Posts Tagged ‘gates’

In January, Bill Gates delivered a speech at the World Economic Forum in Davos calling upon the audience to embrace a “system innovation” to deliver the bottom billion, those poorest people, from poverty. In his reckoning, capitalism harnesses one major human motivator, self-interest, while government and philanthropy apply the other, care for others. Gates thinks a hybrid system is needed to address the dire needs of the impoverished.

“I like to call this new system creative capitalism – an approach where governments, businesses, and nonprofits work together to stretch the reach of market forces so that more people can make a profit, or gain recognition, doing work that eases the world’s inequities.”

Creative capitalism would use dual incentives to solve hunger and disease: profits and altruism. Profit-driven firms would be more accountable while focusing on traditionally under-served markets. Take the example of “a Dutch company, which holds the rights to a cholera vaccine, retains the rights in the developed world, but shares those rights with manufacturers in developing countries. The result is a cholera vaccine made in Vietnam that costs less than $1 a dose – and that includes delivery and the costs of an immunization campaign.”

In response to Gates’s call to action, a number of prominent economists and lawyers have developed an online conversation about creative capitalism’s promise and its weaknesses. Participants include Nobel laureate Gary Becker, Judge Richard Posner and aid skeptic William Easterly. Many of the essays are critical.

Easterly writes, “Mr. Gates’ speech attacks the system that has historically done the most to alleviate poverty—traditional capitalism—in favor of an untried and implausible alternative—an illusory Third Way that mixes profits and altruism.” Posner opines that creative capitalism is nothing more than traditional PR-based charity which actually fits nicely with traditional capitalism.

After browsing the critiques, I think much of the trouble comes down to Gates’s nomenclature. The examples in his speech or C.K. Prahalad’s wonderful book, “Fortune at the Bottom of the Pyramid” are not truly a new system. Prahalad demonstrates the massive profits and opportunities open to firms which are willing to understand and enter the market of the poor.

The problem comes down to capitalism’s tendency to lead to thoughtless profit pursuit. What is needed is not creative capitalism (as Greg Mankiw said “I though capitalism WAS creative.”). What is needed is conscious capitalism. Mortgage brokers, borrowers and Wall Street investment bankers got a taste of unconscious capitalism with the subprime fiasco.

Part of the problem comes down to the way corporate governance is conducted: being under pressure to out-perform the last quarter every 3 months places an insane focus on short-term thinking. Judgement Day for those corporate officers with fidicuary responsibility to shareholders comes not once a lifetime, but 4 times a year. Accountability is good, but long-term thinking often falls by the wayside.

Joi Ito, a Japanese venture capitalist and CEO of Creative Commons, noted something similar at a recent panel. Money makes people short-sighted and when coupled with the Internet’s efficiencies, he believes “fluctuation amplification occurs.” His hope is that capitalism will be injected with long-term thinking about issues like the commons.

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As it relates to the Internet, Joi worries that a rush to mobile-based connectivity will promote carriers who do not reinvest in the ecology of the Internet and who swallow profits for short-term gain.

The same could be said of Gates’s goal. The same wholistic approach which must be taken to defend the Internet’s openness is the approach which must be taken to invest in the poorest in our world. It requires awareness of the difficulties and opportunities of capitalism. By recognizing that today’s poor are next decade’s consumers, capitalism will continue to lift out of poverty millions, but only if it is done consciously.

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An old debate, made famous by Machiavelli, has been resurrected in recent weeks when discussing Barack Obama. Does the end justify the means? Do Obama’s recent political maneuverings on FISA and public financing justify his goal of becoming president? Is his place in the Oval Office so important that he should sway on important issues like telecom immunity or campaign finance? Lawrence Lessig, for whom I have great admiration, certainly thinks so. Others, though, are becoming disillusioned and realize that Obama is a politician like others, prone to changes and human error.

I, too, have been disappointed. I never thought Obama was perfect, but he was certainly brilliant and had the academic credentials and connections that I think are important for politicians to hold. However, it recently occurred to me that perhaps his ideal role is not in politics. The broad, genuine support that Obama has enjoyed certainly makes the highest office of the land look promising, even likely. But could his following exist outside politics?

Historically, those wanting to induce policy change needed to be where power was. They needed the attention that came from being Senator or President. However, the deep structural resiliency of Washington, D.C. allows for the persistence of corruption and stagnation. Many Mr. Smiths have gone to DC to see their hopes and plans crushed.

Now, many of the elements of power – attention, influence, etc. – have been distributed outside DC. Al Gore has been more effective outside of politics than as an insider. Bill Gates commands more flexibility and cash than many countries. Both men have the ability to gain media attention and amplify their power. The same could be true of Obama. Now, I don’t presume that any private citizen could maintain the influence of the President of the USA for four years, but as a private citizen Obama could stick to his principles. The resurrected question of ends and means wouldn’t mean much. The end and means would be aligned.

Imagine Barack Obama forming the “Coalition for Change” or the “Alliance for Hope.” His digital roledex of hundreds of thousands of supporters would quickly become one of the most important political forces – while existing in a distributed, assymetrical fashion.

So, it isn’t that I want Obama to drop out of the race (too much of McCain’s policies and approaches are less than ideal) but, instead, he should recognize that if, for some reason, he doesn’t win the Presidency, he may be better as something besides a politician, a private citizen.