“It is possible, in life, for everyone in the world to be wrong.”

…is what Nicholas Negroponte used to tell his son.  On October 13, I got to hear Nicholas speak for the MIT Club of Northern California about his latest project called One Laptop Per Child. As director of the MIT Media Lab, Nicholas founded for-profit companies such as Wired Magazine and went against the advice of everyone. He made OLPC into a non-profit so that he could achieve clarity of purpose that would enable partnerships with organizations and governments around the world that a for-profit could not achieve:

To create educational opportunities for the world’s poorest children by providing each child with a rugged, low-cost, low-power, connected laptop with content and software designed for collaborative, joyful, self-empowered learning.

By doing so, he found that they could attract the best industry talent to OLPC that they could never afford to pay for and OLPC is at 23 full-time-equivalents (FTEs). OLPC is launching these laptops to children in 31 countries around the world (like Rwanda, Mongolia, Haiti, Peru, Uraguay, India, …) with software and lessons in local languages. Prodction is at 100K laptops per month, and their eventual target market is to reach 500 million children worldwide who lack access to computers.

These computers have a mesh Wi-Fi network interface which is connected to a satellite hookup to the Internet where available — so in addition to Internet access, the laptops can automatically check-in to a central server in each country to track their status. If my memory serves me correct in some countries like Peru and Rwanda he reported 100% of the laptops check-in, in others they have not seen a large fraction of the laptops.

The principles driving their design and deployment of these laptops are:

1. child ownership — low cost laptops designed with a child in mind
2. low ages (6-14) — view children as a market
3. saturation — access for everyone not just a few computers in each school
4. connection — to the Internet
5. free and open-source software

The idea for this started out when Negroponte and his colleagues at MIT recognized that computer programming was the closest we get to thinking about thinking, and when computers are out in the hands of children in developing countries they can learn something not possible with any other means. It brings the learning experience alive for children and teachers even in traditional classrooms.

Going forward, scaling is their biggest organizational challenge. Technically they need to increase the level of integration for the hundreds of components in their laptop to bring down cost. They do not see themselves as being the primary provider of content (lessons, applications) — the analogy he used was that Gutenberg didn’t write the books. He says they don’t compete with Microsoft/Intel in the same way that the UN World Food Program doesn’t compete with McDonalds.

This holiday season OLPC is introducing a Give-One-Get-One program to allow people to buy an OLPC laptop that pays for (donates) a laptop to a child in a developing country.  For their evential target of 500 million children, they need $50 billion (500 x $100 million) to saturate the world with laptops. I think coming up with that amount of cash will eventually become the limit to OLPC’s scaling unless they find some other source of funding through government or private foundations.

Nicholas started off his talk by telling a story on how he got funding for starting the MIT Media Lab that he said was never told before. The MIT president at the time was nearing the end of his term and decided he wanted to do research instead of moving up to Chairman of the MIT board. So Nicholas decided this was an opportunity to start a lab, but needed some funding to do so — where to start? He called up the chairman of NEC saying that others in France would invest provided the chairman invests. Once the chairman decided to invest, he said the same trick on his other investors and so he ended up with the funding he needed.

Like Nicholas, many great people I have admired have at one time or another said something like what Feynman did — “What do you care what other people think?”  Investors like Buffet, Soros, and Trump also say something similar about being contratian. Here is a link to a video from 1984 where Negroponte describes his visions for the future.

update on 5/2, see “Einstein the nobody” and  “The World As I See It”

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“We have decided to be happy because it is good for our health.”

Yesterday for the first time I read this quote written on the bottom of a sign inside Boulange Bakery on Union St (SF) — it was right above the counter with sugar, jam, cream, nutella, etc. Although I had visited the same bakery and spread raspberry preserves on my croissant there numerous times before, I had not noticed the quote until now — pure genius. We often look externally for happiness — is it social, cultural, economic, or geographic? Or is it really just as simple as deciding to be happy?

Study: World Gets Happier

Denmark is the happiest nation and Zimbabwe the the most glum, he found. (Zimbabwe’s longtime ruler Robert Mugabe was sworn in as president for a sixth term Sunday after a widely discredited runoff in which he was the only candidate. Observers said the runoff was marred by violence and intimidation.) The United States ranks 16th…. “The results clearly show that the happiest societies are those that allow people the freedom to choose how to live their lives,” Inglehart said.

The Keys to Happiness, and Why We Don’t Use Them

Happiness is 50 percent genetic, says University of Minnesota researcher David Lykken. What you do with the other half of the challenge depends largely on determination, psychologists agree. As Abraham Lincoln once said, “Most people are as happy as they make up their minds to be.”… One route to more happiness is called “flow,” an engrossing state that comes during creative or playful activity, psychologist Mihaly Csikszentmihalyi has found. Athletes, musicians, writers, gamers, and religious adherents know the feeling. It comes less from what you’re doing than from how you do it.

AVERAGE HAPPINESS IN 95 NATIONS 1995-2005
How much people enjoy their life-as-a-whole on scale 0 to 10

Top > 7,7		Middle range ± 6,0		Bottom <4
Denmark	8,2	Phillipines	6,4	Armenia	3,7
Switzerland	8,1	India	6,2	Ukraine	3,6
Austria	8,0	Iran	6,0	Moldova	3,5
Iceland	7,8	Poland	5,9	Zimbabwe	3,3
Finland	7,7	South Korea	5,8	Tanzania	3,2

“Secure Lives First” by tapping into larger markets

Thanks to Dr. Gavarasana, my 2-page essay got picked up in the May issue of Catalyst magazine alongside several and other articles, a few of them listed below…

See page 25 for my article

Secure Lives First
DEVABHAKTUNI SRIKRISHNA
Tapping into larger markets is the need of the hour if rural poverty in India is to be tackled and human security achieved as agriculture market is limited to $100 billion or $200 billion annually and crop yields are at the mercy of the fluctuating weather.

page 20,

Microcredit, NGOs and Poverty Alleviation
MRITIUNJOY MOHANTY
While access to microcredit serves as a useful complement to the survival strategies of poor households, it is not a strategy of poverty alleviation and growth.

page 31,

Is India’s Prosperity Trickling Down?
ABRAHAM M. GEORGE
Despite increase in employment by 60 million in all sectors in India during the five years sending 2004-05, most of the new jobs have gone urban and incomes have also not risen much for rural workers.

page 38,

Akshaya Patra
The Torch Bearer
At a cost of $28 per child annually, Akshaya Patra is providing underprivileged children in India with a free nutritious meal, often the only meal they receive for the entire day.

quote from Manmohan Singh

“Once poverty-stricken, India has been transformed by the past decade’s economic boom into a burgeoning world power whose wealth can be seen everywhere: New cars cruise the streets, high-end apartment blocks are rising on the edges of cities, luxury shops fill the seemingly endless supply of new shopping malls, he said and added: “But the inequality in this country of 1.1 billion people is as often as conspicuous as the consumption – Indian children are more likely to be malnourished than African ones and the country is home to about a third of the people in the world living on less than $ 1 a day”.

Corporate risks + rewards of breakthrough R&D

Corning’s Biggest Bet Yet? Diesel-Filter Technologies
By SARA SILVER, March 7, 2008; Page B1, Wall Street Journal

Corning, which went public in 1945 and has a market capitalization of about $36 billion, has survived — and often thrived — in recent decades by following a playbook that Wall Street and corporate America deems outmoded. While companies like Xerox Corp. scaled back long-term research, Corning stuck with the old formula, preferring to develop novel technologies than buy them from start-ups.

An investment 25 years ago has turned Corning into the world’s largest maker of liquid-crystal-display glass used in flat-panel TVs and computers. But another wager, which made it the biggest producer of optical fiber during the 1990s, almost sank the company when the tech boom turned into a bust.

Corning Inc. has survived for 157 years by betting big on new technologies, from ruby-colored railroad signals to fiber-optic cable to flat-panel TVs. And now the glass and ceramics manufacturer is making its biggest research bet ever.

Under pressure to find its next hit, the company has spent half a billion dollars — its biggest wager yet — that tougher regulations in the U.S., Europe and Japan will boost demand for its emissions filters for diesel cars and trucks.

“This is the biggest cash hole we’ve ever been in,” says Corning President Peter Volanakis.

In Erwin, a few miles from the company’s headquarters in Corning, the glassmaker is spending $300 million to expand its research labs. There, some 1,700 scientists work on hundreds of speculative projects, from next-generation lasers to optical sensors that could speed the discovery of drugs.

Corning’s roots go back to 1851, when Amory Houghton, a 38-year-old merchant, bought a stake in a small glass company, Cate & Phillips. For most of Corning’s history, a Houghton was either chairman or chief executive. Even today, Corning, population 12,000, is very much a company town. The original Houghton family mansion, still used for company meetings, overlooks the quaint downtown, which is punctuated by a white tower from one of Corning’s original glass factories. Most senior managers have spent their entire careers at Corning.

“Culturally, they’re not afraid to invest and lose money for many years,” says UBS analyst Nikos Theodosopoulos. “That style is not American any more.”

Corning also goes against the grain in manufacturing. While it has joined the pack in moving most of its production overseas, it eschews outsourcing and continues to own and operate the 50 factories that churn out thousands of its different products.

Corning argues that retaining control of research and manufacturing is both a competitive advantage and a form of risk management. Its strategy is to keep an array of products in the pipeline and, once a market develops, to build factories to quickly produce in volumes that keep rivals from gaining traction.

But because Corning often depends heavily on a single product line for most of its profit — 92% of last year’s $2.2 billion profit came from its flat-panel-display business — it is vulnerable to downturns. Even small movements in consumer demand for or pricing of its LCD-based products can cause gyrations in its stock price. During the dot-com meltdown when the market for fiber-optic cable crashed, Corning was brought to the brink of bankruptcy and by 2003 was forced to lay off half of its workers. Today it has 25,000 employees.

Kiva: The Ebay for Microfinance

Yesterday I went to the talk by Premal Shah about www.kiva.org which he calls the “Ebay for microfinance.” It was at Zerox PARC. Thanks to Chari for giving me a heads up about this. They get lots of press and also see a recent NY Times article about them.

 

Kiva is a nonprofit website and clearing house that enables Internet users (lenders) to give 0% (interest-free) loans to specific individual or small-group “entrepreneurs” (borrowers) in developing countries in Africa, South America, Eastern Europe, and Asia. They work with 85 field partners from 40 countries, called microfinance institutions (MFI), who post/vet entrepreneur profiles which are in turn selected by Internet users for personal loans. One of the biggest advantages of Kiva is end-to-end transparency — each lender can “see” who which borrower they are lending to, track their progress through journal updates, and see when the loan is being repayed. See a blog post by Guy Kawasaki that explains their fee per transaction business model — $2.50 voluntary fee that lenders pay when checking out their “shopping cart.”  

Yunis was first 30 years ago, and today there are 10,000 MFIs worldwide. He estimates there are 500M people needing loans like this, and only 100M have been reached through traditional microfinance to-date. Access to capital is still a bottleneck he says. Note: Kiva is prevented from operating in India due to their bank regulations.

Kiva Statistics. Kiva is 3 years old, so far $20M loaned by Q1 08 in 3 years since inception,. Observing parabolic quarter on quarter growth in loans and expect to have loaned $250M to $1B in five years surpassing efforts of microfinance initiatives major banks like Citibank ($100M).  

The Kiva model:  

Internet user (a lender, social investor) 

–> Kiva (online marketplace)  

–> Local Field Partner (Microfinance Institution)  

–> Developing World Entrepreneur (the borrower) 

Each Kiva lender has given on average 2.2 loans — $25 max limited by Kiva. Over the 20-30,000 people visit the site daily, and 3% end up giving loans. Each borrower is usually funded by 15-20 lenders on average — typically in the range of $1000 total loan size. The lenders usually sign up within a day of a loan request being posted for an entrepreneur. In some war torn or crisis areas like Iraq of Afghanistan, the lenders sign up in just a few hours. 

The lenders (social investor) rationale is that Kiva is transparent (know where it goes), sustainable (if repaid, money can be lent to someone else), affordable ($25 to change someone’s life), and unique (“I love microfinance, I want to participate”). For the microfinance institution, Kiva offers a low interest US dollar capital, no liability, flexible repayment terms, and financial assistance + incentives for transparency. 100% of loan funds go directly to the borrowers.

Kiva checks out (verify) the MFIs and the MFIs in turn check out the borrowers. The MFI charges 20% interest rate to cover distribution costs, and they bear currency ris as well when converting from US dollars to local currency and back during repayment period. In the future Premal hopes they can establish credit histories for individuals and bypass this intermediate layer completely. Kiva uses random sampling to audit and check on the MFIs for fraud.  

Unlike traditional microfinance where borrowers are organized into groups who are accountable to each other, social accountability is created via the Internet. Borrowers’ profiles are made visible on the Internet, and is therefore visible online to locals who watch each other at Internet kiosks/cafes. 

Capital. Internet users are willing to bear greater risk than banks probably due to the “personal connection.” People don’t want (need) to lend with interest, whereas banks have to when they are working with MFIs.  

Operating Principles. “Unreliable credit is OK, but unreliable data is not OK.” Each lender gets a “portfolio” of people who they lend to, much like a stock portfolio on Etrade. Loans in this model create a “persistent tie” between the people across the world with journal updates. The accountability is simple. If you are getting repaid, something is working. If you don’t get repayed, something is not working. MFIs report repayment rates of 99.7% but Premal believes that’s skewed to report better than actual results because the MFIs don’t want to discourage Kiva. He believes the actual repayment rate is over 90%. There is a “Risk & Due Diligence Center” on the website. 

Diversification. I asked what types of different activities and market opportunities are being funded, epecially outside agriculture. He said he doesn’t know for sure, but says that agricultural opportunities are the dominant activity being funded. In addition, there appears to be a slight lender bias. For example, the most popular kind of loan that gets funded by lenders is African female farmer, and the least popular is an Eastern European male taxi driver. He questions whether or not that is economically rational, but says that’s what it is right now. In 3Q 2008 they plan to open up APIs so researchers can download and analyze the loan data from their website to gain further insights. 

Organization. Kiva.org is 25 people and operates on very low overhead thanks to cooperation and donations from several silicon valley companies. For example PayPal gives free payment processing. Google offers free AdWords traffic.  

Trust-based lending by the inventor of microcredit

This week we got to see the founder of Grameen Bank, Mohammed Yunnis speak in person at the Fairmont Hotel in downtown SF (Commonwealth Club). He pioneered a new form of banking that can be called “trust-based” or “community-based” lending, which is contrast to the worldwide banking system based on “collateral” and “credit-histories.” For this he won the Nobel Peace Prize in 2006. See this FAQ http://www.grameen-info.org/bank/GBGlance.htm

In 1976, he was a economics professor an Dhaka university where he found the theories he was teaching had little practical applicability to the poverty he was seeing outside the university. So he decided to do what he could. He lent small amounts of money (~$500) to poor people and they became very happy. Then he asked, why doesn’t the bank do this?

For months he struggled to get banks to lend to the poor, but found them to be uncooperative. Since poor people didn’t have credit histories + collateral the banks were unwilling to lend money. His insight was to turn those assumptions on their head by lending to people with no money and history of taking loans. He sought out poor women who were afraid of taking money, and tells his employees that those are the people they should loan to.

No lawyers. By challenging all the “assumptions” he came up with something completely new. He said that the current banking system has lots of money and is setup to loan large amounts of money to people who already have money. That architecture doesn’t scale down to vast majority of people who need it. Using the analogy of ships, he said the modern banking system is like a large supertanker. For poor people you need a system more like a dinghy boat, and if you scale down a supertanker architecture to that size it would sink.

Grameen Bank does not require any collateral against its micro-loans. Since the bank does not wish to take any borrower to the court of law in case of non-repayment, it does not require the borrowers to sign any legal instrument.

Although each borrower must belong to a five-member group, the group is not required to give any guarantee for a loan to its member. Repayment responsibility solely rests on the individual borrower, while the group and the centre oversee that everyone behaves in a responsible way and none gets into repayment problem. There is no form of joint liability, i.e. group members are not responsible to pay on behalf of a defaulting member.

Social business. Yunis described the concept of “social business” intended simply to help people, which can exist alongside profit-maximizing businesses and often work in synergy.  Related, see January 24 front page article on Gates speech at Davos, “Bill Gates Issues Call For Kinder Capitalism”

“If we can spend the early decades of the 21st century finding approaches that meet the needs of the poor in ways that generate profits for business, we will have found a sustainable way to reduce poverty in the world,” Mr. Gates plans to say.

Everyone is an entrepreneur. Yunis explained that all people are entrepreneurial by nature, and it is the system that either brings it out in them or not. Grameen Bank has been able to convert tens of thousands of beggars into door-to-door salespeople who earn a living – since they visit those house anyways, why don’t they take along something to sell and make money? It turns out beggars have unique knowledge of when particular people are home, and and household demographics that is useful in selling.

Begging is the last resort for survival for a poor person, unless he/she turns into crime or other forms of illegal activities. Among the beggars there are disabled, blind, and retarded people, as well as old people with ill health. Grameen Bank has taken up a special programme, called Struggling Members Programme, to reach out to the beggars. About 98,500 beggars have already joined the programme. Total amount disbursed stands at Tk. 102.27 million. Of that amount of Tk. 69.74 million has already been paid off

There are many other programs (scholarships, cell phones, loan insurance, etc) described on the website. Some facts,

• Total amount of loan disbursed by Grameen Bank is US $ 6.55 billion
• Loan recovery rate is 98.35 per cent
• Total number of borrowers is 7.34 million, 97 per cent of them are women
• Grameen Bank finances 100 per cent of its outstanding loan from its deposits. Over 58 per cent of its deposits come from bank’s own borrowers. Deposits amount to 139 per cent of the outstanding loans
• Ever since Grameen Bank came into being, it has made profit every year except in 1983, 1991, and 1992.
• Grameen Bank has 2,468 branches. It works in 80,257 villages. Total staff is 24,703.

I expect the Commonwealth Club audio transcript should be available in a few weeks. Here are some funny short clips from where is interviewed on the Daily Show (2006) right after recieving his nobel prize where he uses the phrase “trust-based lending.” He was also interviewed a few weeks ago by Steve Colbert (2008). Speaking to Colbert, Yunis remarks that the current home loan default crisis in the US was caused not by the people who took the money but rather by the banks who didn’t understand how to lend money.

YouTube and new ideas/concepts/products

Lights! Camera! Sales!

How to use video to expand your business in a YouTube world

By RAYMUND FLANDEZ
November 26, 2007; Page R3

With several good examples to illustrate:

1. Be funny

2. Tap into current events

3. Find a partner

4. Be useful

5. Get your customer involved

MIT hosts first ever Elevator Pitch Contest

MIT hosts first ever Elevator Pitch Contest

October 31, 2007

An elevator pitch, so called because it can be delivered in the time span of an elevator ride, is a brief overview of an idea for a product, service or project. More than 170 contestants from 12 different schools were given 60 seconds to pitch their idea, and winners were chosen representing different fields of innovation, including health care and life sciences, Internet and communications, products and services, energy/green technologies and development.

The winners included several members of the MIT and MIT Sloan community, with MIT sophomore Jessica Laviolette collecting the grand prize of $2,500 with a pitch on automotive production. “Painting an automobile is the most expensive and time-consuming portion of the car manufacturing process. Our patent-pending method takes one-tenth the time and one-twentieth the cost of current paint-drying technology used today,” she said.

Innovation in Process vs Product

The Unsung Heroes Who Move Products Forward

By G. PASCAL ZACHARY

Published: September 30, 2007

New York Times

Words that Work

there is a new book out called, “Words That Work: It’s not what you say, it’s what people hear” which is all about how communication matters – independent of the content. this half-hour NPR interview of the author is pretty good… in the interview he compares how people typically respond to different words used to expressing the same concept:

• “estate tax” as being OK (taxing the rich) versus “death tax” (repulsive).

• “drilling for oil” (exploitative) versus “energy exploration” (cleaner).

• “global warming” (divisive, emotional, intense, polarizing) versus “climate change” (thoughtful, reasonable, less hysteria).

• “gaming” versus “gambling” to describe Vegas.

• he says bush would have been more effective if he said “reexamination” or “reassessment” (flexibility, listening) instead of “surge” which is a simple focus on troop movement.

• “electronic intercepts” works a lot better than “wiretapping.”

to get out of the politics he says we need to find ways to listen to people who we do not necessarily agree with – conservatives reading new york times and liberals watching fox news. this book is his way of how to do that…