The Prosperity Paradox

The Prosperity Paradox

This book really influenced the way I think about entrepreneurship and impact. Here is a summary:

1. Central Idea: You cannot end poverty by focusing your efforts on ending poverty. You can do it through market innovation – creating markets to serve ‘non-consumers’

2. Think of products (cars, cellphones and microwaves) that were initially used by a few wealthy ‘consumers’. The innovators (Ford, Celtel and Galanz) who brought these products to ‘non-consumers’ by investing in infrastructure and reducing costs created enormous markets

3. Why is there non-consumption? For there may be a lack of Skill/Wealth/Access/Time and solving for these requires initiative and risk-taking. In most countries that’re tackling poverty, the government’s can’t take these initiatives, so entrepreneurs must step up

4. The supporting infrastructure needed to serve these non-consumers will be ‘pulled’ once there is a market. The market will act like a magnet for other players to come in and create a reliable ecosystem that spurs growth and inclusiveness (Nigerian Film Industry)

5. Most of these new markets require an integrated supply chain, where the entrepreneur invests across the value chain to reduce the risk of unreliable suppliers (Indomie Noodles)

6. A great example of all of the above is Celtel. Where Mo Ibrahim identified millions of non-consumers in the mobile communications market. He then set up the infrastructure to serve them across Africa and allowed for prepaid cards at low prices, thereby solving for access, wealth and time in one go. As the industry grew it ‘pulled’ in investments in the digital space, infrastructure, finance, etc. This is because Africans now had access to the world. Celtel played an incredible role in uplifting vast sections of the African society

7. Outsourcing is done to countries that focus on efficiency innovation (Mexico, India, etc.). But outsourcing doesn’t have the power to alleviate because markets are created in the countries that outsource this work

8. Corruption exists because, in those countries, it is rational for an individual to be corrupt. Setting up institutions to solve for that isn’t a sustainable solution, but prosperity is. As these alleviated individuals will ‘pull’ and demand better institutions that’ll sustain themselves. Historically, a push strategy hasn’t really been effective in the long run

9. In essence, ask why an issue exists before solving for it. Building millions of toliets in India did not resolve its sanitation problems

10. Focusing on direct and temporary solutions for poverty can lead to compassion fatigue and wear out your passion for change

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