A luminary in Bangalore recently asked me how I could summarize what I had learned from two decades or so of studying entrepreneurship in developing countries and, lately, diving into it myself.
My answer: It’s in every entrepreneur’s self-interest to be public-spirited and invest in his or her surroundings. I believe this to be true, even before one considers other imperatives, like one’s social and moral responsibilities.
Why is this especially true in developing countries? Because these societies have not (yet) developed sufficient mechanisms to adequately ensure such investments of their own accord. Indeed, this lack of investments in the ‘soft’ and ‘hard’ infrastructure is, in my view, the defining feature of a developing country. The reason development does not occur sufficiently is that the so-called ‘plumbing’ needed in society to make it occur is missing.
Why does absence of public goods matter to all?
Some simple examples will clarify why one’s quality of life is largely a matter of relying on public goods. Think about clean air. I can jog in pristine surroundings around my home in a suburb of Boston. No amount of money will allow me to do that in Beijing or Delhi.
There’s a sense of security that comes from being able to leave the door to my back porch or garage open (with quite a bit of equipment in it); no one will steal it. Also, if my home is secure, I can leave my kids there and go to work whenever I need to (not that I want to be available 24/7!)
Of course, not being hostage to the nuisance of dealing with the absence of electricity or the failure of phone lines is also valuable in more obvious ways.
So, it matters. In a nutshell, public goods’ availability affects the productivity of private effort.
All this might persuade you that entrepreneurs should compensate for their institutional inadequacies. But there’s still a leap to say they should invest in public goods, that is, do things from which others can benefit. I can think of several very good reasons (again, staying just with pure self-interest).
Sometimes, doing things purely for one’s own immediate needs is expedient, but often it is not. For example, it might be cheaper for a few people or organizations to band together to create a micro-grid of sorts to deal with power shortages rather than to each invest in diesel or kerosene generators. Of course, this requires some collaboration.
There’s nothing lost if your investments benefit others, as long as you get enough out of it yourself. In most developing countries, progressive entrepreneurs have had to build schools and clinics to benefit their employees when they locate factories in remote areas; those facilities are then generally useful to the population more often than not. These are public goods, but the initiators of the investment benefit sufficiently from it also.
Finally, and sometimes most importantly, being attuned to social problems puts the organization on the cutting edge of change, and predisposes you to being innovative. In my backyard is Whole Foods, the organization credited with making organic food mainstream in America. Recently, it decided to leverage its reputation for social consciousness. They reached out to suppliers predisposed to cooperate in order to upgrade the entire ecosystem to think of, say, water conservation issues. This is the sort of issue that isn’t immediately salient to their business, but likely will suggest innovative products and services in the not-so-distant future. By drawing attention to and helping address a critical general problem, they are investing in public goods. They will help society along with helping themselves (adequately).
And this is in a developed country. Imagine being sensitive to potable-water-scarcity issues that are far more pressing in almost any developing country.
Social consciousness in a developing country pays (monetary) dividends, and then some.
(Featured image source)