Many are familiar with the “time value of money” – if you receive $100 now, it’s worth more than receiving it five years in the future, because you can invest it now and receive interest, and because the purchasing power will be stronger now than after five years of inflation. As a finance professional at Intel, this is at the core of what Kazi did for various investment options.
But we pay little attention to the value of time when we think about the poor. What is the monetary value of their time?
When we talk about the economic benefits that a technology solution will bring, the math needs to be a part of the solution. The source of this realisation came from Kazi [Haque]’s observation that the poor were actually incurring higher costs due to inefficiencies in their day-to-day lives, and that idle time was preventing them from realising income-generating opportunities.
Looking at the economic harm caused simply by traffic jams provides a window into the cost of inefficiency and poorly designed systems. If Kazi spent four hours a day commuting – more than fifteen per cent of his entire day – that means if he had remained in Dhaka and spent fifty years in the workforce, he could expect to spend 7.5 years sitting in traffic.
What else could he be doing with that time? What are the macro-level economic effects, the blow to productivity and GDP of millions of people spending years of their lives in traffic?
Let’s do a simple math problem using an average life expectancy in the United States of eighty years, and further assuming that most people will work from the ages of twenty-two to sixty-five. In those forty-three years, let’s assume an average income of $55,000 per year, which is $2,365,000 through your working life. If you were idle 7.5 years or seventeen per cent of it, that is $412,500 of lost income. That is the money-value-of-time for those idle years.
For most of us reading this book, that number is striking, but for those living on a per capita income of $1,200 per year, that impact of idle time is even more devastating if you were to do a similar money-value-of-time calculation. Most of the workers in this part of the world are not salaried employees but daily wage earners who are incurring a real loss of income.
How many more rides could a rickshaw driver have taken during that idle time? What is the number of unpaid hours for a bricklayer? That also means, there is a higher cost to everything: day-to-day essentials cost more from the increased transportation time and chance of spoilage, and services are more expensive or less accessible due to the decreased availability of teachers, healthcare workers and other commuters. And for the person in that stopped ambulance, traffic may be the difference between life and death.
We can extrapolate the lost time and productivity from that traffic to other similarly neglected systems: power, water and sewerage; Internet connectivity and phone lines; shipping and inventory management; healthcare, education and government services. Poor planning, poor infrastructure and lack of timely, accurate and actionable information cause real harm, not just inconvenience, in countries where large segments live in poverty.
For them, a few hours of lost productivity can mean the difference between earning enough to eat and going hungry.
In the United States, we try to avoid inefficiencies in various ways so that it actually costs less for the ultimate consumer. For example, Walmart manages inventory using sophisticated computer modelling and just-in-time delivery, reducing the ultimate costs that middle-class families in the US have to pay for their purchases. Mobile banking apps allow you to bank remotely so you don’t need to spend time and money walking into a bank.
Efficiency is not just for convenience. It can be a powerful tool to alleviate poverty and reduce suffering, if employed well with a goal to provide economic benefits. But, at the root of those efficient systems is a society built on universal access to quality education, infrastructure that enables the free flow of goods, people and information, and the technology to coordinate it all.
For Kazi, that was the starting point. He was fortunate enough to receive a good education, to secure a job at a large technology company in the US, and to move to a country with good infrastructure. The country he grew up in could offer only a few of those things. How, he wondered, could he bridge the two and make a difference in the world?
When Grameen Intel was formed in 2009, the question of how to effectively deploy solutions in healthcare, education, agriculture and other sectors in developing nations was hotly contested. Existing models for international aid and development had been under heavy criticism for years.
The dominant twentieth- century paradigm of global, top-down aid initiatives led by governments and development agencies was criticised for its apparent ineffectiveness, lack of transparency, inclusiveness or accountability, and approaches that often seemed designed to create political or market benefits for donor countries.
Meanwhile, the “appropriate technology” movement was opposed by entrepreneurs like Martin Fisher, co-founder and CEO of non-profit KickStart, for favouring expensive or ineffective solutions, designed by outsiders, that ignored local needs and failed to utilise economic incentives or market systems. After working directly with, and then abandoning the appropriate technology movement, KickStart was designed
to use a market-based model in which we would sell our new technologies directly to local entrepreneurs.
We would identify profitable business models that thousands of people could start; design the tools and equipment needed to make these businesses possible; and most importantly, establish a private-sector supply chain to manufacture, distribute, and sell the new tools and equipment to the entrepreneurs. This “social enterprise” approach enabled KickStart to help 170,000 families start their own businesses using their products between 1991 and 2014.
Muhammad Yunus, founder of Grameen Bank, co-recipient of the 2006 Nobel Peace Prize, had introduced a similar model to the world of finance. Yunus had left Bangladesh to study, and later teach, economics in the United States, but returned after his home country’s war for independence. While working to improve agricultural yields in villages suffering from the terrible famine that followed the war, Yunus realised that access to formal credit was virtually non-existent. Instead, poor farmers turned to usurious moneylenders for the cash they needed to purchase essential seeds, fertiliser and tools.
The extremely high interest rates charged on such loans often led to default, requiring poor villagers to take out another loan from the moneylender to pay the first, and accelerating a cycle of worsening indebtedness and poverty.
In a famous experiment, Yunus lent $27 of his own money to forty-two poor villagers, enough to help them repay their loans from moneylenders. Seeking a more permanent solution, Yunus approached traditional banks in Bangladesh that had previously refused to serve the poor because they lacked collateral. He offered to serve as guarantor, and started a lending programme that achieved a nearly 100 per cent repayment rate. Heartened by the success of the programme, and convinced that access to credit was a “fundamental human right”, Yunus started his own bank: Grameen, which means “village” in Bangla.
The microfinance model spread in Bangladesh by Grameen Bank helped those most in need establish credit, repay informal loans and launch income-generating businesses. Lending to small groups and establishing education, disbursement and repayment centres in local villages, Grameen Bank was able to ensure a nearly ninety-eight per cent repayment rate. Between late 1970s and 2014, Grameen Bank lent nearly $16 billion.
Buoyed by the success of their model, Grameen established a trust to launch partnerships and ventures in other sectors. In 2007, Intel Chairman Craig Barrett and Muhammad Yunus talked about a possible joint collaboration, the concept that would become the Grameen Intel company.
In 2009, the same year that Grameen Intel was launched, Daniel Kaufmann of the Brookings Institution lamented that “path-breaking IT innovations” and “market- and private-driven solutions to development challenges” were almost completely absent from high-level talks on aid, despite their demonstrated effectiveness. Grameen Intel would seek to fill that gap, using Grameen’s proven grass-roots design and distribution approaches to adapt and utilise Intel technologies, previously designed only for the world’s richest twenty per cent to meet the pressing needs of the global poor.
The new company would seek to use information technology products and services to alleviate poverty through income-generating methods.
In response to the successes, and failures, of previous approaches, and motivated by Kazi and Narayan [Sundarajan]’s commitment to setting up a company with a social mission, a market-based solution and a proven model from Grameen were two key pillars that they took note of. In addition, incorporating the monetary value of time was their first rule (of eleven) to guide their model.
In this way, by pursuing the new social enterprise model of development, they hoped to address the poverty-related issues they had seen when they were growing up and fulfil their commitment to creating a better world.
Excerpted with permission from The Rule of One: The Power of Social Intrapreneurship, Kazi Huque, Narayan Sundarajan, Jacen Greene, Penguin Random House India.