Earlier this month, Clayton Christensen, Karen Dillon, and I published The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty. As I reflect on the ideas put forth in the book, I not only find myself hopeful about the progress many impoverished economies can make, but also think about the journey to co-authoring The Prosperity Paradox. This quest‚ to improve life for as many people as possible in impoverished economies—started a while ago for me.
On a cold February night in 2008, in the pages of William Easterly’s book, The White Man’s Burden, I was introduced to Amaretch, a ten-year-old Ethiopian girl who had to wake up every morning at three a.m. to fetch firewood and sell it in the market. After learning about her life, and thinking about the tens of millions of African children for whom access to things such as water, sanitation, basic healthcare, and education was a luxury, I reflected on how fortunate I was to have access to these things while growing up, and even more fortunate now that I was working in the United States. I felt the need to do something about poverty so I asked some friends to help me start Poverty Stops Here.
What we lacked in skill and expertise, we made up for in dedication and passion. A few years into running the non-profit, we had raised a couple hundred thousand dollars to help poor communities build wells, fund primary education initiatives, and provide microloans to people who wanted to start or grow small businesses. But after assessing the limited impact of some of our projects, I quickly realized that the solution to the problem of poverty was much more complex than I had originally thought. I wanted to learn more about how today’s wealthy nations rose from poverty and became wealthy, and I was especially interested in understanding the role that business plays in this process. And so, in 2013, I headed to the Harvard Business School to search for an answer.
It was at Harvard that I met Professor Clayton Christensen, one of the world’s leading thinkers on innovation. My coursework with Professor Christensen and subsequent research in the years that have followed have helped me understand the role that innovation—and more specifically, market-creating innovation, which transforms complicated and expensive products to simple and affordable ones—plays in creating prosperity for many in our world. It turns out that, for a long time, I had had the development equation backwards.
Conventional thinking suggests that governments must first fix themselves by rooting out corruption and creating functioning institutions that can attract investments before development can happen. In other words, the primary problem in poor countries is perceived as a lack of good institutions, good governance, developed infrastructure, and so on. This perspective helps explain the predominant strategy of many development programs today—one in which hundreds of billions of dollars are spent annually “fixing” these things, in the hopes that investments and prosperity will follow. A careful study of how the process actually worked in most of today’s prosperous countries, from the United States to Japan to many nations in the European Union, debunks this misconception and highlights a missing ingredient in many development efforts: innovation.
Innovation, contrary to popular belief, isn’t a thing that happens on the fringes of society after society builds its infrastructures and develops its courts, legislatures, financial markets, and so on. Instead, innovation is the process by which society develops itself. It is precisely through innovation that creates, or connects to, new markets that societies can create jobs, pay taxes, and build their infrastructure and institutions.
Prosperous societies develop because of, and around, particular innovations. Cities are built around innovations which create new markets for millions of people, ultimately spurring employment, providing funding for infrastructures, and creating the right incentives for good governance. It may seem counterintuitive, but supporting market-creating innovations is one of the most effective strategies governments and development organizations can adopt to engender true and long-term economic development. Spreading this knowledge, and furthering our understanding on the subject, is what led us to launch the Global Prosperity research division at the Christensen Institute two years ago, and ultimately what led me to co-author The Prosperity Paradox.
I cannot wait to share more of the insights in the book with the millions of policy makers, development practitioners, and entrepreneurs working every day to make the world a better place. Together, I believe that we can not only get to the end of extreme poverty in our generation, but we can also begin to see many nations start their journey to true and lasting prosperity.