Our World

Fat vs. Lean Markets

I’ve always struggled with what word to use when describing poor markets. There’s the developed and the developing world. There’s the bottom or, a little better, base of the pyramid. There’s the emerging or frontier market, which evokes an image of covered wagons heading west—Manifest Destiny and all that. The UN classifies them as LDC, or Least Developed Countries. The problem with all these is that they define people by how much money they make and set the Western way of life as the ultimate goal—if you develop, climb the pyramid, and emerge, you’ll be like us, which is obviously what you want to do. It grades people based on purchasing power, which has always felt dehumanizing to me.

In manufacturing there’s a concept called Lean Manufacturing, which at a high level represents a philosophy of “maximizing value while minimizing waste.” Eric Reis has taken these ideas and applied them to startups, something he calls the Lean Startup. As I met one amazing entrepreneur after another last week in Kenya with Acumen Fund, I thought, what better word to describe the environment they operate in than “lean.” These guys are all about maximizing value and minimizing waste—they have to be. They’re capital-constrained, they face a shortage of skilled labor, their customers have little disposable income, and they are often at odds with state-backed incumbents or even the government itself. They operate in a lean market, and yet they are succeeding. I think back to a scene I saw earlier this year in China: two women were fighting over a discarded plastic bottle for the recycling refund. Now that’s a lean market.

The constraints of these markets breed innovation—it’s the reason startups beat incumbents. It’s why the Nokia 1100 cell phone with it’s monochrome screen and $20 price tag is the world’s best selling cell phone. It’s why Tata can build a car for $2,200 and why Visa’s mobile banking platform was developed in Africa and imported to the US and Europe. It’s why 37signals is so successful and why the Lean Startup methodology is being ever more widely adopted.

So if these markets are lean, I guess that makes us fat, and, really, is this so far off the mark? We have the highest obesity rate of any country in the world—about 30%. We consume more energy per capita than almost anyone else (the exception being a handful of very hot Middle Eastern countries). We have the shortest school year. We drive the largest cars and build the biggest houses. It’s hard to be innovative when you have everything you could possibly need, and thus we’ve become fat. On top of that, we’ve taken on a mountain of debt to pay for it all. From the World Economic Forum’s Global Risks 2010 Report:

According to IMF, by 2014, the average debt-to-GDP ratio of advanced economies that are members of the G20 is expected to climb from 2007 pre-crisis levels of 78% to 118% [various academic work has shown that a ratio above 90% becomes a serious head-wind to growth]. In sharp contrast, emerging economies, with smaller governments and lower exposure to the baning crisis, kept their fiscal houses in order. According to the same IMF analysis, between 2007 and 2014 the average debt-to-gdp ratio fo emerging countries that are members of the G20 will never exceed 40%. For once, and in contrast to the 1980s and 1990s, emerging economies are not the causal to global fiscal crisis.

So who emerges as the winner here? In a world of debt, who out performs? And what market do you want to emulate—the one that excels when faced with every constraint imaginable or the one that has everything? Which one figures out the environmental problems first—the one where waste is valuable or the one that can afford to ship and dump it? The one with the longer school day and year or the one with the shortest of both? The lean startup or the incumbent? Which one is your money on?

What you call a market matters—it frames the discussion—and in this case, we may want to reevaluate who is aspiring to what.

This post originally appeared on Nate Laurell’s blog, New Frontier: Solutions for an Accelerating World, where he writes on energy and the application of markets to various social issues. Nate is a board member and advisor to several technology-driven financial firms and recently joined the Acumen Fund Global Advisory Board.


A Cleaner Path: Solar Energy’s Impact on Health

Imagine for a moment that the light used in your home was a poison. One that could damage your lungs, irritate your eyes, even impact the health of your unborn child. You’d think twice about flicking on that switch. Kerosene lamps—used by an estimated 290 million people across Africa—contribute to household air pollution. Such pollution is responsible for more deaths a year than tuberculosis, malaria and HIV combined. [Read More]

Acumen Hosts Workshop on Building High-Impact Partnerships at Skoll World Forum

Acumen, with support from EY, Sainsbury’s, Pfizer, and the Skoll Centre for Social Entrepreneurship, is hosting their second Beyond Dialogue workshop today as a part of the Skoll World Forum. The event, Beyond Dialogue: Three Models for High Impact Collaboration, will bring together leading global corporations, innovative social enterprises, experts and intermediaries to work together to uncover new knowledge and opportunities to partner. [Read More]

Day 2 Recap: AcumenGG17

As morning broke on Day Two, the grounds of the Great Rift Valley Lodge & Resort were dotted with Good Society groups. Cohorts joined together, bringing a diversity of perspectives, for revelatory, at times tough, but ultimately enriching discussions built around Ursula Le Guin’s “The Ones Who Walk Away from Omelas” and Yunus Emre’s “The Drop That Became the Sea.” [Read More]

Day 1 Recap: AcumenGG17

It only seemed fitting that the Global Gathering kicked off with the vibrant colors and electric rhythms of East Africa. Adorned in Maasai cloths, the East Africa Fellows—with some help from the Global Fellows—set the tone for a day of nonstop energy and inspiring conversation. [Read More]

What Women Can Do

In these uncertain times, when progress towards a more just world sometimes seems to be slowing, or even reversing its course, I often ask myself the question, what can I do? It’s easy to feel small or isolated in the face of so many challenges, many of which seem to have escalated over the past few months. [Read More]

Lighting the Way: A Look at Solar Energy’s Impact on Poverty Alleviation

In the last decade, solar lanterns have emerged as a clean, cost-effective solution to provide access to modern energy to the 1.2 billion people currently living off-grid. These small, portable and rechargeable lights fulfill an immediate need for the poor and, as a result, have become increasingly widespread in countries across Africa, South Asia and beyond. They are affordable, easy to use and require little maintenance. And for families who’ve become accustomed to life stopping when the sun sets, a solar lantern can mean hours of light to enjoy dinner together, do homework for class tomorrow, or keep a business open a little later. [Read More]