There are few things more impactful than effective generosity. And over the past 25 years, Bill Gates, through his foundation, has generously given away more than $100 billion to “create a world where every person has the opportunity to live a healthy, productive life.”
The Foundation’s giving is equivalent to spending more than $10 million a day… $10.95 million to be more precise.
Gates’ giving has resulted in some incredible progress across the world. One of the most remarkable achievements has been the creation of Gavi, the Vaccine Alliance. To date, through Gavi’s efforts, 20 infectious disease fighting vaccines have been developed and more than 1.1 billion children globally have been immunized, which has resulted in almost 20 million lives saved.
A newsletter to Gates Foundation subscribers summarizes the Foundation’s 25-year impact: “We’ve helped cut global child mortality by half. Our collaborations with Gavi and the Global Fund helped save over 80 million lives. Hundreds of millions of people have risen out of poverty and into better lives.”
Not only is that admirable, but also few organizations can boast of the kind of philanthropic impact the Gates Foundation has had since its inception 25 years ago.
Yet, despite billions of dollars given to help millions of people rise out of poverty, millions still languish in severe destitution. The title of this Economist piece says it best, The world’s poorest countries have experienced a brutal decade.
The article notes that much of the progress we made fighting poverty happened between 2000 and 2015. Since then, poverty has either been winning the fight or, at the very least, it has been a draw. Simply put, we are no longer winning the fight against poverty. Progress has halted and as the article suggests, “Poverty is a thing of the past in much of Europe and South-East Asia; in much of Africa it [poverty] looks more ingrained than it has in decades.”
Understanding the evolution of poverty and how it has stalled in Africa is incredibly important because Bill Gates has committed to spending $200 billion in the next 20 years, with much of it going to Africa. “The majority of that funding will be spent on helping you address challenges here in Africa,” Gates said in an interview.
If Gates succeeds in giving away $200 billion by 2045, that would amount to spending approximately $27.4 million everyday, for the next 20 years!
If giving away $100 billion in the first 25 years was impactful, giving away $200 billion in 20 years has the potential to be even more impactful, and even generationally transformative. So, how best can the Gates Foundation spend its resources to create wealth, root out poverty, and stamp out disease once and for all? Here is a simple idea.
Think different: Fund African “Microsofts”
There is growing awareness, backed by irrefutable evidence, that “higher levels of GDP per capita and consumption expenditures are empirically necessary and empirically sufficient for high levels of human material wellbeing.” Renowned economist Lant Pritchett has long argued that boosting GDP per capita is both necessary and sufficient for improving human wellbeing. Yet much of development still focuses on marginal fixes rather than bold, growth-focused interventions.
To grow an economy, it’s essential to understand that enterprises are its foundation. As my late mentor, Clay Christensen, taught me, an economy is a nested system: global economies contain national ones, made up of industries, which consist of enterprises. These enterprises organize people into teams that create and deliver products and services to meet consumer needs or struggles. Most economic activity happens within enterprises—they invest, create or eliminate jobs, respond to policy and interest rate changes, pay taxes, and build infrastructure. In many ways, enterprises don’t just drive the economy—they are the economy.
And so, to get economic growth, enterprises must grow to solve problems for people. The economies that harbor the kinds of enterprises focused on serving the vast majority of people, locally and globally, are more likely to become prosperous, and will ultimately root out poverty. This is where building more “Microsofts” comes in.
Microsoft made computing more affordable and accessible to people for whom computing was complicated and expensive–nonconsumers. By targeting the vast nonconsumption of computing and making it more affordable, Microsoft created a new market with new possibilities. As a result, it engendered incredible economic growth and created many jobs and significant wealth. In our research, we call Microsoft a market-creating enterprise. These enterprises transform complicated and expensive products into simple and affordable ones thereby making them accessible to nonconsumers. As we describe in our book, The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty, investing in market-creating enterprises is the critical missing piece in the economic development puzzle today.
The possibility of market creation
A recent report by McKinsey & Co., a consulting firm, describes how a small number of firms contribute the majority share of productivity growth in most economies. When firms become more productive, wages increase, wealth is created, and economies prosper.
Market creation is not only possible in Africa, but it is also necessary. Companies such as MDaaS, Moniepoint, and mPharma are making diagnostic services, financial services, and primary health and pharmacy services affordable to millions of nonconsumers across the continent. What if the bulk of the Gates Foundation’s $200 billion goes towards building more market-creating enterprises, such as these, that serve the average African? These enterprises create jobs, generate tax revenues, and ultimately create wealth for the continent.
In a previous blog, I explained how nonprofits do good work but ultimately keep countries in a cycle of poverty. It is primarily by funding market-creating enterprises that countries can escape the cycle of poverty. The goal of development shouldn’t be to help the poor live marginally more efficient lives. Instead, it should be to transform poverty into prosperity. Market creation can achieve that goal.
Investing in innovation (I3) is pioneering a new way
It is already happening. The I3 program, funded in large part by the Gates Foundation, is an initiative designed to support the commercialization and impact of promising early and growth-stage companies working to make healthcare products and services more affordable to the average African (I serve on the steering committee of the I3 program). To date, the I3 program has delivered more than $3 million to innovators, facilitated almost 500 introductions, and influenced more than $11 million in additional contracts. All these have led to these innovators receiving additional $50 million in funding from other investors and organizations.
I3 shows what’s possible. Now imagine what’s achievable if a billion dollar market creation fund were deployed to unlock nonconsumption, empower entrepreneurs, and spark new industries that have the potential to transform entire economies. At a time when official development assistance (foreign aid) is dwindling, radical and transformative thinking is necessary to plug the gap.
For Gates’ $200 billion to have the most impact in the next 20 years, we should go beyond aid and invest in the kinds of enterprises that create markets, generate jobs, and build lasting wealth. The Gates Foundation has a once-in-a-generation opportunity to lead this transformation by directing a majority of its funding toward market-creating enterprises in Africa.
The most transformative gift is the one that no longer needs to be given.
