Sustainable Capitalism and The Role of Aid vs. Trade in Prosperity Creation

I picked up a glossy investment prospectus from a firm called Legatum Group at up at the Fortune Brainstorm Tech conference today. A statement inside caught my eye. It stated:

“While aid can play an important role in alleviating immediate needs, its impact is naturally limited since it is neither sustainable nor scalable.” Separately, it states, “Quite distinct from the limited scope of charitable initiatives, businesses are both self-sustaining and scalable. Legatum directs its attention towards promoting entrepreneurship and business for all its social benefits within developing communities.”

I wanted to to take a chance to think more about the nuance of the right type of aid vs. the right type of trade and investment.

I feel presently that the answer to reducing poverty and increasing access to opportunity and prosperity in developing nations is three fold. The answer is A) for-profit private capital investment into sustainable companies that are socially responsible (or at least not socially irresponsible) AND B) direct “aid with standards” to community-based non-profit organizations run by local social entrepreneurs that are efficiently serving the needs of their communities AND C) efficiently run transparent government that creates and protects a system of law and property rights.

The question that should be asked cannot be as black and white of aid vs. trade. It’s not aid OR trade. It’s accountable aid AND sustainable trade AND efficient goverment. It’s a public/private/community partnership that does not succeed without participation from each sector. The questions that we as a society should be asking is how to make direct aid measurable and accountable AND how to make trade and investment sustainable AND how to make government efficient and transparent.

These methods of human and capital investment are on the spectrum of socially responsible venture philanthropy that builds human capital, infrastructure, and standards of living through education, medicine, nutrition, and technology that enables us to do more with less resources. At the end of the day–all private sector and public sector investment should come back to efficiently serving the needs and desires of the local population in a sustainable manner.

What the answer to prosperity creation seems not to be is the traditional bi-lateral government to government aid (read: loans that local populations will have to pay back to buy our stuff from our companies) nor traditional private capital investment in companies that are not socially responsible and end up hurting local environments. This of course is the very common and very key “aid vs. trade” question that so many like Sachs, Easterly, Collier, Stiglitz, Pralahad, and Gates have debated.

So what is the import of this debate and why is a tech CEO talking about it? The great war of ideas of the 19th and 20th Century between pure communism (total state control of the economic sector) and pure capitalism (total market control of of the economic sector) is giving way to an “end of history” state that could be simply called “Sustainable Capitalism.”

Sustainable Capitalism could be defined as a state in which competitive market economies that are based on environmental sustainability, democracy, transparency, communication technology, an educated populace, and a government with a limited but very important role in setting the rule of law, thrive while efficient social entrepreneurs with services that produce a public good are invested in with capital with measured returns and public servants integrate the same communication and ERP systems of the best-run companies in the world.

In this new Zakarian model of economic system, companies that destroy the environment, provide a negative net benefit through off-balance sheet externalities, or exploit their populations are video blogged and written about and pressured through market forces to reform or wither. This is perhaps somewhat idealist today–but it is the path I believe we are on. The fact that all companies must be sustainable soon enough for the system to scale and prosperity to be possible for all humans is clear. This trend will accelerate as we enter into the coming age of ubiquitous broadband and improved technology of the citizen blogger and as resources become less available. Governments, non-profits, and businesses will have a much higher level of accountability. This assumes of course people have incentives to work toward shared prosperity that can continue beyond the short-term, and I think that is a fair assumption and a vision shared by the global connected youth of today that I know.

What’s the common denominator for human invesment in either the public or private sector? Return on invested capital, as long as the definition of return is broadened to include social returns and the definition of cost is broadened to include environmental degradation. This is the Net Domestic Product (NDP) approach versus the Gross Domestic Product (GDP) approach.

So am I criticizing the Legatum brochure statement? No, not really–I just hope they share the belief–and I am sure they do–that prosperity in the developing world and continued sustainable improvement can only be possible if we find methods to enable entrepreneurs, social entrepreneurs, and public service entrepreneurs to transparently, efficiently, and sustainably make investments that maximize individual utility, return on investment, and the public good.

The effort toward sustainable capitalism and efficient government requires an improved ability to communicate, collaborate, and measure results. There’s a digital generation of entrepreneurs and social entrepreneurs that gets this who will be the global leaders sooner than you might imagine.

Thoughts on Uganda

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I was in Uganda from June 29-July 6. I was there to visit two non-profit organizations I have been involved with and contributed funds to in the past. It was my first visit to Africa, and definitely will not be my last.

Uganda really is a beautiful country. It has lots of challenges, yet lots of real opportunities. Seeing the extreme poverty that exists there first hand was difficult, yet instructive and very helpful to my understanding of the issue. 89% of Ugandans are currently subsistence farmers, so a great majority of the population lives in rural villages. It was very common to see families of 6 to 8 living in mud and stick one-room shacks with tin or grass roofs with dried dung floors with no running water, toilet, or electricity. The primary school we visited in Mityana in the West had neither windows nor doors and had dirt floors.

Even more difficult is the realization that the difficulty of the living conditions I saw in the rural areas pale in comparison to those in the refugee camps 300 miles to the north in Northern Uganda, centered around Gulu which was the center for the LRA activity, which has significantly calmed since the 90s. I was amazed at the extent to which the children and most adults living in these most difficult conditions maintain such a level of happiness and non-complaint.

It was a bit unnerving to see out front of every bank and gas station an armed security guard with a rifle or shotgun. The traffic is absolutely insane, enhanced by the pavement ending at times. At one point we were passing a car that was passing another truck, and got driven into the shoulder on the other side of the road. That type of experience was common. There are no medians and the highways are all two lanes. There are just three stop lights in Kampala and none elsewhere in the country.

The thousands of Boda Bodas (motorcycles) and Matatus (bus taxis) all over and the pedestrians crossing allover add to the confusion. And not to mention the cows, which are often in the road calmly walking across. Cows and goats tend to be tied up to the side of the roads so they can be used for mowing. Babies run around naked or just wearing shirts, often with no parents in sight, and kids from 3 to 12 wearing bright purple, yellow, green, or blue school uniforms can be seen walking along the side of the roads for miles around 8am and 5pm each day. The kids would often smile and yell out “Muzungu” which means white person when we drove by.

The current Museveni administration has been in power since 1986 and while it seems to be succeeding in providing some basic services, the roads are still very spotty and the electrical grids shut off a few hours per day outside Kampala. Many are calling for him to leave, not because he’s doing a horrible job but because he’s been in power 22 years. They seem to have a good freedom of speech there and an opposition newspaper. People we spoke to were not shy to offer their criticisms. Many people were speaking about Mugabe and his visit to the African Union last week and hoping for his ouster.

The economy is growing. The competition between CelTel, Warid, Uganda Telecom, and MTN for cell phone was intense. All the services sell Airtime Credits rather than monthly subscriptions since most Ugandans do not have a fixed postal address nor a credit card. These four companies advertise literally everywhere, including painting in exchange for compensation thousands and thousands of buildings and homes along the side of all the roads.

Uganda now has GPRS service which allowed me to access my Blackberry email without a problem most of the time even in very rural areas.

They also are deploying 3G service in the major cities. I saw a number of iPhones there among lawyers and professionals. The biggest employer in Uganda is interestingly Coca Cola. There are tremendous opportunities to invest in alternative energy production, especially in regards to biomass. Roey and I had a chance to visit Torero Cement, the largest cement factory in Uganda on Friday as he’s working with them to supply biomass so they can reduce their coal usage. The economy remains a cash economy. I did not find a single store or company that accepted credit cards outside of the airport.

We stayed with an investment banker who runs Daro Capital on Friday night in Kampala. He help a get together of a group of technology execs and professionals on Tuesday night, including a gentleman who is starting an SMS marketing service. I spoke to a number of people to get a sense of the ripeness for email marketing. Rough statistics, but it seems right now about 25pc of Ugandans have email addresses, though most check them via Internet Cafes. Broadband access is only available via Satellite at a cost of USD$1000 per month, so even the professional class and wealthy have only dial up or GPRS access. A T1 is being installed in Uganda in 2009 after which access will go substantially up.

We visited Entebbe and Kampala on Day 1, Mityana on Day 2, Mbale on Day 3 and 4, and Torrero on Day 5, and Mukono on Day 6. We also drove though Jinja and saw the source of the Nile river.

In Mityana, we visited Nourish International Students working at Naama Millennium School, a school funded by Dr. Christopher Kigongo, who now lives in Durham most of the year and was the former Director of Health Education for Uganda. In Mbale, we visited the Foundation for the Development of Needy Communities (FDNC) which has a vocational school and special needs school founded by Samuel Watulatsu, who presented at a Entrepreneur & Social Entrepreneur Meetup at our house in Chapel Hill last October.

On the way there I spent a day layover in Dubai. Dubai is one of the 7 emirates in the United Arab Emirates, so it’s the size of a county and has 6-7 cities in it, that have names like “Internet City, Media City, and Sports City.” The amount of construction and cranes there was immense. The Emirate boasts an indoor skiing area, and man-made islands in the shape of a palm tree and one in the share of the world. They have built the largest building in the world, the Burj Dubai, shown in picture 4. It is still being finished. When it is done next year it will be 166 floors and 2100 feet tall.

Bottom line, the experience has caused me to be even more dedicated toward spending the rest of my life working to increase access to education, healthcare, food, and technology and working toward ending warfare and ensuring sustainability. I look forward to going back again soon.

This Page May Contain Content That is Not Consisent With the Moral Cultural, or Social Values of the UAE

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I was in Dubai for a night two weeks ago on my way to Uganda and tried from my Holiday Inn Express in Dubai Internet City home of the Middle East campuses of Sun Microsystems, Cisco, and EMC and to access a blog called Secret Dubai Diary. The site came up in a Google search for Dubai nightlife. When I tried to access the site, I got the lovely “Surf Safely” message above, indicating that this site was “inconsistent with the moral, cultural, or social values of the UAE.” Unfortunately for the government censors in the United Arab Emirates, they didn’t think to block the Google Cache version of the page.

It was very reassuring that UAE recognizes the Internet as a “powerful medium of communication, sharing and serving our daily learning requirements.”

If you wish, you can send an email to “safesurf[at]du.ae” to share your view of Internet censorship.

Tom Friedman: Why We Need a Green Revolution, And How It Can Renew America

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What is next after the Information Technology (IT) revolution of the last 30 years?

Well, according to Thomas Friedman, it’s the Energy Technology (ET) revolution.

Last Monday I had the chance to hear Mr. Friedman give an impassioned presentation at Duke’s Terry Sanford Institute for Public Policy. I made the following notes from Tom’s presentation about his new book, Hot, Flat, and Crowded. All of the below viewpoints are not necessarily mine, but I do very much share his stated urgency for encouraging investment in energy technology.

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The Emperor Has Lost Her Groove

Hot, Flat, and Crowded masquerades as a book about energy and the environment. In reality, it’s a book about American losing its way, losing its groove. American has lost her groove over the past 15 years due to:

1. Our reaction after 9/11–going into the Iraq War
2. The loss of a superpower competitor in the USSR
3. Our government not operating efficiently since Bush was elected

We have become the United States of Fighting Terrorism instead of the The United States of America. Our day should be July 4th not September 11th. The government in Washington D.C. simply has been unable to solve long-term multigenerational problems any longer. The U.S. is as innovative as ever, but the government is not maximizing this opportunity.

Energy Technology will have 10x the impact Information Technology had. We need a common vision. What ‘red’ was as a coordinating force in 1950, ‘green’ must be 2008. But instead of going from red to green we’ve gone from red to code red–to a politics of fear.

Meaning of the Title

The significance of the title is:

• HOT – Global warming, the climate system is sensitive. There is only 6 degrees celsius between the ice age and today.
• FLAT – The rise of the middle class all over the world
• CROWDED – Population growth. 2.6B people in 1953 when Friedman was born. 9.2B people in 2053 when he reaches 100 years old. Fuels that we are using today are expensive, exhaustible, and toxic.

The 5 Megaproblems Our World Has:

Key to the book are the five megaproblems our world has. They are:

1. Energy and Natural Resources Running Out
2. Petrodictatorship
3. Climate Change
4. Energy Poverty
5. Biodiversity Loss

1. Energy & Natural Resources Running Out When flat meets crowded, in an unsustainable world, watch out! There are skyscrapers blossoming from the desert floor in Doha, Qatar. In the 4 years since he was last there, Doha has sprouted a Manhattan. In another city you haven’t heard of, Dalian, China, they’ve also sprouted a Manhattan. That clean air initiative in Vermont was just wiped out by unsustainable growth in a place you probably haven’t heard of.

2. Petrodictatorship

This is the concept of oil revenues leading to great power for semi-elected or unelected leaders/dictators, leading to worse relations with the United States. As price of oil goes up, freedom for oil producing countries goes down. When oil was at it’s de minimus point in 1995 at $16 per barrel, the index of freedom was at its highest in countries like Nigeria, Venezuela, Russia, and Iran. As oil prices have gone up, freedom has declined.

3. Climate Change

The weather will get weirder. The droughts will get longer. The hurricanes will get bigger. There is so much CO2 being released into the atmosphere, we don’t know any more what is an act of God and what is an act of man. Did ‘we’ make Katrina or did ‘He’ make Katrina?

Al Gore should apologize to the world. He should apologize that he underestimated the problem of climate change. Due to China growing faster than initially projected, the original estimates from five years ago were too low. There’s one good thing about healthcare getting better over time–All the climate change deniers are going to live long enough to find out how wrong they were.

4. Energy Poverty

25% of the world is not yet on the electric grid. In China, every 2 weeks generates as much new electricity as sub-Saharan Africa in 1 year, excluding South Africa. Without energy you will fall behind as a society exponentially–in education, healthcare, technology. To be energy poor will be problematic–for us and for ‘them.’

5. Biodiversity Loss

We are the first generation of humans who are having to think like Noah–having to think about saving the last two pair of every species. We are losing thousands and thousands of species that will inhibit our ability to find new medicines.

Problems or Opportunities?

There are two ways to look at this list. Either they are A) Insoluble Problems or B) Incredible Opportunities.

The solution is simple: Abundant, Clean, Cheap, Reliable Electrons. The country that comes up with abundant, clean, cheap, reliable electrons will have the most global respect and the most financial success. America can be this country. We have to rethink green. We are positioned to lead this revolution. Green is the new Red, White, and Blue. Green is the new Patriotism.

The Green Revolution or The Green Party?

Some say we’re in a green revolution already. But no, we’re just having a green party. There’s never been a revolution without someone getting hurt. You’ll know the revolution is here when someone gets hurt. Not physically–but financially. Just like NCR and DataGeneral died when they did not evolve in the IT Revolution and ended up in the Great IT Heaven In The Sky. The world is flat, so change or die, adapt or die.

This is not yet a revolution. It’s a green party. I know–I’m invited to them all.

This revolution will not be easy. It will be the greatest industrial project mankind has ever undergone.

How Do We Stimulate the Revolution Before It is Too Late?

How do we go about finding solutions? We have to innovate our way out of the problem–through the American Marketplace, U.S. universities, and venture capital. We have to find the next ‘Green Google’ and ‘Green Microsoft.’

We need government stimulus however, and here’s why. In the IT Revolution, it was a greenfield opportunity. There were no microcomputers previously. There was no Internet previously. There was nothing to replace. In the ET revolution, there’s existing competition, existing competition from dirty fuels that today are slightly cheaper in the short term, but much more expensive in the long term.

In order to stimulate the start of the ET revolution the Government must force us to take into account the true full cost of dirty fuel. If we do this, we will reach the China Price–the price at which ET will scale in India and China. We need to pay the ‘fully burdened’ cost of the lights. Only the government can do this. This policy will drive immense investment in clean ET and ET will go down the price/volume curve and soon enough become cheaper than we currently pay today.

By putting in a price floor for a barrel oil, for example at $100, firms and investors will be able to make investments in ET without concern that the price will drop and in the short-term they’ll be uncompetitive and die.

By following the policy, the amount the consumer pays over the non-fully burdened cost (if it is less than $100/barrel) would go to the government in the short-term to allow them to invest in ET. This is much better than what happens currently, where the excess goes to petrodictatorships that often work against America’s interests.

Green Revolution Great for American Economy

With higher clean standards, government encouragement, and insurance that the fully burdened price will be charged, the price signals for ET will be right and investment will boom. There is only one thing more powerful than Mother Nature, and that is Father Profit.

As an example, Erie, PA has a export surplus. How does Erie, PA have an export surplus? They have a plan for GE that produces a hybrid locomotive called the EVO. It is in very high demand become it is very efficient with energy. ET is good for the American economy and our trade balance.

We must increase clean standards to force innovations. Standards and price signals matter. If we don’t have a floor under the price of oil, we can’t make investments in ET. In order to launch the Green Revolution and scale, we must do this.

Not About The Whales Anymore

All great change in history was made by optimists. The future is choice, not fate. When you put people together you put the planet together. This is not about the whales anymore. It’s about us. We are all sailing on the Mayflower again.

We must redefine green and rediscover America. $5B in VC went into ET in 2007. But $80B in VC went into IT in 2000. $5B is nothing. We need a game changer. We need standards and a fully-burdened price floor. Then investment will take off.

There’s Now Only One Green Candidate in the U.S. Election

We need the next U.S. President to be a real CEO–a Chief Energy Officer.

As President you have a big bully pulpit. We need him to use it to promote ET. This is the future for America.

I won’t say who I support for President, but let’s just say my wife supports Obama and I love my wife. There’s a guy with 13 cars and a guy with a Ford Escape Hybrid. There’s only one green candidate in this election. We had two, but McCain has changed for the worse under the influence of Drill Baby Drill. Don’t be fooled by windmills in advertisements.

We need to find abundant, cheap, clean, reliable electrons. We need to create green collar jobs–the new blue collar jobs.

How could some people be chanting, “Drill, Baby, Drill.” It’s just stupid. It’s like on the eve of the IT revolution in 1978 someone was chanting “Carbon Paper, Baby, Carbon Paper.” Our motto should be “Invent, Baby, Invent.”

How to Be a Credible Energy Activist

Utilities today are paid based on how much they use. They should be paid on how much they help you save. We need to rewrite the rules for utilities like California and Idaho have.

If you want to be an energy activist, learn what the rules are and how to change the rules. Don’t just protest.

Isn’t it BRICs Turn To Be Dirty?

Brazil, Russia, India, and China might have an argument that we’ve developed dirty for 150 years and now its their turn. I was in China speaking at a conference of auto-industry executives. I said to them, “Sure you can be dirty for the next 20 years if you want. That might save you some money. In the mean time, America’s innovation engine will revolution the world with clean electric cars that cost less and don’t require costly fuel and by the time you wake up we will eat your lunch economically. Sure, go ahead and be dirty.”

China is hiding behind us. If we move, they move.

An Earth Race

We had a Space Race. Now we need an Earth Race. An Earth Race so that man and woman can live sustainably. Without it, we’re dead.

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What Do You Think?

What are your thoughts? Is Friedman right? Does he overestimate the problem or is he right on? What do you think about the oil price floor? Please feel free to comment below.

Project Polaroid: Giving A Child Their First Picture | Dare Mighty Things

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How do you get the attention of a large global company (Polaroid) and convince them to reverse a key strategic decision? Hopefully, like this…

The Birth of Project Polaroid

Nine months ago, in early January, I was hanging out in Charlotte with a friend of mine named Carly. Carly is just 20 and a junior at UNC-Chapel Hill. She is an entrepreneur and a social entrepreneur who runs a photography business, Carly Brantmeyer Photography. We were brainstorming. She wanted to do more than be a student and photographer. She wanted to use her talents and abilities to give back.

Carly had just returned from a Christmas family trip to Costa Rica. There, she took lots of beautiful digital photos. The children were eager to see the picture she just took of them on the back LCD display. She wanted to be able to give the children a copy of their photo, but couldn’t. There was no easy way.

She thought, “If I had a Polaroid camera with me I could give them a copy of the picture right now.”

She returned and while brainstorming at her house in January she came up with Project Polaroid. She would bring hundreds of Polaroid instant film with her to developing countries and give children a picture of themselves–something most of them would never seen before, yet alone owned.

Project Polaroid in Colombia

Carly had the opportunity to visit Colombia over the summer to try out Project Polaroid for the first time. She borrowed my Polaroid camera that was given to me as a gift in 2007 and bought some film. Here are some of the inspiring pictures she took. Take a look especially of the one of the mother, holding a picture of her beautiful young daughter for likely the first time:

Project Polaroid in Uganda

In July, I went to Uganda for a week. Carly had returned from Colombia so I got my camera back the night before. Here are some of the pictures I took.

I was able to take about 60 pictures there while in Uganda while in 4 different locations. Each time I noticed an interesting phenomenon. In one of the locations, I found myself in a small village near the Mirembe Kawomera Peace Coffee Cooperative. This place was about 30 minutes down a dirt road from Mbale, Uganda. I took my first photo of a child and gave it to her. She was very confused as to what it was. I told her to shake the picture. She then ran away, nervous it seemed.

Exactly, on the dot, 3 minutes later, a group of at least eight kids came running around the corner jumping up and down with excitement. The picture had developed! Each time I began taking photos with just one or two children. They would go away, wondering what I had gave them (most Ugandan children in villages speak little English), then come back with their whole crew just 2-3 minutes later when they realized what had been given to them. This run away, see the photo develop, and bring back more children would happen every time. Sometimes, as Carly has experienced, you get surrounded by as many as 40 or 50 children within minutes.

In the village outside of Mbale I also gave away some of the soccer jerseys and shorts that had been donated by Sports Endeavors of Hillsborough, NC, the owners of Soccer.com and Eurosport, through the U.S. Soccer Foundation Passback Program. The children created such a commotion that the villages lone police office came over hurriedly, thinking the children were stealing from the van.

Project Polaroid in Ghana

This fall semester, Carly is living and studying in Legon, Ghana at the University of Ghana, with a study abroad program from UNC. She has received a number of donations to help expand the program and has brought dozens of packs of film. Here are some of the photos she’s taken so far in Ghana:

Polaroid Will Stop Selling Polaroids in Early 2009

For background information, back in 2001, Polaroid Corporation, the makers of the famous Polaroid Cameras and instant film filed for bankruptcy. It’s assets ended up being purchased by a private investment firm, Petters Group Worldwide, in 2005.

Very unfortunately for Project Polaroid, Polaroid announced back on February 8 that it will be phasing out production of its instant film and that it will be completely off the shelves by early 2009. We were of course a bit saddened by this announcement. Polaroid will no longer sell Polaroids. It’s a travesty of sorts and will certainly make the project difficult to scale. Polaroid has said that it will be willing to license its instant film technology to another firm should another firm be interested. Here’s hoping Polaroid somehow comes across this story and they realize the immense value that Polaroid film has to their brand.

Carly writes on her detailed travel blog.

“The idea is simple. $1=1 Polaroid photo, for 1 kid, that will last a lifetime. So many children around the world have never even owned a single photo of themselves. What could be more precious of a memory than a photo of you/your family?”

How You Can Help

When she left, Carly raised money from her family and community. She was able to take a few dozen packs of film with her. A month into the trip, Carly is now running out of film. If you would like to contribute, the best way would be to mail her a pack of two of Polaroid 600 film. She would very much appreciate any help. She will be at the following address until December:

Carly Brantmeyer
University of Ghana
c/o International Programs Office
International Student Housing II
Room #127
Legon, Accra, Ghana

Update: If you’d prefer you can send them to Charlotte where Carly’s mom Lisa has offered to collect them and mail them in one package to Ghana. The address is: 14803 Davis Trace Drive, Charlotte, NC, 28227.

Overall, I am excited to see Project Polaroid in Ghana and look forward to her getting back in January and brainstorming how to scale the project to many more developing countries. Being in Uganda myself in July and seeing the impact owning a simple picture can have in the life of a child and the parents of that child has made a lasting impact on me. One of the children was 3 and didn’t have pants–just a long shirt. He lived in a thatch hut near a school Roey and I were speaking at with his brother, sister, and mother. He didn’t have pants but he was overjoyed with happiness to have the picture. Hopefully we can convince Polaroid to sponsor the project in the future and keep producing instant film.

Gates vs. Easterly on Aid

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Jeff Jarvis’ BuzzMachine provides a good insight into and video live from Davos.

The video with Arianna Huffington on new media and old media and politics is especially interesting.

And this post describing an exchange between Bill Gates and William Easterly on aid is brilliant.

“Easterly says that when VC companies screw up, they die. Aid agencies don

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