Making Capitalism More Creative

By Bill Gates
Time, Thursday, Jul. 31, 2008

Capitalism has improved the lives of billions of people — something
that’s easy to forget at a time of great economic uncertainty. But it
has left out billions more. They have great needs, but they can’t
express those needs in ways that matter to markets. So they are stuck
in poverty, suffer from preventable diseases and never have a chance
to make the most of their lives. Governments and nonprofit groups have
an irreplaceable role in helping them, but it will take too long if
they try to do it alone. It is mainly corporations that have the
skills to make technological innovations work for the poor. To make
the most of those skills, we need a more creative capitalism: an
attempt to stretch the reach of market forces so that more companies
can benefit from doing work that makes more people better off. We need
new ways to bring far more people into the system — capitalism — that
has done so much good in the world.

There’s much still to be done, but the good news is that creative
capitalism is already with us. Some corporations have identified
brand-new markets among the poor for life-changing technologies like
cell phones. Others — sometimes with a nudge from activists — have
seen how they can do good and do well at the same time. To take a
real-world example, a few years ago I was sitting in a bar with Bono,
and frankly, I thought he was a little nuts. It was late, we’d had a
few drinks, and Bono was all fired up over a scheme to get companies
to help tackle global poverty and disease. He kept dialing the private
numbers of top executives and thrusting his cell phone at me to hear
their sleepy yet enthusiastic replies. As crazy as it seemed that
night, Bono’s persistence soon gave birth to the (RED) campaign. Today
companies like Gap, Hallmark and Dell sell (RED)-branded products and
donate a portion of their profits to fight AIDS. (Microsoft recently
signed up too.) It’s a great thing: the companies make a difference
while adding to their bottom line, consumers get to show their support
for a good cause, and — most important — lives are saved. In the past
year and a half, (RED) has generated $100 million for the Global Fund
to Fight AIDS, Tuberculosis and Malaria, helping put nearly 80,000
people in poor countries on lifesaving drugs and helping more than 1.6
million get tested for HIV. That’s creative capitalism at work.

Creative capitalism isn’t some big new economic theory. And it isn’t a
knock on capitalism itself. It is a way to answer a vital question:
How can we most effectively spread the benefits of capitalism and the
huge improvements in quality of life it can provide to people who have
been left out?

The World Is Getting Better
It might seem strange to talk about creative capitalism when we’re
paying more than $4 for a gallon of gas and people are having trouble
paying their mortgages. There’s no doubt that today’s economic
troubles are real; people feel them deeply, and they deserve immediate
attention. Creative capitalism isn’t an answer to the relatively
short-term ups and downs of the economic cycle. It’s a response to the
longer-term fact that too many people are missing out on a historic,
century-long improvement in the quality of life. In many nations, life
expectancy has grown dramatically in the past 100 years. More people
vote in elections, express their views and enjoy economic freedom than
ever before. Even with all the problems we face today, we are at a
high point of human well-being. The world is getting a lot better.

The problem is, it’s not getting better fast enough, and it’s not
getting better for everyone. One billion people live on less than a
dollar a day. They don’t have enough nutritious food, clean water or
electricity. The amazing innovations that have made many lives so much
better — like vaccines and microchips — have largely passed them by.
This is where governments and nonprofits come in. As I see it, there
are two great forces of human nature: self-interest and caring for
others. Capitalism harnesses self-interest in a helpful and
sustainable way but only on behalf of those who can pay. Government
aid and philanthropy channel our caring for those who can’t pay. And
the world will make lasting progress on the big inequities that remain
— problems like AIDS, poverty and education — only if governments and
nonprofits do their part by giving more aid and more effective aid.
But the improvements will happen faster and last longer if we can
channel market forces, including innovation that’s tailored to the
needs of the poorest, to complement what governments and nonprofits
do. We need a system that draws in innovators and businesses in a far
better way than we do today.

Naturally, if companies are going to get more involved, they need to
earn some kind of return. This is the heart of creative capitalism.
It’s not just about doing more corporate philanthropy or asking
companies to be more virtuous. It’s about giving them a real incentive
to apply their expertise in new ways, making it possible to earn a
return while serving the people who have been left out. This can
happen in two ways: companies can find these opportunities on their
own, or governments and nonprofits can help create such opportunities
where they presently don’t exist.

What’s Been Missed
As C.K. Prahalad shows in his book The Fortune at the Bottom of the
Pyramid, there are markets all over the world that businesses have
missed. One study found that the poorest two-thirds of the world’s
population has some $5 trillion in purchasing power. A key reason
market forces are slow to make an impact in developing countries is
that we don’t spend enough time studying the needs of those markets. I
should know: I saw it happen at Microsoft. For many years, Microsoft
has used corporate philanthropy to bring technology to people who
can’t get it otherwise, donating more than $3 billion in cash and
software to try to bridge the digital divide. But our real expertise
is in writing software that solves problems, and recently we’ve
realized that we weren’t bringing enough of that expertise to problems
in the developing world. So now we’re looking at inequity as a
business problem as well as something to be addressed through
philanthropy. We’re working on projects like a visual interface that
will enable illiterate or semiliterate people to use a PC instantly,
with minimal training. Another project of ours lets an entire
classroom full of students use a single computer; we’ve developed
software that lets each student use her own mouse to control a
specially colored cursor so that as many as 50 kids can use one
computer at the same time. This is a big advance for schools where
there aren’t enough computers to go around, and it serves a market we
hadn’t examined before.

Cell phones are another example. They’re now a booming market in the
developing world, but historically, companies vastly underestimated
their potential. In 2000, when Vodafone bought a large stake in a
Kenyan cell-phone company, it figured that the market in Kenya would
max out at 400,000 users. Today that company, Safaricom, has more than
10 million. The company has done it by finding creative ways to serve
low-income Kenyans. Its customers are charged by the second rather
than by the minute, for example, which keeps down the cost. Safaricom
is making a profit, and it’s making a difference. Farmers use their
cell phones to find the best prices in nearby markets. A number of
innovative uses for cell phones are emerging. Already many Kenyans use
them to store cash (via a kind of electronic money) and transfer
funds. If you have to carry money over long distances — say, from the
market back to your home — this kind of innovation makes a huge
difference. You’re less tempting to rob if you’re not holding any
cash.

This is how people can benefit when businesses find opportunities that
have been missed. But since I started talking about creative
capitalism earlier this year, I’ve heard from some skeptics who doubt
that there are any new markets. They say, “If these opportunities
really existed, someone would have found them by now.” I disagree.
Their argument assumes that businesses have already studied every
possible market for their products. Their attitude reminds me of the
old joke about an economist who’s walking down the street with a
friend. The economist steps over a $10 bill that’s lying on the
ground. His friend asks him why he didn’t take the money. “It couldn’t
possibly be there,” he explains. “If it were, somebody would’ve picked
it up!” Some companies make the same mistake. They think all the $10
bills have already been picked up. It would be a shame if we missed
such opportunities, and it would make a huge difference if, instead,
researchers and strategists at corporations met regularly with experts
on the needs of the poor and talked about new applications for their
best ideas.

Beyond finding new markets and developing new products, companies
sometimes can benefit by providing the poor with heavily discounted
access to products. Industries like software and pharmaceuticals, for
example, have very low production costs, so you can come out ahead by
selling your product for a bigger profit in rich markets and for a
smaller profit, or at cost, in poor ones. Businesses in other
industries can’t do this tiered pricing, but they can benefit from the
public recognition and enhanced reputation that come from serving
those who can’t pay. The companies involved in the (RED) campaign draw
in new customers who want to be associated with a good cause. That
might be the tipping point that leads people to pick one product over
another.

There’s another crucial benefit that accrues to businesses that do
good work. They will find it easier to recruit and retain great
employees. Young people today — all over the world — want to work for
organizations that they can feel good about. Show them that a company
is applying its expertise to help the poorest, and they will repay
that commitment with their own dedication.

Creating New Incentives
Even so, no matter how hard businesses look or how creatively they
think, there are some problems in the world that aren’t amenable to
solution by existing market incentives. Malaria is a great example:
the people who most need new drugs or a vaccine are the least able to
pay, so the drugs and vaccines never get made. In these cases,
governments and nonprofits can create the incentives. This is the
second way in which creative capitalism can take wing. Incentives can
be as straightforward as giving public praise to the companies that
are doing work that serves the poor. This summer, a Dutch nonprofit
called the Access to Medicine Foundation started publishing a report
card that shows which pharmaceutical companies are doing the most to
make sure that medicines are made for — and reach — people in
developing countries. When I talk to executives from pharmaceutical
companies, they tell me that they want to do more for neglected
diseases — but they at least need to get credit for it. This report
card does exactly that.

Publicity is very valuable, but sometimes it’s still not enough to
persuade companies to get involved. Even the best p.r. may not pay the
bill for 10 years of research into a new drug. That’s why it’s so
important for governments to create more financial incentives. Under a
U.S. law enacted last year, for example, any drug company that
develops a new treatment for a neglected disease like malaria can get
a priority review from the Food and Drug Administration (FDA) for
another product it has made. If you develop a new drug for malaria,
your profitable cholesterol drug could go on the market as much as a
year earlier. Such a priority review could be worth hundreds of
millions of dollars. It’s a fantastic way for governments to go beyond
the aid they already give and channel market forces so they improve
even more lives.

Of course, governments in developing countries have to do a lot to
foster capitalism themselves. They must pass laws and make regulations
that let markets flourish, bringing the benefits of economic growth to
more people. In fact, that’s another argument I’ve heard against
creative capitalism: “We don’t need to make capitalism more creative.
We just need governments to stop interfering with it.” There is
something to this. Many countries could spark more business investment
— both within their borders and from the outside — if they did more to
guarantee property rights, cut red tape and so on. But these changes
come slowly. In the meantime, we can’t wait. As a businessman, I’ve
seen that companies can tap new markets right now, even if conditions
aren’t ideal. And as a philanthropist, I’ve found that our caring for
others compels us to help people right now. The longer we wait, the
more people suffer needlessly.

The Next Step
In june, I moved out of my day-to-day role at Microsoft to spend more
time on the work of the Bill & Melinda Gates Foundation. I’ll be
talking with political leaders about how their governments can
increase aid for the poor, make it more effective and bring in new
partners through creative capitalism. I’ll also talk with CEOs about
what their companies can do. One idea is to dedicate a percentage of
their top innovators’ time to issues that affect the people who have
been left behind. This kind of contribution takes the brainpower that
makes life better for the richest and dedicates some of it to
improving the lives of everyone else. Some pharmaceutical companies,
like Merck and GlaxoSmithKline, are already doing this. The Japanese
company Sumitomo Chemical shared some of its technology with a
Tanzanian textile company, helping it produce millions of bed nets,
which are crucial tools in the fight to eradicate malaria. Other
companies are doing the same in food, cell phones and banking.

In other words, creative capitalism is already under way. But we can
do much more. Governments can create more incentives like the FDA
voucher. We can expand the report-card idea beyond the pharmaceutical
industry and make sure the rankings get publicity so companies get
credit for doing good work. Consumers can reward companies that do
their part by buying their products. Employees can ask how their
employers are contributing. If more companies follow the lead of the
most creative organizations in their industry, they will make a huge
impact on some of the world’s worst problems.

More than 30 years ago, Paul Allen and I started Microsoft because we
wanted to be part of a movement to put a computer on every desk and in
every home. Ten years ago, Melinda and I started our foundation
because we want to be part of a different movement — this time, to
help create a world where no one has to live on a dollar a day or die
from a disease we know how to prevent. Creative capitalism can help
make it happen. I hope more people will join the cause.

Perihal perencanamuda
Komunitas perencana muda progressif

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