk/physics-of-poverty/5530-physics-of-poverty-who-cares-about-the-average-income">yourstory.in</a><br /><br />Apparently this last year the per capita income of Indians increased to Rs. 46,492 per year. That’s Rs. 3874 ($85) per month. Glory days! The ‘average’ Indian is no longer living in ‘poverty’. But really, per capita income is an average and who cares about the average income when the average Indian hardly exists. The distribution of income is highly skewed and looks like this (see my last related post ‘It’s not a pyramid’). You can see where that places the average.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEikIEgIEhNqNadggiYdZ80-ze0YvutBGZG8osEVTfMmUSF_j5t4wI3qwS8NKBp54ggq9MhBgDXAY8rOpsV5_yKCCR0GIZXGcgnwV3RBDjoih7m6FIiuArGlpg8wLWzVm3uGLyKkzLw4WR6m/s1600/physics_poverty_pyramid_avgincome.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 276px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEikIEgIEhNqNadggiYdZ80-ze0YvutBGZG8osEVTfMmUSF_j5t4wI3qwS8NKBp54ggq9MhBgDXAY8rOpsV5_yKCCR0GIZXGcgnwV3RBDjoih7m6FIiuArGlpg8wLWzVm3uGLyKkzLw4WR6m/s320/physics_poverty_pyramid_avgincome.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5587122724800432178" /></a><br /><br />Yet when we think of an average we make certain assumptions about the spread or distribution of the values that go into this number. If you say the average height of people in India is around 5’ 5” with a standard deviation of 5”, it’s pretty intuitive what that means – that when you arrive in India you will find most people around 5’5” with about 5 inches variation this way and that. In large part it means that we all look similar and can fit in the same seats, sleep on the same size beds and fit through the same doorways. So if we hear that the average height of Indians has increased, we think immediately that we are collectively growing taller as a population and not that a small group of freak giants suddenly emerged. Similarly, reports of an increase in the average income suggest to us that we are collectively better off. Are we?<br /><a name='more'></a><br />Now instead, imagine if the distribution of heights was not a bell curve but looked like the distribution of income in the picture above. What this would mean is that most people are less than a foot tall (at the base) while a few are absolutely enormous giants of 50 to 100 feet (in the point) with the rest somewhere in between. In this scenario there is no one size fits all and it would be impossible for a randomly selected group to be comfortable sitting at the same sized table. The enormous giants the height of multi-storey apartment buildings would have to live in a different sort of world of much larger proportion where they could barely see the underfoot base scurrying around lest they get unwittingly crushed. The average height in this distribution would still be around 5’5” but knowing this average, and even the standard deviation, would be completely uninformative. A single giant of 100’ might raise the average by a few feet. Similarly a single person with an annual income of 2.5 Crores among a million people earning just Rs.21,500 per year (below that arbitrary poverty line of $2/day) would give you that per capita income figure of Rs. 46,492.<br /><br />So if you knew nothing about India and you wondered what single number would best prepare you for the economic landscape, average or per capita income is really quite uninformative. Rather If you knew the exponent that described how fast the point tapers, or better still, had a good visual of the distribution, you would come prepared to find Mukesh Ambani in a 27 storey house on Altamount road surrounded by millions of abysmally poor people with barely a roof over their heads (and some of everything in between).<br /><br />Really, who cares about the average income!Tara Thiagarajanhttp://www.blogger.com/profile/02381494131533733589noreply@blogger.com3