One of the books that influenced our thinking about Philanthrocapitalism was “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits“, by the management guru C. K. Prahalad, who sadly has just passed away. If you have not read the book yet, you should.
Frustrated by the failure of traditional aid to end poverty, Prahalad urged the private sector to get involved – especially the for-profit business sector. He saw a potential win-win, whereby businesses could profit by providing products, services and work that helped to raise the living standards of the 4 billion least well-off people on the planet. In the six years since his book appeared, this idea has gone from the wild fringes of development and business thinking, to the mainstream – though, as he readily conceded, the action has yet to match the volume of the rhetoric. However, the boom in mobile telephony and of for-profit microfinance among poorer communities in the past few years is proof that the idea that the profit motive can be harnessed to do good has genuine power to change the world.
Prahalad rightly worried that using terms like “the poor” reflected a mindset of low expectations: far better to see the four billion people at the bottom of pyramid as (potential) customers, entrepreneurs or investors – or, if you like, micro-consumers, micro-entrepreneurs and micro-investors. He was adamant that these people should be served with the latest technology, albeit tweaked to reflect their lesser incomes, and that the “frugal engineering” that is needed to profitably serve them would spawn innovations that would soon flow back to the rich world.
Prahalad also saw that there is a crucial role to be played by philanthrocapitalism. Business requires an effective ecosystem if it is to operate effectively – the lack of an appropriate ecosystem of trust, information, rule of law and so forth is often the biggest obstacle to the creation of successful businesses at the Bottom of the Pyramid. Business must therefore take the lead in building suitable ecosystems, Prahalad argued – something that will require it to partner effectively with philanthropists and non-profit organisations, as well as perhaps with government. These are the sort of partnerships that are increasingly common in the developing world – a key part of the Gates Foundation’s global development strategy, for example.
Prahalad will be sorely missed. Yet, happily, his ideas seem set to go from strength to strength. When he last spoke to Matthew, he said that “I can now answer ‘yes’ to five questions I posed when I first launched the idea of Bottom of the Pyramid. Is there a real market? Is it scalable? Is there profit? Is there innovation? Is there a global opportunity?” As we mourn him, we also share his optimism.