http://www.businessweek.com/smallbiz/content/jun2010/sb20100615_837938.htm

Smart Answers

Doing More Business in the World's Poorest Places


Marty Anderson, a business lecturer at Babson College, devoted the first part of his career to corporate turnarounds and supply chain management. In the course of his worldwide travels, he's begun documenting what he calls "innovation at the edge of electricity." He spoke recently to Smart Answers columnist Karen E. Klein about the use of technology by entrepreneurs in some of the world's poorest places. Edited excerpts of their interview follow.

Karen E. Klein: How did you begin studying entrepreneurship on the fringes of the developed world?

Marty Anderson: I've been living at the edge of the First and Third Worlds for most of my life, in the course of my previous work. And I noticed the Anglo view of the Third World was completely erroneous. If you wanted to do the most advanced Toyota (TM) techniques, for example, it was much easier to roll out in places such as Brazil, where they don't already have resources and technologies and think they know it all.

Does that contribute to the outsourcing of manufacturing from the U.S.?

Most of the advanced manufacturing outsourcing is attributed to cheap labor. But it has nothing to do with cheap labor. It has to do with flexibility, low fixed costs, and a willingness to change and adapt.

What are the big changes you're seeing in global entrepreneurship?

Right now, the big change is that most of the world has gone into electronics and the Internet. We all think that's associated with computers, but within about 10 years, the dominant computing device will be the wireless phone. It has exploded worldwide. Nearly half the human species—three billion people—are wired. Some may only be text-messaging, but one billion people have daily Internet access.

What are the implications of that trend?

The scale of that development means that it's no longer about economic development in the Third World. In those places, people are using wireless phones and some PC computation to literally execute the most advanced technological businesses that we can think of.

Can you give some examples?

In 2001, we made a huge leap. We cracked the human genome. But the bottom line is that most of genetic engineering is about mathematics and cleaning up data. It's a massive task. When the code was cracked, the cost to discover and clean it up was $10,000 or $15,000 per genomic base pair. As we speak now, the cost is under 30¢.

So while the medical and scientific work on genetics still has to take place in a very advanced laboratory, the data can be farmed out to tens of thousands of people in a grid environment. People take the data, clean it up, and get paid for it. So we've taken one of the most advanced things in science, sent it out all over the world, and commoditized it.

How difficult is high-tech entrepreneurship in places without reliable electricity?

I know it's hard to conceive of science being computed in a hut in Nepal. But about five years ago, I began carrying electronic devices around with me and I wandered around looking for networks in some weird, remote places such as the middle of the Chilean desert. And even there, I found seven or eight currency-exchange houses competing with each other for tourists by offering Internet access. It really is ubiquitous around the world.

If one person in a rural village buys an iPod Touch, they've got a shared resource. If they can connect it to their Bluetooth iPhones, they have a network. If one person is rich enough to get a dialup telephone line, he can resell it to several thousand users who line up and pay a couple of pennies apiece to get online. At that moment, these entrepreneurs have access to global distribution.

What are the implications in all this for the U.S. and the West in general?

Our companies are a tiny slice at the top of the world's economic chain. Probably 80 percent to 90 percent of global economic activity is conducted by small family businesses using cash-flow business models, not equity.

Peer-to-peer and villager-to-villager microlending is the dominant form of financing in the world. If you drop modern electronics into that environment, without regulatory restrictions, all the family businesses in the world can start cracking genomes or doing music distribution or publishing.

Remember that IT did not collapse in the recent crash. The recession was not really global. It was in North America and Western Europe. Small business around the world kept doing just what they've been doing forever because we did not let them play in the market that crashed. They're cranking along, but instead of selling tomatoes these days, they're working in an international marketplace online.

Karen_klein
Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

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