Global Thinker Award 2008
Full Speech of Speech of Prof. C.K.Prahalad
First let me tell you how deeply honoured and humbled I am by your recognition and I am so delighted to have a dear friend Dr. Abid Hussain, take the time to come here and also introduced me. and I am grateful to IILM and to Mr. Rajan for doing me the honour. and I have to tell you that I told them yesterday, give me the award first before I speak because by the end of my speech, you may want to take it away and they were kind enough to agree. sSo here I am.
It gives me the chance to say what I want to say. What I would like to do is to really spend some time with you, raising a point on how do you democratize commerce. If you really think about it, the last century was about democratizing politics. Getting people the share of voice in the way they are governed. We know the world is not perfect. It is still work in process but as that idea of democracy takes roots around the world, it’s time for us to ask the question, what is the next challenge because it takes generations to get this done around the world in a sensible fashion and what .I have been spending some time, is asking tThe question I am raising is how do we get economic power, economic access, economic opportunities for everybody around the world. and I just call it democratizing commerce and I believe that we have to start with India because that is where the big challenge is and it’s the challenge for not only India but all countries in the world including the United States.
There are forty to forty-five million people there who are also ddisfranchised from participating fully in the economic activities of the country. So when we stop asking this question, iIt is typical across the world, especially among intellectuals, to ask the question, ‘Is globalization good or bad for the poor?’ I want to start by suggesting how we frame that question, determines the answer that we get, I think this is the wrong question. The moment that you say is it good or bad for the poor, you are going to polarize the group, any group that you take. I have done this in front of students or executives and I am sure here senior public policy makers and politicians are going to get two camps: one saying yes it is good, others saying it is bad. I think we ought to re-frame the question. I believe globalization is like gravity. Don’t deny gravity but defy gravity. Build a plan.
Make globalization what work for everybody. So my starting point is a very different one. I don’t ask the question, is it good or bad?. I ask the question how to make it work for the benefit of the all. If you ask theis question, may be there is an answer on how to make get it work for everybody. So I started by saying, can we start it with a very simple proemise on what democratizing commerce means and what it can mean. I believe that every person must have the right and must have access to the benefits of the global economy. That should almost become a fundamental right and if you treat it as a fundamental right, there are only two ways in which we can do it. One is to treat every person as a consumer.
I use the word consumer very decidedly because consumers have choice, consumers have dignity, consumers are respected. Therefore, I want every person to be a consumer. That means we have to create affordable products and services for all six billion people to enjoy the benefits of globalization. What is more importantly and I will come back to this, we should not have the right to tell people what they should consume and how they should consume it. Every person just like you and me must have the right to make a choice that is equally fundamental. Therefore I said, two elements of consumer, treating all people as consumers, give them choice and give them world-class products at affordable prices.
And I will come back and say how we can do it because that’s the first organizing idea. The second organizing idea is every person must be treated as a micro producer. She or he must have the right on fareir wages for the effort, for the knowledge orn their activities. That means no body should be exploited as it happens around the world but every body should have a transparent market base system where the work will be compensated adequately and unfairly, and I think that’s an important part. So if you start thinking about this as a very simple idea then you understand where I am coming from.
The inclusion of four to five billion under-served in the market economy as micro-consumers or micro-producers was the substance of the book called the “Fortune atof the bottom of the Pyramid”. The same year that the book came out, I wrote another book called, “The Future of Competition”, essentially arguing that consumers must have the right to shape their own experiences. Consumers must become co-creators of their experience with the forum. firm.
The fFiorm should not have asymmetric forum power over the consumer but the consumer must become co-creator and therefore, co-creation of value is an important concept whether we are going to talk about poor or the rich. Or I will come back to it again. So the two organizing ideas, the two books may look very different but there is one uni-frame idea, that is, democratizing commerce and understanding and recognizing the centrality of the individual in what we do.
So However, the paradox of rapid economic development, however, is quite interesting. If you look at what the paradox is, rapid economic developments are moving people away from abject poverty. Whether it is in China or India, it is happening. The largest massive movement of people out of poverty for the first time in human history; that’s the good news, the bad news is, while there is a tremendous shift from abject poverty, there is increasing income inequality that goes with rapid economic development. And that problem is true in China and it is true here. We call it the desire for inclusive growth as an organizing idea and the Chinese call it building harmonious society. It’s the same. Harmonious society is the code word for recognizing income inequalities in China.
An inclusive growth is our code word for recognizing, we are creating a society with tremendous income inequalities. So I thought it might be useful for us to ask the question when we talk about inclusive growth what we really mean because I find that in the last year there has been a lot of discussion of inclusive growth but I am yet to see a common deformation definition of what it is.
So I look at the Gene Cong FisherCoefficient which is normally used by economists to look at income inequalities. United States is reasonably unequal but I wanted to look at what China did. China was very equal, looks like Finland but unfortunately everybody was spore poor. tThat is not a good start to say everybody sporeis poor, and therefore, we are equal, is not a good idea. So let’s not go back to where India was before.
We cannot say one way of solving inequality problem is to make everybody poor again. That would be unacceptable,. I think., India has also moved in terms of income inequality, Brazil has always been there,a very unequal society and so is Malaysia. Every one of them are is deeply concerned about this problem but if this is all they have to deal with, I think there is a way out. You can ask the question, why the income inequality discussion is becoming very prominent in China and India and I think in the current elections in the United States,. iIt’s going to be a matter of debate in the United States as well.
You already can see the democratic platform dealing with an issue. But if youYou add to more pieces of information, GDP per capita is 43,000$ in the United States, $7600 in China, India is the lowest of in the group. So we have great income inequality, very low per capita income, absolutely the lowest in Human Resource Development or Hhuman DdevelopmentI index. Out of 177, we are in at 121 and in terms of corruption ranking we are trying to be on powerat par with China and Brazil.
I would like to pose theis question,: when we talk about creating a society which is inclusive, which one of these numbers you want to manage. because tThat’s athe question, because we have very different solutions depending upon what you want to manage. It’s not one thing that you want to manage. So I ask the question, when we talk about inclusive growth in India, do we mean we are going to eliminate abject poverty, do you mean we are going to reduce income inequalities or do we mean we are going to eliminate unequal access to opportunities, change life-style inequalities.
What do I mean by life-style inequalities? Cell-phone is a fascinating example for me. I can have a cell-phone even if I am very poor; you can have a cell-phone. The stuff inside is the same. You can buy a fancy one for $500$, I can buy one for nothing as long as I get a pre-paid card. Both of us have the same life-style but what we wear is different. Every body has a watch, one can have a $50,000$ watch or other can have a $5000$ watch. Both have the same function.
Our question should be, do we have to reduce life-style inequalities in India rather than just income inequalities or we can say reduced inequalities of choice. Should every Indian have the same level of choice and it goes straight on public policy on whether we should decide in Delhi what choices per our people make in their lives or should it be the choice of local communities to decide what they will accept and what choices are relevant for them or reducing inequalities in the share of voice. So when we talk about inclusive growth, at least all of you may be totally clear, which one of those six things we are talking about. It’s not clear to outsiders. Let me stop here for a minute.
Is this an issue for us to debate and I would like to raise this table the otheranother issue. We don’t know exactly what inclusive growth means, our solutions can differdefer dramatically across political parties, across bureaucrats, across agencies of the government because we are all trying to solve this problem called inclusive growth. Each one of us haves our own deformation definition of what it is. So this is a good idea to say, this is what we are trying to solve. I said, if you have one way of thinking about it, you can say re-distribution of wealth is a solution. Another way of thinking about the same issue is - it is the wealth creation not re-distribution of limited resources.
We can also say public policy focus is what is required, that is what you do when you want to re-distribute wealth,. eEntrepreneurship and market forces areis what you focus on if you want to create wealth. Very seldom can public policy create wealth. It can create the conditions for wealth creation but it does not create wealth., Iit re-distributes wealth. And that is perfectly fine, that’s the part of what the policy should be. But I think we ought to ask the question, and you can’t find the answer unless we say, what do we mean by inclusive growth. Now, having said that I thought I should tell you what my pieces views are.
I much rather move people out of abject poverty very rapidly; that’s number one. I much rather create income mobility which is provides opportunities for moving up in the economic ladder and creating hope. If we can do those two things well, income inequality would not disappear but it can be managed because income inequality becomes a major bone of contention when people have no hope, when people do not see opportunities for changing their lives from one economic level of opportunity to another.
So, my personal preference would be one and three not only focus on two. And I think if you only focus on two, you can get to use only public policy instruments to reduce income disparities by taxing the very rich. You have done that before. And I don’t think that’s an easy answer to the problem. But one and three requires imagination and innovation and I’ll come to that. So before I get into the depth of what I want to say, I want to lay there my key assumptions and my thesis.
My key assumptions, the starting assumption is theat antidote to poverty and inequality is wealth creation and growth. If we do not create wealth, we cannot deal with poverty. It is obvious at one level. Poverty is the anti-thesis of wealth. Therefore, if you want to deal with the poverty, you have to create wealth. But wealth creation and growth can come only through entrepreneurship and innovation. So we need to ask - what are the pre-conditions for entrepreneurial drive and for wealth creation? But entrepreneurship can only work when we have good governance and reduced transaction cost in our society. And tThat’s fairly obvious and good governance can only come when we have shared goals. and I recognize coalition politics does not allow for shared goals but we have to have shared goals and we have to ask how do we create shared goals in a multi-party system and wethe political will to solve persistent problems.
I do not know of any other country where every body knows what the problem is, every body knows what the solution is and no body has the political will to do something. And I know it’s a hard statement and that’s the reason why I got the award before I start because we have to come to terms with this issue and I believe that one and two are easy to accept. Steps three and four are not so easy to accept and three and four holds the key for sustained growth and sustained wealth creation. And that can be shown beyond any doubt.
So what do I want all of us to do? At least for the next forty-five minutes I want you to think of the poor not as an intractable problem, not the concern of business, that is being the traditional way of thinking; just mentally jump over the fence, just for forty-five minute. That’s all I ask you to do. Just imagine the poor as one who represents the new opportunity. Even if you, for a moment you think of the poor as an opportunity, either because you are a moral person and you feel morally obligated or you are intellectually excited or you are just a big, see that business opportunity or you are greedy. He It does not matter to me.
Your starting point is irrelevant because you cannot get without innovation. So my basic thesis is, don’t do inclusive growth because you want to be nice. If you want to build that innovative globally comparative competitive society, inclusion is not a choice. It is where the opportunity exists and I am going to demonstrate that. So I want to start with the typical picture. Now, all of you know what this picture is about. Some of we have brilliant eye-sight. Don’t read the stuff underneath. But what you see. You see two elephants; is this anything new in India? For two thousand years we have seen this in villages. What is new is, during the last general elections, this was taken in Assam. They are carrying electronic polling booths on top of the elephants. This is important.
All of us know that in India the entire election was done electronically. After India went to the polls, of course the incumbents lost,. tThey complainted of losing but not about the polling process. aAnd that’s important. because aAfter that Germany went to the polls. It was not electronic. Japan went to the polls, it was not electronic and I also want to say, United States is going to go to the polls and is not going to be electronic. So, anybody can see poverty but very few people can see the capacity to lead from the West. That’s exactly what we did. So don’t see the elephant when you see the poor. See the electronic polling booth because every body can see poverty, very few can see the capacity that the poor and an emerging market provides leak forgingleap frogging the West.
I am not talking about bench-marking the best; I am talking about leak-forgingleap frogging the West and creating the next practice, not the best practice. That is the opportunity that we have in this hours to lose and I am going to show you why we are likely to lose if we don’t understand the enormous opportunity that is handed to us on a silver platter. So don’t complain about the poor. See them as the instruments of leak-gorging the West.
Of course the poor live in unorganized, inefficient systems. The good news is the poor understands markets instinctively. The markets are local monopolies,. eEvery shanty town, every village is a market. The rules are clear, is unorganized, it is inefficient and there is tremendous amount of information asymmetry. Poverty is about information asymmetry and that is what the middle men leverage. The arbitrage is about information arbitrage and of course I coined the term poverty penalty, “The poor paid more for everything”.
Take for example credit. The local money-lender charge 300% rather than 10%. That is the poverty penalty. If you are trying to get what a truck rate into Dharavi, people pay more than the rich people pay in Bombay. I have documented this very carefully. The good news is that is true universally. It is true in Sao Paulo; it is true in United States. The poor pay more and they get poor quality. and low tag. So it is not wWe don’t have to romanticize poverty, people live in a very stringent and harsh system. All that we have to create is, how to take the unorganized sector into the organized sector, how to create national and global competition for those markets so that the local landlords, the local village headman don’t control the market.
The question is, how to get world class quality at affordable prices, how to access information differently and how to use advanced technologies and new methods. So that’s I think is the antidote to the current system in which we live and I believe that at least we have to pay attention to four may be five mother industries because poverty is also about poor productivity.
You have poor productivity because you don’t have information or connectivity. You don’t use energy efficiently, you are not educated and, therefore, you don’t have good health care or you don’t have health care therefore you don’t have education and you don’t have access to credit. Micro-finance is starting with NGOs and private sector but in education, health care and energy, really nothing much has happened and I would like to ask the question, why can’t we do in energy and in health and in education t.
The same level of creativity that connected India and created the world’s fastest growing market in cell-phones. What stops us from doing it? So, in other words people always ask me, it’s sort of nice for you to say there is a market and I know there is lot of business people here., yYou can ask the question, is there really a source of wealth? I say yes,. aAll of you are familiar with these pictures. Is it not?
The local kirana shop, the rag-picker in Ahmedabad, the cycle-tyre or the two-wheeler tyre fixer in a small shop; have all their lives been changed by the cell-phones.? I would like to pose the question, is has it been just good for these people to change their life-styles and their business morals.
I remember in Ahmedabad where I go sometimes, people used to go and buy vegetables. Now the vegetable vendor has a cell-phone. He takes orders on the cell-phone. Only buys what is required. There is no shrinkage, no wastage, no forecasting and in two hours he is down and he goes on to do something else. And the same thing is true in Africa. Last Africa had more new subscribers than United States. Same thing is in South Africa.
The first new multinational coming out of South Africa, - MTN, is a cell-phone company. Of course in China, India and so on, I believe three billion people are already connected, may be four billion by 2010;. fFirst time in human history, and India is one of the fastest growing markets. I don’t change this line in the last six months because six million or eight million it doesn’t matter. It’s the fastest growing market and the cost of service is the lowest and the market gap of fore fronts in ten years time is 75 billion. That’s real money. I would like to pose the question, can you enable ordinary people to be connected therefore again change the lives add more income whether it’s a fisher man in Karela or a Kirana shop in Ahmedabad, at the same time make a lot of money for your self?
In other words, is good business good for the community as well if you know how to do it right? And a cell phone is increasingly becoming the choice, the device of choice not the be sagemessage. So, if you just look at this, you ask yourself how we convert consumers from the unorganized in efficient market to the organized markets. The only advantage we had in the cell phone business is, there was no business before. The poor had no access to connectivity. So it was not replacing some body who is already there. But int many businesses there is already an existing system,. Bbut is unorganized.
We have to develop the market and we have to do break through innovations but first we have to start thinking differently. Price minus profit must equal to cost, affordable price for all people if you want inclusion. Politically, if you want inclusion as a business, you want a large market. It’s the same thing, you must have affordable prices and prices must be set by the community whom you want to serve. pProfit you have to make to sustain the business. Therefore, reduce the cost. That’s the different starting point from cost plus profit must equal to price. You may think what is the difference, isthose are the same three variables.
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Let me show you some pictures. It is obvious that this woman requires cataract surgery. How much should it cost? World class cataract surgery, to give a reference iscosts three thousand dollars in the United States. They tell me it was Rs.25, 000 to 30,000 Rupees in the most reasonable hospitals in not big metros. In Delhi, it may be more I don’t know but any way 25000 to 30000 rupees she can’t afford 25000 to 30000 rupees. How much should we pay and you must still make profit. If you focus on this woman and try to help her, build tThe world’s largest cataract surgery clinic is called Arvind Roy Eye Hospital: it costs. 30 dollars max. That’s the cost 60% get it free. and iIf you look at the balance sheet and the annual statement, there is absolutely no debt. I would love to see company’iess with that quality of balance sheet and the other. Ok, you say, I am not in the medicine business. hHow about this one.
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We have the cheapest quality and cheapest price and the best quality of service in most part of the country. We don’t have to do market research in India. The market is staring in the face that this person can use a car. iIf you just look at this one slide you know there is a market and I ask my self why does did it takes so long for us to figure this out. Iif you want to help this person, build the a car for $2000. thousand dollar.
That’s what we have done and I can tell you in the Detroit auto show they had Toyotas, the GMs, the Volkswagen and BMWs. Tata was not there but that was the only topic that was discussed and the reason is, it created a tremendous inflection point world wide. Why, because we wanted to help this person.
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If you don’t like it, if you want to help these kids, you get a 100 dollar computer and 100 dollar computer has a better functionality than mine. The battery lasts for nine hours, you can read in ambient light there is no problem,. yYou can put coffee on it, you can also put some mug on it and still works. In other words, we have creative fundamental innovation by trying to help poor people.
The reason why I think this is important is, in order to do this we have to create break -through innovations and the break -through innovations can create global opportunities. Just imagine, Tata Nano can have an equivalent car we are not going to get un-contested opportunity. Every car company today is fine trying to do it. They will create 30 million new vehicles world wide. That’s not a small market; I would like to get 5% of it. I would like to get 10% of it for India. Our problem is now going to be scaling of so fast and and come to that if you want to scale it, if you want to have speed we cannot operate..
I just don’t think we understand the pace and the speed at which we have to innovate. First, we have to innovate and then we have to scale dramatically and fast and get global scale more rapidly than others can. I think we are hindered in that way, we’ll come back to that. So we need a new methodology to think about innovation, creating micro consumers. and therefore I call it the innovations sand box. Let me not give you so much more the ideology and the theory behind because that’s not convincing. I want to share with you case studies, all from India not from outside.
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First case study is this; you know we talked about energy. I was very concerned about energy. How many fewof us think, that this problem has persisted in India for atleast 500 years? Why can’t we with put all our brains to solve this problem? Just to ask yourself that question. This is bad for the woman. The particular pollution inside the hut is ten times more than the outside. It creates respiratory disease. It hurts the children, it’s awful. Would you agree? So I decided that if you want to create a solution, we have to create a sand box. We have to create the product that is very aspirational for the poor. They like to have it because in a hut there is only one room, they must proudly display it. That is a kind of product we have to create. It must have world class safety standards or itand it must be scalable solutions, not in one village. You must be able to produce one million, five million, ten million and it must be affordable that must perform a new price performance relationship. I said within this box you can innovate as much as you want.
Don’t violate the conditions that describe this box. So I decided after lot of thinking and talking to those who would support this research effort. Earlier, unlikely companying and I talked to Janson Menry, who was the vice-chairman at that time and John Brown who was the chairman and they said let’s go, experiment.
So, theyThey only work at OEACD markets, they have no idea of India. Only thing they have in India is cash strong; nothing else. They have no market here. We pick rural poor as a target market. I don’t have to explain that. Bbetween North and South, chapattis and rice, there is a big difference. East and West there is a big difference and what we found fascinating is women are smart.
The poorest women make a choice on availability of funds’, access to bio-mass and also what they want to cook. So sometimes even if the LPG is available, they use bio-mass if they don’t have funds. They conserve LPG,. sSo they are smart enough to figure out how the family finances whatwork. We need their forum very flexible personalize above solution. Not one solution for everybody. Everybody can personalize for themselves. There is great opportunity for improving energy efficiency and help the women and children in the village and it must be affordable.
Those were the specifications I set for myself underlain and we created a bio-mass stove, a combination chulah which can use bio-mass and LPG. For those you are engineers, you know that’s a very complex combination. You put bio-mass chulah open flame next to LPG, it can explode. So you can have a bomb inside a village. So you have to extremely good and at understanding technology. Instead of just using bio-mass we created local village level palletizer. So you palletize bio-mass and get consistent quality or and improve the energy efficiency four times - f.
From 12% of the open flame till 50-60% and no smoke. and I’ll show you how. This was the original stove that was used in market research and you can see that with a pilot chulah was in villages., yYou can see that each one of them have to understand safety requirements before they can buy. We just did not want to sell before sharing with each family, what the requirements are, how they should use it before we could sell. and tThis was my favourite person in Madurai district because she was the first, Jyoti Amma, village entrepreneur who would help, sell and educate villages how to use it responsibly and of course we trained a large number of Jyoti ammas in villages so that they become our distribution, training and support service.
So, we have to create a manufacturing majestic base, fundamentally new for the chullah, new palletizers in one kilo gram bags for five rupees. and f Five rupees allows you to cook one meal for six people, is all standardized. LPG supply chain and I’ll come back to LPG and the creational village entrepreneurs and partnerships with NGOs and Indian Institute of Science. Actually, the people helped to design this, technical design was to Indian Institute of Science that enough professors who know to do these things in India. No body went and asked them before, that’s a different story.
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And what I find very fascinating is, what we started in India now actually is not hundred thousand, they are selling 1000 everyday, so it’s up to 250 thousand250,000. This year they will reach 750 thousand,000 install base and probably next year two million just in India and .Wwhat I find interesting is I wanted to see the quality of stuff is,. tThat was the first stall and in fact I remember going to the village with those drawings. and vVillage women were extraordinarily smart, don’t underestimate them. They may not look like us; they may not be highly educated with degrees. I told one of them, why don’t we put a fan and you can crank it, she laughed at me and said why would you want me to sit here and crank, why don’t you put a battery. I came back to the research group and I said we have to put a battery.
What is the immediate reaction? No we can’t find the technologies, that would not increase the cost. We did find, we went looking around the wall, we find found type motors with a little battery works on a battery and she can regulate the bio-mass flame exactly like you and I can regulate the LPG flame. It is possible to do absolutely smoke free. I wanted to see what has happened. Stabilized version, current version and what is interesting also, is we collaborated with a larger number of people.
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So, all that I want to say is that the technology here used is extremely sophisticated. We have a sleeve which is a stainless steel and some of your engineers so you know what is it. Stainless steel coated with ceramic. So that is very stable and it does not crack. For those of you who are engineers, you know that’s a very difficult combination and to do it at a price that people can afford And I want to show you what a reaction comes.
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What I wanted to say is that we started piloting in India, scaling in India in 2007 to 2010, experiments in South Africa, and piloting and its getting commercial this year. Opening of eight new geographies in three years including China, Vietnam and Indonesia.. All created in India and I’ll like to ask a question. How many of us believe that if we understand what to do with the poor, you can create a business, you can create a global business an which is extremely competitive.
And that’s exactly I want to share with you because I was deeply involved in this project from the original conception. To From going to these villages, forcing the design engineers, participating in design meetings, negotiating with the NGOs, all that. And the reason why I find it so fascinating is this is real today. 250 thousand250,000 installed base, commercially sold. The reason why we can’t scale faster is we did not; we underestimated how well this product will would be received. It’s a manufacturing problem and it’s going to get solved. This is what is going to look. The next version is going to be sold in India and Vietnam. That’s what it looks like and the same, essentially the same core product with a different way of cooking in a walk in China. All designed in India and I don’t know how many of you think what you pay for it is scrub, aluminum, stainless steel, ceramic coating, no smoke Rs.675. rupees.
So, case study number two which all of us know but one of my favourites. So, I am going to go through it. Take Jaipur foot, bare-foot walking, and squat on the floor, sitting cross-legged, walking on uneven ground. Lot more complex thatn anything you find in the West, so any engineer can tell you these specifications as much more honour is. USD 10,000 $ for a prosthetic in the United States and I’ll show how they do it here. Much better quality and then you can decide how much you’ll pay and for those of your mechanical engineers, it’s a complicated thing.
Foot is a complicated thing. And I won’t go into all these specifications. The only thing I want say is poor people cannot wait for five days. They have to have it fit in one day and you have to do it in one day and you don’t even have doctors. So let’s see how they do this.
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First is give and it free and we check the cost is $25. - $10,000 in US, $25 in India, better functionality. So, this is the American foot, for $10000 you get this. It’s a good foot, but it’s not the same, it doesn’t look like a normal foot. And if you wearing a sari or any dress which comes up to your foot or you paint your toe nails, nobody knows that you have it. I could have very easily shown a very famous dancer using Jaipur foot. But that’s not the point; we are talking about ordinary people. Why show a very famous star.
I want to show ordinary people can benefit so can the star if she can do Bharatnatyam with this foot. That means it is good stuff. And all of you know how complex Bharatnatyam is. The reason I am saying it is, the they are the world’s largest, they do 16000, there is nobody else close enough. Arvind Eye Care does 2,50,000 cataract surgeries. There is not even anybody close enough. Forget about beating them. And it does 7500 cardiac surgeries per year, $1500 compared to $200000 in the West. And of course you have 200 xtimes advantages, 100 xtimes advantages over the west and you can see why it is going to be the big deal.
The reason is you focus on poor people, do it commercially, and through innovation. Now I know some of you are going to say this is all my what my consumption. Let me now talk about being micro producers. How you create micro producers, how do you connect the rural poor to global markets. How many of you think that you can build a global company with this women, two buffaloes and three kids. You can. If you organize her, that’s called a move.
Amul has been around for 50 years. I don’t know how much Amul gets into the discussion in New Delhi and how to connect rural farmers with global markets. Because if you do that, Amul today processes 6.4 million kilograms per day, 2.2 million farmers are organized, 10,755 villages, 3,000 collection centres, it’s a billion dollar business. It’s the world’s largest dairy, not second largest. It is the largest.
And India today has the cheapest raw milk, not processed milk but raw milk. Not cheese but raw milk. And I can buy them in the United States. Or I would like to pose the question, so what’s wrong with this picture. Now if you say I don’t like milk, that’s ok. I’ll give you; this is my last case study. This is ITC chaupal. I studied it as it was being implemented many years ago, five years ago. One PC per village connected with the internet, farmer as the custodian or the sanchalaks. Now today 2 million farmers are connected. I wanted to listen to what the farmers are saying. These are the so called subsistent illiterate farmers. That’s the way we describe them. They need help from us. Just listen to them. They have never a typewriter in the life.
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You can see the only people who are upset are the middlemen. And these people are quite serious; in fact I got an e-mail from one of them saying we hear that there is a great market for organic food in the US, we can grow organic food. Can you build a distribution system for us? These are farmers who did know anything about the computers. 6 mMonths later, they are sending e-mails and asking me to build the distribution system. So we ask them why did they check the Chicago board of trade. He told me you are the educated one you should know. I did not know, and then I realized a lot of India’s soyabean is exported. Therefore the prices depend on what happens in Chicago.
These guys figured this out. So, all that I am saying is if you remove the asymmetryic information, that’s what the PC did., Yyou remove the asymmetry of choice, asymmetry of capacity and enforce contracts. Now this person, this farmer can enforce the contract on ITC. ITC can also enforce the contract that reduces the transaction cost and improves governance in relationships and therefore you eliminate the asymmetry of dignity and self-esteem between the poor and the rich.
In other words we have to start looking at these examples because either Amul or ITC did not disturb the village, decentralized origination, village collection centres in Amul, village collection centres called e-choupal and e-sagar now; highly decentralized payment systems but world class processing and marketing facilities very different way of building world scale operations. Not having so many people in one location.
So, the question I’ll like to ask you is, should we depend only on the west orn the top of the pyramid to build innovations? Can bottom of the pyramid build innovations for the top as well? So, just last few slides. mMake the globalization benefit hall,, democratize commerce, market be appease is very large is , $5 trillion in purchasing per parity. bBut it is complex. It requires breakthrough innovations and if you can do it, I think there is a global market available for you. I think the real issue is not resources, it is thinking. We have to change the way we think. Globalization is not bad for the poor, it can benefit all. Multilaterals - no one shoe fits all approach, also true in India, one show fits all.
We need multiple solution, we need global standards and national standards, but locally responses to solutions. Civil society focuses on self sufficiency and local solutions; I say we have to focus on locally responsive but scalable solutions. Elites which is us, the poor and intractable problem, I don’t think so when organized, they offerpoor offer new opportunity, for solving poverty. The private sector has ignored the poor. and I think there is a source of innovation and but the govt. agencies tend to focus on subsidies or single solution.
This is the year of micro credit. Or this is the year of SME. I say sorry, we can do something better. The public view is private sector cannot be trusted, I said no it can be. Universities also don’t pay attention, I find it fascinating. All this work should have been done in India not in the United States and I say make access to educational research inclusive and finally I think you can create ecologically sensible solutions.
So, I want to leave you with a simple thought. We must think with the philosophy that we have an obligation to democratize commerce through markets. That’s the core idea. If you that the importance of governance, scale, speed, quality, cost, ecological footprint and access, the enablers or the entrepreneurs innovative business morals modelsand w. Wealth creation are the social outcomes orand inclusion global competiarativeness are the social outcomes. and tThey argue very importantly also augment national security.
If you have three hundred million people who are under privileged, I think it’s a national security threat and I think we were understanding it’s not any more a choice, so this transformation is not about resources. This is about imagining the a different India. Passion, courage, lot of humanity and humility go back to the women in the village and the men in the village.
They know a lot more, I have learnt enormous amount, going and sitting with them, discussing what they want. And they have told me a lot more about life, thaney have lot of books. So intellect house and you’ll see that I put intellect only just above luck. As a professor that was halt. But I can assure that if we cannot imagine this world, we cannot create it. And my request is, let us not go back to the old and the easy ways of the past. Let us focus on entrepreneurship, innovation and define inclusion in a more precise and sensible fashion by creating enough opportunities for all, not by degrading them by providing subsidies. I think it is degrading for human beings to be given the donle. So, Thank you very much for your patience. I over stayed.
Thank You.
