[p2p-research] director of the Legatum Center for Development and Entrepreneurship at MIT

[Michel Bauwens]

Dear Sam,

I think that *Iqbal Quadir should know about our work, both FF-P2P-F, and
could perhaps use our work as potential for funding opportunities,*
**
*could you contact him on our joint behalf?*
**
*he's at MIT,*
**
*Michel*




The link between poverty, (de)centralisation and
(non)connectivity<http://blog.p2pfoundation.net/?p=9662>
[image: photo of Michel Bauwens]
Michel Bauwens
9th July 2010

 A talk by *Iqbal Quadir* , “Technology Empowers the Poorest”,
summarized<http://longnow.org/seminars/02008/may/21/technology-empowers-the-poorest/>by
Kevin Kelly:

“In Quadir’s view, it’s not that centralization per se creates poverty.
Poverty is the natural beginning state of all societies, east or west.
Rather, *decentralization is the engine which removes poverty and brings
wealth. To the degree that infrastructure, education, and trade can be
decentralized, wealth will rise in proportion. To the degree that
infrastructure, education and trade are centralized, poverty will remain*.

Whereas many of us in the west, particularly the digital west, agree with
this intuitively, we act contrary to this observation when we give
large-scale aid to poor countries. As Quadir’s colleague William Easterly
argues in his book The Elusive Quest for Growth, the billions and billions
of dollars spent on aid for developing countries has not only *not* helped,
it has set them back decades. Aid, as we know it, kills development. This
harm occurs because almost all previous aid has funneled through a central
government or semi-governmental organizations and that official route
tightens centrality. Even if the governments were saintly, and they are
definitely not, the scale of money flowing through these centralizing nodes
prohibits the distribution of resources, infrastructure, trade, and
education. The more aid that arrives, the less development can actually
happen.

*Technology is the escape from this quandary. Quadir came to see that
“technologies that connect” could liberate productivity. He matched his
experience in Bangladesh as a 13-year-old boy having to walk 10 kilometers
to get medicine, only to find out the medicine man he sought was not home,
and then walking back empty handed, having wasted a day — all because there
was no connection between his home and the pharmacist. Many years later in
New York he wasted a day at work when there was no electricity to run phones
or computers. Productivity required connectivity. If connectivity could be
decentralized then it would lead to increased wealth.*

Quadir settled on the cell phone as a way to decentralized connectivity. In
the early 1990s cell phones were big, dumb, and very expensive. Calls were
$3 per minute. Only the rich could afford them. But he wanted the poorest
people in the world to get them. How would this be possible?

First, he believed in Moore’s Law: that the phones would decrease in price
and increase in power every year. That seemed inevitable to him. He said he
could see “micro-chips marching toward the poor.” He was right about that.
Second, he piggybacked his hopes on a remarkable invention of another
Bangladeshi, Mohammad Yunus, who developed micro-financing (and later won a
Nobel prize for this invention). In Yunus’ scheme a woman who owned
virtually nothing could get a loan of $200 to purchase a cow. She would then
sell the surplus milk of the cow to pay back the loan, earn both milk and an
income for her family, and maybe buy another cow. Ordinarily, no bank would
have lent her this trifling amount because she had no collateral, no
education, and the costs of overseeing such a small loan with small gains,
would have been prohibitive. Grameen Bank, Yunus’ creation, discovered that
these illiterate peasants were actually more likely to repay these small
loans, and were very happy to pay good interest rates, and so that in
aggregate, these micro-loans were more profitable than loaning to large
industrial players.

Quadir proceeded to ask, what if the women could rent a cell phone instead
of a cow? Grameen Bank could make a micro-loan to the poor for the purchase
a cell phone, which they then could sell/rent minutes to the rest of the
village. The enterprising phone-renter would benefit and more importantly,
the entire village would benefit from the connectivity. It did not really
matter if the minutes were expensive, because when you have no connection,
you are willing to pay dearly for it. Quadir started off his GrameenPhone
with 5 cell towers, and eventually GrameenPhone erected 5,000 towers.

In 1993 when Quadir began, Bangladesh had one of the lowest penetrations of
telephones on the planet — only one phone for every 500 people. GrameenPhone
project unleashed 25 million phones. Today there are 100 times as many
phones, or one per 5 people. Just as Quadir had envisioned, this
decentralized connectivity has increased productivity. Without connectivity
people waste a lot more time on economic errands. With cell connectivity
farmers maximize their profits by getting real-time prices at distant
markets; shepherds can call a vet, or order medicine. One study concluded
that the total lifetime cost of an additional phone (including the cell
tower and switching gear) was about $2,000, but that each phone enabled
$50,000 of increased productivity. And surprisingly, the poorer the country
to begin with, the greater the increase in wealth from connectivity.

A lot of myths cloud the good intentions of developmental aid, Quadir says.
Myths such as: poor countries have no resources, or that the poor don’t have
discretionary spending, or aren’t concerned with brands,or aren’t good
credit risks, and so on. All these assumptions have been proven untrue over
and over again, and especially so with GrameenPhone. The chief myth it
dispelled was that government needs to subsidize technological development,
when in fact there is good money to be made enabling the productivity of the
poor. As Quadir says, “You don’t make money on the poor, but with the poor.”
At dinner I asked Iqbal what he would have done differently with
GrameenPhone. He replied, “Kept more shares.”

Quadir is now searching for other technologies to decentralize, and thereby
become a tool to erase poverty. He is director of the Legatum Center for
Development and Entrepreneurship at MIT, which has been funded with $50
million. He is investigating whether energy can also be dethroned from its
current mode of extremely centralized generation. Only 10% of the
electricity produced at its source remains at the end of the wires as they
reach homes and factories. Perhaps there are ways to decentralize its
generation, which would trigger connections at the local level, and in his
scheme, elevate wealth and democracy. If it worked, decentralized energy
might also work in rich countries, increasing wealth and democracy in our
part of the world as well.”


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