who will buy what the poor produce? can we really expect america and europe to consume all that the poor can produce? how large was the market for electricity in 1880? how are efficient markets created? how are local monopolies broken? how are utility preferences corrected? how do the poor gain power so that they can get their government to actually serve them?

Thoroughly enjoyed your paper Aneel! Long overdue! I am just sharing my excitement of finally reading Aneel's cool and sharp critique of the "anything-goes in development scholarship" of BOP proponents. P{overty is not a management optimization problem, waiting to be solved by some clever pricing and product distribution adjustment. The poor are poor because there are deep-rooted structural inequities that continue to exist in our societies and world order. Poor are poor Because Of Poverty (the BOP). Somehow some management 'experts' have decided that we can forget about social structure, political power and privilege and just recycle the arguments of technical rationality with (as Aneel shows) unrealistic 'proclamations' and all the probelms of poverty will be solved. I do see tremendous potential for private sector to invest in, help develop and eventually benefit from public good (health, education, environment). But to think of a quick magic of turning profits from the so called 'bottom of the pyramid', is anything but good management thinking and definitely not good news for the poor. Tamo Chattopadhay; Columbia University in New York

I agree. Graham Douglas Integrative Federation™ www.integrative-thinking.com

Dear All, I'd be very interested in collecting - perhaps through NextBillion - a set of cases and examples in which large companies, say MNCs and/or large national companies, are working with the poor as producers or taking integrative approaches which span the production/consumption sides. I've heard of several such integrative approaches in the agribusiness sector, e.g. ITC's e-Choupal and several initiatives of Nestle's. What others are folks aware of? Are there any other industries where integrative approaches tend to appear? I'm sure many examples are already to be found on NextBillion. Is there an efficient way to search the different sectors for models in these two categories? Best regards, Beth Jenkins

Agreed. The ideas behind making something of the bottom of the pyramid (or the long-tail, whichever you choose to use as a model) can't be built upon the presupposition of selling to them. Sure, there is money to be made by selling, even to the poor, but the value you add by bringing their services/products to market are much more lucrative. There are a host of other items to talk about around poverty, but one of them that I feel speaks to the issue directly is the fact that "development" doesn't work. You need to have commercial businesses make the change. So, provide a way for the poor to make a market by providing a platform from which they can do that. Good thoughts!

Beth, Have you seen this interview? http://www.nextbillion.net/search/node/david+wheeler It was indicative of an integrative approach. Graham Douglas Integrative Federation™ www.integrative-thinking.com

I agree with Karnani that the best win-win for companies and the communities of the poor is in the field of skill building and employability/employment. I began work in the field of Private Sector linkages with the poor exploring various models in plantations, commodities etc. The issues however are so complex and in many cases getting the win on both sides is a challenge. Now, as head of the Employment Generation Mission in Andhra Pradesh India, I work in building models with govt, private sector and really poor and vulnerable socially and economically underpriveleged youth as stakeholders and the program works on scale. Meera Shenoy, India

regardless, 'poverty' is more defined by the inability to consume than anything else. we say a person is poor because they cannot consume - electricity, clean water, sewage treatment, health care, schooling, housing, clothing, heat, etc.

therefore, the only solution to poverty is, in fact, consumption. you may look to production as the enabler that helps people consume, but it's only an enabler.

if you're a company, an MNC for instance, and you care about the poor, you have to find a way to help the poor consume. if you find ways to help them produce, that's fantastic. but, somebody's got to market products and service to them ... otherwise they'll never consume, and they'll always be poor.

the BOP idea is simple: develop, market and distribute products and services that actually make poor peoples' lives better. the BOP idea is to make it possible for poor people to receive more "consumer surplus" than they ever have before.

for instance, microfinance creates "consumer surplus" by offering lower prices than local, monopolistic moneylenders. safebuoy creates "consumer surplus" by helping people avoid food-borne illnesses such as diarrhea. [you know what else would help? 'silverware'. a silverware company could really help people.]

remember, it doesn't matter how much the poor produce or how much money they make. they can't eat money, and money doesn't stop an infection. somebody has got to go in there with real products and sell them.
...or maybe we should just let each village discover penicilin on their own.

macharia,

i'm blessed to know both texts quite well. in my opinion, dr hart's main contribution is to point out that BOP consumption, in the long term, must be sustainable. dr senge's point is well taken, but the difficult thing is to see that 'the fix will fail' ahead of time; even dr senge's fixes can fail.

there's so much i'd like to say...but i'll contain myself to just look at the paper. let's begin at page 23 - "the poor as producers".

--micro-finance. yes, micro-finance is enabling many of the 'poor' to produce, to become entrepreneurs. but my bank charges me interest on my loans...trust me, they do indeed see me as their customer. now, microfinance may not be profitable all around yet (not all 1st world banks are, either), but that's really a business model problem that people are trying to work out, it is not an indication that it's impossible to make a profit there.
--create efficient markets. yes, the poor do suffer from gross market inefficiencies; it's a huge problem. but, i enjoy an 'efficient' market because companies compete for my business....it's the competition that delivers the efficiency. 'amul' is competition for the middlemen. 'e-Choupal' has provided a service to farmers and has helped to increase farmer profit (by reducing middleman profit); but improved market efficiency would be better characterized by a second, third and forth middleman moving into the neighborhood and competing against one another/ innovating to improve their operations.
--job creation. yes, job creation is great, and it is generally done by smaller firms in this context, currently, that is. but why? because it is mostly done this way now is not a convincing argument that MNCs should not try. indeed, isn't prahalad saying that MNCs should begin trying?
--role of the government. yes, the government has an important role. unfortunately, many governments don't do that great a job. ...don't MNCs have a remarkable way with changing government policies when they have an economic interest to do so?
--economic growth. yes, trickle down economics can be too little and too slow. but how about 'consumer surplus'? isn't that immediate and potentialy substantial?
--non-economic development. yes, poverty is more than economics. but aren't MNCs primarily economic entities? what does 'non-economic development' really have to with the MNC? if you're the CEO of a MNC, are you charged with bringing democracy and freedom to the world or with creating wealth for your owners?
--government failure. why, why, why is water, sewage, education, roads and agricultural technology a government responsibility? there is no supporting argument within the text for the statement made here. ...frankly, if the state IS failing to provide, i would much rather have a business provide these things than not to have them at all.
--finally, the doctor-good samaritan-band aid analogy is not accurate, because it implies (1) that the good samaritan is incompetent, just as the doctor was, and (2) that the good samaritan is not self-interested. first, the competent good samaritan and the competent consultant will give that patient the band-aid, then an operation, then a recovery ward, then occupational therapy and then regular checkups. second, the good samaritan will charge for services rendered...while 'the good samaritan' is common parlance is actually hurt economically, the MNC as 'the good samaritan' must make a profit.

'beyond the hype' began with:
"The BOP proposition is characterized by much hyperbole and very weak research methodology. The fortune and glory at the bottom of the pyramid are a mirage. The fallacy of the BOP proposition is exacerbated by its hubris."
....strong words deserving serious skepticism; i would encourage everyone to really put this paper under a microscope before buying into it. or, even better, go do something practical to prove this paper correct or incorrect.

Dear Lance,

Thanks again for the deep and detailed look at the paper. I mentioned Peter Senge's (1990) work in this conversation because of his focus on Systems, rather than parts of Systems. My biggest contention with C.K.'s BoP proposition is the lack of consideration of the ecoSystem in the BoP, and it only based on snapshots of a bigger system. Indeed, at a deepest level, Aneel Karnani's argument insists on the need for systems view, and consideration to ensure balance, and perhaps sustainability. While it is not possible to take care of all the (lose) ends, as they were, a conceptual model such the C.K.'s BoP Proposition must provide a means of dealing with all contingencies in a system. C.K.'s Proposition leaves out way too many important issues, in the BoP. Karnani helps to point out some big omissions, such as the role of the government, leadership, and so forth.

Stu Harts argument in the Capitalism at the Crossroads provides the second step towards completing the fortune at the BoP. However, Stu's argument is will need Hernado de Soto's concept for us to realize the full capacity for the fortune at the BoP. At the most basic level de Soto's extensive work in Peru, and many other developing countries, continually provide illustrative examples of much dead capital in all developing countries. De Soto has worked out the mechanism that would communities, and governments to turn dead capital into live capital.

The fortune at the BoP (Prahalad), is the first step in announcing responsible investment; capitalism at the crossroad (Hart), as the mechanism of mutual value creation at the BoP; and turning dead capital to live capital (de Soto) is the ultimate mechanism of fixing wealth at the BoP. In my mind, a combination of the three concepts provides a systems-based conceptual model for finding, creating value, and fixing the fortune at the BoP.

Macharia

I just enjoy this long thread, mostly from academics like myself. When will we ever realize that the bulk of our so-called "disputes" center on a predilection to stake a "one or the other" kind of position? We know from astute observation and experience that 'taint so. I posit that ALL consumption AND production AND distribution AND finance AND behavior ought to be harnessed and be made to work together for real incomes to increase and improve the lot of the world's poor. Seems like this empty discourse is only made to score one over another. Who cares about whose view is correct, anyway, if the poor remain poor? That I why I opted for an approach that harnesses all of them within a contractual type of environment. If I may suggest (hopefully not immodestly) please check the blog on COMMUNITY BASED ENTERPRISE (OR CBED) STRATEGY, for an exposition. I can send the entire parpe for those who are interested, keeping in mind that I do not need accolades or brickbats as much as actual hands and resources to make it work. We just finished prototyping, am already in process of raising resources to implement it. It may not be theoretically rigorous but our experiment seem to have worked. I suspect that a few years from now when we have improved the lives of the communities we will serve, these debates will still be here. Human nature? Please, we have enough work ahead of us. Spare the academe from more insults like - if we can't do, teach. Let's teach what we know works first hand.

Victor, after listening to the debate for over forty years as a practitioner I could not agree more with your general view. Most of the debating points have not changed much in that time while the problems have grown and led to an unsustainable world. At the same time, our scientific understanding of the human mind and behaviour and of our world has improved immensely. Surely it is time we applied that understanding very widely through education and training. With this in mind I am collecting relevant tools and research to advance the diffusion, refining and implementation of Integrative Improvement: Sustainable Development as if People and Their Physical, Social and Cultural Environments Mattered. May I please have a copy of the paper you mentioned? Graham Douglas Integrative Federation™ www.integrative-thinking.com

I have enjoyed reading this thread. It is important to follow Victor's advice. The importance of the BOP as a concrete image of the social issue and as a market opportunity should not be diminished. For many coporations to now understand what the BOP is and to be seeking to do business in this segment is a huge step-change. These conversations never took place before the mid 1990's because the metaphors had no value to enterprise. Now with all the work that has been done in the area, the BOP is a valid market segment to be considered in strategic business planning. Our business has been ravaged by globalization and we have learned that to enter emerging markets, one must go local and build markets, products and the infrastructures locally. The product may or may not be produced locally but the relationships (market) must be local due to the cultural differences between the southern poor and the the west. The product - service value proposition is simply different in the BOP, and is very similar to western, local markets. To be is to do, and all the talk and experiments are only worth anything to enterprise if they can create the customer.

None of the models or prepositions (including CK's BoP) would be fullproof. The role of critique is to highlight scope of enhancement/add value and should be taken in that spirit only. It is not important whether the no. of people at BoP is 4 billion or less or what methdology is used to calculate it (one of the points raised by AK). The reality is that there are large number of people and they would be helped in a dignified way if innovative ways could be devised for engaging them. ITC's e-choupal has helped the soya farmers in central India. But that has been the story of one company and one crop only, what if other companies evolve similar ways for other crops, all along involving BOP in business opportunity giving them dignity and choice. And when that happens it would be the starting (and not the end) of process of development. Once people start feeling empowered and have resources, other ways and means need to be planned to develop other markets and consuption of services and goods which can be consumed either by poor or well off.