Enabling wider participation in the global economy can boost a company’s competitive advantage, improve business in the longer-term, and make the world a fairer place
Let’s start by being clear about what the market is. The market is a simple mechanism that matches messages about supply and demand, using pricing, based on the rule of law. The market we currently have is the sum total of all of those messages. This is because the “market” is created by individual actions and interactions, which influence others in the market, and is what is called a “complex adaptive system”.
A key characteristic of complex adaptive systems is their susceptibility to “nudges”, because they are such delicately- balanced ecosystems. Those market players that provide the most supply and demand nudges are thus most likely to be able to influence the market in their favour.
In the world today, it is the richer nations in general who have this power, and the rich and powerful people within these nations. So one way in which we can help the market reach those for whom it is not yet working, is to cast proxy “votes” into the market for those who have no access, domestically and internationally.
If we don’t do this, the market shapes itself beautifully to suit those who are taking an active role. Eventually, we end up with a market that accelerates away not just from the poor but also from the comfortable, to cater increasingly for only the super-rich, because they have, quite literally, cornered the market. This isn’t anyone’s fault, it is simply what the market does – it matches supply and demand, so that if there is more demand for designer handbags than there is for clean water, that’s what it delivers. And what we are learning is that this kind of market is not sustainable, neither is the inequality it drives conducive to global happiness.
EVE POOLE TALKS ABOUT THE UNDERPINNINGS OF CAPITALISM
Enlightened companies realize that a better market is better for business over the longer term. And even if they are driven by short-term profits, the good news is that nudging the market can deliver these too, whether directly to the bottom line through new product lines or new customers, or indirectly through brand enhancement and the ability to attract and retain talent.
In general, companies are responding to the market’s lop-sidedness in two main ways: either they are enabling and increasing demand by building platforms to enable market participation, or they are creating and improving supply by using their know-how to provide products and services that it’s hard for local providers to supply.
Nudges on the demand side
On the demand side, one way to cultivate this is by using grey-market behaviour to create new “bottom of the pyramid” business models. What is a grey market? It’s an unofficial market that has been created by a community denied access to the global marketplace.
The Peruvian economist Hernando de Soto, argues that “extralegal” sectors in the developing world account for 50-75% of all working people, and are responsible for anywhere between a fifth to more than two-thirds of the total economic output of lower-income countries. In his book Stealth of Nations, Robert Neuwirth estimates the size of the “informal economy” to be $10 trillion worldwide, making it the second-largest economy in the world after the US. And whatever you think about the legality of such markets, they show that these communities are already embracing basic market behaviour, and they are a huge opportunity for legitimate business.
One example is in mobile telephony. There are now more mobile phones in Africa than there are in North America. Rather than copying the slow evolution of Western telephony, mobile technology offers the developing world a way to leap-frog ahead. For example, Motorola has developed a $40 no-frills mobile phone for the developing world market, which has a battery life of 500 hours for villagers without regular electricity, and extra-loud volume settings for use in noisy markets.
In Africa, companies like Vodafone and Visa have devised ways to use mobile phones as platforms for banking and other transactions, to get round the issue of market access for the threequarters of the world’s poor that the World Bank estimates are un-banked, often living in shanty towns and rural areas.
According to 2012 data from On Device Research, in Kenya, which has the highest penetration in terms of this market 96% of mobile phone users use their mobiles to conduct financial transactions, which becomes a general average of 53% when data is included from Ghana, Nigeria, India, and Indonesia. Together, these technologies could transform scattered and impoverished communities into viable and thriving economies, and accelerate their entry into the global economy.
Eve Poole is associate faculty at Ashridge Business School and an associate research fellow of the William Temple Foundation, teaching leadersmithing, neuro-leadership and ethics.