Heads up: My new book will be in stores Sept. 9

My co-author, Paul Polak, and I are now putting the final touches on the manuscript, and it’s got months of design and production ahead. But the new book will be published this year by Berrett-Koehler, the San Francisco firm that brought out an earlier book of mine, Values-Driven Business: How to Change the World, Make Money, and Have Fun (co-authored with Ben Cohen of Ben & Jerry’s fame). The official publication date for the new book is Sept. 9.

Its title is The Business Solution to Poverty: Designing Products and Services for Three Billion New Customers.

It’s premature to tell you much about the book, but I thought you might like to know a little about my co-author, Dr. Paul Polak.

Paul Polak is widely regarded as the father of market-centered approaches to development. He started harnessing the energy of the marketplace 30 years ago when IDE, the organization he founded, sold one-and-a-half million treadle pumps to small farmers in Bangladesh, increasing their net income by more than $150 million a year. Over the past 30 years, he has had long conversations with more than 3,000 small farmers who live on less than $1 a day and walked with them through their fields. IDE has now enabled 20 million of the world’s poorest people to move out of poverty by selling them radically affordable irrigation tools made available through thousands of small village manufacturers, dealers, and well drillers, and opening smallholder access to markets where they could sell their crops at a profit.

Paul’s earlier book, Out of Poverty: What Works When Traditional Approaches Fail, has been widely used as a basic text on practical solutions to rural poverty. He is the founder and CEO of Windhorse International and co-founder and board chairman of Spring Health India, for-profit companies with the mission of bringing safe drinking water to 100 million poor rural customers in the world. Paul is the prime mover for creating and implementing the four social impact multinationals in this book, each designed to transform the lives of 100 million $2/day customers and generate annual sales of $10 billion.

Prior to founding Windhorse, in 2008 Paul established D-Rev, a nonprofit that seeks “to create a design revolution by enlisting the best designers in the world to develop products and ideas that will benefit the 90 percent of the people on earth who are poor, in order to help them earn their way out of poverty. Paul’s vision inspired Smithsonian’s Cooper Hewitt travelling exhibit, “Design for the Other 90 percent.” He was named by The Atlantic as one of the world’s 27 “Brave Thinkers” along with Steve Jobs and Barack Obama. He has also received the Ernst and Young Entrepreneur of the Year award and the Scientific American “Top 50” award for agricultural policy.

Paul graduated from medical school in 1958, worked for 23 years as a psychiatrist, creating innovative models of community treatment, and at various points in his career also worked as a farmer and a hands-on investor in oil and gas, real estate, and equipment leasing. He and his wife Agnes have been happily married for 53 years, and have three grown daughters. At the age of 79, he still puts in an 80-hour work week and loves what he does.

A brilliant Indian novel about the 19th Century opium trade

A review of River of Smoke, by Amitav Ghosh

@@@@ (4 out of 5)

Balzac (and lots of people after him) thought that “Behind every great fortune there is a crime.” Nowhere is that aphorism more baldly illustrated than in the 19th-Century opium trade that enriched England, Scotland, and the United States and created a score of hereditary fortunes that have left their mark on the world for nearly two centuries since. After all, when Europeans introduced China to the practice of mixing opium with tobacco in the mid-18th Century, the one-sided trade in Chinese porcelain, tea, silk, and other goods was rapidly draining Europe of silver and reinforcing China’s position as the world’s richest country. The opium trade reversed that trend. Early in the 19th Century, with the Industrial Revolution gathering force in Europe, China’s nearly two-century-long decline  was underway. Meanwhile, massive profits from opium enriched the endowments of Harvard and Yale, helped build Princeton and Columbia Universities; launched the fortunes of the Astors, the Delanos (FDR’s grandparents); and bankrolled the Bell Telephone Company, antecedent of AT&T.

River of Smoke is the second book in Amitav Ghosh’s planned Ibis trilogy set among the momentous events of the massive 19th-Century opium trade between India and China. The first book in the trilogy, Sea of Poppies, set the scene with an in-depth look at the harvesting and manufacture of opium in India. River of Smoke details the life at sea and in the foreign enclave in Canton of the immensely rich men who dominated the trade, principally Britons.

Ghosh’s sprawling novel spans the years 1838 and 1839, detailing the events in South China that led to the First Opium War. The central plot-line follows the journey of a poor Indian Parsi (Zoroastrian) named Bahram who had risen to lead the trade division of a celebrated Mumbai shipbuilding company owned by his wealthy in-laws. Though not yet rich himself, Bahram has become the dean of the Indian opium traders, realizing profits for the family as great as those of many of the British and Americans but, in the racist fashion of the times, he is looked down upon as “inferior.” However, he comes to play a principal role in the traders’ increasingly tense and threatening dealings with the newly energized Chinese government, which has resolved to end the opium trade. (Bahram is the author’s invention, but the English and American traders depicted in the novel come straight from the pages of history.)

Any lover of language will find the writing of Amitav Ghosh irresistible. I certainly did. Both the dialogue and the narrative text in Sea of Poppies were enchanting. Ghosh had immersed himself in contemporaneous dictionaries and wordlists of 1830s India and Britain to reproduce the language and the vocabulary of not one but several English dialects. In fact, a great many of the novel’s characters are historical figures who left behind memoirs, letters, parliamentary testimony, and other records, and as Ghosh notes in his acknowledgments, “Much that is said in this book is taken from [the characters’] own words.” Even more colorful is the hybrid language that emerged from the marriage of English and Hindi and surfaces in dialogue throughout the book. But in River of Smoke, it’s the pidgin of 19th-Century Canton that stands out, and wonderful it is to behold!

The 12 best nonfiction books I’ve read in 2012

This was going to be a list of 10 books, but I couldn’t resist adding another two. It’s been a great year for nonfiction.

1. Mary’s Mosaic: The CIA Conspiracy to Murder John F. Kennedy, Mary Pinchot Meyer, and Their Vision for World Peace, by Peter Janney

Review to be posted Dec. 10. Look for it!

2. The New Jim Crow: Mass Incarceration in the Age of Colorblindness, by Michelle Alexander

A penetrating analysis of the racist underpinnings of the U.S. justice system, the result of the ill-conceived “war on drugs” and deep-seated racial fears that has led to the mass incarceration of people of color.

3. The Swerve: How the World Became Modern, by Stephen Greenblatt

This exceptionally brilliant book is the story of a long-lost poem and of the man who rediscovered it more than a thousand years later, helping to trigger an upheaval in medieval European thinking that came to be known as the Renaissance. The Swerve details the staggering impact of the poem, a 7,400-line masterpiece that laid out in minute detail the revolutionary worldview of a Greek philosopher whose greatest influence was felt two millennia after his death.

4. 1491: New Revelations of the Americas Before Columbus, by Charles C. Mann

Forget just about everything you learned in school about the peoples who lived in the Western Hemisphere before 1492 — and about the land, too. It turns out that yesterday’s historians, anthropologists, paleontologists, and ecologists got it pretty much all wrong. In this revised edition of a 2006 bestseller, we learn that the Americas before Columbus were far more heavily populated, the leading civilizations far more sophisticated, and their origins far further back in time than earlier generations of scholars had suspected.

5. Behind the Beautiful Forevers: Life, Death, and Hope in a Mumbai Undercity, by Katherine Boo

An enthralling and deeply disturbing book that reads like a novel, this is a three-year study of life in a small Indian slum nestled between the new Mumbai International Airport and the five-star hotels clustered nearby. A quest to understand poverty and the ways people find to transcend it.

6. The Revenge of Geography: What the Map Tells Us About Coming Conflicts and the Battle Against Fate, by Robert D. Kaplan

Through a geopolitical lens, Planet Earth, and the machinations and foibles of earthly leaders, look a lot different than they do in most history books. Stand a few feet away from a globe and squint: if the globe is properly positioned, what you’ll see is one huge, three-tentacled landmass (Asia-Africa-Europe); a second, much smaller one that consists of two parts joined by a narrow connector (North and South America); and several even smaller bits of land scattered about on the periphery (Australia, Greenland, Japan, Indonesia). That’s the world as Robert D. Kaplan sees it in this illuminating study of world history and current events as influenced by geography.

7. The Self-Made Myth, and the Truth About How Government Helps Individuals and Businesses Succeed, by Brian Miller and Mike Lapham

A thoughtful and impeccably reasoned new book that goes straight to the heart of the conservative argument favoring limited government and coddling the rich. Rather than quibble about this program or that issue, or fasten on the transparently shoddy logic of a Republican budget that promises to reduce the federal deficit when in fact it will surely increase it, Miller and Lapham’s argument strikes at the fundamental values and assumptions underlying today’s conservatism: the myth rooted in the writing of novelist Ayn Rand of the superhuman “job creator.”

8. Freedom’s Forge: How American Business Produced Victory in World War II, by Arthur Herman

Focuses on the role that America’s business community, and especially Big Business, played in the monumental effort that resulted in the unconditional surrender of Germany and Japan just months apart in 1945.  Two extraordinary men — William S. Knudsen and Henry Kaiser — are the stars of this story, business impresarios who marshaled the stupendous numbers of men and women and the unprecedented mountains of raw materials that supplied the U.S. and its Allies with the weapons of war.

9. Infinite Vision: How Aravind Became the World’s Greatest Business Case for Compassion, by Pavithra Mehta and Suchitra Shenoy

The truly truly astonishing story — one with profound implications for development throughout the Global South — of how a retired Indian eye surgeon founded a nonprofit eye hospital in a southern Indian city in 1976 that is today “the largest and most productive blindness-prevention organization on the planet.” Equally important, Aravind also serves as a global resource center for opthalmology, training one out of every seven Indian eye doctors, consulting on management and technical issues with eye hospitals in 69 countries, and operating a state-of-the-art research center.

10. Double Cross: The True Story of the D-Day Spies, by Ben McIntyre

The mind-boggling story of six European double agents who were “turned” or recruited by the British and played roles as large as those of any American general in the success of the Normandy invasion that opened up the Western Front and the path to Allied victory.

11. The Signal and the Noise: Why So Many Predictions Fail — But Some Don’t, by Nate Silver

As ambitious as it is digestible, and written in an easy, conversational style, The Signal and the Noise explores the ins and outs of predicting outcomes not just in politics, poker, and sports as well as the stock market, the economy, the 2008 financial meltdown, weather forecasting, earthquakes, epidemic disease, chess, climate change, and terrorism.

12. Spillover: Animal Infections and the Next Human Pandemic, by David Quammen

A fascinating account grounded in scientific research of a class of diseases known as “zoonoses,” that is, animal in origin, that encompasses AIDS, Ebola, Marburg, SARS, H5N1 — and many others of of the world’s scariest diseases. The book recaptures the drama in the lives of the research scientists, physicians, veterinarians, and others who are on the front lines of humanity’s defense against disease.

The sorry record of microcredit laid bare by an industry veteran

A review of Confessions of a Microfinance Heretic: How Microlending Lost Its Way and Betrayed the Poor, by Hugh Sinclair

@@@@@ (5 out of 5)

“Some microfinance is extremely beneficial to the poor, but it is not the miracle cure that its publicists would have you believe. Microfinance has been hijacked by profiteers, and we need to reclaim it for the poor. The problem is not with a few rogue operators, alas, but with systemic flaws that permeate the sector.”

Thus does Hugh Sinclair lay out the thesis he pursues in Confessions of a Microfinance Heretic. If you skip over this statement in the opening pages of the book, you could easily conclude that Sinclair can see no good at all in the $70 billion industry that has grown up under the impetus of Muhammad Yunus’ 2006 Nobel Peace Prize. After all, Sinclair writes — at least twice — that he wouldn’t invest a single dollar in microfinance today. Nonetheless, he insists that the “debate is not whether microfinance works, but how the inherent conflicts of interest can be managed.”

The systemic flaws Sinclair perceives are eye-opening:

• A majority of the money loaned to poor people goes not to help them launch or sustain microbusinesses to supplement family income but rather for current consumption, sometimes to buy food during a time when there’s not enough money coming in, sometimes just to buy TV sets.”Estimates for consumption loans range from 50 percent to 90 percent of all microfinance loans,” depending on the study. As Sinclair points out, citing numerous sources, the proportion of entrepreneurs among the poor is no bigger than it is among the rich. It’s naive of us to expect otherwise.
• The interest rates charged for microloans are, far too often, prohibitively high. Muhammad Yunus’ benchmark — 10 to 15 percent above the cost of money — is rarely observed. Though there are indeed many, mostly small, nonprofit MFIs (Microfinance Institutions, generally microloan lenders) that charge no more than 25 or 30 percent, the bigger institutions, and most of the for-profit banks in the industry, typically charge far more. In one notorious case, the effective interest rate runs as high as 195 percent, but there are many other instances in which the rate exceeds 100 percent.
• The amounts of money loaned by MFIs are far too small to permit businesses to grow to a size where they may employ workers outside the family. In fact, to the extent that businesses remain family-run, they frequently employ even the youngest children, sometimes withdrawn from school to work in the business. However, there’s another side to this question, as Sinclair reveals in an exchange with one businesswoman: “[W]e asked her about her future plans for the business, and whether she thought it could be built up further and be a useful business for her children to take over. ‘You misunderstand me. I don’t do this job because I like it or want to grow it into a big business. I do it so my children will never have to do work like this.'”
• In countries where local laws and a lack of government oversight give free rein to the MFIs, competition run wild among them has sometimes led to credit crises. In India’s Andhra Pradesh state, for example, “There were more microloans than poor people.” And in Nicaragua “total lending by MFIs was estimated at $420 million in 2008, in a country of about 5.5 million, not all of whom were poor (and MFIs generally don’t lend to children).” Microloan customers frequently borrowed from several of the country’s 19 MFIs — the nationwide average was four — often to be able to pay back loans to other MFIs. “One particularly ambitious client in Jalapa had managed to rack up $600,000 in micro-loans.” As Sinclair disclosed in a talk he gave in Berkeley a few weeks ago, Nicaragua was only the first of several countries where the microcredit bubble is likely to burst. Stay tuned, he said.
• The profit motive appears to have become the central preoccupation of the microfinance funds, which function like private equity funds, gathering together investment dollars and placing them in selected MFIs. Even some of the biggest and most prestigious of these funds — including the Grameen Foundation (USA), Calvert Foundation, Kiva.org, and BlueOrchard (the world’s largest) — have been tainted by longstanding investments in some of the most egregiously exploitive MFIs, brushing aside mountains of evidence that their investments were helping victimize poor people in Nigeria, Mexico, and other countries.

Despite all this, there is NO documented evidence that microfinance has achieved any reduction at all in the level of poverty. As a 2007 article in the Harvard Business Review stated, “In 1991, for example, Bangladesh ranked 136th on the UN Development Programme’s Human Development Index (a measure of societal well-being); 15 years later it ranked 137th.” And Sinclair writes, “In 2001, Nicaragua was the 106th poorest country in the world . . . Microfinance was almost unheard of in Nicaragua at this point, and there were no large microfinance funds throwing money around. By 2009, when the full Nicaraguan microfinance meltdown occurred, Nicaragua had slipped to 124th place.”

Hugh Sinclair is no cranky, slapdash journalist taking on a controversial subject for the sake of selling books. He is a ten-year veteran of the microfinance industry and has been involved as either an employee or a consultant in dozens of MFIs around the world and in several microfinance funds. He clearly knows whereof he writes, his citation of sources is extensive, and his publisher, Berrett-Koehler, is a highly respected source of books on business and current affairs.

Confessions of a Microfinance Heretic is an important book that should be must reading for anyone involved in international development.

Must reading about global poverty and the contrasting approaches to ending it

A review of Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, by Abhijit Banerjee and Esther Duflo

@@@@@ (5 out of 5)

Public debate about the way to combat global poverty has ricocheted between two extremes. One was summed up in 2005 in The End of Poverty by Jeffrey Sachs, the Columbia economist who spearheaded the UN Millennium Development Goals. The other was laid out by former World Bank economist William Easterly the following year in The White Man’s Burden. Sachs advocates massive government-to-government foreign aid. Easterly deplores foreign aid, convinced that it does more harm than good.

In Poor Economics, Abhijit Banerjee and Esther Duflo seek a path between these two extremes, emphasizing the Randomized Controlled Studies they and their colleagues had conducted to ascertain what works and what doesn’t. (As of 2010, they had completed more than 240 studies in forty countries around the world.)They characterize Easterly’s approach as demand-driven, since he believes that poor people must seek their own solutions — a conservative, free-market attitude. By contrast, Sachs’ approach is supply-driven, reflecting Sachs’ conviction that a government must provide for its people based on consensus thinking about what poor people need — a liberal, top-down attitude. (I find myself bemused that I’m on the right side of this debate.)

Banerjee and Duflo report that their observations and research results support each of these two approaches — and sometimes both — depending on what issue they study. Hunger, health, education, financial services, family planning, business development, policy options: each field offers up a unique picture of success and failure attributed to one or another of the two approaches. In other words, circumstances and details matter, all of which may vary from one country to another. There is no silver bullet, they assert, no panacea to eliminate poverty.

Poor Economics focuses on the overarching question of whether there is such a thing as a “poverty trap.” Sachs contends there is: poor people will be stuck in poverty unless and until they are given the resources to release themselves from the trap. In many circumstances, Banerjee and Duflo find scant evidence to support this assertion. In others, however, they see the need for government intervention in the lives of the poor because otherwise they will perceive no reason to act for themselves.

Rather than identifying a simple, unitary explanation why Sachs’ approach often fails, they emphasize “ideology, ignorance, and inertia — the three I’s — on the part of the expert, the aid worker, or the local policy maker.” These three I’s, they claim, “often explain why policies fail and why aid does not have the effect it should.” Banerjee and Duflo explain further: “The poor often resist the wonderful plans we think up for them because they do not share our faith that those plans work, or work as well as we claim.”

It would be difficult to find two scholars better prepared than Abhijit Banerjee and Esther Duflo to forge a middle course through the opposite poles of thought about global poverty erected by Jeffrey Sachs and William Easterly. Banerjee, an Indian economist who is also the son of two economists, holds an endowed chair in economics at MIT. He co-founded MIT’s Abdul Latif Jameel Poverty Action Lab with Duflo, a French economist and a former MacArthur Fellow (recipient of the “genius” award).

For anyone who seeks deeper understanding of global poverty and the ways and means of fighting it, Poor Economics is must reading. This book is the latest I’ve read in my ongoing effort to study world poverty. For a list of additional books on the topic, go to my reading list.

Narrowing global inequities: a reading list

Lately I’ve been working with Paul Polak on a book about how to end global poverty. (Berrett-Koehler will publish the book in 2013.) Paul’s previous book, Out of Poverty, was published six years ago, and this new work – provisionally titled The Business Solution to Poverty – represents the evolution of his thinking, six more years of work with poor people in developing countries, and the reading and relevant field experience I’ve had over the years.

As I’ve dug more deeply into the subject of global poverty, it has become increasingly clear to me that truly understanding how today’s glaring inequities have come about requires extensive knowledge in a wide array of topics, from Third World history to social psychology, development economics to the history of business and international trade.

Well, I confess I’m no expert in any of those fields. I’ve read widely in some, superficially in others, and I’m learning a lot.

My reading has emphasized economic history, the economics of poverty, colonialism, Third World development, social enterprise, and the ongoing debate about the impact of “foreign aid” (more properly, overseas development assistance). Along the way, I’ve reviewed in this blog many of the books I’ve read.

In previous posts, I’ve offered up reading lists on some of these subjects individually. Here, I’m sharing a compiled list. These are the books I’ve actually read. Where I reviewed a book, you’ll find boldfacing and underlining that signifies a link to my review. The books are listed alphabetically by the author’s last name.

Banerjee, Abhijit, and Esther Duflo, Poor Economics A Radical Rethinking of the Way to Fight Global Poverty. PublicAffairs, 2011. (review to come)

Bornstein, David, How to Change the World: Social Entrepreneurs and the Power of New Ideas. Oxford University Press, 2007.

——, The Price of a Dream: The Story of the Grameen Bank. Oxford University Press, 2005.

——, and Susan Davis, Social Entrepreneurship: What Everyone Needs to Know. Oxford University Press, 2010.

Clark, Gregory, A Farewell to Alms: A Brief Economic History of the World. Princeton University Press, 2007.

Cohen, Ben, and Mal Warwick, Values-Driven Business: How to Change the World, Make Money, and Have Fun. Berrett-Koehler Publishers, 2006.

Collier, Paul, The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It. Oxford University Press, 2007.

Collins, Daryl, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven, Portfolios of the Poor: How the World’s Poor Live on $2 a Day. Princeton University Press, 2009.

Crutchfield, Leslie R., and Heather McLeod Grant, Forces for Good: The Six Practices of High-Impact Nonprofits, 2nd Edition. Jossey-Bass Publishers, 2012.

Diamond, Jared, Collapse: How Societies Choose to Fail or Succeed. Viking Press, 2005.

Easterly, William, The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Penguin Press, 2006.

Elkington, John, and Pamela Hartigan, The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World.Harvard Business Review Press, 2008.

Govindarajan, Vijay, and Chris Trimble, Reverse Innovation: Create Far From Home, Win Everywhere. Harvard Business Review Press, 2012.

Guha, Ramachandra, India After Gandhi: The History of the World’s Largest Democracy. HarperCollins Publishers, 2007.

Hochschild, Adam, King Leopold’s Ghost: A Story of Greed, Terror, and Heroism in Colonial Africa. Houghton Mifflin Company, 1998.

Kamkwamba, William, and Bryan Mealer, The Boy Who Harnessed the Wind: Creating Currents of Electricity and Hope. HarperCollins Publishers, 2009.

Kidder, Tracy, Mountains Beyond Mountains: The Quest of Dr. Paul Farmer, a Man Who Would Cure the World. Random House,2003.

Kristof, Nicholas D., and Sheryl WuDunn, Half the Sky: Turning Oppression Into Opportunity for Women Worldwide. Knopf, 2009.

Light, Paul Charles, The Search for Social Entrepreneurship. Brookings Institution Press, 2008.

Lynch, Kevin, and Julius Walls, Jr., Mission, Inc.: The Practitioner’s Guide to Social Enterprise. Berrett-Koehler Publishers, 2008.

Mehta, Pavithra, and Suchitra Shenoy, Infinite Vision: How Aravind Became the World’s Greatest Business Case for Compassion. Berrett-Koehler Publishers, 2011.

Moyo, Dambisa, Dead Aid: Why Aid is Not Working and How There Is a Better Way for Africa. Farrar, Straus and Giroux, 2009.

Polak, Paul, Out of Poverty: What Works When Traditional Approaches Fail. Berrett-Koehler Publishers, 2006.

Prahalad, C. K., The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Pearson Prentice Hall, 2004.

Sachs, Jeffrey D., The End of Poverty: Economic Possibilities for Our Time. Penguin Press, 2005.

Schwartz, Beverly, Rippling: How Social Entrepreneurs Spread Innovation Throughout the World. Jossey-Bass Publishers,2012.

Sullivan, Nicholas P., You Can Hear Me Now: How Microloans and Cell Phones Are Connecting the World’s Poor to the Global Economy. Jossey-Bass Publishers, 2007.

Wrong, Michaela, It’s Our Turn to Eat: The Story of a Kenyan Whistle-Blower. HarperCollins Publishers, 2006.

Understanding the day-to-day reality of global poverty

A review of Portfolios of the Poor: How the World’s Poor Live on $2 a Day, by Daryl Collins, Jonathan Morduch, Stuart Rutherford, Orlanda Ruthven

@@@@ (4 out of 5)

This book makes a major contribution to our understanding of global poverty.

Portfolios of the Poor reports the findings of a series of detailed, year-long studies of the day-to-day financial practices of some 250 families in India, Bangladesh, and South Africa, including both city-dwellers and villagers. The authors conducted monthly, face-to-face interviews with each family, focusing on money management and recording every penny spent, earned, or borrowed in “diaries” that formed the principal source for their observations. In the process, they made discoveries that will surely be surprising to some readers:

• The poor rarely live from hand to mouth. “[N]o matter where we looked, we found that most of the households, even those living on less than one dollar a day per person, rarely consume every penny of income as soon as it is earned. They seek, instead, to ‘manage’ their money by saving when they can and borrowing when they need to.”
• Lack of money is just one of the financial characteristics of poverty. It’s equally important that poor people’s income is both unpredictable and irregular. Crops come in two or three times a year, yielding whatever the weather may permit and the market may bear; between-times a family may have no cash income at all. A son might get a job for a day but not again for a week or a month. Illness or injury may interrupt a family’s income. And so forth.
• Rather than helpless victims of their poverty, the authors found, the poor are remarkably sophisticated about the financial circumstances of their lives. “We came to see that money management is, for the poor, a fundamental and well-understood part of everyday life.”
• Microlending is just one of the financial services needed by the poor to lift themselves out of poverty. “[W]e saw that at almost every turn poor households are frustrated by the poor quality — above all the low reliability — of the instruments that they use to manage their meager incomes. This made us realize that if poor households enjoyed assured access to a handful of better financial tools, their chances of improving their lives would surely be much higher.”
• Most observers regard money-lenders as simply a scourge of the poor, as they are so very often. However, given the dearth of mainstream money-management alternatives, there are many circumstances in which it’s logical for poor people to turn to money-lenders for short-term cash loans. “One of the lessons from the diaries is that interest paid on very short-duration loans is more sensibly understood as a fee than as annualized interest.”

Scholars, activists, and policymakers alike have quarreled over the question of global poverty and what to do about it for more than half a century. More often than not, the disputes they air in official policy debates, in the news media, and in scholarly journals are grounded in statistics developed by the United Nations and the World Bank — figures that usually represent worldwide averages. Therein lies much of the trouble.

The most widely accepted benchmark for world poverty today is $2 a day per person, as determined by the World Bank. However, you have to dig deeply before you can understand what the World Bank and the United Nations actually mean by “$2 a day.” They’re not referring to those two one-dollar bills you may have crumpled up in your pocket or purse. To correct for economic differences from one country to another, they use the concept of Purchasing Power Parity (PPP).

In theory, PPP takes into consideration the sharp differences in how much $2 will buy in any given country as compared to the global norm. But in practice the experts have widely differing views on what method should be used to calculate PPP and, in effect, what is the global norm. As if that isn’t bad enough, the most commonly used techniques to calculate PPP are based on each country’s economy-wide standard of living. In other words, the definition of poverty might depend in part on the price of big-screen TV sets and BMWs or their equivalent. In hopes of correcting that problem, scholars have been writing papers for several years about “poverty-based PPP,” excluding anything but goods and services commonly demanded by people living at subsistence level, but none of the approaches they’ve proposed has yet been officially adopted.

The whole question of PPP, then, is so confusing — and so confused — that the authors of Portfolios of the Poor have rejected the concept. They base all their calculations simply on the prevailing exchange rates between local currencies and the U. S. dollar. To which I say, amen.

The four co-authors of this book are an intriguing bunch. Two are men and two women. (Daryl Collins, the lead author, is female.) All four are products of elite universities: Oxford, Cambridge, Harvard, and the London School of Economics, though only one, Jonathan Morduch, is currently an academic. Morduch teaches development economics at NYU’s Wagner School of Public Policy in New York; he is an expert in microfinance. Daryl Collins, Stuart Rutherford, and Orlanda Ruthven are all development practitioners with practical field experience — Collins with a Boston-based global consultancy, Rutherford with a microfinance institution he founded in Bangladesh, and Ruthven with DFID, the UK equivalent of USAID.

The best books I’ve read so far this year

You have to wait until December to see a list of “best books” in The New York Times Book Review, but right here in this space you can see my list for the first six months of 2012! Of course, it’s a short list, and quite specialized, since there are lots of categories of writing that hold no interest for me. And I don’t limit myself to books that were published after January 1, 2012 (though most were). After all, I’m not The New York Times. But, for what it is, here goes, in no particular order . . . with links to my reviews in this blog.

Nonfiction

The Passage of Power, by Robert A. Caro. Volume 4 in The Years of Lyndon Johnson. Robert Caro’s masterful portrait of Lyndon Johnson’s early days as President.

Confront and Conceal: Obama’s Secret Wars and Surprising Use of American Power, by David E. Sanger. Barack Obama’s foreign and military policy viewed from the inside.

The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World, by John Elkington and Pamela Hartigan. The power of unreasonable people, and how they’re changing the world.

The Self-Made Myth, and the Truth About How Government Helps Individuals and Businesses Succeed, by Brian Miller and Mike Lapham. A brilliant contribution to the public debate about politics and the economy.

The New Jim Crow: Mass Incarceration in the Age of Colorblindness, by Michelle Alexander. One of the most important books published in English so far this century.

Behind the Beautiful Forevers: Life, Death, and Hope in a Mumbai Undercity, by Katherine Boo. A searing look at poverty in India that reads like a novel.

The Quest: Energy, Security, and the Remaking of the Modern World, by Daniel Yergin. Daniel Yergin’s superb new book: a brilliant survey of energy issues.

Infinite Vision: How Aravind Became the World’s Greatest Business Case for Compassion, by Pavithra Mehta and Suchitra Shenoy. Aravind: A social enterprise with scale and impact to match Grameen Bank.

1491: New Revelations of the Americas Before Columbus, by Charles C. Mann. Astonishing new evidence about the Americas before Columbus.

Trade Fiction

They Eat Puppies, Don’t They?, by Christopher Buckley. Washington and Beijing get what they deserve in this satirical novel of politics and diplomacy today.

The Windup Girl, by Paolo Bacigalupi. One of the best science fiction novels I’ve ever read.

The Orphan Master’s Son, by Adam Johnson. An unsparing tale of life in the living hell of North Korea.

Incendiary, by Chris Cleave. A wrenching portrait of the human cost of terrorism.

The Fear Index, by Robert Harris. A taut thriller about the world of multibillion-dollar hedge funds.

A Theory of Small Earthquakes, by Meredith Maran. A first novel from a brilliant nonfiction writer.

Mysteries and Thrillers

Mission to Paris, by Alan Furst. A truly superior novel of espionage at the dawn of World War II.

The Midnight House, by Alex Berenson. The Pentagon and the CIA take a lot of punishment in this novel of rendition and torture.

Harbor Nocturne, by Joseph Wambaugh. Joseph Wambaugh’s latest paints Los Angeles in many clashing colors.

The Limpopo Academy of Private Detection, by Alexander McCall Smith. An exceptional tale of Botswana’s #1 Ladies’ Detective Agency.

Buried Secrets, by Joseph Finder. A thriller that explores the intersection of high finance and high crime.

The Ghosts of Belfast, by Stuart Neville. A grim story of war and betrayal in Northern Ireland.

The Bridge of Sighs, by Olen Steinhauer. A fully satisfying murder mystery set in post-war Europe.

Breakdown, by Sara Paretsky. Sara Paretsky’s latest detective story hits home.

Believing the Lie, by Elizabeth George. Elizabeth George’s latest Inspector Lynley novel, unpredictable as always.

The Silent Oligarch, by Chris Morgan Jones. A refreshingly original new thriller that explores international intrigue with minimal violence.

Agent 6, by Tom Rob Smith. A superb suspense novel set in the USSR, Afghanistan, and the U.S.

Social entrepreneurship: what it is, how it works, and where it’s going

A review of Social Entrepreneurship: What Everyone Needs to Know, by David Bornstein and Susan Davis

@@@@@ (5 out of 5)

After three decades of increasingly widespread public attention, a surprisingly large number of commentators in the field of social entrepreneurship continue to argue about the most basic question of all: What is a social enterprise, and what isn’t? In this superb little book, David Bornstein and Susan Davis straightforwardly put this question to rest: “Social entrepreneurship is a process by which citizens build or transform institutions to advance solutions to social problems, such as poverty, illness, illiteracy, environmental destruction, human rights abuses, and corruption, in order to make life better for many.” So much for all those deconstructionists who contend that a social enterprise must never turn a profit, or must always turn a profit, or must address some sorts of problems but not others!

As an introduction to the field, Social Entrepreneurship is unmatched.

Most books on social entrepreneurship feature case studies or vignettes starring some of the field’s most innovative and successful individuals. This was the case with an earlier book of Bornstein’s, How to Change the World, which is widely (and rightfully) regarded as “the bible” of the field. By contrast, the three short chapters that constitute Social Entrepreneurship ask and answer the most fundamental questions that any reader unfamiliar with the pursuit of social change might ask, first clarifying the definition of social entrepreneurship, then examining the practical challenges practitioners face, and finally “Envisioning an Innovating Society.” In that third chapter, Bornstein and Davis discuss how government, academia, business, philanthropy, and the news media might contribute to fashioning the “everyone a changemaker” world posited by Ashoka’s Bill Drayton.

As the authors point out, “Social entrepreneurs have always existed. But in the past they were called visionaries, humanitarians, philanthropists, reformers, saints, or simply great leaders. Attention was paid to their courage, compassion, and vision but rarely to the practical aspects of their accomplishments. Thus, people may know about the moral teachings of St. Francis but not about how the Franciscans became the fastest growing religious order of its day. Children learn that Florence Nightingale ministered to wounded soldiers but not that she built the first professional school for nurses and revolutionized hospital construction. Gandhi is remembered for demonstrations of nonviolent rsistance but not for building a decentralized political apparatus that enabled India to make a successful transition to self-rule.” And if St. Francis, Florence Nightingale, and Gandhi exemplified the isolated and occasional social entrepreneurs of yesteryear, there are thousands of courageous individuals now walking parallel paths to institutional change on every continent — backed up by a growing suport network that includes Ashoka, the Skoll Foundation, the Schwab Center for Social Entrepreneurship, Avina, and many other organizations. Given the enormity of the challenges facing humanity in the 21st Century, their combined efforts may represent our last, best hope to create a world in which our grandchildren can live healthy, rewarding lives.

David Bornstein and Susan Davis came to the task of writing this book with impeccable qualifications. In addition to How to Change the World, which went into a second edition in 2007, Bornstein wrote The Price of a Dream: The Story of the Grameen Bank, first published in 1996. He is the preeminent journalist in the field. Davis is a supremely accomplished activist, having served as a founding member of the Grameen Foundation and then co-founding BRAC USA, which she serves as President and CEO. (BRAC began its institutional life as a Bangladeshi nonprofit, later expanding to many other countries around the world. It is regarded as the world’s largest NGO.) She also helps select Ashoka Fellows. Previously, she held a series of senior positions with the Ford Foundation, Women’s World Banking, the International Labor Organisation, and other institutions.

The how-to-guide to “the fortune at the bottom of the pyramid”

A review of Reverse Innovation: Create Far From Home, Win Everywhere, by Vijay Govindarajan and Chris Trimble

@@@ (3 out of 5)

Back in 2004, a respected marketing professor at the University of Michigan named C. K. Prahalad raised eyebrows in the business community with a widely-read book titled The Fortune at the Bottom of the Pyramid. In 25 words or less, he postulated that multinational corporations could grow their markets and their bottom line by reaching out to the billions of poor people who crowd emerging nations across the globe. Much of Prahalad’s book consisted of “case studies” — written by his graduate students — that purported to support his thesis. Unfortunately, practically none of them did.

Here, eight years later, is the book that Prahalad — now, unfortunately, deceased — should have written. Govindarajan, a professor at Dartmouth’s Tuck School of Business, and Trimble, a younger Tuck faculty member, have formulated a concept they call “reverse innovation” that is the key to doing business in those emerging markets that excited Prahalad’s lust. Their book, too, is dominated by case studies, but in this case the examples do a good job of illustrating how multinational companies have successfully developed products that gained a foothold in developing countries — though by no means necessarily at “the bottom of the pyramid.”

“Reverse innovation” — an ethnocentric term — begins with the conventional wisdom that business innovation takes place in rich countries but asserts that transnational corporations wishing to become established in developing markets must cast off traditional thinking and develop products and services within those markets and base them on the needs and wants of people living there. Govindarajan and Trimble advocate reverse innovation as the alternative to exporting rich-country products and services with minor adjustments, a strategy that many companies have found unsuccessful. (The authors call this strategy “glocalization.”)

The case studies in Reverse Innovation span a wide range of needs, desires, and prices. The authors write about an extremely inexpensive electrocardiograph machine developed and marketed in India by GE Healthcare, lightweight enough for use by individual physicians on rounds in villages. They relate the story of the development from scratch of a lentil-based new snack food by PepsiCo in India, and of a new automotive “infotainment” system crafted through an international effort by Harman and eventually purchased by Toyota. Other examples include Procter & Gamble, Logitech, and the nonprofit Partners in Health.

Most of the case studies are great stories, even if they are better illustrations of how multinational corporations can make more money than they are of how poor people in emerging nations can gain access to needed goods and services at affordable prices. However, the bulk of Reverse Innovation is given over to discussion about change management in large corporations: it’s clear that the real challenge these companies face in growing their markets is to get around the massive barriers thrown up by organizations that are too large, too successful, and too set in their ways. The authors write, “Reverse innovation begins not with inventing, but with forgetting . . . You must let go of the dominant logic that has served you well in rich countries . . . Reverse innovation is what we call clean-slate innovation.”

Govindarajan and Trimble make it clear that the only way for a transnational company to bring about reverse innovation is to (1) start with a champion at the top, usually the CEO; (2) appoint a brilliant and politically savvy person to head up an “LGT,” by which the authors do not mean to suggest gender preference but simply to abbreviate “Local Growth Team;” (3) recruit to the team a group of mavericks willing to ignore the conventional rules; and (4) work on site in one of the major emerging markets, far, far from headquarters.

Reverse Innovation is well-organized, well-written, and delivers on its promise. Why, then, have I awarded this book only three @@@ out of 5? Out of pique, perhaps, more than anything else. For one thing, the do’s and don’ts of management in large organizations are  . . . well, for me, the only apt word is boring. And I can’t get past my aggravation that this is yet one more instance of brilliant minds being lashed to the task of making the rich richer.