Enterprise Resilience Management Blog

Venture Capitalist Philanthropy

Several months ago I wrote some posts about two types of individuals who have joined the ranks of the philanthropic [see The Rise of the Social Entrepreneur and Philanthropy at the Top of the Economic Pyramid]. The former blog discusses young social entrepreneurs who have more energy and drive than money, but want to make a difference in the world. The latter post talks about people who have made a lot of money thanks to globalization and now want to use it to improve the lot of others. New York Times' columnist David Brooks recently wrote about those who span both groups -- social entrepreneurs with money ["Thoroughly Modern Do-Gooders," 21 March 2008]. Brooks writes:

"Fashions in goodness change, just like fashions in anything else, and these days some of the very noblest people have assumed the manners of the business world — even though they don't aim for profit. They call themselves social entrepreneurs, and you can find them in the neediest places on earth. The people who fit into this category tend to have plenty of résumé bling. Bill Drayton, the godfather of this movement, went to Harvard, Yale, Oxford and McKinsey before founding Ashoka, a global change network. Those who follow him typically went to some fancy school and then did a stint with Teach for America or AmeriCorps before graduate school. Then, they worked for a software firm before deciding to use what they'd learned in business to help the less fortunate. Now they work 80 hours a week, fighting bureaucracies and funding restrictions in order to build, say, mentoring programs for single moms. Earlier generations of benefactors thought that social service should be like sainthood or socialism. But this one thinks it should be like venture capital. These thoroughly modern do-gooders dress like venture capitalists. They talk like them. They even think like them. ... They don't wear ponytails, tattoos or Birkenstocks. They don’' devote any energy to countercultural personal style, unless you consider excessive niceness a subversive fashion statement. Next to them, Barack Obama looks like Abbie Hoffman."

Brooks notes that most of these VC social entrepreneurs are used to being the boss and prefer the personal touch of small organizations. As a result, they eschew large organizations and are more likely to be found involved with single issue groups that capture their imagination -- as well as their enormous, talent, energy, and fortunes.

"J.B. Schramm created a fantastic organization called College Summit that provides students with practical guidance through the college admissions process. Gerald Chertavian, a former software entrepreneur, created Year Up, which helps low-income students get apprenticeships in corporations and packages its fund-raising literature in the form of an I.P.O. prospectus. The venture-capital ethos means instead that these social entrepreneurs are almost willfully blind to ideological issues. They will tell you, even before you have a chance to ask, that they are data-driven and accountability-oriented. They're always showing you multivariate regressions or explaining why some promising idea 'didn't pencil out.' The highest status symbol in their circle is a Rand study showing that their program yields statistically significant results. Bill Gates, who fits neatly into this world, came to dinner with journalists in Washington [in mid-March 2008]. He looked utterly bored as the conversation drifted to presidential campaign gossip. But when asked about which programs produce higher reading scores, the guy lit up and became a fountain of facts and findings."

Brooks then describes how this new breed of philanthropist differs from those of past eras.

"The older do-gooders had a certain policy model: government identifies a problem. Really smart people design a program. A cabinet department in a big building administers it. But the new do-gooders have absorbed the disappointments of the past decades. They have a much more decentralized worldview. They don't believe government on its own can be innovative. A thousand different private groups have to try new things. Then we measure to see what works. Their problem now is scalability. How do the social entrepreneurs replicate successful programs so that they can be big enough to make a national difference?"

Many of these social entrepreneurs are trying to get the U.S. Government involved in the mix -- with some trepidation Brooks notes.

"America Forward, a consortium of these entrepreneurs, wants government to do domestic policy in a new way. It wants Washington to expand national service (to produce more social entrepreneurs) and to create a network of semipublic social investment funds. These funds would be administered locally to invest in community-run programs that produce proven results. The government would not operate these social welfare programs, but it would, in essence, create a network of semipublic Gates Foundations that would pick winners based on stiff competition. There's obviously a danger in getting government involved with these entrepreneurs. Government agencies are natural interferers, averse to remorseless competition and quick policy shifts. Nonetheless, these funds are worth a try. The funds would head us toward this new policy model, in which government sets certain accountability standards but gives networks of local organizations the freedom to choose how to meet them."

Brooks is very positive about the rise of the social entrepreneur.

"These are some of the smartest and most creative people in the country. Even if we don't know how to reduce poverty, it's probably worth investing in these people and letting them figure it out. They won't stop bugging us until we do."

Not everyone is thrilled with the rise of the social entrepreneur; especially, the ultra-wealthy ones who operate on the international stage. The Economist reports that more traditional non-governmental organizations feel they are being pushed aside and not allowed to collaborate ["The side-effects of doing good," 23 February 2008 print edition].

"Is it possible—even in theory—for an organisation to work too hard for the benefit of humanity, or to devote too much money to the eradication of a deadly disease? To judge by some of the recent bickering between leading players in the field of global health, there are serious people who in answer to those questions would say, 'paradoxically enough, yes.'"

The target of this criticism is one of the people mentioned in Brooks article -- Bill Gates or more specifically the Bill & Melinda Gates Foundation.

"At the heart of the argument is the Bill & Melinda Gates Foundation, which has often been called the biggest philanthropic organisation—at least among those whose accounts and internal workings are open to public scrutiny—in the world. Since Mr and Mrs Gates established the charity in 2000, it has spent over $8 billion on improving global health, and won deservedly lavish praise for its efforts. But just as huge, powerful countries can be awkward neighbours ... lavishly funded organisations can sometimes cause resentment among other outfits which are struggling to do a similar job. And whether because of jealousy or legitimate concerns, the Gates Foundation has not been having such an easy time of late with its public image."

To be honest, the list of gripes published in the article do sound a lot like sour grapes.

"More seriously, perhaps, the New York Times this week published bits of an internal document from the World Health Organisation (WHO)—a letter from its chief malaria-fighter to the agency's boss, Margaret Chan—which alleged that the Gates Foundation was having a negative influence on research into killer diseases. The letter from Arata Kochi, a feisty veteran of the global public-health scene, said the excessive sway of the Gates Foundation was distorting research priorities and quashing independent thinking by sweeping up the best scientists and keeping them 'locked up in a cartel'. However unintended this effect might be, the charity's might was marring the process of peer review because researchers were now bunched into groups which were competing for Gates funding, and each member of such a group had 'a vested interest to safeguard the work of the other'."

I can understand how groups competing for funding would be reluctant to collaborate -- and that's not a good thing. But complaining that "independent thinking" is being quashed by "sweeping up the best scientists" doesn't make much sense. If the best scientists really are working together, I suspect that egos and the exchange of ideas would be generating a lot of independent thinking. Leading scientists don't get that way by being susceptible to groupthink. Not all Dr. Kochi's criticism is unfounded.

"Dr Kochi also challenges the foundation's recent proclamation that the total eradication of malaria is a realistic goal. 'Like going to the moon, it sounds really good,' he says—but he is still convinced that this dream is impossible to fulfil with the current tools, and that trying to do so may have bad side-effects. Such 'over-reach', in Dr Kochi's view, amounts to a costly, risky diversion of resources away from the realistic aim of just controlling malaria. He also says the foundation bets too much on particular treatments, such as the artemisinin combination therapy (ACT)—a combination of drugs based on Chinese herbs. Although ACT does work better than older therapies, there are signs that drug-resistant strains of the disease are emerging. Dr Kochi frets about what will happen if, under the Gates influence, malaria researchers put 'all the eggs in that one basket.' How substantial are these charges? It is plain that the organisation's wealth and targeted approach do attract clusters of leading researchers to specific areas; indeed, that is the whole idea. It is also true, argues Laurie Garrett of the Council on Foreign Relations, an American think-tank, that the charity's focus on 'measurable outcomes in a short time, while a fantastic improvement on the past, exacerbates the devastating shortages of health-care workers on the ground.' Even Tadataka Yamada, head of the Gates Foundation's global health efforts, admits that in the past it may have focused too much on high-profile research and not enough on boosting entire health systems."

There can be honest differences of opinion about what agenda should be followed, but as I have stated before, whatever strategy is pursued it should take a holistic approach to the problem. The article, having explained the criticism, then lays out the counter-argument.

"But some good points can be made in defence of the Gates approach. First of all, argues Dr Yamada, calling this organisation an emerging monopoly is 'way off base'. The foundation often collaborates with other charities, and jostles with other big agencies and newish funders, such as PEPFAR (George Bush's AIDS effort) and the Global Fund to Fight AIDS, Tuberculosis and Malaria. This week the White House announced yet another tropical health initiative: a $350m effort to combat seven neglected diseases. Dr Yamada also challenges the 'eggs in one basket' theory. Although it is true that Mr Gates personally has argued for the eradication of malaria, and that his charity does heavily support ACT therapies, the charity also uses a range of other approaches, like malaria vaccines and bed nets. Dr Yamada says frankly that 'we don't have to choose between one thing and the other: we have enough resources to do both.' That, of course, is just the sort of cockiness that rankles with health pundits."

The article continues by noting that for years the World Health Organization held monopolies in areas in which it now complains the Gates Foundation is encroaching.

"At least in part, the gripes against the Gates Foundation are the churlish growls of a jealous crowd of bureaucrats and labourers at less influential charities. Some people at the WHO, a Geneva-based arm of the United Nations, openly worry that the foundation is setting up a new power centre that may rival their organisation's authority. Such conspiracy theorists point to the foundation's recent grant of over $100m to the University of Washington to evaluate health treatments and monitor national health systems—jobs supposed to be done by the UN agency. Therein lies an irony. The WHO, one of whose captains now calls the Gates Foundation monopolistic, used itself to hold a monopoly in the fight against malaria, and it did a lousy job as a result. Indeed, Dr Kochi himself has been refreshingly frank about the WHO's poor record in fighting the disease. "

The article concludes what any reasonable observer who doesn't have a dog in the fight would conclude -- the world is a better place because the Gates Foundation is getting involved.

"A big new non-government organisation, crashing into the jungle like a young elephant, is bound to cause resentment, and perhaps bound to have unintended ripple effects. But without this elephant's input of new money and ideas, the battle-front against malaria and other deadly diseases might present an even worse picture, especially if the field were left to governments and inter-governmental bodies."

The rise of social entrepreneurs, even those who have more energy than money, is a good thing. Harvard University Law School just announced that it would provide tuition assistance for students willing to commit to public service. Other such programs would be a good way to encourage the rise of even more socially involved young people. The next generation will be equipped with more technological means of connecting large numbers of people than any generation of the past. Equipping them with a social conscience that matches their means could hold great promise for the future.

Malicious Software Continues to Grow

It has been a while since I posted a blog about malicious software. A recent Washington Post article, however, caught my eye ["Firms Struggle Against Web Viruses," by Brian Krebs, 20 March 2008]. The statistics it provided are staggering.

"The number of malicious software programs vying to take up residence on unsuspecting computer users' hard drives has quadrupled in the past two years, according to security experts."

A quadrupling of malicious programs wouldn't be so disturbing if they had gone from 2 programs to 8, but as every computer user knows, there have been hundreds of thousands of worms, viruses, and Trojan horses created in the past.

The growth has set off alarms at security firms, which say that identifying viruses has become more time-consuming and expensive.

"About 5.5 million malicious software programs were unleashed on the Web last year, according to AV Test Labs, a German company that measures how quickly and accurately antivirus products detect malicious software, also known as malware. That number has increased by four times since 2006 and by at least 15 times since 2005, according to the company. In the first two months of 2008, AV Test found more than 1 million samples of malware spreading online. 'Back in 1990 we were seeing a handful of new viruses each week,' said David Perry, global director of education for Trend Micro, an antivirus company in Japan. 'Now, we're having to analyze between 2,000 and 3,000 new viruses per hour.' Much of the malware harvests financial and personal data, which is sold to groups that turn the information into cash through identity fraud. Cyber criminals also use infected machines to anonymously attack others, relay junk e-mail or host fraudulent Web sites advertised through spam."

The biggest difference between today's viruses and those in the past is the motivation behind those creating them. When viruses were first introduced, they were intended to crash computers, wipe-out data, and cause all sorts of mischief. People knew they were infected because bad things happened. Today's viruses are meant to be undetected. Their creators work hard to ensure that host computers continue to run without interruption or interference so that they can remain zombies.

"The proliferation of viruses and other malware has forced the antivirus industry to change how it writes software and to make its products far more powerful and sophisticated. The challenge, security experts say, is that criminal groups responsible for manufacturing most of the malicious software are investing profits in research and recruiting talented computer programmers. A special emphasis is placed on creating malware that exists peacefully with infected computer systems, doing its work quietly in the background. 'A lot of these shops are now hiring professionals and doing quality assurance work, things that generally make the job of the antivirus researcher that much harder,' said Randy Abrams, director of technical education at ESET, an antivirus company in Slovakia. Malware writers are increasingly taking steps to ensure that computers infected with their creations stay infected, according to security researchers. In the past, no matter how quickly an antivirus product shipped updates to detect the most recent malware, most antivirus software would eventually sound the alarm if a virus managed to slip past its initial defenses. But more of today's cyber criminals are continuously updating the malware they have managed to install on victims' computers, replacing older malicious files with new ones to keep them hidden."

The article concludes with a caution that once infected the only remedy may be completely reinstalling the operating system from scratch.

"For many users, some of the most tenacious intruders cannot easily be removed without reinstalling operating systems. Reinstalling isn't such a huge hassle for business, which tend to keep user-generated data files in separate digital storage. 'A lot of today's infections are extremely difficult for the average user to remove completely," said Don Jackson, senior security researcher for SecureWorks, an Atlanta security firm. 'You can see the evidence of that by number of people desperately posting to various security self-help sites.' Experts say PC users shouldn't depend on antivirus software to save them from risky online behavior, such as clicking on Web links in unsolicited e-mail and instant messages. Rather, they say, antivirus should be part of a layered security approach that includes using a firewall to keep out unwanted Internet traffic and applying software updates for Microsoft Windows and third-party software -- particularly popular programs used to display documents or play audio and video files."

Ever vigilant -- that should be the motto of anyone who surfs the net or uses email. As president and CEO of a growing business, I know how much effort my IT team puts into trying to protect our network from malware. Like most IT staffs, they continually plead with employees not to do dumb things on-line. With 3000 new viruses an hour coming your way, even vigilance may not be enough.

Some Light amid the Gloom

There is certainly plenty of bad economic news filling the newspapers and airways. The Economist, back in January, listed some of the reasons that pessimism has gripped the globe:

"Public attitudes generally seem to have become more pessimistic and inward-looking. The proportion of Americans who think their country should be active in the world (42%) is the lowest it has been since the early 1990s. Support for international trade and multinational companies is falling. Opposition to immigration is growing. Large minorities in most countries say globalisation is bad for them personally. Although the main perceived threat varies by time and place—from climate change to economic recession—the general mood is a bit despondent. And the outside world tends to be viewed as a source of trouble. Indeed, for a great many people the way things are is pretty rotten."

In the weeks that have followed, the bad news has continued to build. Stock markets around the world remain volatile. Commodity prices (like gold, grain, and oil) skyrocketed then steadied. Unrest threatens Tibet. Yet The Economist sees silver linings behind many of the clouds ["Somewhere over the rainbow," 26 January 2008 print edition].

"To some extent, our qualified optimism is borne out by impartial data. ... We look at three pieces of evidence: the underlying social conditions in poor countries; poverty alleviation over the past decade; and the incidence of wars and political violence. By those measures the world seems to be in rather better shape than most people realise."

Even though the magazine's optimism is "qualified" (probably even more so given the events of the past several weeks), they wisely base their assessment on long-term rather than short-term assessments.

"In China 25 years ago, over 600m people—two-thirds of the population—were living in extreme poverty (on $1 a day or less). Now, the number on $1 a day is below 180m. In the world as a whole, a stunning 135m people escaped dire poverty between 1999 and 2004. This is more than the population of Japan or Russia—and more people, more quickly than at any other time in history. Poverty alleviation has gone hand in hand with improvements in basic services. Digging canals and building water-treatment plants has increased the number of people with access to safe water: in South Asia, for instance, the number of those without clean water has been nearly halved since 1990. Thanks to this, and to better public-health provision, the rate at which people die from infectious diseases such as malaria and tuberculosis is falling in most poor countries, Africa excepted. That in turn has cut child mortality. In 2007 Unicef, the United Nations child-welfare body, said that for the first time in modern history fewer than 10m children were dying each year before the age of five. That is still an awful lot but it represents a fall of a quarter since 1990. Life expectancy has increased a bit in low- and middle-income countries. The long march to literacy is nearing an end: three-quarters of people aged 15-25 were literate in 1975; now the rate is nearly nine-tenths."

It's always good in the midst of troubling times to reflect on how far the world has come. The rapid fire bad news that continually riddles the senses should not kill our sense of hope, wonder, and optimism. The article reminds us that these changes have taken decades of effort and patience -- hence their absence from the front pages. One of the drivers of change, the article asserts, is that people now have more control over how large their families will be.

"The biggest change affecting people's lives has little to do, at least directly, with development policy or public spending. People in poor countries are now able to exert more control over their own fertility, and hence over the size of their families. A generation ago the biggest worry about poor countries was over-population. Books such as 'The Population Bomb' (1968) and 'The Limits to Growth' (1972) predicted Malthusian crises in countries where women were having five children or more. Since then the fertility rate (the average number of children a woman can expect during her lifetime) in low- and middle-income countries has crashed. In East Asia and the Pacific, the rate was 5.4 in 1970. Now it is 2.1. In South Asia, the fertility rate halved (from 6.0 to 3.1). In the world as a whole, fertility has fallen from 4.8 to 2.6 in a generation (25 years). The biggest decline is in those countries that are most involved with globalisation (especially in East Asia, though China is a special case because of its one-child policy). The most important exception to the rule of declining fertility is sub-Saharan Africa. All the countries with fertility rates over 5.0 are in Africa (with the one exception of Yemen). Globalisation, it seems, leads to a shift in the direction of 'replacement fertility': the rate at which the size of a population eventually stabilises. This is a remarkable development. In closed agrarian societies, families need a lot of children as insurance against disaster. But in countries that have opened themselves up, families can rely on other sorts of protection, such as urban jobs or trade."

Decreasing growth rates are a double-edged sword. They can decline so precipitously that economic growth can be threatened, giving the edge to countries with a more sustainable birth rate.

"These demographic changes help to create a virtuous circle of growth. When fertility rises then falls, you get a bulge of people at and just after the inflection point. The baby boomers were one such bulge. Between 1960 and 1990 Europe and America had relatively few old people (because mortality rates had earlier been high), relatively few children (because fertility had fallen) and a disproportionately big number of economically active adults. These 30 boom years were (to borrow the French phrase) 'les trente glorieuses'. Developing countries are seeing a similar confluence now. Eventually, of course, the demographic bonus turns into a demographic onus, as is happening in parts of Europe. But that is a difficult story for a later generation. In the next one, low- and middle-income countries will have a demographic advantage to reinforce their economic gains."

Whether gains that have been made can be sustained through the current financial crisis remains an open question. In order to be sustained, the global economy must continue to grow.

"These social achievements have not come about by accident. They are, at least in part, attributable to growth. A World Bank study of 19 poor countries concluded that every 1% increase in national income per head translates into a 1.3 point fall in extreme poverty. Hence the importance of the second broad indicator: the state of the world economy. Last year the global economy entered its fifth year of over 4% annual growth—the longest period of such strong expansion since the early 1970s. Despite financial turmoil and soaring oil and commodity prices, world growth barely dipped in 2007 and trade grew at 9%, even though trade talks fell apart. Unlike previous expansions, inflation remained more or less under control. Moreover, growth was spread around fairly evenly. According to the World Bank, national income in the European Union rose slightly more than in America for the first time in a decade. Growth in East Asia was 10%, in South Asia over 8%, in eastern Europe almost 7% and in Africa, thanks to the commodity boom, over 6%. This was unprecedented. In earlier booms, fast growth seemed to have been the preserve of a few miracle countries, such as the Asian tigers. No longer. Almost half of humanity, spread over more than 40 nations, lives in countries growing at 7% a year or more, a rate that doubles the size of an economy in a decade. This is twice the number of fast growers that existed in the years between 1980 and 2000. As a result, the world's economic balance is tilting from rich industrialised countries to emerging markets. Their share of world output in 2006 was just below half, and rising. The International Monetary Fund reckons that in 2008 China and India will be the largest contributors to worldwide growth for the first time. This does not mean that the world will be able to make light of a slowdown in industrialised countries. Nor will developing countries be unaffected by problems hitting America and Europe. Nevertheless, so far they have been hit less hard by the credit crunch than rich nations were."

As good as those statistics are, the article makes it clear that growth and development have nevertheless been uneven. In areas where development has not caught hold, inequalities are getting larger and the economic gulf continues to widen.

"There is a problem, however. Many people argue that the pattern of world growth over the past 20 years has not been beneficial. They point out that globalisation-driven growth has gone hand in hand with a growth in inequality. This inequality is a worry in its own right (communities get broken up; the poor get left behind) and also a missed opportunity (emerging markets might have done better still if only their extra wealth had been distributed more fairly). Is this charge against globalisation true? And, if it is, does it follow that globalisation has been a failure because its benefits have been pinched by the rich? The evidence that the rich have done best is certainly compelling. Inequality has risen in both rich and poor countries. It is thus a sharp break from the pattern established between 1950 and 1990, when there was a general decline in inequality, notably in East Asia, where the tigers managed to combine fast growth with relatively equal incomes. But it is not so clear that globalisation—in the sense of opening up to trade and foreign investment—is to blame. Ukraine and Poland both opened themselves in the 1990s. Yet inequality rose in Poland and fell in Ukraine. Globalisation, it seems, sometimes increases inequality, sometimes reduces it."

As with most things, timing is important. Emerging market countries that have been able to take advantage of the benefits of globalization have been those who had in place most of the prerequisites for growth (some infrastructure, some education, and so forth). Thus, the "culprit" for inequality is probably not globalization, but a lack of underlying pre-conditions that would have permitted countries to take advantage of opportunities as they arose. The article seems to agree.

"A more plausible culprit for rising inequality seems to be technological progress. This is associated with inequality in poor countries because in emerging markets the people best able to take advantage of new technology are those who already have an education and who are usually among the richest in society. The more technological progress, therefore, the better the well-off do. But to limit technology to reduce inequality would be a cure worse than the disease. Technology in its broadest sense—the flow of new ideas—is the only way of getting growth rates up to 5-10% a year, the rate which enables poor countries to catch up with the West. Without it, growth would be dependent on labour and capital inputs, and growth would be just a few percent. To reduce technological progress—even supposing one could do it—would be to condemn poor countries to stay poor. In fact, since the mid-1990s, the incomes of the poorest fifth have risen everywhere except, marginally, in Latin America, where they have been affected by the after-shocks of debt crises. In Asia, the real incomes of the poorest fifth rose 4% a year; in Africa, by 2% a year, faster than the rise for other income groups. The result is that the number of very poor people in the world is falling fast—even though many critics continue to believe that the poor have not really benefited from growth. In 1990 those on $1 a day accounted for more than a quarter of the population of developing countries. By 2015, on current rates, the proportion of very poor people should have shrunk to 10%. Moreover, these monetary measures probably understate the real gains from things such as lower child mortality, safer water, literacy and other social achievements. A rich man appreciates his extra cash but this does not compare with what a poor family gains from seeing an infant survive childhood or learn to write. The general reduction in the numbers of the very poor weakens the perceived link between globalisation and inequality. Across the world, if not within nations, globalisation can be claimed to be making people more equal, not less. This is mainly because China and India, with their 2.5 billion people, are growing fast and narrowing the gap with rich countries."

Finally, the article notes one other factor that has contributed to conditions favorable to economic growth -- the decrease in conflict around the globe. With Iraq and Afghanistan filling the headlines, and occasional flare-ups in places like Kosovo, Kenya, Sri Lanka, Sudan, and Tibet, people forget that things have actually been getting better.

"Economic growth improves lives unobtrusively. The more dramatic explanation for improved living standards is the decline in the number of wars, and in deaths from violence and genocide. This explanation for prosperity will seem far-fetched to many. International opinion has long held that the end of the cold war unlocked a Pandora's box of ethnic violence that superpower rivalry had kept contained (the splitting of Yugoslavia being the classic example). Most people believe that the number of wars has increased; that conflicts have become deadlier (Iraq is typical); and that there are more acts of genocide (Darfur being just the most recent). Yet there is surprisingly little evidence to back up this impression. The number of conflicts (both international and civil) fell from over 50 at the start of the 1990s to just over 30 in 2005 (definitions are obviously fluid; these are the ones used by scholars at the universities of Uppsala and British Columbia for a project called the 'Human Security Report'). On their definitions, the number of international wars peaked during the 1970s and has been falling slowly since. The number of civil wars continued to rise until about 1990 and then fell precipitately. In total, the death toll in battle fell from over 200,000 a year in the mid-1980s to below 20,000 in the mid-2000s. Such numbers are subject to error and dispute. Figures from the World Health Organisation, for example, are much higher. Still, the direction of change does look plausible. In general, the number of new wars, and new episodes in old wars, seems to be falling. More recently, 2006 saw a war in Lebanon, violence in Congo and conflict in Nepal, Somalia and Timor-Leste. By 2007 those struggles had simmered down, somewhat. ... Violence in the Middle East is a reminder, as if one were needed, of the many ills—climate change, greenhouse gases, chronic diseases in poor countries and much, much more—that need to be set against the achievements of the past few years. But the successes provide some perspective, both to the extent of the world's persistent problems, and to their setting."

The article concludes with a reminder that things remain pretty bad in the deepest parts of what Tom Barnett calls "The Gap," those countries that have not yet been able to connect with the global economy.

"An extraordinary concentration of misfortunes is to be found in a group of countries which the World Bank labels 'fragile'. This is a slightly larger category than the so-called failed states, such as Somalia, where the central government has ceased to exist. It includes countries where the government has partial control of territory (Sudan), where it cannot deliver basic services (Zimbabwe) and places with high levels of political conflict (Nigeria). Fragile states contain roughly half the developing world's childhood deaths. About a third of their people are undernourished and more than that do not have access to drinking water. They usually have extremely high fertility rates: most of the countries with fertility rates over 5.0 are fragile. In one way or another, they are much more likely to be affected by wars, refugees and every sort of political crisis. Bad government and lack of growth often, though far from always, go together. Whatever the problems of globalisation, they are dwarfed by the penalties of being untouched by it. The World Social Forum, a gathering of self-proclaimed progressives who want to turn back trade, growth and globalisation has adopted as its slogan the motto 'Another world is possible'. In reality, another and better world is painfully and fitfully coming into being."

Certainly inequalities remain and uneven growth continues to be experienced. On the whole, however, The Economist is correct in its qualified optimism. The question is how to proceed forward. A better world is possible, but it won't be achieved by trying to derail the progress tied to globalization.

The Limits of Leapfrogging

In a recent post about Green Development, I noted that The Economist, like many others, recommends helping emerging market countries leapfrog older technologies. "Everyone will gain," the magazine claims, "if poor countries find a way to leapfrog over the phases of development which in so many other places did terrible harm to the environment." In another article, however, The Economist notes that leapfrogging is not a simple matter ["The limits of leapfrogging," 9 February 2008 print edition]. In fact, the article begins by noting that "the spread of new technologies often depends on the availability of older ones." The article concedes that mobile phones have been an exception and that they have transformed telecommunications in even the poorest of countries.

"Mobile phones are frequently held up as a good example of technology's ability to transform the fortunes of people in the developing world. In places with bad roads, few trains and parlous land lines, mobile phones substitute for travel, allow price data to be distributed more quickly and easily, enable traders to reach wider markets and generally make it easier to do business. The mobile phone is also a wonderful example of a “leapfrog” technology: it has enabled developing countries to skip the fixed-line technology of the 20th century and move straight to the mobile technology of the 21st. Surely other technologies can do the same? Alas, the mobile phone turns out to be rather unusual. Its very nature makes it an especially good leapfrogger: it works using radio, so there is no need to rely on physical infrastructure such as roads and phone wires; base-stations can be powered using their own generators in places where there is no electrical grid; and you do not have to be literate to use a phone, which is handy if your country's education system is in a mess. There are some other examples of leapfrog technologies that can promote development—moving straight to local, small-scale electricity generation based on solar panels or biomass, for example, rather than building a centralised power-transmission grid—but there may not be very many."

I have always insisted that sustainable development relies in large measure on governments (or public/private partnerships) building a certain amount of critical infrastructure: transportation systems, electrical power generation and distribution systems, water systems, and banking systems being among them. Some of these systems might not be able leapfrog current technologies, but using Enterra Solutions' Development-in-a-Box™ approach to build such systems they can at least be implemented using the best practices available. Doing so places countries in a much better position to take the next step forward.

"As a recent report from the World Bank points out, it is the presence of a solid foundation of intermediate technology that determines whether the latest technologies become widely diffused. It is all too easy to forget that in the developed world, the 21st century's gizmos are underpinned by infrastructure that often dates back to the 20th or even the 19th. Computers and broadband links are not much use without a reliable electrical supply, for example, and the latest medical gear is not terribly helpful in a country that lacks basic sanitation and health-care facilities. A project to provide every hospital in Ethiopia with an internet connection was abandoned a couple of years ago when it became apparent that the lack of internet access was the least of the hospitals' worries. And despite the clever technical design of the $100 laptop, which is intended to bring computing within the reach of the world's poorest children, sceptics wonder whether the money might be better spent on schoolrooms, teacher training and books."

I wouldn't easily dismiss the importance of introducing as much technology as possible, even in the poorest areas. Pundits have been constantly surprised with how people use new technologies to improve their lives. At the same time, I don't get too excited about hyperbolic visions of a future created through technology. Just go back a few years and look at some of the things that prognosticators were saying about the future. For example, Herbert A. Simon, an expert in artificial intelligence at Carnegie Mellon University, predicted in 1965 that by 1985, "machines will be capable of doing any work Man can do." Few things develop the way they are predicted to unfold. Fortunately, pundits have underestimated achievements as often as they have exaggerated them. Three years before Simon was predicting the rise of machines, Dennis Gabor, British physicist and author of Inventing the Future, predicted that the "transmission of documents via telephone wires is possible in principle, but the apparatus required is so expensive that it will never become a practical proposition." Predictions aside, baseline infrastructure is important for any future.

"The World Bank's researchers looked at 28 examples of new technologies that achieved a market penetration of at least 5% in the developed world, and found that 23 of them went on to manage a penetration of over 50%. Once early adopters latch onto something new and useful, in other words, the rest of the population can quickly follow. The researchers then considered 67 new technologies that had achieved a 5% penetration in the developing world, and found that only six of them went on to reach 50%. That suggests that although new technologies are often adopted by a small minority of people in poor countries, they then fail to achieve widespread diffusion, so their benefits do not become more generally available."

For more on this phenomenon and what The Economist had to say about it, see my post Technology and Developing Countries. The article concludes that developing countries require "lavatories before laptops;" although I would argue they need both lavatories and laptops.

"The World Bank concludes that a country's capacity to absorb and benefit from new technology depends on the availability of more basic forms of infrastructure. This has clear implications for development policy. Building a fibre-optic backbone or putting plasma screens into schools may be much more glamorous than building electrical grids, sewerage systems, water pipelines, roads, railways and schools. It would be great if you could always jump straight to the high-tech solution, as you can with mobile phones. But with technology, as with education, health care and economic development, such short-cuts are rare. Most of the time, to go high-tech, you need to have gone medium-tech first."

You simply can't create something from nothing. Sustainable development requires a solid foundation of infrastructure, especially in the electrical power and transportation sectors. The better this infrastructure (i.e., the more it adheres to best practices) the faster development can take place.

The Globalization of Happiness

I have often noted that globalization involves the flow of people, resources (like raw materials and manufactured goods), and capital. Ideas also manage to find their way across international borders. The Economist focused on one such idea, "an anti-poverty scheme invented in Latin America [that] is winning converts worldwide" ["Happy Families," 9 February 2008 print edition].

"Mention globalisation and most people think of goods heading across the world from East to West and dollars moving in the other direction. Yet globalisation works for ideas too. Take Brazil's Bolsa Família ('Family Fund') anti-poverty scheme, the largest of its kind in the world. Known in development jargon as a 'conditional cash transfer' programme, it was modelled partly on a similar scheme in Mexico. After being tested on a vast scale in several Latin American countries, a refined version was recently implemented in New York City in an attempt to improve opportunities for children from poor families. Brazilian officials were in Cairo this week to help Egyptian officials set up a similar scheme. 'Governments all over the world are looking at this programme,' says Kathy Lindert of the World Bank's office in Brasília, who is about to begin work on similar schemes for Eastern Europe."

I first wrote about the Mexican program referred to in the article in November 2006 [Programs that Fight Poverty] and discussed it again in April 2007 [Oportunidades At Home and Abroad]. Oportunidades has been described as bribery for the poor for changing their lifestyles. The decade-old program rewards parents for keeping their children healthy and in school. To qualify for the "bribe," people must live in extreme poverty, that is, on less than the equivalent of $2 a day. In addition to seeing to the health and education of their children, parents must also get personally involved by attending talks on health, nutrition and family planning. The Brazilian program is very similar to the one in Mexico.

"Bolsa Família works as follows. Where a family earns less than 120 reais ($68) per head per month, mothers are paid a benefit of up to 95 reais on condition that their children go to school and take part in government vaccination programmes. Municipal governments do much of the collection of data on eligibility and compliance, but payments are made by the federal government. Each beneficiary receives a debit card which is charged up every month, unless the recipient has not met the necessary conditions, in which case (and after a couple of warnings) the payment is suspended. Some 11m families now receive the benefit, equivalent to a quarter of Brazil's population."

Unlike traditional welfare plans, where end objectives beyond the survival of recipients are often unclear, the Latin American programs aim to create educated and healthy future generations that no longer require assistance. The beef against traditional welfare programs is that they foster dependency in current and subsequent generations. The Latin American programs hope to break the chain of dependency. In some areas of Brazil, the program is so large that it looks like a socialist system; but, results are starting to be seen.

"In the north-eastern state of Alagoas, one of Brazil's poorest, over half of families get Bolsa Família. Most of the rest receive a state pension. 'It's like Sweden with sunshine,' says Cícero Péricles de Carvalho, an economist at the Federal University of Alagoas. Up to a point. Some 70% of the population in Alagoas is either illiterate or did not complete first grade at school. Life expectancy at birth is 66, six years below the average for Brazil. 'In terms of human development,' says Sérgio Moreira, the planning minister in the state government, 'Alagoas is closer to Mozambique than to parts of Brazil.' Vote-buying is rife: the going rate in the last election for state governor was 50 reais. 'People come to us complaining that they sold their vote to a politician and he hasn't paid them yet,' says Antônio Sapucaia da Silva, the head of Alagoas's electoral court. As well as providing immediate help to the poor, Bolsa Família aims in the long run to break this culture of dependency by ensuring that children get a better education than their parents. There are some encouraging signs. School attendance has risen in Alagoas, as it has across the country, thanks in part to Bolsa Família and to an earlier programme called Bolsa Escola. The scheme has also helped to push the rate of economic growth in the poor north-east above the national average. This has helped to reduce income inequality in Brazil. Although only 30% of Alagoas's labour force of 1.3m has a formal job, more than 1.5m of its people had a mobile phone last year. 'The poor are living Chinese rates of growth,' says Aloizio Mercadante, a senator for São Paulo state, repeating a proud boast of the governing Workers' Party."

Human capital is important in any country. Brazilian politicians have decided that investing in that capital is as important as investing in infrastructure and they hope they are using the right portfolio to make those investments. The impressive growth rates in economically distressed areas are a good sign. This growth is being spurred by the growth of both businesses and consumption.

"Look hard enough and it is ... possible to find businesses spawned by this consumption boom among the poor. Pedro dos Santos and his wife Dayse started a soap factory with 20 reais at their home in an improvised neighbourhood on the edge of Maceió, the state capital. With the help of a microcredit bank, they have increased daily output to 2,000 bars of crumbly soap the colour of Dijon mustard. Nearby, another beneficiary of a microfinance scheme has opened a shop selling beer, crisps (potato chips) and sweets."

Improving economic conditions, of course, doesn't guarantee happiness (despite the title of this post). Even the U.S. Constitution only promises people the right to pursue happiness. When families are held tight in poverty's grip, they don't have the means to make the pursuit. Help people earn enough money to eat, put a roof over their heads, and take care of their families and you find more smiles and increased laughter. The Brazilian program is not without its problems -- not unexpected in any large government program.

"Despite the early success of Bolsa Família, three concerns remain. The first is over fraud. Because money is paid directly to the beneficiary's debit card, there is little scope for leakage. The question is whether local governments are collecting accurate data on eligibility and enforcing the conditions. Some 15% of municipal councils make the improbable claim that 100% of pupils are in school 100% of the time. Despite this, most of the money does go to the right people: 70% ends up in the pockets of the poorest 20% of families, the World Bank finds. Second, some people worry that Bolsa Família will end up as a permanent feature of Brazilian society, rather than a temporary boost aimed at changing the opportunities available to the poorest. Whether this happens will depend largely on whether Brazil's public schools improve fast enough to give all their new pupils a reasonable education. Since the scheme began on a large scale only in 2003, it is still too early to tell. Third, Bolsa Família is sometimes equated with straightforward vote-buying. That is unfair. Luiz Inácio Lula da Silva's name is strongly associated with the scheme—even among some people in Alagoas who are unaware that he is Brazil's president. But their gratitude does not extend to support for his Workers' Party. There are signs that mayors who administer the programme well get a reward at the polls while those who do not suffer. For a relatively modest outlay (0.8% of GDP), Brazil is getting a good return. If only the same could be said of the rest of what the government spends."

Clearly, the final chapter in this story is years away from being written. The positive aspect of the story, however, is that the program under discussion is aimed at creating some of the pre-conditions necessary to sustain development. Brazil, of course, is not a third world country. It is one of the stars among emerging market countries (along with the other so-called BRIC countries: Russia, India, and China). It does have enclaves, as the story suggests, that resemble conditions found in third world. That is why so many are watching how the program works there. If it works in Brazil's poorest areas, it should work elsewhere around the globe.

The Future of Urbanization

In a recent post about what Paul Polak has been doing in developing countries [Work versus Welfare], I mentioned the fact that he is expanding the scope of his work to include helping the poor in urban areas as well as rural areas. Urbanization, I noted, is one of the demographic trends that appears to be continuing. In fact, last year was the tipping point for urbanization. More of the global population now lives in urban areas than in rural areas. Matt Vella, in his review of a new book, The Endless City, for BusinessWeek, makes that point to underscore the importance of the book ["The City of the Future," 7 March 2008].

"The steady, centuries-long migration of people into cities passed a crucial milestone last year. More than half of humanity now lives in cities—and that figure will likely reach 75% by 2050. This urban shift is already visibly transforming newly sprawling giants such as Shanghai and Mexico City, as well as highly developed cities such as New York and London. This growth is also bringing titanic problems. Now, The Endless City, a new book edited by the London School of Economics' Ricky Burdett and design curator Deyan Sudjic, aims to put urban expansion into perspective. The growth of cities, they argue, is not just a problem for local government agents or urban planners. Instead, urban growth is inseparable from major political and economic forces including globalization, immigration, employment, social exclusion, and sustainability (themes that track closely with the issues currently being debated in the runup to the U.S. Presidential election.)"

In my discussions of Development-in-a-Box™, I have stressed time and again that a holistic approach to development is essential to fostering success. Piecemeal or siloed approaches simply don't work because the good they do is often undermined by shortcomings in areas not receiving attention. The fact the Burdett and Sudjic have put together a book that offers a holistic view of urbanization is encouraging. According to Vella:

"The book's encyclopedic scope and the way it connects urban problems to economic and social issues make it a useful resource for urban planners and architects, as well as a broader range of designers and business people hoping to orient their products and services to consumers living in the world's fast-growing cities."

As Vella notes, The Endless City is an edited volume, which means that Burdett and Sudjic were not alone in this endeavor. According the article, over three dozen individuals from numerous fields were involved in the project. Long-time readers of this blog, know that I favor such approaches. They create what Frans Johansson calls The Medici Effect. As Johansson writes in the book named after this effect:

"When you step into an intersection of fields, disciplines, or cultures, you can combine existing concepts into a large number of extraordinary ideas."

That is exactly what the group hoped would happen when they began collaborating on the book. They didn't want to put together a bunch of esoteric essays that would satisfy some academic need to publish or perish. They wanted to put together a book that could serve as a practical guide to for dealing with the unique challenges presented by urbanization.

"The 500-page tome is the culmination of four years of meetings, conferences, and collaborations among the members of an informal working group of nearly 40 architects, planners, designers, and academics, dubbed the Urban Age Project. Spearheaded by Burdett and Sudjic, both based in London, the project has hosted conferences in cities from Berlin to Mumbai. In this, the group's first major book, the team seeks a vision of cities as places where 'urban life becomes a source of mutual strength rather than a source of mutual estrangement and civic bitterness,' according to group member Richard Sennett, a sociologist. The book is intended as a practical resource for those looking at rapid urban growth as an opportunity despite the looming challenges and often stark inequalities. (Case in point: 1.4 billion people will be living in city slums by 2020.)"

That the book contains contributions from a number of professionals in different fields is great. Just as important is the fact that the book contains contributions written by politicians -- the kind of policymakers who must enact laws that guide, regulate, and enforce how cities develop.

"Rather than overwhelm the reader with an amorphous mass of essays, The Endless City is neatly divided into six chapters, each with a distinct agenda, including an introduction and a combined glossary-index. The first of these sections is an in-depth examination of six very different cities and the challenges facing each. Berlin, its economy stagnant, is still reeling as the mass influx of citizens anticipated after the city's reunification nearly 20 years ago failed to materialize. In contrast, Mexico City's uncontrolled expansion over the past 20 years sees 60% of its nearly 20 million inhabitants living in illegal and informal housing, creating vast, unplanned, and sometimes dangerous communities. And just as New York is managing its post-September 11 growth, Johannesburg is searching for a cohesive identity as it has been transformed from an all-white city of about 250,000 in 1994 to a post-apartheid, multi-ethnic conglomeration of some 3.25 million inhabitants today. These four cities, along with Shanghai and London, are emblematic of the many challenges facing the rest of the world's metropolises."

The fact that the book examines old mega-cities (like London) as well as new mega-cities (like Mexico City) should make the book much more useful for those interested in tackling urban challenges. In edition to describing challenges, the book also examines some innovative theories and approaches for dealing with them.

"A subsequent chapter, titled 'Issues,' is more theoretical, packed with essays on subjects from the politics and policy of urban reform to a look at how the historical DNA of cities informs their ongoing architectural development. 'Interventions,' meanwhile, is a curated set of 20 innovative projects that give practical responses to many of the challenges introduced earlier in the book. Particularly compelling examples include New York's Hearst Tower, a successful environmentally conscious building; and Mexico City's Metrobus project, a bold attempt to implement a system of public buses catering to the entire metropolis to begin easing the city's infamous traffic congestion."

Vella's major criticism of the book (and it's really a minor one), is that a few of the contributors remain atop their high horses and use pompous and pretentious language in hopes of giving their particular contributions an unjustified air of superiority. He concludes:

"Still, the book's many essays are underscored by a comprehensive set of graphics, charts, and diagrams that are one of its chief strengths. Full-page photographs and richly detailed maps make the book instantly accessible, even if it didn't have its more thorough arguments and analyses. The book's final section, 'Positions,' puts forward an agenda of smarter urban planning. The authors suggest endeavors like their own Urban Age Project (they're already putting together the next conference) can help executives avoid the planning and development mistakes of the past. Managing the coming surge in urban populations, they argue, will require the worldwide collaboration of designers, architects, and politicians. That this is the book's thinnest section suggests the majority of the endless city's story has yet to be told."

Anyone who has traveled extensively knows that cities around the world each have a distinct flavor about them. Yet, as this book appears to underscore, they also have a number of challenges in common. I'm in favor of projects that encourage collaboration and take a holistic view of development. In the end, such projects have a much better chance of creating resilient and sustainable solutions. I agree with Vella that much of the story has yet to be told, because the real future of cities has yet to unfold.

IBM's Big IT Bets

The sheer size of IBM means that people take notice of how it's positioning itself for the future. One of the places they look for clues is IBM Research -- the company's R&D division. According to an article in BusinessWeek, IBM Research is making some pretty big bets on the future ["Big Blue Goes for The Big Win," by Steve Hamm, 10 March 2008 print edition]. The story focuses on the agenda John E. Kelly III, the director of IBM Research, is pursuing.

"Kelly, a 27-year IBM veteran who took over as research director in July [2007], is planning surprisingly dramatic changes. 'We have to do bolder things, bigger things,' he says, speaking about his plans publicly for the first time. 'If we don't fail a third of the time, we're not stretching enough. On the other hand, when we win, we need to win big.'"

At least Kelly has the correct philosophy for someone involved in R&D. Fear of failure has no place in research lab. So what do these bold plans involve?

"For starters, he's focusing on four top research priorities, rather than spreading investments too thin. The four bets are enormous, though. Each of the projects will get $100 million over the next two to three years, in hopes of generating at least $1 billion, each, in new revenue. The projects: inventing a successor to today's semiconductor, designing computers that process data much more efficiently, using math to solve complex business problems, and building massive clusters of computers that operate like a single machine—an approach called 'cloud' computing. Central to the effort will be even more emphasis on basic scientific research, such as physics, chemistry, and math."

None of these "big bets" are really surprising. IBM has historically sought the next big thing in computer design. It just hasn't always been successful at guessing what that would be. For example, they completely missed the mark when it came to personal computers. I think most people understand what each of these areas involves, perhaps with the exception of cloud computing. I've written a couple of posts on cloud computing you may find helpful [The Coming Age of Cloud Computing and The AIR is getting Blurry with Clouds -- Computing that is]. In pursuing his objectives, Kelly is also reaching out to others.

"The other major change Kelly has in the works is overhauling the way IBM does research. Today the tech giant has eight research facilities with 3,200 scientists, and it hasn't opened a new one in a decade. Kelly foresees creating dozens of new joint ventures for research, which he calls 'collaboratories,' with countries, companies, and independent research outfits. One venture with Saudi Arabia, focusing on nanotechnology, was unveiled on Feb. 26 [2008]. Kelly believes IBM needs to leverage its resources and learn from others. 'The nature of research itself is changing,' he says. 'Great ideas are springing up everywhere, and we need to shift from focusing on large brick-and-mortar operations to having a much more collaborative outreach program.' He'll try to do all this without a sharp increase in spending. IBM doesn't break out its research budget, but Kelly says it will rise at the rate of IBM's revenues, in the single digits. The company spends more than $6 billion a year overall on research and development of new products."

Kelly's attitude toward research is sensible. We live in an age of collaboration that is undergird by enormous amounts of data and the rapid creation of new knowledge. Collaboration, however, doesn't mean that competition has died.

"Kelly knows IBM can't be complacent. Both Microsoft and Google are investing heavily in research. For the first time, Microsoft broke the top 10 for U.S. patent awards last year, coming in at No.6. 'It's a race,' says Kelly. 'While others are trying to emulate us, we're going to skate ahead.'"

Kelly's R&D roots, Hamm notes, run deep -- as does his collaborative approach.

"Kelly, the seventh director since IBM established its labs in 1945, has research in his blood. His father worked as a technician at General Electric's lab in Niskayuna, N.Y., where Kelly would visit regularly as a boy and watch him work with vacuum tubes. Kelly got a PhD in materials engineering at Rensselaer Polytechnic Institute, just outside of Albany. At IBM, he ran one of the major research departments, in between stints in the chip division.  His collaborative research strategy emerged out of a dire situation he faced in 2003 as head of IBM's chip business. The company was suffering huge financial losses as the costs of keeping up with the latest technology were soaring. Kelly took a gamble and set up research alliances with a handful of partners, including Sony Electronics and Advanced Micro Devices, to share expenses and brainpower. The approach eventually paid off, as IBM's chip business returned to profitability and remained on the cutting edge of technology. 'This is a smart strategy,' says [Tim Studt, editor-in-chief of R&D Magazine]. 'You can't be the leader all by yourself anymore. The technology is just too complicated and expensive.' The just-unveiled deal with Saudi Arabia is an example of where Kelly is headed. The two sides plan to develop technologies for solar energy and water desalinization. The Saudis chose IBM because of its expertise. IBM scientists won a Nobel Prize in 1986 for nanotech breakthroughs, and they're leaders in developing new nanotech materials."

Although solar energy and water desalinization seem far afield from the four research areas on which Kelly wants to focus, he doesn't believe they are.

"Kelly expects the basic research that IBM does with partners to feed back into its own four high-priority projects. Nanotechnology, for instance, will be critical to inventing the successor to today's chips. Performance improvements have been slowing down in the current chip technology, and scientists expect chips of the future to be made with tiny switches built with individual atoms. As part of its effort, IBM announced on Feb. 22 [2008] that it had calculated how much force it takes to move a single atom. 'If they can come up with a true, game-changing technology, they'll have a clear first-mover advantage and a huge business benefit,' says Charles M. Vest, president of the National Academy of Engineering. Another major research initiative with a big potential payoff is IBM's new computer reengineering project. IBM was at the forefront of redesigning microprocessors, the brains of computers, to include multiple parts, or cores, on a single piece of silicon. That makes it possible for the processors to run at lower power, with less heat. Now the company is designing chips with specialized cores that perform certain kinds of calculations more efficiently, plus software to take advantage of the new processing power. If the project works, it will help IBM strengthen its lead in high-margin server computers."

In a previous post [A New Form of Data Storage], I also noted that IBM is looking for breakthroughs in data storage. Hamm concludes the article with a quote from Kelly that demonstrates his entrepreneurial spirit. He claims to thrive in an environment that requires big risks, but promises big payoffs. That sums up the spirit of most entrepreneurs and it is what separates them from other business people.

Forecasting Pandemics

Resilience is normally defined as the ability to bounce back after some catastrophic event. Needless to say, resilience is a great characteristic for any system to have. Even better than resilience, however, is prevention. Anyone who has ever been sick and recovered agrees that prevention is better than cure. Just as importantly, prevention is cheaper than cure. Companies and healthcare providers are slowly getting on board with that notion; primarily because of the rising costs of health insurance. Prevention of deadly epidemics is exactly what a virologist at UCLA has in mind with a new computer network and prediction model he is championing ["And now here is the virus forecast," The Economist, 23 February 2008 print edition]. The article begins with news that an experimental treatment for AIDS has failed field tests and that the disease continues to spread.

"AIDS kills over 2m people a year. A way of stopping it spreading is urgently required. Yet according to Nathan Wolfe, a virologist at the University of California, Los Angeles, things need never have got this bad. If there had been, in the 1970s, a programme searching for unrecognised diseases in Africa then AIDS would have been noticed long before so many people had started dying from it. Microbicides and other interventions could have been tested when only hundreds of thousands were infected, rather than tens of millions. AIDS would still have been horrible, but not nearly as horrible as it has become. To try to stop this happening again, Dr Wolfe is attempting to create what he calls the Global Viral Forecasting Initiative (GVFI). This is still a pilot project, with only half a dozen sites in Africa and Asia. But he hopes, if he can raise the $50m he needs, to build it into a planet-wide network that can forecast epidemics before they happen, and thus let people prepare their defences well in advance."

Forecasting the spread of known diseases, like the flu, is relatively easy compared to what Dr. Wolfe is attempting to do. He wants to create a system that will forecast the spread of heretofore unknown diseases.

"Dr Wolfe outlined his ideas, and the research that has led him to believe they are feasible, to this year's meeting of the American Association for the Advancement of Science (AAAS) in Boston. He began his work nearly a decade ago in Cameroon, in a project reminiscent of the 19th-century animal-collecting expeditions that pushed into the forest to look for new species. Except that his quarry is viruses, not butterflies and birds."

These are not "free range" viruses. They are not simply lying about on the jungle floor waiting to be discovered. They hide in animal species.

"Almost all human viruses whose origins are known have come from animals. But it is not simply a matter of an animal virus suddenly finding humans to be a congenial host, and flourishing as a result. With AIDS, for example, the global epidemic is caused by what was originally a chimpanzee virus. There is, however, a second form of AIDS, caused by a monkey virus. This has not become global. It is pretty much restricted to West Africa. Moreover, there are a further two very rare forms caused by different versions of the chimpanzee virus. These rare forms are examples of what Dr Wolfe calls viral chatter, a term borrowed from intelligence agencies which monitor telephones for the use of certain words or unusual patterns of communication."

Pattern recognition is useful in a lot areas of human endeavor. Healthcare may be foremost among the areas where it can pay big, early dividends.

"[Dr. Wolfe's] thesis is that there is continual low-level interchange of viruses between species. That is particularly so for people, such as hunters and farmers, who are in constant and often bloody proximity to animals. His hope is that by monitoring this viral chatter he will be able to spot pathogens before they take the second, crucial evolutionary step of being able to transmit themselves from one human to another. So far, he has concentrated his efforts on a group known as retroviruses, of which HIV is one. He has already found three examples of 'foamy viruses' jumping from wild apes and monkeys to Cameroonian hunters. At the moment, no known foamy virus can spread between people. But until the 20th century that was true of the simian equivalents of HIV. He has also found two new members of a group called HTLV that have moved from monkeys to men. Since HTLV-1, an example of the group discovered several decades ago, has already spread around the world, these cases are particularly noteworthy. HTLV-1 is not as common as HIV, and causes symptoms in only 5-10% of those it infects. But those symptoms can include a fatal leukaemia. And a different type of HTLV might not be so choosy about whom it kills. Even more worryingly, Dr Wolfe has found many examples of viruses recombining in his Cameroonian hunters. Recombined viruses often have properties present in neither parent. Sometimes these include the ability to jump from human to human. The pandemic version of HIV is the result of such a recombination."

Dr. Wolfe wants the touchstone of his initiative to be the most complete catalog of viruses possible. That is why he goes virus hunting and he wants others to join in the search. He believes his greatest allies in this effort will not be other scientists, but native hunters.

"The next stage of the project is to try to gather as complete an inventory as possible of animal viruses, and Dr Wolfe has enlisted his hunters to take blood samples from whatever they catch. He is collaborating with Eric Delwart and Joe DeRisi of the University of California, San Francisco, to screen this blood for unknown viral genes that indicate new species. The GVFI will also look at people, monitoring symptoms of ill health of unknown cause and trying to match these with unusual viruses."

If Dr. Wolfe can raise the money he is seeking, the next step will be to enlist animal stall merchants in Asian countries to join his cadre of hunters.

"Animal markets are next in line. Dr Wolfe is working with Peter Daszak, of the Consortium for Conservation Medicine, to study the so-called wet markets of China where SARS began in 2002. They will inspect the animals sold in them, and test the stallholders and customers for signs of dodgy viruses. Dr Daszak is a co-author of a study published in this week's Nature that maps the global 'hot spots' of emerging diseases and concludes, as Dr Wolfe has, that the real threat lies in the tropics. That is despite the fact that most new diseases are (as with AIDS) first noticed in rich countries."

The assertion that new diseases are "first noticed" in rich countries is a bit patronizing. Those who contract diseases in poor countries (and their loved ones) certainly notice them. The difference is that they are not empowered to do anything about it. Even healthcare workers in poor countries who "notice" new diseases have few tools with which to work. A concomitant benefit of Dr. Wolfe's initiative is that these diseases would finally be noticed in time to help those least capable of helping themselves. The payoff for those living in rich countries is that they may never have to face the threat such diseases pose. The article concludes:

"If and when the GVFI is running smoothly, Dr Wolfe hopes to see not only what is threatening, but also to identify the general characteristics (if any) that threatening viruses share. If some features are regularly associated with a propensity to become pandemic, then forecasting outbreaks of new viral diseases will become easier and more scientific. At that point, this branch of medicine will be able to make the most important leap of all—from cure to prevention. And then a catastrophe like AIDS will need never happen again."

I doubt we have seen the last pandemic, but even preventing one could save millions of lives. Technology is a marvelous thing in the hands of someone who knows how to stretch the envelope of the possible. I suspect we haven't heard the last of Dr. Wolfe and his pandemic prediction scheme.

Technology and Developing Countries

Since the computing age began in earnest starting in the mid-1980s, there has been talk about a digital divide between developed and developing countries. In recent years, pundits have been surprised how quickly developing countries have adopted technology (such as the cell phone) despite the fact that many of their economies have faltered. An article in The Economist indicates that technology adoption might be broad, but it isn't deep ["Of internet cafes and power cuts," 9 February 2008].

"Within a few months China will overtake America as the country with the world's largest number of internet users. Even when you factor in China's size and its astonishing rate of GDP growth, this will be a remarkable achievement for what remains a poor economy. For the past three years China has also been the world's largest exporter of information and communications technology (ICT). It already has the same number of mobile-phone users (500m) as the whole of Europe. China is by no means the only emerging economy in which new technology is being eagerly embraced. In frenetic Mumbai, everyone seems to be jabbering non-stop on their mobile phones: according to India's telecoms regulator, half of all urban dwellers have mobile- or fixed-telephone subscriptions and the number is growing by 8m a month. The India of internet cafés and internet tycoons produces more engineering graduates than America, makes software for racing cars and jet engines and is one of the top four pharmaceutical producers in the world. In a different manifestation of technological progress, the country's largest private enterprise, Tata, recently unveiled the 'one lakh car'; priced at the equivalent of $2,500, it is the world's cheapest. Meanwhile, in Africa, people who live in mud huts use mobile phones to pay bills or to check fish prices and find the best market for their catch. Yet this picture of emerging-market technarcadia is belied by parallel accounts of misery and incompetence. Last year ants ate the hard drive of a photographer in Thailand. [Earlier this year] internet usage from Cairo to Kolkata was disrupted after something—probably an earthquake—sliced through two undersea cables. Personal computers have spread slowly in most emerging economies: three-quarters of low-income countries have fewer than 15 PCs per 1,000 people—and many of those computers are gathering dust."

The article points out that most of the evidence for and against the value of technology in developing countries has been anecdotal; but that evidence is now being supplemented by a World Bank Study.

"The bank has drawn up indices based on the usual array of numbers: computers and mobile phones per head, patents and scientific papers published; imports of high-tech and capital goods. In addition, it uses things such as the number of hours of electricity per day and airline take-offs to capture the absorption of 19th- and 20th-century technologies. It tops this off with measures of educational standards and financial structure, which show whether technology companies can get qualified workers and enough capital. The results, laid out last month in the bank's annual Global Economic Prospects report, measure technological progress in its broadest sense: as the spread of ideas, techniques and new forms of business organisation."

These measures fit neatly into the Development-in-a-Box™ framework I've been pushing. What the World Bank is measuring is not only the presence of technology but whether nor not it achieves what is hoped -- that it will connect a country's economy to the global marketplace.

"Technology so defined is fundamental to economic advance. Without it, growth would be limited to the contributions of increases in the size of the labour force and the capital stock. With it, labour and capital can be used and combined far more effectively. So it is good news that the bank finds that the use of modern technology in emerging economies is coming on in leaps and bounds."

The assertion that "modern technology in emerging economies is coming on in leaps and bounds" is good news. It backs up recent assertions that the digital divide may be closing faster than pundits thought it would. The assertion is backed up by the World Bank's data.

"Between the early 1990s and the early 2000s, the index that summarises the indicators rose by 160% in poor countries (with incomes per person of less than about $900 a year at current exchange rates) and by 100% in middle-income ones ($900-11,000). The index went up by only 77% in industrialised countries (with average incomes above $11,000), where technology was more advanced to start with. Poor and middle-income nations, the bank concludes, are catching up with the West."

The report also confirms what I have been preaching about the benefits of globalization for developing countries -- a country progresses faster when its connectivity with the outside world increases.

"The main channels through which technology is diffused in emerging economies are foreign trade (buying equipment and new ideas directly); foreign investment (having foreign firms bring them to you); and emigrants in the West, who keep families and firms in their countries of origin abreast of new ideas. All are going great guns."

The article goes on to look at each of the principal flows of globalization -- resources, capital, and people -- separately. It begins with trade -- the flow of resources and goods.

"In the past ten years the ratio of poor countries' imports of high-tech products to their GDPs has risen by more than 50%. The ratio in middle-income countries has increased by over 70%. Capital goods (mainly industrial machinery) often embody new technology, and imports of these have increased faster in middle-income countries than in rich ones. The gain in high-tech exports has been more striking still: emerging economies' share of global trade in such goods rose by 140% between the mid-1990s and the mid-2000s. Some of the world's fastest-growing multinationals have sprung from such countries. These include Brazil's Petrobras, owner of some of the world's best deep-sea oil-drilling technology, and Mittal, a company of Indian origin that is now the world's largest steelmaker."

The article then turns to the flow of capital -- mostly in terms of foreign direct investment. As I have pointed out in the past, FDI is much more important for a developing country than foreign aid.

"Relative to GDP, inflows of foreign direct investment to developing economies have increased sevenfold since the 1980s. In some countries, such as Hungary and Brazil, foreign firms account for half or more of all R&D spending by companies. This has had dramatic demonstration effects. Local French-language call centres in Morocco and Tunisia got going only after French operators began outsourcing to the Maghreb. A quarter of Czech managers said they learned about new technologies by watching foreign companies in the Czech Republic."

Finally, it discusses the flow of people. The movement of people -- through emigration -- is probably the most controversial of globalization's flows, but for spreading technology it is a critical flow.

"Emigrants are arguably the most important source of new ideas and capital. Granted, emigration can be costly: computer engineers, scientists and doctors, trained at public expense at home, go to work abroad. But money and skills flow back. Nearly half the $40 billion-worth of foreign direct investment in China in 2000 came from Chinese abroad. Remittances have doubled in the past ten years and now account for roughly 2% of developing countries'GDPs—more than foreign aid. An émigré banker returned to set up Bangladesh's Grameenphone banking network last year; it now has 15m customers. Bata, a Czech shoemaker, has been saved twice by foreign connections. Facing bankruptcy in the early 1900s, Tomas Bata went to America to learn about mass production. He came back and established branches from India to Poland. After the second world war his son fled to Canada to escape the communists. He returned in 1989 and used late-20th-century know-how to expand in eastern Europe and open factories in China and India."

While all of this seems to bode well for developing countries, the World Bank report does throw a bit of a pall over this rosy picture. It reports that much technology is concentrated in urban and wealthier areas, leaving rural and poor areas still on the far side of the digital divide.

"The upshot is that technology is spreading to emerging markets faster than it has ever done anywhere. The World Bank looked at how much time elapsed between the invention of something and its widespread adoption (defined as when 80% of countries that use a technology first report it; see chart 1). For 19th-century technologies the gap was long: 120 years for trains and open-hearth steel furnaces, 100 years for the telephone. For aviation and radio, invented in the early 20th century, the lag was 60 years. But for the PC and CAT scans the gap was around 20 years and for mobile phones just 16. In most countries, most technologies are available in some degree. But the degree varies widely. In almost all industrialised countries, once a technology is adopted it goes on to achieve mass-market scale, reaching 25% of the market for that particular device. Usually it hits 50%. In the World Bank's (admittedly incomplete) database, there are 28 examples of a new technology reaching 5% of the market in a rich country; of those, 23 went on to achieve over 50%. In other words, if something gets a foothold in a rich country, it usually spreads widely. In emerging markets this is not necessarily so. The bank has 67 examples of a technology reaching 5% of the market in developing countries—but only six went on to capture half the national market. Where it did catch on, it usually spread as quickly as in the West. But the more striking finding is that the spread was so rare. Developing countries have been good at getting access to technology—and much less good at putting it to widespread use. As a result, technology use in developing countries is highly concentrated. Almost three-quarters of China's high-tech trade comes from just four regions on the coast. More than two-thirds of the stock of foreign investment in Russia in 2000 was in Moscow and its surroundings. Whereas half of India's city-dwellers have telephones, little more than one-twentieth of people in the countryside do."

Another interesting conclusion of the study, as implied from the above data, is that there is more than one digital divide. There is the divide between developing and developed countries and the divide between regions within a country and, according to their data, some big differences even between emerging market countries.

"For example, China imports and exports far more high-tech goods than India does and its exports are as technologically advanced as a country three times as rich. India and Bangladesh are neighbours with comparable levels of GDP per head. But electricity losses in India are about 30% of output; in Bangladesh, they are below 10%. And although Africa as a whole has low levels of mobile-phone use, in six countries (Botswana, Gabon, Mauritius, the Seychelles, Sierra Leone and South Africa) more than 30% of the population uses them."

The Economist goes on to report that technology optimists believe that "technological diffusion" -- the wide spread of technology throughout a country -- will take care of itself once a technology gains a toehold in a country. The pessimists, however, doubt there is reason to believe that technological diffusion will occur so naturally.

"The evidence from successful emerging markets is that if they absorb a new technology they usually do so fairly quickly. The corollary is that if a technology is not diffused promptly, it may at best be diffused only slowly and incompletely. Judging by the World Bank's index, that is what seems to be happening in some places. As a general rule, technological achievement rises fastest in poor and middle-income countries and then levels off as these countries approach Western living standards. But ... Latin America and Europe [demonstrate the case being made]. Eastern Europe is following the path taken by America and western Europe a few years before. But in Latin America the slope flattens at lower levels than elsewhere. The region has less installed bandwidth and fewer broadband subscribers than poorer East Asia, and not many more internet users or PCs. High-tech exports account for less than 7% of the total in Argentina and Colombia, against one-third in East Asia. In Chile and Brazil less than 2% of the business workforce is in ICT. This relative technophobia probably reflects years of inward-looking economic policies, import substitution and disappointing education systems. Here, slow technological dispersal may not be just the result of a time lag. It may be evidence of more fundamental problems."

The fundamental problems the article refers to include many of the pre-requisites for development I have harped on in the past -- infrastructure (particularly, access to electric power), good governance, good education, and good health).

"Broadly, two sets of obstacles stand in the way of technological progress in emerging economies. The first is their technological inheritance. Most advances are based on the labours of previous generations: you need electricity to run computers and reliable communications for modern health care, for instance. So countries that failed to adopt old technologies are at a disadvantage when it comes to new ones. Mobile phones, which require no wires, are a prominent exception. The adoption of older technologies varies widely among countries at apparently similar stages of development. Soviet central planners loved to build electricity lines everywhere; the result is that ex-communist countries enjoy near-universal access to electricity (an extremely rare example of a beneficial legacy from communism). Latin American countries had no such background and as a result consume only about half as much electricity per person as eastern Europe and central Asia. This partly explains the patchiness in countries' technological achievements overall. Call centres in Kenya, for example, pay more than ten times as much per unit of bandwidth as do rivals in India, because India's fibre-optic cable system is far better and cheaper. So sometimes you cannot leapfrog. As countries get richer, older technology constraints do not always fall away. It depends in part on how governments organise basic infrastructure like transport and communications. The other set of problems has to do with the intangible things that affect a country's capacity to absorb technology: education; R&D; financial systems; the quality of government. In general, developing countries' educational levels have soared in the past decade or so. Middle-income countries have achieved universal primary-school enrolment and poor countries have increased the number of children completing primary school dramatically. Even so, illiteracy still bedevils some middle-income countries and many poor ones."

We created Development-in-a-Box to help emerging market companies address shortfalls in these areas using international standards and best practices so that they wouldn't have to waste precious resources "reinventing the wheel" locally. A concomitant benefit is that the implementation of such standards gains a level of trust in processes that would otherwise take years, perhaps decades, to achieve. The article concludes that, despite the mixed picture it paints, there is no reason to be gloomy about technology and developing countries. They base their hope, in part, on the rising generation of youth around the world who are much more attuned to the opportunities that technology offers than were their parents and grandparents. As an optimist, I agree that the future is mostly bright. It remains dark only where oppressive and corrupt leaders choose to keep their countries disconnected. In a future post, I'll address another aspect of technology in developing countries -- the need for basic infrastructure on which to build.

Smoking and Development

One of the subjects I have repeatedly written about in this blog is