Enterprise Resilience Management Blog

Political Power and Progress

In my discussions of Development-in-a-Box™, I have noted that bad leaders and corruption often undermine the best efforts of the development community to achieve genuine progress. An interesting Washington Post article by Shankar Vedantam provides some insight into why some leaders go bad ["With Power Comes a Selfish Point of View'," 26 November 2007]. I wrote about one example of a potentially good leader gone bad in a recent post concerning Ethiopia [Uncertain Future for Ethiopian Development]. In that post, I noted that Ethiopia's prime minister, Meles Zenawi, was once considered the darling of Western powers for his efforts to tackle Ethiopia's deep poverty; but power brought out his darker side. Vedantam begins his column talking about another leader who has been both praised and vilified by the West, Pervez Musharraf.

"In the interest of promoting democracy, Pakistan's president, Gen. Pervez Musharraf, recently announced that he had to lock up most of his country's democracy activists. And because he wanted the Pakistani Supreme Court to independently rule on whether he could continue as president, Musharraf also locked up the country's top judges and replaced them with yes men. Seen in the long light of history, last week's court ruling that Musharraf could continue in power was less Machiavellian than unoriginal. For as far back as historical records go, people in power have told astonishingly bald-faced lies, saying they are acting in the public interest when they are really acting in their own."

There is no delusion like self-delusion. Even most tyrants hold sham elections to demonstrate how beloved they are of people. Vedantam points out that Saddam Hussein used to hold elections and win them with an impressive 95 percent of the vote -- the remaining 5 percent of the vote, he muses, were given to other candidates as a show of modesty! Power-hungry leaders, it seems always couch their speech in populist rhetoric, and use it to justify nearly everything. As Vedantam writes, "In earlier times, conquests and colonialism, even slavery, have been justified as being in the best interest of the victims." The question raised by Vedantam is: Are selfish, power-hungry leaders born or made?

"The standard explanation for why those in power act in self-interested, venal and authoritarian ways is that they are bad apples to begin with. Indeed, many people believe that such men and women are the ones most likely to rise to power. But new research in political science and psychology has provided a novel explanation for why leaders and managers regularly let their followers down and resort to the kind of 'layoffs and pay cuts are good for you' talk that defines absurdity. These studies show that leaders often emerge from communities not because they are ruthless, but because they are skilled at managing social relationships."

You often hear critics of powerful people say, after meeting the target of their criticism face-to-face, they found them quite engaging and charming. In other words, they like them in social situations and are confused why that personal amiability doesn't translate into public sensibility. In a word: power.

"Something happens to people once they acquire power, however, and the transformation appears to be psychological. Adam Galinsky, a social psychologist at Northwestern University's Kellogg School of Management, recently had volunteers describe either a situation in which they had power over someone else or a situation in which they felt powerless. Those asked to remember a situation in which they felt powerful were made to feel even more powerful by being given control of the distribution of goodies, whereas the volunteers asked to remember a powerless situation were further reminded of their powerlessness when they were asked to estimate how many goodies they expected to receive. When Galinsky and his colleagues asked all the volunteers to draw the letter E on their foreheads with a marker, those who had been made to feel powerless were three times more likely to draw the E so that it was legible to someone facing them. Those made to feel powerful, however, drew the letter so that it looked correct from their internal perspective but was a mirror image from the point of view of someone facing them [the power "E" is on the left in the attached image -- click to enlarge]."

In interviews, FBI Special Agent George Piro, the man entrusted with interrogating Saddam Hussein following his capture, asserted that Saddam was an engaging conversationalist who teared up after their final session. The study cited by Vedantam indicates that we each have a Jekyll and Hyde side. Power changes us in dramatic ways; not the least of which is that it changes how we think.

"Galinsky's point, which he noted in a study published in the journal Psychological Science, is that volunteers made to feel powerful, even in a trivial laboratory experiment, almost instantly lose the ability to see things from other people's points of view. Dacher Keltner, a social psychologist at the University of California at Berkeley, said Galinsky's finding reflects a growing realization that power entails a paradox. 'People in organizations and in hierarchies and in informal groups like college dorms want leaders to be socially intelligent,' Keltner said. 'They will sacrifice all manner of things to have leaders who are thoughtful and engaged and give other people voice.' But once socially gifted people rise to power, Keltner added, the paradox is that 'power simplifies our thinking. We tend to see things in terms of our own self-interest, and it makes us more impulsive. We forget our audience in service of gratifying our own impulses.' Keltner and others have shown that power exacerbates many cognitive biases. People who lack power turn out to be more accurate in guessing the opinions of those around them, whereas those in power tend to be inaccurate. Because subordinates are also hesitant to tell superiors things they do not want to hear, the problem gets worse, with powerful people having even less input and perspective about how others think and feel."

The surprising thing is that there is such a thing as "great leader." Great leaders are those who make their subordinates feel like their views and interests are being heard and met, even when decisions go against them. I suspect that most great leaders have at least one trusted ally who is willing to tell them what they need to hear even if it is bad news. Unfortunately, most leaders surround themselves with "yes men" [or women] and appreciate loyalty more than truth. That appears to be a formula for failed leadership.

Lord Acton wrote a famous passage in a letter to Bishop Mandell Creighton in 1887 that read:

"Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."

He obviously defined "great" differently than I do. By "great," Lord Acton meant powerful, not "wise, inspiring, fair, and decisive." I don't believe you can be great and bad. Galinsky's study helps us understand why power corrupts. The interesting thing is that Galinsky's study implies that relative positions of power make a difference even to people who have no reason to worry about losing power -- like Supreme Court justices.

"Even U.S. Supreme Court justices, Stanford University psychologist Deborah Gruenfeld found, write more complex arguments when they are in the minority compared with when they are part of the majority. In some ways, the results should not be surprising: Not having power forces you to see things from other people's points of view and increases empathy and social behavior. Having power allows you to ignore other points of view -- depriving you of the social skills that led to power in the first place."

How often have you asked yourself (after seeing some powerful person do or say something stupid), "Doesn't he [or she] understand how that makes them look?" Well, apparently they don't.

"When powerful people such as Musharraf say and do things that are absurd, ... it could be that they are simply unaware of how they appear to others. Keltner once had groups of three people sit before a bowl that contained five cookies, and each volunteer took one. That left two cookies. By mutual agreement, the volunteers always left the last cookie in the bowl. So who took the fourth cookie? Invariably, Keltner found, the person in the group who had been randomly assigned to feel powerful rudely grabbed the fourth cookie. 'We videotaped how they ate,' Keltner said, laughing. 'The high-powered person ate with their mouth open, cookie crumbs falling all over their shirt.'"

Political cartoonists, of course, are thrilled by boorish behavior and make a fine living from it. They are not interested in seeing such behavior change, but the rest of us are. As I consider how best to implement Development-in-a-Box, for example, I need to know how to approach political leaders who may fit the description noted above. Vedantam doesn't provide further insight in that direction, but knowing that powerful leaders have certain tendencies helps me to understand what motivates them. In any given situation, there is always someone who sits in the power chair. Even lesser bureaucrats can feel empowered in certain situations and it is important to know when they do because their behavior will likely change when they feel empowered. That means how you must deal with them changes as well. The lesson to be learned is "look for the cookie crumbs to find out who feels powerful."

Kurdistan Regional Government Still Seeking Oil Contracts

In early October, I wrote a post about the frustration politicians in Kurdistan are feeling because of the sluggish progress being made elsewhere in Iraq [Tensions Mount with Uneven Iraqi Development]. The event that prompted that post was the signing of an oil deal between the Kurdish Regional Government signed and Hunt Oil of Dallas, TX. Despite objections from both the Iraqi central government and the Bush administration, Kurd politicians continue their pursuit of additional contracts ["Kurdish Ministers Woo U.S. Oil Firms," by Stephen Mufson, Washington Post, 28 November 2007]. Mufson reports that Omer Fattah Hussain, deputy prime minister of the Iraqi Kurds' autonomous region, and Ashti Abdullah Hawrami, the Kurdish regional oil minister, have been in the U.S. cozying up to oil companies.

"After more than a year of political deadlock in Iraq over a national petroleum law, the Kurdistan Regional Government unanimously adopted its own petroleum legislation in August. In the past month, it has signed a dozen oil exploration contracts and hopes that foreign firms will ultimately invest $10 billion in the oil sector and bring 1 million barrels a day of new oil production from the Kurdish region over the next five years. ... Hawrami said the contracts posed no conflict with Iraq's federal constitution. The Iraqi central government, however, is irate over the Kurdish contracts -- and the State Department isn't happy either. The Bush administration has been striving mightily over the past year to get a national petroleum law approved before international firms jump in. In addition, a group of 60 Iraqi oil professionals signed a letter saying that the recent Kurdish contracts were a 'dangerous step that has no legal or political standing whatsoever.' Iraqi oil union leaders have also opposed the contracts."

With so much opposition, the fact that Kurdish leaders continue to sign contracts underscores their frustration with the Iraqi central government. For its part, the central Iraqi government is threatening retaliation against any oil companies that negotiate with the Kurds.

"Earlier this month, Iraqi oil minister Hussein Shahristani called the deals illegal. He warned that foreign oil companies that sign contracts with the Kurdish authorities without central government approval risk retaliation when seeking stakes in the bigger oil prospects in the southern part of the country."

Although such threats don't help the situation (and they reinforce Kurdish feelings that their Arab neighbors are still out to get them), oil companies have to take them seriously because there is much more money to in southern Iraq than in the Kurdish region.

"There are 51 known but undeveloped fields in Iraq. Several major international oil companies have been talking to Baghdad about resuming work in the same giant southern fields where they had worked when Saddam Hussein was in power. And the central government indicated to them that it might rely on Hussein-era oil laws or offer service contracts if the new petroleum legislation is delayed, according to Kamal Field Aldasri, an economic adviser to the Iraqi government. Aldasri said recently that the central government wants help in finding ways to boost output at the 27 operating oil fields throughout Iraq, which are producing well below their potential. The Kirkuk field, for example, used to produce almost 1 million barrels a day and now produces less than 200,000. The government's aims to boost production from the current 2.2 million barrels a day to 3 million, though it is running far behind schedule."

For the moment, most oil companies are watching from the sidelines and providing timely advice when requested.

"The major oil companies have been giving advice, reviewing data and training Iraqi oil workers -- without compensation. Royal Dutch Shell Group, for example, is drawing up a master plan for tapping for domestic consumption the more than 600 million cubic feet a day of natural gas now being burned off. Exxon Mobil, Chevron, BP and Total are also doing technical studies, industry sources say. But given political uncertainty, legal disputes and security risks, the big international firms are not prepared to reenter the country with their own personnel."

Mufson reports that large oil companies are likely to shun Kurdistan until a national oil policy is adopted because the size of potential Kurdish oil fields is too small for them.

"Smaller firms, however, have rushed to sign exploration and production contracts there. They include affiliates of Russia's Alfa-Access-Renovo group, India's Reliance Industries, the Korea National Oil Corp. and Austria's major oil firm, OMV. Asked about the absence of major oil companies, Hawrami said TNK-BP had signed a contract. BP said that it was not involved but that its Russian partner had entered the agreement on its own."

Large U.S. oil companies are also likely to shun Kurd advances because the Bush administration is pressuring them to work through the central Iraqi government.

"In a ... meeting with the Washington representatives of major oil companies, two State Department officials insisted that the Bush administration's policy was that U.S. companies should not sign separate deals with the Kurdistan Regional Government without approval from the central government in Baghdad. According to one person at the meeting, the officials warned that some of the blocs being offered by the Kurdish government lay outside its territory and might extend into Turkey or Iran. While conceding that the Hunt deal did not violate any U.S. law, they said it created an 'unfortunate and untimely' impression that the U.S. government was changing its position on the need for a national petroleum law."

One of the challenges created by separate Kurdish oil deals is that the terms they are setting could differ from the terms required by a national petroleum law.

"Some Iraqis accuse the Kurdish regional authorities of giving overly generous terms to foreign oil companies in production-sharing agreements. In those agreements, a foreign firm takes on all the risk of exploration but gets a share of production if it finds oil. Hawrami said the foreign firms would get no more than 15 percent of production under recent contracts and less if the regional government chooses to take a one-quarter stake in the venture after oil is found. He said contracts in relatively peaceful areas would offer smaller percentages to foreign companies."

Whatever Kurdish oil resources are developed, they will flow to market through a pipeline that runs through Turkey. As I've noted before, despite Turkish disagreements with PKK rebels operating from Kurdish territory, Turkey and Kurdistan enjoy a symbiotic relationship. The oil pipeline is just one manifestation of that relationship. While there may be a bit of "thumbing the eyes" of the central Iraqi government for past injustices in the KRG's pursuit of oil contracts, it pales in comparison to the burning desire of KRG leaders to develop their resources and stimulate their economy. I see this desire every time I visit Iraq. My company, Enterra Solutions, has recently concluded a number of strategic alliances that will help it implement our activities there. In addition, the company recently announced it will open an office in Erbil and today it announced today that a contract is now in place for Enterra Solutions to provide business-to-business and business-to-consumer trading exchange services to Iraqi companies. The road ahead remains long and the challenges many, but everything is headed in the right direction.

Brazil's Oil Discovery

Alexei Barrionuevo reports in the New York Times that about a year ago Brazil found a large deep-water oil reserve off of its southeastern coast, but just recently completed assessing its full potential ["Brazil Discovers an Oil Field Can Be a Political Tool," 19 November 2007]. Apparently, that potential is big. Barrionuevo asserts that it could "transform Brazil into a global energy powerhouse."

"Petrobras, [Brazil's state oil company] ... announced on Nov. 8 that the field held some five billion to eight billion barrels of crude oil and natural gas. The announcement has everyone in the region, and beyond, taking notice. A field that size — the biggest in the world since a discovery in Kazakhstan in 2000 — is a potential political game-changer for Brazil. In the next five years it is conceivable that Brazil could move ahead of Mexico and Canada in total oil reserves, becoming second only to Venezuela and the United States in the energy pecking order of the Americas."

Brazil was already considered one of the rising international stars -- it is the "B" in the so-called "BRIC" countries of emerging economies (the others being Russia, India, and China). This discovery adds more luster to its economic and political portfolio.

"This is heady stuff for Brazil, a country that only last year became a net energy exporter mostly because of its aggressive push into sugar-cane ethanol and hydroelectric power. 'All of a sudden Brazil is emerging as an energy power,' said Peter Hakim, president of the Inter-American Dialogue, a policy group in Washington focusing on Latin America. 'Everything they have developed, from soybeans to sugar to oil is suddenly working. They have had amazing luck.' There is little doubt that the find gives Brazil new influence against energy players like Bolivia and Venezuela, and not just in the economic competition among energy suppliers, but in the political arena as well."

Petro-politics is what Barrionuevo focuses on.

"Much to the chagrin of the United States, Venezuela's president, Hugo Chavez, has used his nation’s oil wealth to aggressively push a leftist agenda at home and abroad. The Brazilian field, known as Tupi, now has the potential to lend more weight to Brazil’s more moderate, leftist approach."

It is not US/Brazilian relations, however, on which Barrionuevo dwells; it is Latin American political relationships.

"Already countries around the region have been quick to sense the potential threats and benefits. With news of the discovery coming just ahead of a meeting of Latin American leaders in Santiago, Chile, Brazil's president, Luiz Inacio Lula da Silva, acknowledged there during the meeting that he was being 'treated with a certain deference' by the other leaders. Mr. Chávez nervously jested that Mr. da Silva was now an 'oil magnate.' He also quickly suggested that the two nations create an Amazonian energy region similar to the Caribbean and Andean integration efforts Venezuela had been pushing for. 'Now Lula has some cards to put on the table with Chávez,' said Roberto Teixeira da Costa, an economist who serves on the board of the private equity arm of Brazil's development bank. 'It is good to have some counterweight in Latin America.' It seems the discovery has already given Mr. da Silva more confidence in standing up to Mr. Chávez and his protégé, the Bolivian president, Evo Morales. Petrobras on Tuesday pulled out of a natural gas project with Venezuela, citing 'technical and economic reasons.' It denied the pullout had anything to do with the Tupi discovery. A cartoon in the Brazilian newspaper O Globo showed Mr. da Silva sunbathing atop an oil gusher one day, and breathing a black substance into the face of Mr. Morales the next. 'There’s Lula, full of gas: be careful Morales!' the caption read. The turnabout is dramatic. Just two years ago Mr. Morales announced the nationalization of his nation’s energy reserves. The step was a firm slap to Brazil, which had invested in Bolivia. Now analysts expect the new field will allow Brazil to take a tougher stand in its negotiations with Bolivia over new gas contracts and investments in Bolivia’s nationalized gas sector."

In addition to political repercussions, Brazil's discovery effects regional energy policy as well.

"Mr. da Silva basked in the sudden possibilities, declaring that 'Brazil would obviously participate in OPEC,' the global oil cartel, and already felt free enough to weigh in on its politics, saying that the organization should reduce oil prices. He also insisted that Brazil would not 'pull back even one millimeter' from its push into biofuels. Brazil is sitting on the most abundant farmland in the world, which it has been using a part of to produce sugar cane for ethanol. Not least, though the new oil will not be online for at least five years, the announcement of the size of the field may help Mr. da Silva blunt criticism at home that Brazil was heading into an energy crisis because of a shortage of natural gas. It has also raised hopes of easing the energy crisis among Brazil's neighbors, notably Argentina and Chile, which have been struggling with a lack of natural gas of their own. Argentina has consistently cut off the flow of gas to Chile for the past two winters, causing Chile to scramble to find supplies elsewhere, and Bolivia's nationalization has raised doubts about its ability to supply its neighbors’ growing energy demand. 'Every country in Latin America is aiming for energy independence, because they don't have that much trust in their neighbors,' Mr. Hakim said. Just last week Michelle Bachelet, Chile's president, rejected an offer from Mr. Chávez of subsidized gasoline for the struggling public transportation system in Santiago. Ms. Bachelet said she was convinced that Chileans could resolve the system’s problems 'ourselves.'"

All of this sounds great for Brazil, but Barrionuevo warns that the new discovery is no more than that. To actually get at the oil will be an enormous challenge.

"Petrobras, which has developed into a leading expert on deep-water oil exploration, will have to work hard to tap the find. To coax the oil from Tupi, engineers will have to drill up to 16,000 feet below the sea floor through salt and rocks, in water depths of up to 10,000 feet, an undertaking that is at the frontier of the industry's technological ability, according to PFC Energy, a consultancy in Washington."

Even if Brazil moves ahead of Canada and Mexico on list of countries with proven reserves, it will still lag far behind Venezuela as an oil powerhouse.

"Even if the field turns out to be a good deal bigger than Petrobras has estimated publicly, Brazil still could not match Venezuela's 80 billion barrels of oil reserves. The Tupi field, if it holds at least 5 billion barrels, could push Brazil past 17 billion barrels. 'This is oil that is promised for the future, not for today or tomorrow,' said Larry Goldstein, director of the Energy Policy Research Foundation in Washington. 'If I was Chávez I wouldn't be losing a lot of sleep — not yet.'"

Brazil is better off than many oil rich countries because it has a more diversified economic base. As I noted in a recent blog [Oil and Development], many oil rich countries have squandered this resource and failed to invest in the future. Brazil could be different and needs to be if it is going to achieve the potential that most analysts believe it has. If it does, it will earn its place as one of the BRIC nations.

Uncertain Future for Ethiopian Development

The Economist reports that "while things are getting better for much of Africa, Ethiopia risks getting left behind ["A brittle Western ally in the Horn of Africa," 3 November 2007 print edition]. With all the turmoil that has taken (and continues to take) place in the Horn of Africa, it isn't too surprising that a country in that area is having trouble. Ethiopia, however, had a couple of things going for it that had inserted a ray of hope into the picture -- one of those things was the political support of Western powers. The Ethiopian Government proved its value to many of those powers when it routed a militant Islamist group in Mogadishu that Western powers feared would provide protection to terrorists hiding in Somalia. However, with renewed fighting in Mogadishu and Ethiopian soldiers being dragged through the streets in "Blackhawk Down" fashion, things aren't looking too good at the moment.

"As America surveys the map of eastern Africa, it finds little to take comfort from. Somalia is in anarchy, riven by competing warlords and a haven for Islamist militants. Sudan is involved in the bloody suppression of blacks in its western region, Darfur. Both countries are deaf to outside complaints and seem chronically unstable. America is thinking of putting Eritrea, briefly a beacon of hope after it split from Ethiopia in 1993, on its list of countries that sponsor terrorism. But between that grim trio stands Ethiopia, America's hope. This ancient country has become an essential ally of America in the 'war on terror.' Last year Ethiopia invaded Somalia in support of a UN-backed transitional federal government, which had been threatened with jihad by the Union of Islamic Courts (UIC) that had taken over Mogadishu, the capital. The Americans joined in, giving vital intelligence, to catch al-Qaeda people whom the UIC was sheltering. These men, it believed, were responsible for the bombings of the American embassies in Kenya and Tanzania in 1998, killing more than 220 people. ... Certainly the Bush administration has been unstinting in its praise of Meles Zenawi, the prime minister. It has also vilified Ethiopia's neighbour and mortal enemy, Eritrea, which it accuses, among other things, of arming and funding the Somali Islamists."

It wasn't just Zenawi's support for efforts to route terrorism that garnered praise it was his apparent desire to bring Ethiopia out of the dark ages.

"Mr Zenawi won the West's friendship, too, for his efforts to tackle Ethiopia's deep poverty. These have met with some success—so much so that Tony Blair has put Mr Zenawi in the vanguard of an 'African Renaissance.'"

So far, so good. But The Economist reports that the West's honeymoon with Zenawi was a short one.

"Ethiopia's upward track as development poster-child and dependable ally was rudely interrupted in 2005. That year's presidential and parliamentary elections were marred by mass killings on the streets of the capital. Police fired on opposition supporters and others who were protesting against what they claimed were rigged elections. Tens of thousands, including journalists and NGO workers as well as opposition activists, were rounded up in a general dragnet; many spent weeks, or months, in prison without charge. Opposition leaders were accused of hugely inflated crimes, such as high treason and genocide. Seventy-one of them were freed only last summer, after having to sign a letter admitting their part in inciting violent protests. These events shattered the West's cosy image of the modernising, progressive Mr Zenawi. Appalled Western governments abruptly switched off direct financial support to the Ethiopian government, though aid has been resumed through indirect channels. And an anti-Zenawi lobby, largely funded by the big Ethiopian diaspora in America, now issues a stream of anti-government criticism from the United States. A few weeks ago the House of Representatives passed a bill condemning Ethiopia's human-rights record and pledging money to help opposition politics. Though it stands almost no chance of becoming law, it shows that Ethiopia is now a subject of fierce controversy."

This is an old story in Africa -- bad leaders and corruption squandering opportunities. No African country can afford setbacks caused by such leadership, but even among African countries Ethiopia is remarkably unresilient.

"Ethiopia likes to do things differently. In September it started celebrating the new millennium, more than seven years after everybody else. The country has been out of step in this respect since 1582: while the rest of the Christian world changed to the revised Gregorian calendar, Ethiopia stuck to the Julian. It also still keeps its own time, measured in 12-hour cycles rather than 24-hour ones. Uniquely in Africa, Ethiopia was never really colonised by Europeans. But its singular history has been a curse as much as a blessing. As the rest of Africa decolonised and modernised, albeit fitfully, after the second world war, Ethiopia remained stuck fast in a feudal fantasy presided over by a diminutive emperor, Haile Selassie. He was deposed only in 1974, by which time the modern world had largely passed Ethiopia by and the country had become known for poverty and famine. It still is. Ethiopia was further damaged by the committee of military officers, known as the Derg, that overthrew the emperor. That regime degenerated into a “red terror” of gulags and summary executions; it also lost an expensive, wasteful war with Tigrayan and Eritrean separatists over what would become, in 1993, the new country of Eritrea. The Derg produced the dreadful famines of 1984-85, the first to be alleviated mainly by the efforts of Bob Geldof and a phalanx of rock stars.

The story in Ethiopia, however, has been a mixed one under Zenawi. While he may be a tyrant, he has not been a complete tyrant.

"Since the early 1990s, ... Ethiopia has recovered somewhat under Mr Zenawi. Signs of that are evident on the big, pristine campus of the University of Arba Minch, more than 500km (311 miles) south of Ethiopia's capital, Addis Ababa. The university's president, Tarekegn Tadesse, has welcomed 8,000 students this term, a huge number for an obscure provincial town of 50,000-odd people. The crowd of freshmen, he says, testifies to the government's rapid expansion of tertiary education; in the case of Arba Minch, enrolment has increased fourfold in seven years. It is an inspiring story. The new university buildings springing up all over the south are tangible evidence that the aid and development money pumped into Ethiopia reaches the people it is meant to. Roads are clearly being built, funded largely by the Chinese; schools and water-treatment plants are being opened. And there are few complaints of corruption, a fact that continues to make Ethiopia popular with foreign donors. Some of the results are encouraging, too. Infant mortality is said to have dropped from 141 per 1,000 live births in 2000 to 123 per 1,000 in 2005; over 70% of children are now in school, and access to clean water has more than doubled in ten years. Furthermore, the government can point to the rapid expansion of a few sectors in what is still mostly an agricultural economy. The great volcanic lakes of the Rift Valley south of the capital are now ringed by vast flower farms, mainly exporting to Europe. Flowers earn the country about $88m in exports annually, creating some 50,000 jobs in the past few years."

So why is Ethiopia's future so bleak? The answers are myriad, but include a bad demographic outlook, political patronage, inflation, and a moribund market economy.

"After almost a decade of well-intentioned development policies, Ethiopians remain mired in the most wretched poverty. Officially, about 80% of them live on less than $2 a day. Often it is a lot less than that. An area like Sidama, in the south, looks green, tropical and improbably fertile, but existence there can be precarious. One foreign charity, Action Contre la Faim, recently found that the average cash income for households in one area was six cents a day. Shocked researchers concluded that the depth of poverty there was 'far beyond what had previously been thought.' Visiting the nearby villages confirms these cold statistics. In Garbicho Lela, high up in the hills, a nurse estimates that 13% of children are severely malnourished. The one shop in the village betrays the low level of economic activity; on the weekly market day, when over 500 people will walk for hours from the surrounding hill-villages to sell a few things, the shop will do only about 200 birrs ($23) of business. On an average day, it sells two Pepsis. After three years of good rains, aid workers reckon that the risk of severe food shortages has, for the moment, receded. But so marginal are the reserves of food and money here that one bad season could still spell disaster. The fact is that for all the aid money and Chinese loans coming in, Ethiopia's economy is neither growing fast enough nor producing enough jobs. The number of jobs created by flowers is insignificant beside an increase in population of about 2m a year, one of the fastest rates in Africa. Since every mother has about seven children, it is conceivable that Ethiopia, with 75m-plus people today, could overtake Nigeria (now 140m-strong) as Africa's most populous country by mid-century. Just to stand still, let alone make inroads into poverty, the country must produce hundreds of thousands of jobs a year. It is hard to see where they will come from. The government claims that the economy has been growing at an impressive 10% a year since 2003-04, but the real figure is probably more like 5-6%, which is little more than the average for sub-Saharan Africa. And even that modestly improved rate, with a small building boom in Addis Ababa, for instance, has led to the overheating of the economy, with inflation moving up to 19% earlier this year before the government took remedial action. The reasons for this economic crawl are not hard to find. Beyond the government-directed state, funded substantially by foreign aid, there is—almost uniquely in Africa—virtually no private-sector business at all. The IMF estimates that in 2005-06 the share of private investment in the country was just 11%, nearly unchanged since Mr Zenawi took over in the early 1990s. That is partly a reflection of the fact that, despite some privatisation since the centralised Marxist days of the Derg, large areas of the economy remain government monopolies, closed off to private business."

For those who might question the role of a program like Enterra Solutions' Development-in-a-Box™, they need look no further than Ethiopia to understand why such a framework is required. Ethiopia is locked in an agrarian mindset, where large families are considered necessary to help run the farm. But with no real farms to work or markets in which products can be sold, progress is as fallow as the fields. Education normally brings down birthrates, but with no jobs being created for those being educated, the result is tension and despair. Development-in-a-Box is designed to create better conditions for a market economy and to help generate jobs. Government patronage and international dole create dependencies rather than build capacities. People need work and entrepreneurs need a supportive climate in order to create jobs. Since Ethiopian policies have produced just the opposite conditions, it is no wonder it remains locked in poverty.

"This is where Ethiopia misses out badly. Take telecoms. While the rest of Africa has been virtually transformed in just a few years by a revolution in mobile telephony, Ethiopia stumbles along with its inept and useless government-run services. Everywhere else, a plethora of South African, home-grown and European providers has leapt into the market to provide Africans with an extraordinary array of cheaper and more efficient services, now used even by the poorest of farmers, for instance, to check spot prices for agricultural goods in markets miles away. And the mobile-phone revolution has created thousands of new livelihoods; at times it seems as if every boy on a street corner is hawking a top-up card. Not in Ethiopia. It is the same story in financial services, where, despite the growth of some smaller private banks, no foreign banks are allowed. Micro-finance schemes have expanded exponentially, but it remains almost impossible to find start-up loans for small or medium businesses."

Zenawi's hit and miss policies must be replaced by a more holistic vision that addresses challenges throughout the country simultaneously. You can't simply address one sector, like education or clean water, and ignore the economic sector that produces jobs and improves livelihoods. The article notes that Ethiopia remains fractured by tribal disputes and Zenawi's leadership has only sharpened differences between tribes. At a time when millions are being lifted out poverty by connecting to the global economy, Horn of Africa countries, including Ethiopia, are creating conditions that almost guarantee that they remain of little interest to the West except when terrorists hide there or money must be raised to alleviate the humanitarian disasters caused by bad leaders, poor policy, or tribal feuding.

Security Threats Continue to Become More Complex

There was understandable euphoria late last century when the Soviet Union collapsed along with the notion of ideological blocs. Peace and cooperation appeared to be spreading around the globe. A number of events, however, including in the terrorist attacks of 11 September 2007, burst the rosy vision of a world at peace. Since then, we have seen a complex security environment emerge. Now, Adi Shamir, a professor at the Weizmann Institute of Science in Israel and one of the world's most prominent cryptographers, warns that bad math should be added to the list of challenges ["Adding Math to the List of Security Threats," by John Markoff, New York Times, 17 November 2007]. Shamir insists that a math error embedded in widely used computing chips could place the security of the global electronic commerce system at risk. In a research note written for colleagues:

"He wrote that the increasing complexity of modern microprocessor chips is almost certain to lead to undetected errors. Historically, the risk has been demonstrated in incidents like the discovery of an obscure division bug in Intel's Pentium microprocessor in 1994 and, more recently, in a multiplication bug in Microsoft's Excel spreadsheet program, he wrote. A subtle math error would make it possible for an attacker to break the protection afforded to some electronic messages by a popular technique known as public key cryptography."

Most of us think about Enigma machines or other various devices used by spies when we think of cryptography. The fact is, however, that most of us rely on encryption every day of our lives. I have written in other posts that the global economy functions mainly on trust (loans, credit cards, brokered deals, and the like). Just as Ronald Reagan used to say "trust but verify," encryption is used to keep unscrupulous people from getting at sensitive information. As Markoff writes:

"Using this [public key cryptography] approach, a message can be scrambled using a publicly known number and then unscrambled with a secret, privately held number. The technology makes it possible for two people who have never met to exchange information securely, and it is the basis for all kinds of electronic transactions."

So what's the problem?

"Mr. Shamir wrote that if an intelligence organization discovered a math error in a widely used chip, then security software on a PC with that chip could be 'trivially broken with a single chosen message.' Executing the attack would require only knowledge of the math flaw and the ability to send a 'poisoned' encrypted message to a protected computer, he wrote. It would then be possible to compute the value of the secret key used by the targeted system. With this approach, 'millions of PC's can be attacked simultaneously, without having to manipulate the operating environment of each one of them individually,' Mr. Shamir wrote. The research note is significant, cryptographers said, in part because of Mr. Shamir's role in designing the RSA public key algorithm, software that is widely used to protect e-commerce transactions from hackers."

As I noted in a recent post [Algorithms and Business], algorithms and automated business processes are going to play increasingly important roles in our lives. The burden this places on those generating algorithms or equations is enormous. Although Shamir's scenario is hypothetical, clearly the unintended consequences of "bad math" could ripple through the global economic system and result in its collapse as money is lost, liability is assessed, and so on. Analysts are inclined to take Mr. Shamir seriously.

"'The remarkable thing about this note is that Adi Shamir is saying that RSA is potentially vulnerable,' said Jean-Jacques Quisquater, a professor and cryptographic researcher at the Université Catholique de Louvain in Belgium. Mr. Shamir is the S in RSA; he, Ronald Rivest and Leonard Adleman developed it in 1977. Because the exact workings of microprocessor chips are protected by laws governing trade secrets, it is difficult, if not impossible, to verify that they have been correctly designed, Mr. Shamir wrote. 'Even if we assume that Intel had learned its lesson and meticulously verified the correctness of its multipliers,' he said, 'there are many smaller manufacturers of microprocessors who may be less careful with their design.'"

The type of challenge that Shamir identified is not new. The fact that it was Mr. Shamir who was raising the warning, not just warning itself, that made his concerns big news.

"The class of problem that Mr. Shamir described has been deeply explored by cryptography experts, said Paul Kocher, who is president of Cryptography Research, a consulting and design firm in San Francisco. However, he added that it illustrated how small flaws could subvert even the strongest security. An Intel spokesman noted that the flaw was a theoretical one and something that required a lot of contingencies. 'We appreciate these and we look at everything,' said George Alfs, an Intel spokesman. In e-mail correspondence after he sent the note, Mr. Shamir said he had no evidence that anyone is using an attack like the one he described."

I take personal interest in such concerns because my company, Enterra Solutions, is in the rule set automation and information sharing business. Security and trust are critical elements to both. Like others, we trust chip manufacturers to provide us with products that contain no critical flaws. All of the recent toy recalls involving toys made in China must give pause to companies dependent on microchips being manufactured in China. Although I'm sure that microchip manufacturing has much better oversight than toy manufacturing, standards and enforcement are essential parts of maintaining trust in the global economy. That is why the WTO sets standards, why the ISO sets standards, and why there is so much haggling over standards in most industries. Standards can be a pain to deal with; but the fact that the negative consequences of having no or low standards can be devastating -- as Mr. Shamir aptly demonstrates -- makes the pain they cause tolerable.

Happy Thanksgiving!

Thanksgiving in America is a time of reflection. The truly thankful person can find a well of gratitude even amidst life's tragedies. It is easy to be grateful when all is well. Where I live, we are well and truly into fall colors in all their blazing glory. The roads, rails, and airways are filled with travelers, more than even the poet John Greenleaf Whittier might have suspected when he penned the following stanza:

Ah! on Thanksgiving day, when from East and from West,
From North and from South, come the pilgrim and guest,
When the gray-haired New Englander sees round his board
The old broken links of affection restored,
When the care-wearied man seeks his mother once more,
And the worn matron smiles where the girl smiled before.
What moistens the lip and what brightens the eye?
What calls back the past, like the rich Pumpkin pie?

[The Pumpkin, st. 2]

No matter where you are this day, I wish you and yours a happy Thanksgiving Day.

Prosperity and Altruism

Bill Gates and Warren Buffett are only the latest in a long line of individuals who have used their wealth for altruistic purposes. You don't have to be super-rich, however, in order to be philanthropic. In his hierarchy of needs, Abraham Maslow theorized that once one's basic needs were fulfilled he or she could (and more likely would) turn their thoughts and activities to higher purposes. That scenario is playing itself out in India according to New York Times' reporter Anand Giridharadas ["In India, Poverty Inspires Technology Workers to Altruism," 30 October 2007]. Had Maslow written that headline, it probably would have read "Prosperity Inspires Technology Workers to Altruism." Giridharadas begins his article with the story of Indian laborer.

"Manohar Lakshmipathi does not own a computer. In fact, in India workmen like Mr. Manohar, a house painter, are usually forbidden to touch clients’ computers. So you can imagine Mr. Manohar’s wonder as he sat in a swiveling chair in front of a computer, dictating his date of birth, phone number and work history to a secretary. Afterward, a man took his photo. Then, with a click of a mouse, Mr. Manohar’s page popped onto the World Wide Web, the newest profile on an Indian Web site called Babajob.com. Babajob seeks to bring the social-networking revolution popularized by Facebook and MySpace to people who do not even have computers — the world's poor. And the start-up is just one example of an unanticipated byproduct of the outsourcing boom: many of the hundreds of multinationals and hundreds of thousands of technology workers who are working here are turning their talents to fighting the grinding poverty that surrounds them."

While Giridharadas asserts that the tech worker contributions toward fighting poverty are motivated by altruism, he is not sure that corporate concern stems from the same moral imperative.

"Perhaps for less altruistic reasons, but often with positive results for the poor, corporations have made India a laboratory for extending modern technological conveniences to those long deprived. Nokia, for instance, develops many of its ultralow-cost cellphones here. Citibank first experimented here with a special A.T.M. that recognizes thumbprints — to help slum dwellers who struggle with PINs. And Microsoft has made India one of the major centers of its global research group studying technologies for the poor, like software that reads to illiterate computer users. Babajob is a quintessential example of how the back-office operations in India have spawned poverty-inspired innovation. The best-known networking sites in the industry connect computer-savvy elites to one another. Babajob, by contrast, connects India's elites to the poor at their doorsteps, people who need jobs but lack the connections to find them. Job seekers advertise skills, employers advertise jobs and matches are made through social networks."

I have noted before that corporations have finally discovered that money can be made at the bottom of the economic pyramid. When conducted properly and ethically, as Giridharadas notes, commercial ventures that  serve the poor are a good thing. Such ventures create jobs, make goods and services available, and point the way out of poverty. That brings us back to Maslow's hierarchy and how prosperity can lead to altruism.

Sean Blagsvedt, Babajob's founder, "now 31, joined Microsoft in Redmond in 1999. Three years ago he was sent to India to help build the local office of Microsoft Research, the company's in-house policy research arm. The new team worked on many of the same complex problems as their peers in Redmond, but the employees here led very different lives outside the office than their counterparts in Redmond. They had servants and laborers. They read constant newspaper tales of undernourishment and illiteracy. The company's Indian employees were not seeing poverty for the first time, but they were now equipped with first-rate computing skills, and many felt newly empowered to help their society. At the same time, Microsoft was plagued by widespread software piracy, which limited its revenue in India. Among other things, the company looked at low-income consumers as a vast and unexploited commercial opportunity, so it encouraged its engineers' philanthropic urges. Poverty became a major focus in Mr. Blagsvedt's research office. Anthropologists and sociologists were hired to explain things like the effect of the caste system on rural computer usage. In the course of that work, Mr. Blagsvedt stumbled upon an insight by a Duke University economist, Anirudh Krishna. Mr. Krishna found that many poor Indians in dead-end jobs remain in poverty not because there are no better jobs, but because they lack the connections to find them. Any Bangalorean could confirm the observation: the city teems with laborers desperate for work, and yet wealthy software tycoons complain endlessly about a shortage of maids and cooks. Mr. Blagsvedt's epiphany? 'We need village LinkedIn!' he recalled saying, alluding to the professional networking site. He quit Microsoft and, with his stepfather, Ira Weise, and a former Microsoft colleague built a social-networking site to connect Bangalore’s yuppies with its laborers. (The site, which Mr. Blagsvedt started this summer and runs out of his home, focuses on Bangalore now, but he plans to spread it to other Indian cities and maybe globally.)"

The key for Blagsvedt was finding a business model that could help the more but still earn money -- money from sources other than the poor people he was trying to help (i.e., money from people higher on the economic pyramid). There were other challenges as well.

"Building a site meant to reach laborers earning $2 to $3 a day presented special challenges. The workers would be unfamiliar with computers. The wealthy potential employers would be reluctant to let random applicants tend their gardens or their newborns. To deal with the connectivity problem, Babajob pays anyone, from charities to Internet cafe owners, who finds job seekers and registers them online. (Babajob earns its keep from employers’ advertisements, diverting a portion of that to those who register job seekers.) And instead of creating an anonymous job bazaar, Babajob replicates online the process by which Indians hire in real life: through chains of personal connections. In India, a businessman looking for a chauffeur might ask his friend, who might ask his chauffeur. Such connections provide a kind of quality control. The friend's chauffeur, for instance, will not recommend a hoodlum, for fear of losing his own job. To re-create this dynamic online, Babajob pays people to be “connectors” between employer and employee. In the example above, the businessman’s friend and his chauffeur would each earn the equivalent of $2.50 if they connected the businessman with someone he liked."

This is a classic case of globalization using rather than displacing cultural norms. Duke University's Krishna, according to Giridharadas, is intrigued by this innovation but fears that those most in need of help don't have the kind of social connections that permit them to take advantage of the system. Babajob is still quite new, with only 2,000 job seekers currently signed up. Nevertheless, it provides a glimmer of hope for millions. Giridharadas concludes his article with the hope generated in the house painter.

"In Mr. Blagsvedt’s apartment one morning, Mr. Manohar, the painter, professed hope. He earns $100 a month. Jobs come irregularly, so he often spends up to three months of the year idle. Between jobs, he borrows from loan sharks to feed his wife and children. The usurers levy 10 percent monthly interest, enough to make a $100 loan a $314 debt in one year. Mr. Manohar does not want his children to know his worries, or his life. He wants them to work in a nice office, so he spends nearly half his income on private schools for them. That is why he was at Babajob in a swiveling chair, staring at a computer and dreaming of more work."

Sean Blagsvedt would not have been in a position to provide hope to the likes of Mr. Manohar had he not had sufficient resources to start Babajob. One of the reasons that Enterra Solutions' Development-in-a-Box™ framework keeps me excited is that I see it as an approach that holds out hope. It's aimed at helping sustainable economies in developing countries -- which means it helps encourage entrepreneurs, helps create jobs, and helps connect local businesses to the global economy. People like Sean Blagsvedt are helping identify best practices that can be used in situations where normal business practices don't work well. As Development-in-the-Box continues to evolve, such rules will be incorporated into its implementation. That's why I refer to Development-in-a-Box's "flexible framework." Enterra Solutions and our growing list of strategic partners will continue to search for lessons learned and best practices that can help make the development process ever more effective.

Modeling Swarm Behavior

In recent posts, I have discussed how some MIT engineers foresee the day when energy can be "farmed" from crowd behavior [Energy from Crowds] and how designers are looking more often to nature to help them create better products [Turning to Nature to Save Energy]. One natural behavior that has long captivated scientists (and which relates to both crowd behavior and natural models) is swarm behavior. Carl Zimmer, reporting in the New York Times, talks about some of the fascinating advances being made in the study of swarm behavior ["From Ants to People, an Instinct to Swarm," 13 November 2007].

"If you have ever observed ants marching in and out of a nest, you might have been reminded of a highway buzzing with traffic. To Iain D. Couzin, such a comparison is a cruel insult — to the ants. Americans spend a 3.7 billion hours a year in congested traffic. But you will never see ants stuck in gridlock. Army ants, which Dr. Couzin has spent much time observing in Panama, are particularly good at moving in swarms. If they have to travel over a depression in the ground, they erect bridges so that they can proceed as quickly as possible."

As someone who spends more time trapped in Washington, DC, traffic than I care to think about, I'm inclined to agree with Couzin that we don't give ants enough credit.

"The reason may be that the ants have had a lot more time to adapt to living in big groups. 'We haven’t evolved in the societies we currently live in,' Dr. Couzin said. By studying army ants — as well as birds, fish, locusts and other swarming animals — Dr. Couzin and his colleagues are starting to discover simple rules that allow swarms to work so well. Those rules allow thousands of relatively simple animals to form a collective brain able to make decisions and move like a single organism. Deciphering those rules is a big challenge, however, because the behavior of swarms emerges unpredictably from the actions of thousands or millions of individuals."

I noted in one my posts referenced above that simple rules can create complex behavior. Ants have never been accused having massive brains that work out complicated survival strategies. Yet, when necessary, they build bridges, construct columns, and dig amazingly complex nests -- all by obeying a few simple rules.

"To get a sense of swarms, Dr. Couzin builds computer models of virtual swarms. Each model contains thousands of individual agents, which he can program to follow a few simple rules. To decide what those rules ought to be, he and his colleagues head out to jungles, deserts or oceans to observe animals in action. Daniel Grunbaum, a mathematical biologist at the University of Washington, said his field was suddenly making leaps forward, as math and observation of nature were joined in the work of Dr. Couzin and others. 'In the next 10 years there’s going to be a lot of progress.' He said Dr. Couzin has been important in fusing the different kinds of science required to understand animal group behavior. 'He's been a real leader in bringing a lot of ideas together,' Dr. Grunbaum said. 'He has a larger vision. If it works, that'll be a big advance.' In the case of army ants, Dr. Couzin was intrigued by their highways. Army ants returning to their nest with food travel in a dense column. This incoming lane is flanked by two lanes of outgoing traffic. A three-lane highway of army ants can stretch for as far as 150 yards from the ant nest, comprising hundreds of thousands of insects."

Since Couzin can't read ant minds, he did the next best thing. He looked at ant biology, drafted a few rules that apply to that biology, and then let a computer model go to work.

"What Dr. Couzin wanted to know was why army ants do not move to and from their colony in a mad, disorganized scramble. To find out, he built a computer model based on some basic ant biology. Each simulated ant laid down a chemical marker that attracted other ants while the marker was still fresh. Each ant could also sweep the air with its antennas; if it made contact with another ant, it turned away and slowed down to avoid a collision. Dr. Couzin analyzed how the ants behaved when he tweaked their behavior. If the ants turned away too quickly from oncoming insects, they lost the scent of their trail. If they did not turn fast enough, they ground to a halt and forced ants behind them to slow down. Dr. Couzin found that a narrow range of behavior allowed ants to move as a group as quickly as possible. It turned out that these optimal ants also spontaneously formed highways. If the ants going in one direction happened to become dense, their chemical trails attracted more ants headed the same way. This feedback caused the ants to form a single packed column. The ants going the other direction turned away from the oncoming traffic and formed flanking lanes."

Pleased with the results Couzin and his colleague, Nigel Franks, an ant expert at the University of Bristol in England, went to Panama and filmed army ants in motion. The reason they filmed the ants was so that could study them at leisure back in their offices. Just imagine trying to follow the actions of a few individual ants in real time -- it simply can't be done. In order to study individual behavior, Couzin and Franks had to study their film frame by frame.

"Eventually they found that the real ants were moving in the way that Dr. Couzin had predicted would allow the entire swarm to go as fast as possible. They also found that the ants behaved differently if they were leaving the nest or heading back. When two ants encountered each other, the outgoing ant turned away further than the incoming one. As a result, the ants headed to the nest end up clustered in a central lane, while the outgoing ants form two outer lanes. Dr. Couzin has been extending his model for ants to other animals that move in giant crowds, like fish and birds. And instead of tracking individual animals himself, he has developed programs to let computers do the work."

One of the more exciting breakthroughs that Couzin has made is the realization that swarms, no matter the species, all tend to follow the same basic rules.

"The more Dr. Couzin studies swarm behavior, the more patterns he finds common to many different species. He is reminded of the laws of physics that govern liquids. 'You look at liquid metal and at water, and you can see they're both liquids,' he said. 'They have fundamental characteristics in common. That's what I was finding with the animal groups — there were fundamental states they could exist in.' Just as liquid water can suddenly begin to boil, animal swarms can also change abruptly thanks to some simple rules."

Why, you may ask, are discovering the rules of swarm behavior so important? Consider the devastation caused by swarms of locusts. What if a way could be discovered to interrupt the rules that cause them to swarm? Locusts, it turns out, is one of the species Couzin is studying.

"The insects typically crawl around on their own, but sometimes young locusts come together in huge bands that march across the land, devouring everything in their path. After developing wings, they rise into the air as giant clouds made of millions of insects. 'Locusts are known to be around all the time,' Dr. Couzin said. 'Why does the situation suddenly get out of control, and these locusts swarm together and devastate crops?' Dr. Couzin traveled to remote areas of Mauritania in Africa to study the behavior of locust swarms. Back at Oxford, he and his colleagues built a circular track on which locusts could walk. 'We could track the motion of all these individuals five times a second for eight hours a day,' he said. The scientists found that when the density of locusts rose beyond a threshold, the insects suddenly began to move together. Each locust always tried to align its own movements with any neighbor. When the locusts were widely spaced, however, this rule did not have much effect on them. Only when they had enough neighbors did they spontaneously form huge bands. 'We showed that you don't need to know lots of information about individuals to predict how the group will behave,' Dr. Couzin said of the locust findings, which were published June 2006 in Science."

Zimmer points out that knowing "how" species swarm and "why" they swarm are two different questions.

"In some species, animals may swarm so that the entire group enjoys an evolutionary benefit. All the army ants in a colony, for example, belong to the same family. So if individuals cooperate, their shared genes associated with swarming will become more common. But in the deserts of Utah, Dr. Couzin and his colleagues discovered that giant swarms may actually be made up of a lot of selfish individuals. Mormon crickets will sometimes gather by the millions and crawl in bands stretching more than five miles long. Dr. Couzin and his colleagues ran experiments to find out what caused them to form bands. They found that the forces behind cricket swarms are very different from the ones that bring locusts together. When Mormon crickets cannot find enough salt and protein, they become cannibals. 'Each cricket itself is a perfectly balanced source of nutrition,' Dr. Couzin said. 'So the crickets, every 17 seconds or so, try to attack other individuals. If you don’t move, you're likely to be eaten.' This collective movement causes the crickets to form vast swarms. 'All these crickets are on a forced march,' Dr. Couzin said. 'They're trying to attack the crickets who are ahead, and they're trying to avoid being eaten from behind.' Swarms, regardless of the forces that bring them together, have a remarkable ability to act like a collective mind. A swarm navigates as a unit, making decisions about where to go and how to escape predators together."

That may be the true mystery of swarms, that they have a Borg-like collective mind. But even in the Star Trek series there was a queen directing the collective. That doesn't seem to be the case in nature. It appears that which ever member of the swarm senses a danger or understands a situation becomes leader by default -- the director of collective action.

"'There’s a swarm intelligence,' Dr. Couzin said. 'You can see how people thought there was some sort of telekinesis involved.' What makes this collective decision-making all the more puzzling is that each individual can behave only based on its own experience. If a shark lunges into a school of fish, only some of them will see it coming. If a flock of birds is migrating, only a few experienced individuals may know the route. Dr. Couzin and his colleagues have built a model of the flow of information through swarms. Each individual has to balance two instincts: to stay with the group and to move in a desired direction. The scientists found that just a few leaders can guide a swarm effectively. They do not even need to send any special signals to the animals around them. They create a bias in the swarm’s movement that steers it in a particular direction."

What happens, however, when two individuals in the swarm feel a need to act? Sometimes, the swarm separates. You see that happen in schools of fish or birds in flight. But just as often, the swarm somehow manages collectively to decide on which leader to follow -- at least in computer simulations.

"Two leaders may try to pull a swarm in opposite directions, and yet the swarm holds together. In Dr. Couzin’s model, the swarm was able to decide which leaders to follow. 'As we increased the difference of opinion between the informed individuals, the group would spontaneously come to a consensus and move in the direction chosen by the majority,' Dr. Couzin said. 'They can make these decisions without mathematics, without even recognizing each other or knowing that a decision has been made.' Dr. Couzin and his colleagues have been finding support for this model in real groups of animals. They have even found support in studies on mediocre swarmers — humans."

By putting groups of people in a circle surrounded by numbers and then asking them to follow simple rules, Couzin and his colleagues could create swarm behavior.

"To study humans, Dr. Couzin teamed up with researchers at the University of Leeds. They recruited eight people at a time to play a game. Players stood in the middle of a circle, and along the edge of the circle were 16 cards, each labeled with a number. The scientists handed each person a slip of paper and instructed the players to follow the instructions printed on it while not saying anything to the others. Those rules correspond to the ones in Dr. Couzin’s models. And just as in his models, each person had no idea what the others had been instructed to do. In one version of the experiment, each person was instructed simply to stay with the group. As Dr. Couzin’s model predicted, they tended to circle around in a doughnut-shaped flock. In another version, one person was instructed to head for a particular card at the edge of the circle without leaving the group. The players quickly formed little swarms with their leader at the head, moving together to the target. The scientists then sowed discord by telling two or more people to move to opposite sides of the circle. The other people had to try to stay with the group even as leaders tried to pull it apart. As Dr. Couzin’s model predicted, the human swarm made a quick, unconscious decision about which way to go. People tended to follow the largest group of leaders, even if it contained only one additional person."

As the rules become clearer for swarm behavior, and as we understand when and where interfering with or applying those rules pays dividends, we will have another "natural" tool in our kit. In the meantime, the studies continue to underscore the importance and power of rules and rule sets.

Oil and Development

The news has been filled over the past few weeks with the economic repercussions of rising oil prices. Some analysts have blamed rising prices on commodity traders (prompting a call from the Indian government to stop just futures trading). Other analysts insist that it is not the futures market, but rising demand that has caused the sharp increase. During recent OPEC meetings, suppliers blamed the weakening dollar. There is truth in all these arguments; but regardless of the cause, the bottom line remains that the cost of a barrel of oil has skyrocketed. This situation has created both winners and losers. China, for one, has started to feel the pinch ["China fuel crisis spreads," by Jim Bai and Rujun Shen, Washington Post, 31 October 2007]. Growing Chinese demand for fossil fuels has been encouraged by generous government subsidies according to Bai and Shen.

"China's worst fuel crisis in two years spread to the capital and other inland areas by Wednesday, and one man was killed in a brawl at a petrol station queue, upping pressure on the government to intervene. Diesel shortages in China's political heart, which escaped previous supply crunches unscathed, highlight tensions between the government and its increasingly independent oil firms about who should pay for the country's generous fuel subsidies. Top refiner Sinopec on Wednesday pledged more supplies and bought additional diesel fuel abroad, but it may fall to Beijing to end the stand-off by raising domestic prices, easing taxes, promising another year-end pay-off -- or simply strong-arming suppliers into selling more fuel at a loss. ... In scenes reminiscent of the weeks-long shortages in summer 2005, also caused by the yawning gap between domestic prices and global crude costs, petrol stations across the country were turning away trucks and rationing supplies."

While consumer countries are struggling to cope, supplier countries are enjoying flush times. I say supplier countries because according to Tina Rosensberg "77 percent of the world’s oil reserves are held by national oil companies with no private equity, and there are 13 state-owned oil companies with more reserves than ExxonMobil, the largest multinational oil company." ["The Perils of Petrocracy," New York Times, 4 November 2007].

"The popular perception in the United States is that if leaders of oil countries nationalize their oil, they are bucking a global trend toward privatization. In reality, nationalized oil is the trend. And the percentage of oil controlled by state-owned companies is likely to continue rising, mainly because of the demographics of oil. Deposits are being exhausted in wealthy countries — the ones that exploited their oil first and generally have the most private oil — and are being found largely in developing countries, where oil tends to belong to the state. Nationalization is also a political trend in some regions, mainly Latin America, where the populist presidents of Bolivia and Ecuador have made it part of their discourse. They are led, of course, by Hugo Chavez of Venezuela. He has made private producers accept state control of their operations. When they wouldn’t, as in the case of ExxonMobil and ConocoPhillips, he simply nationalized their holdings. Chávez has also asserted his control over Venezuela’s state oil company, which before him operated very much like a private, profit-driven enterprise. ... Now as the record high price of oil has made exploitation worthwhile even in places that are remote or geologically complicated (Chad comes to mind), more underdeveloped countries have to choose what to do with their oil. Those that have long held oil must decide how to spend the incomprehensible amounts of money oil is now bringing them."

Spending money is the problem. Few oil-rich governments have had the wisdom to invest their revenues in the future of the country by improving education, creating sustainable jobs, and building much needed infrastructure. Leaders like Chavez use the money to bribe constituents in order to remain in power. Other leaders use the money for personal enrichment. Bai and Shen report that bad spending is the norm.

"Historically, almost every country dependent on the export of oil has answered this question ["how do you spend the money"] in the same way: badly. It may seem paradoxical, but finding a hole in the ground that spouts money can be one of the worst things to happen to a nation. With one or two exceptions, oil-dependent countries are poorer, more conflict-ridden and despotic. OPEC's own studies show the perils of relying on oil. Between 1965 and 1998, the economies of OPEC members contracted by 1.3 percent a year. Oil-dependent nations do especially badly by their poor: infant survival, nutrition, life expectancy, literacy, schooling — all are worse in oil-producing countries. The history of oil-dependent countries has produced what Terry Lynn Karl, a Stanford University professor, calls the paradox of plenty. Oil not only creates very few jobs, it also destroys jobs in other sectors. By pushing up a country’s exchange rate, the export of oil distorts the economy. 'Oil rents drive out any other productive activity,' Karl says. 'Why would you bother to produce your own food if you could buy it? Why would you bother to develop any kind of export industry if oil makes your money worth more and that hurts all your other exports?' The most successful societies develop a middle class through manufacturing; oil makes this extremely difficult. Oil concentrates a country's wealth in the state, creating a culture where money is made by soliciting politicians and bureaucrats rather than by making things and selling them. Oil states also ask their citizens for little in taxes, and where citizens pay little in taxes, they demand little in accountability. Those in power distribute oil money to stay in power. Thus oil states tend to be highly corrupt."

The money pouring into oil country coffers is immense. Stephen Mufson, writing for the Washington Post, reports that rises in oil prices is generating one of the greatest shifts in wealth in history ["Oil Price Rise Causes Global Shift in Wealth," 10 November 2007].

"High oil prices are fueling one of the biggest transfers of wealth in history. Oil consumers are paying $4 billion to $5 billion more for crude oil every day than they did just five years ago, pumping more than $2 trillion into the coffers of oil companies and oil-producing nations this year alone. The consequences are evident in minds and mortar: anger at Chinese motor-fuel pumps and inflated confidence in the Kremlin; new weapons in Chad and new petrochemical plants in Saudi Arabia; no-driving campaigns in South Korea and bigger sales for Toyota hybrid cars; a fiscal burden in Senegal and a bonanza in Brazil. In Burma, recent demonstrations were triggered by a government decision to raise fuel prices. In the United States, the rising bill for imported petroleum lowers already anemic consumer savings rates, adds to inflation, worsens the trade deficit, undermines the dollar and makes it more difficult for the Federal Reserve to balance its competing goals of fighting inflation and sustaining growth."

Another consequence of this windfall is that oil rich developing nations are becoming major international investors ["Oil and Trade Gains Make Major Investors Of Developing Nations," by David Cho and Thomas Heath, Washington Post, 20 October 2007].

"The government of Libya, flush with oil, has amassed $40 billion and is ready to put it in play on Wall Street. China recently acquired a huge stake in one of the biggest names in U.S. finance. Tiny Qatar is adding $1 billion a week to its investment coffers and is trying to buy the leading grocer in Britain. Developing nations, especially in Asia and the Middle East, are aggressively stockpiling some of the largest concentrations of investment money in history. The cash hoards, called sovereign wealth funds, are controlled not by state-run companies or private investors but by governments. These investment pools are equal to or even bigger than the largest pension and private-equity funds in the United States, and many are highly secretive about their activities. The Abu Dhabi Investment Authority has an estimated $875 billion to invest, while China's first stab at a sovereign wealth fund, which started last month, has $200 billion. The largest private-equity firm has about $90 billion under management. Sovereign wealth funds have been around for decades. But enriched by the surge in the price of oil ... and the trade gap between the United States and Asia, these funds have grown to gigantic proportions. This has alarmed U.S. politicians and regulators, some of whom held a series of meetings on the topic here this month. Some on Wall Street say the growing prominence of these funds portends a fundamental shift in financing power away from Western nations."

These sovereign wealth funds could do an enormous amount of good if used wisely. Most of these countries need a substantial amounts invested in internal infrastructure. Gap countries, at the bottom of the pyramid, also need vast amounts of money to build infrastructure. Whether this money is invested in such ventures is yet to be seen. To date, it has been used to help the rich get richer. Money is not the entire answer [see my post Will Money Solve Africa's Problems?] -- the proper use of money, however, can make a big difference. The flush days won't last forever and strategic plans need to be put in place now to make sure that this shift in wealth doesn't simply disappear down empty well holes. In other words, these emerging market countries need to become more resilient.

Singapore: The Challenges of Success

Singapore's economy is sizzling and along with its success comes challenges. Singapore's success and the challenges that success brings are the focus of articles in The Economist ["High-flyer," 27 October 2007 print edition] and Washington Post ["Singapore's economic boom widens income gap," by Melanie Lee, 9 November 2007]. Let's start with The Economist's article, which labels Singapore's economy as "booming, bustling and bursting at the seams."

"The strong global economic tide has lifted the boats of most South-East Asian countries, but perhaps the most impressive performer is Singapore. Its national income per head is already higher than Spain's and New Zealand's, and five times that of its nearest neighbour, Malaysia. Yet in the year to the third quarter, its economy grew by 9.4%. Singapore is 'a developed country that grows at developing-country rates,' as Robert Prior-Wandesforde, an economist at HSBC, puts it. Since the 1997 Asian crisis it has fared markedly better than its rival, Hong Kong."

The reason that Singapore interests me is because it was able to move from developing to developed country is such a short period. Not everyone believes its strategy for success was fairly executed, but it's hard to deny the results. And those results just keep pouring in.

"The signs of a boom are unmissable. The shopping malls along Orchard Road are bustling. Fancy hotels are full of wealthy tourists despite cranking up their room rates. Marina Bay, by the financial district, is a forest of cranes as a $3.6 billion casino resort goes up. The Singapore Flyer, a giant Ferris wheel, looks down on the vast expanse of building site. Office rents have risen by 50% in the past year, while the price of homes is up by 28%."

My colleagues at Enterra Solutions studied Singapore when framing our Development-in-a-Box™ approach. We wanted to know what conditions existed that permitted such rapid development and what strategy was used. We also looked to Singapore because its model has been widely praised.

"Singapore has sustained its growth through unusually clean and efficient government, and by having one of the world's best education systems. While Hong Kong has shifted most of its factories to its southern China hinterland, in Singapore manufacturing still accounts for around 25% of GDP. However, anticipating the competitive threat from China, it has moved up the value chain, away from low-end electronics, and found lucrative new niches. Its marine-engineering and biomedical firms are growing at around 40% annually. Its finance industry has cornered the regional market in private banking for the wealthy."

The biggest criticism of Singapore's strategy is its immigration policy, which is aimed at controlling population growth while, at the same time, allowing people willing to work for minimum wages to settle there. That policy has created two big challenges: continuing to provide affordable, quality living conditions for those at the bottom of the economic pyramid and the how to deal with the growing income gap.

"Singapore's boom has already sucked in millions of immigrants: new figures show that, as in London, almost one-third of residents were born in other countries. To keep the economy growing and reduce pressure for wage rises, the government is keen to admit more foreigners: its development plans assume the population will grow from 4.7m now to 6.5m in 40-50 years' time, mostly by immigration. Many of the new immigrants come from India and China. They are wowed by Singapore's order and prosperity, notes Sinapan Samydorai of the Think Centre, a think-tank. They also tend to be conservative-minded and thus are likely to embrace Singapore's unique mixture of free-market economics and strait-laced politics. There have been worries that lower-paid Singaporeans are missing out on the boom. Indeed, until recently, consumer spending was lacklustre. But it has gathered pace in the past few months and, with employment and wages each growing at around 9% annually, there is plenty of domestic spending power to help the economy survive any export downturn."

Frankly, income disparity is a bit of red herring. The key to whether a society is fair and prosperous is not how wide the income gap is between the top and bottom but how those are on the bottom are treated. On the surface, it looks Singapore is doing fairly well.

"Though its Gini coefficient, a measure of income disparity, suggests Singapore is a rather unequal place, there are few visible signs of poverty. Most Singaporeans live in massive, publicly built housing projects that are freshly painted and surrounded by neat, litter-free gardens. No graffiti or menacing youngsters here. Most residents have bought their apartments and are seeing their value soar."

Looks can be deceiving however. It can be argued that the city-state looks neat not because there is no poverty but because Singapore is harsh on anyone breaking their strict laws (ask gum chewers). But surveys about the "happiness" of Singaporeans generally find them rating themselves around a "7" on a scale of 1 to 10. Lee points out in her article, however, that there are those living in poverty inside the city-state.

"Income inequality is nothing new in free-market Singapore, but two years of blistering economic growth and a government policy of attracting wealthy expatriates have created a new class of super-rich, while a string of price increases for everything from bread to bus fares have made life harder for the poor. 'I can't save anything, it's so difficult for me," [Singapore resident Carol] John told Reuters. John, who is unemployed, relies on her husband's S$600 (US$420) monthly salary and a S$100 government handout. 'We don't benefit at all from the economy. As far as I know, my husband's pay hasn't gone up,' she said. Singapore's economy is firing on all cylinders, with a booming construction sector, record tourist arrivals and a fast-growing financial sector all contributing to a gross domestic product set to grow nearly 8 percent in 2007. But the rising tide is not lifting every boat."

Lee points out that the big concern is not that the rich are getting richer, but that the percentage of the population living at bottom of the pyramid is growing.

"The proportion of Singapore residents earning less than S$1,000 ($690) a month rose to 18 percent last year, from 16 percent in 2002, central bank data released late last month show. At the same time, the proportion of those earning S$8,000 and above rose from 4.7 percent to 6 percent in the same period."

Analysts that Lee interviewed indicated that widening of the wage gap is typical in growing economies. What troubles them is that Singapore's Gini profile looks more like that of developing than a developed country. Wikipedia notes that the Gini coefficient is a measure of statistical dispersion most prominently used as a measure of inequality of income distribution. The Gini coefficient was developed by the Italian statistician Corrado Gini and published in his 1912 paper "Variability and Mutability." Lee writes:

"Despite sporting a first-world GDP per capita of $29,000 -- second only to Japan in Asia -- Singapore has an income inequality profile more in line with third-world countries. Singapore's Gini coefficient, a measure of income inequality, has worsened from 42.5 in 1998 to 47.2 in 2006, and is now in league with the Philippines (46.1) and Guatemala (48.3), and worse than China (44.7), data from Singapore's Household Survey and the World Bank show. Other wealthy Asian nations such as Japan, Korea and Taiwan have more European-style Ginis of 24.9, 31.6 and 32.6."

Clearly, despite doing many things right, Singapore still has some lessons to learn when it comes to dealing with those at the bottom of the pyramid if it is to remain the development model that other countries should follow. To be fair, I should note that the U.S. Gini coefficient is also bad and rising (46.6), which is worse than Iran's (43). The creation of jobs and fair wages are the way out of this situation, not welfare. The creation of dependencies has never been the answer to poverty. The challenge should be easier for a small city-state than it is for a continental nation like the U.S. I would love to see the Singaporean government find a creative solution to the problem that could exported for use in both the developed and developing world.

Will Money Solve Africa's Problems?

The John Templeton Foundation asked a number of analysts to respond to the question, "Will money solve Africa's problems?" The answers were not only mixed but guarded. Ashraf Ghani, chairman of the Institute for State Effectiveness, answers the question with a "yes, if ..." response. His answer should sound familiar to readers of this blog.

"If it is invested in enhancing African capabilities to integrate the continent into global networks of knowledge and creating prosperity and stability. This will mean confronting and overcoming a triple failure: corruption and abuse of power by African governments, predatory practices by extractive industries, and the waste of resources by an uncoordinated and ineffective aid system. Africa will acquire a strong voice when it is represented by credible leaders and managers. Such people cannot be produced without investment in the appropriate institutions. Currently, about $5 billion per annum is provided in the form of technical assistance to meet donor requirements. Directing a significant portion of this money toward investment in institutions will produce stakeholders focused on creating a positive change."

Ghani is calling for investments in infrastructure as well as noting that certain pre-conditions must exist to make those investments sustainable and productive. In my writings about Enterra Solutions' Development-in-a-Box™ framework, I have repeatedly made the same arguments. Ghani continues his response with arguments similar to those I've used in the past.

"African entrepreneurs encounter significant national and international constraints to business development. While there is favorable legislation in Europe and North America for African exports, access to information that allows Africa to benefit from these laws is limited. The necessary knowledge for taking advantage of legislation exists within corporations that are leading the global effort in corporate social responsibility and social entrepreneurship. These organizations could partner with African businessmen to ensure exports meet the standards necessary for developed countries. Infrastructure planning in Africa has not allowed for sub-regional and regional integration, or improved Africa’s access to global markets. As reliable infrastructure is a prerequisite for participation in the global economy, the strategic horizon for Africa’s infrastructure needs to be between ten and twenty years.Such a strategy requires moving from the current one to three-year budget cycles of the aid system to predictable, long-term financing mechanisms (such as trust funds) that will guarantee the effective use of resources. There is sufficient evidence that poor people are able to both prioritize and manage the use of limited resources. A programmatic approach, along the lines of the successful rural development programs in Afghanistan and Indonesia, would enable the most excluded segments of the African population to become stakeholders in systems of good governance and carry-out development themselves."

Enterra Solutions recently announced that is partnering with the International Resources Group. This new strategic partnership is aimed at utilizing IRG's unequaled development skills and Enterra Solutions' Development-in-a-Box framework to establish a entirely new approach for development. The approach gets at many of the challenges identified by Ghani. The other analyst who answered "yes," also added an "if" in his response. Professor James Tooley, president of The Education Fund, Orient Global, also offered thoughts that should sound familiar to readers of this blog.

"Only if the money comes as investment. Africa doesn't need aid from governments and international agencies. Over the last 40 years, aid to developing countries has reached $2.6 trillion, 25% of which has gone to sub-Saharan Africa. It has notably failed to eliminate poverty. Philanthropy should have only a limited role – for disaster relief – and helping policy makers promote good governance, the rule of law, and property rights. What Africa needs in order to overcome its problems is the same as that of any other region or country: flourishing enterprises that provide employment and create wealth. This is true even in my field – education. Less than 60% of the adult population of sub-Saharan Africa can read and write with understanding. And for every 100 men, only 76 women are literate."

Tooley talks about the rise of private, but affordable, schools where teachers actually show up and teach (apparently a rare occurrences in state run schools) and are held accountable for their results. He indicates that his organization, Orient Global, is making a major investment in such schools. I have often noted that an education population is one of the pre-conditions that help foster development success.

So much for the "yes" answers. All of the other pundits who wrote essays said th