Can Silicon Valley Save the World?

Not content with dominating IPOs on Wall Street, Silicon Valley entrepreneurs are taking their can-do, failure-conquering, technology-enabled tactics to the challenge of global poverty. And why not? If we can look up free Khan Academy math lectures using the cheap, kid-friendly computers handed out by the folks at One Laptop per Child, who needs to worry about the complexities of education reform? With a lamp lit up by an electricity-generating soccer ball in every hut, who needs coal-fired power stations and transmission lines? And if even people in refugee camps can make money transcribing outsourced first-world dental records, who needs manufacturing or the roads and port systems required to export physical goods? No wonder the trendiest subject these days for TED talks is cracking the code on digital-era do-gooding, with 100 recent talks and counting just on the subjects of Africa and development.

In a 2003 speech, Kofi Annan, then U.N. secretary-general, challenged Silicon Valley’s tycoons to look abroad, daring the valley to “bring more of its remarkable dynamism and innovation to the developing world.” California moguls old and new have risen to the challenge. The most famous of these techno-philanthropists, Microsoft founder Bill Gates and his wife, Melinda, commit jaw-dropping sums of cash each year, backed up by the best science that money can buy, in a business-like effort to eradicate polio and river blindness, and to raise small farmers’ incomes in Africa and South Asia. Others opt for a more explicit technological evangelism, bordering on utopianism. In 2011, financier Bob King donated $150 million to found the Stanford Institute for Innovation in Developing Economies, which “aims to transform the lives of people in poverty on a massive scale through entrepreneurship and innovation.” Eric Schmidt, the chairman of Google, and Jared Cohen, a former U.S. State Department official who now runs the “think/do tank” Google Ideas, predict in their new book, The New Digital Age, that connecting the world’s remaining 5 billion offline people to the Internet will turbocharge global development. The “gains in efficiency and productivity will be profound,” they write, “particularly in developing countries where technological isolation and bad policies have stymied growth and progress for years.” Schmidt even ventures that everyone worldwide will be online by 2020. If he and Cohen are right about the power of connectivity, poor countries are in for a wild few years.

Cohen and Schmidt’s The New Digital Age is a tract of reactionary Luddism next to the vision laid out in Abundance: The Future Is Better Than You Think, by X Prize Foundation chairman and CEO Peter Diamandis and journalist Steven Kotler. “Humanity,” they write, “is now entering a period of radical transformation in which technology has the potential to significantly raise the basic standards of living for every man, woman, and child on the planet. Within a generation, we will be able to provide goods and services, once reserved for the wealthy few, to any and all who need them.… Abundance for all is actually within our grasp.” No surprise, then, that there are so many new poverty-fighting start-ups these days in Silicon Valley, mirroring their for-profit brethren’s world-spanning ambition. To take just one example, Palo Alto-based Nuru International, though funded with a modest $3 million a year by “angel investors from Silicon Valley,” boasts on its website that its model of training and equipping local leaders “is designed to be the first self-sustaining, self-scaling, integrated development model to end extreme poverty in remote, rural areas, in our lifetime.”

Technology, of course, has already made a huge difference in the quality of life of many of the world’s poorest people. Think of the smallpox vaccine (which has saved hundreds of millions from early death), the nearly 7 billion mobile-phone subscriptions, the radio, or even the humble bicycle. And no doubt the new tech titans have brought a much-needed infusion of energy, ideas, and cash to a field long dominated by bureaucrats, budget wonks, and economists. Schmidt’s Google has already done some wonderful things for development, producing, for example, some of the first decent digital maps of African city streets.

But entrepreneurial spirit and even the fanciest of gadgets will only get you so far. All the technological transformation of the last 200 years hasn’t come close to wiping out global poverty. More than half the planet still lives on less than $4 a day, and 2.4 billion people live on less than $2 a day. And that’s after a decade that saw the biggest drop in extreme poverty ever. What’s more, millions and millions of people still die annually from easily and cheaply preventable or treatable diseases like diarrhea and pneumonia. None of this is for a lack of science; often it isn’t even for lack of money. It is because parents don’t follow simple health practices like washing their hands, government bureaucrats can’t or won’t provide basic water and sanitation programs, and arbitrary immigration restrictions prevent the poor from moving to places with better opportunities.

Sorry, but no iPhone, even one loaded with the coolest apps, is going to change all that.

The tech gurus, like so many evangelists of earlier eras, are wildly overoptimistic about what their gadgets can accomplish in the world’s poorest places. In this they share a rich history of failure. No less than Marx and Engels were sure the locomotive was going to unite the proletariat into a national force for social revolution, and the world would be a worker’s paradise in short order as a result. More recently, in the midst of the Arab Spring protests, columnist Thomas Friedman and many fellow pundits gushed about the power of tools like Twitter and Facebook to overthrow dictators and promote democracy. The Internet, declared the State Department’s in-house tech guru, Alec Ross, had become “the Che Guevara of the 21st century.” (Given that Che failed in three of the four revolutions in which he participated, that might actually be about right.)

But Friedman and Ross are hardly the only, or even worst, offenders when it comes to dramatically inflating the Internet’s power to promote change. A recent World Bank report suggests a 10 percent increase in broadband access correlates to a 1.38 percentage point increase in the rate of GDP growth in low- and middle-income countries. Taken at face value, that suspiciously precise figure suggests that if you just get ubiquitous broadband access, you’ll leave China in the dust. The report has been cited by the United Nations Broadband Commission for Digital Development to argue that high-speed Internet is crucial to meeting development targets from halving global poverty to slashing child and maternal mortality to ensuring universal primary schooling. The fact that the World Bank analysis was about GDP growth that happened before there was any broadband at all in most of the countries analyzed goes unmentioned — but it sure is a sign of the hype around technology and the willingness of people to believe we’ve finally found the holy grail for growth on the flimsiest of evidence.

THE WEAK LINK between technology’s advance and global poverty reduction shouldn’t come as a surprise. Most technologies were invented in the rich world to tackle rich-world problems. Today, that means they’re designed to be used most effectively by highly educated knowledge workers operating in places where physical and institutional infrastructure is strong. That’s not much use in countries like Liberia, where illiteracy is rampant, along with corruption and blackouts. Rich-world technologies usually just don’t transfer well to the poor world.

The exceptions to this rule tend to be by accident rather than design. Take the mobile phone, originally conceived as a status toy for yuppies, not a mass-market tool far cheaper than a landline phone, but now used by at least four times as many people in developing countries as in the industrialized world. From Kenya to the Philippines, local entrepreneurs have adapted mobile phones to work on a prepaid system that doesn’t require users to have bank accounts, and to deliver cheap communication and financial services through texting and mobile banking.

Sadly, tractors rusting in Ethiopian fields and Internet kiosks in rural areas sitting dusty and unused are the far more common outcomes of trying to drive development through high tech. Yet the latest set of tech boosters appears to be determined to ignore the lessons of the past. They hand out prizes, awards, and funding to whiz-bang projects that look great on a PowerPoint slide, but often crash and burn in the real world.

Take the innovation that Popular Mechanics labeled a “brilliant idea“: the Soccket. The device is a $99 soccer ball enclosing electronics that can power an LED light for three hours after you kick the ball around for 30 minutes. Two of the inventors — students at Harvard when they founded the project — were named the university’s Scientists of the Year in 2012. At the Clinton Global Initiative’s 2011 meeting, former U.S. President Bill Clinton said the ball is “quite extraordinary … an off-grid solution that gives us a way to bring power and improved quality of life, working capacity, learning capacity.” In April, Inc. magazine named the company that makes Soccket one of its 25 Most Audacious Companies. State Farm insurance company and Western Union have sponsored ball giveaways in Latin America and Africa, while TED labeled the idea “an invention with revolutionary potential for the developing world.”

It really is a neat trick that a soccer ball only 2 ounces heavier than regulation weight can enclose a battery and technology pack that generates power from rolling. Then again, you can get a solar-powered lamp for $10. It isn’t clear why anyone would pay 10 times that for a light whose power source you have to kick around for half an hour to get less illumination. (Alison Dalton Smith, who works for the start-up behind Soccket, admits in an email exchange, “The Soccket is definitely more expensive than other lighting solutions,” but argues, “because soccer is the most popular sport on the planet, this combination of need and play encourages people to make play a priority.”)

Before the Soccket, there were PlayPumps, an innovation hailed by Laura Bush and AOL co-founder Steve Case that would use the power generated by kids spinning on a merry-go-round to deliver water. PlayPumps cost four times what a regular water pump did. Aid workers reported that they broke and were hard to fix. And, according to an analysis by the Guardian, it turned out that kids would have to “play” for 27 hours a day to meet the target of delivering water to 2,500 people per pump.

In defense of the smart, committed young entrepreneurs behind the Soccket, it must be said that older, grizzled professors have made bigger and more expensive mistakes. The Massachusetts Institute of Technology’s Nicholas Negroponte leads the One Laptop per Child project, whose website claims that by distributing $100 laptops, “we have seen two million previously marginalized children learn, achieve and begin to transform their communities.” But in 2012, two separate studies — one in Nepal and the other in Peru — concluded that kids using the computers gained little or no benefit in terms of improved language or math skills or school attendance.

Even ideas that may have real potential get hyped far before that potential has been demonstrated. Consider San Francisco-based Samasource. The nonprofit takes outsourcing work like transcription and data-checking and breaks the work into tasks small enough that they can be completed by women and disadvantaged youth in 11 work centers across five countries. Digital technology allows Samasource not only to send your project to the other side of the globe, but also to break down seemingly complex, skill-intensive tasks into bite-sized pieces. Last year it won awards from Secretary of State Hillary Clinton and the Club de Madrid. And it may turn out to be an exciting model. But it is still a little early to say. The nonprofit’s website says it has paid more than $3 million in wages to more than 3,700 people. But Samasource has raised at least $12 million in donations over that time — implying that it raises $4 in donations for each $1 paid in wages. (Pam Smith, head of marketing at Samasource, says the current ratio is about $1 in overhead to $1 in wages. She also notes that Samasource provides training and has a strong record of getting graduates into permanent gainful employment.) For now, that’s still a very expensive job-creation program.

Hey, everybody makes mistakes. And when working with new technologies and approaches, we should expect lots of failures. Tech entrepreneurs are used to a culture of failure — 10 bad ideas that sink before one gets to its multibillion-dollar initial public offering. But the advantage of the system in which they operate is the market test. As a rule, the bad ideas go bankrupt (if sometimes only after the multibillion-dollar IPO).

But by moving the model to development, we’ve taken tech entrepreneurs’ high tolerance for failure and penchant for hyping harebrained schemes to an arena where the market test is considerably diluted. Ideas get funding from Kickstarter and philanthropies on the basis of their appeal to donors and philanthropists in the West rather than consumers in Africa. And that’s what leads to the Soccket, the PlayPump, and One Laptop per Child.

Uncharted Play; Mediamolecule via Flickr

SO WHAT CAN BE DONE to harness technological innovation, filter the good ideas from the bad, and spread a little of Silicon Valley’s fairy dust on the world’s poorer regions? The answer, according to Harvard economist Michael Kremer, is market discipline and rigorous testing. Kremer is a MacArthur “genius” grant winner whose name pops up in speculation about future Nobel Prize contenders. He thinks that technological fixes can dramatically improve the lives of the global poor, but markets won’t provide the right innovations without support.

Poor people don’t have the buying power to build demand for the innovations — say, malaria vaccines or new potato varieties — that could improve their lives. So Kremer has been looking for ways to create a market for new technologies the poor are simply too poor to create a market for on their own. His first idea grew out of research with MIT’s Rachel Glennerster looking at vaccines. They noted that billions of dollars in annual research and development spending on new drugs in rich countries largely ignored the diseases that kill people in poor countries. And the money spent by aid agencies to support basic research on those neglected diseases wasn’t generating results. For example, U.S. aid agencies had paid millions of dollars for malaria vaccine research without any success. The problem, Kremer and Glennerster argued, was that the government’s model required picking winners up front — deciding which labs and which companies to fund ahead of time, before any results came in. And it was fundamentally impossible to know from where the best ideas would emerge.

Instead, Kremer and Glennerster suggested, why not guarantee a market for the vaccine once it was created? Donors wouldn’t pick a winning lab or a winning approach, but they would pay for the winning solution — thus creating an incentive for lots of different labs to try many different approaches. Their hope was that these “advance market commitments” would encourage major drug companies to direct some of their R&D efforts to otherwise neglected tropical diseases.

In 2009, the GAVI Alliance — a group of major aid donors, including many rich-country governments and philanthropic foundations — took up Kremer and Glennerster’s proposal. They created a $1.5 billion fund that would pay for affordable drugs to address the leading cause of vaccine-preventable death in children under 5 worldwide: Streptococcus pneumoniae, which causes diseases such as pneumonia and meningitis. A vaccine suitable for pneumonia strains in developing countries had not been developed yet. But GAVI guaranteed a market for drug companies that tried to make one — and succeeded. Today the vaccine is being administered around the world. The GAVI Alliance estimates that the “advance market” approach to stimulating research for the vaccine could avert as many as 1.5 million childhood deaths by 2020. The World Bank has been exploring a similar mechanism to incentivize research to increase output on small farms in the developing world. So why don’t we create these kinds of commitments or prizes for everything?

The answer, Kremer says, is that “there are also important technological innovations that you could never predict in advance because describing the problem was half the solution.” He cites the example of the Post-it note. You couldn’t have offered a prize or guaranteed a market for the Post-it because “you didn’t know we needed it until somebody invented it,” he says. The same is true of the graphical user interface used by PCs and Macs the world over. Or as the Mark Zuckerberg character tells the Winklevoss twins in the movie The Social Network, “If you guys were the inventors of Facebook, you would have invented Facebook.”

In the language of economics, Kremer’s smart market for vaccines is a “pull mechanism” — in this case, the promise of a market pulls innovators toward solving a particular problem. But this requires specifying very precisely the problem you want solved. If you don’t know the problem you are trying to fix, you instead use the funding mechanism that got Facebook onto a billion screens: venture capital. That’s a “push mechanism” in which investors back promising ideas until they’re developed enough to market or roll out at scale.

The best minds of Silicon Valley ought to get this; after all, it’s where venture capital was born. The problem is that few in the tech world have the rigor to know when they’re backing a good idea and when they’re backing a dud. Every start-up thinks it has the next billion-dollar idea until the market reveals otherwise. The same is true when start-ups wade into development philanthropy; there’s just no market to disabuse them of those notions. Of course, technology and innovation can play a huge role in improving the quality of life of poor people across the globe, but the surprising truth is that the right approach for harnessing that innovation hasn’t been incubated in freewheeling Palo Alto, but in the bowels of a supposedly hidebound government bureaucracy in Washington, D.C.

UNDER ADMINISTRATOR RAJIV SHAH, the normally risk-averse and publicity-shy U.S. Agency for International Development has created a venture capital fund, Development Innovation Ventures (DIV), looking to back development solutions and test them to see whether they actually work. And they hired Kremer to help run it. So far DIV is very small: To date, Kremer’s team has made about 40 grants worth just over $10 million together. But the ambition is to provide a model for serious public-sector venture capital work that will create a piggybacking effect, attracting support from government donors and private companies.

DIV is putting money and serious intellectual energy into ideas that until now seemed mostly just technological boosterism. For instance, what if an app that runs on a cheap mobile phone could save the lives of millions of children every year? That’s essentially the claim behind CommCare, a start-up that just received $1 million from DIV to experiment with a new “m-health” app that aims to bring modern medicine to rural India via mobile phone. In 2005, the Indian government set a goal of deploying an “accredited social health activist,” i.e., a community health worker, into every village in the country — 750,000 health workers in total. The workers are generally young women who must be literate and live in the villages where they work, but have little or no formal health training. CommCare’s idea is to use mobile technology to convert this new mass of largely underducated community health workers into an army of sophisticated diagnosticians.

In theory, getting community health workers to show up on time, ask the right questions, and offer the right answers could have huge real-world effects. Every year, nearly 7 million children under age 5 die from causes that could be easily prevented using effective, low-cost interventions that already exist. The World Health Organization (WHO) publishes explicit, paint-by-number protocols for managing child illness to avert these deaths, and CommCare puts those protocols at health workers’ fingertips. Initial trials in India and Tanzania have shown that the system significantly increases the timeliness of health workers’ visits and their adherence to WHO protocols.

But remember the electric soccer ball: A shortage of new technological innovations isn’t always the problem. Kremer notes, “There are some very big wins from technology, but it’s also important to have a mechanism to avoid throwing good money after bad.” That’s why DIV has a staged funding approach and why the second stage involves rigorous testing to make sure the initial trials pan out.

Perhaps the most obvious form of rigorous testing is a market test. “If something is being demanded by the market, then that’s at least some indication that it’s a useful technology,” Kremer says. “Someone is willing to pay for it.” Solar Sister, for example, is a DIV grantee that designs solar cells to provide lighting and mobile phone-charging to rural households in South Sudan, Tanzania, and Uganda. Three-quarters of the organization’s target population has no light source after dark beyond firewood and burning grass. While $1 million in initial DIV financing will allow Solar Sister to train 3,000 sales agents to sell an initial stock of 315,000 solar lights, the project’s medium-term survival will hinge on it finding paying customers.

Still, for many innovations in health and education, the market test doesn’t work because the services are provided by governments. In this case, research has to fill in the role of market feedback in order to figure out what works or — in the case of One Laptop per Child — what doesn’t.

Take the innovation of Georgetown University’s William Jack and James Habyarimana, who wanted to improve road safety in Kenya. Based on current trends, traffic accidents will kill more people than malaria in Kenya by 2030. And commuter minibuses, or matatus, are some of the most lethal vehicles on the road. Jack and Habyarimana thought that putting stickers inside the buses that encourage passengers to complain if the driver is going too fast might help improve the situation.

Rather than blindly throwing money at a cute idea, not only does DIV finance the research to determine whether these ideas have an impact, but further financing is dependent on that impact. So to test whether their sticker idea would work, Jack and Habyarimana used the same approach that drug companies use to test new drugs: a randomized controlled trial. In early 2008, they recruited 2,300 matatu drivers and offered half of them small cash prizes to keep the stickers in place. Then they compared accident rates for 2007 and 2008, contrasting minibuses with and without the stickers. Their results were astonishing: This simple tweak produced a 60 percent reduction in insurance claims involving injury or death — for a cost of just $7 per year of life saved. This all suggests that scaling up the entirely low-tech sticker program might have a huge impact on road safety in Kenya at a very low price.

This kind of rigorous testing is exactly what separates Kremer’s vision of incremental change from the hype emerging from Silicon Valley. Technical fixes that marginally improve community health care, or set up markets for solar lanterns, or get a few more matatu drivers to stop at red lights, aren’t going to turn Lesotho into Luxembourg. But they just might save quite a few lives along the way.