As part of the American Enterprise Institute’s Philanthropic Freedom Project, AEI President Arthur Brooks recently interviewed Microsoft co-founder and philanthropist Bill Gates about the intersection between the exceptional entrepreneurial success of Microsoft and the extensive charitable contributions of the Bill and Melinda Gates Foundation.
When asked about how a free market supports philanthropy, Gates explained that effective governments have the capacity to implement social services and deliver necessary support to citizens, but lack the resources to improve upon goods and delivery mechanisms. Taking on the expensive risk of such innovation therefore falls to the private sector, which has a financial incentive to invest in what would otherwise become a market failure.
However, sometimes needed goods are not lucrative for private enterprise to invest in, either. Gates offered the example of anti-malarial medicine research, which proves to be an undesirable field for pharmaceutical companies to invest in due to the inability of most people in malaria-affected countries to afford these medicines at the costs required to support such an expensive research effort. This is the space in a free market where philanthropic efforts, such as those of the Bill and Melinda Gates Foundation, step in to provide research and development assistance that will hopefully produce a cheaper and more effective product.
Trying to explain the connection between democracy and market-driven growth can be like trying to solve the puzzle of the chicken and the egg: which came first? Our panelists in the free enterprise and democracy webinar on September 12 did a commendable job of sorting through the linkages and debunking several myths.
One of the starting premises for discussion was that economic growth flourishes when private property rights are protected in a market-oriented system under rule of law. While autocrats can provide a level of protection for property and a legal order, without democratization there cannot be universal protection of property rights, as Boris Begovic, Senior Fellow at the Center for Liberal Democratic Studies, pointed out. In the long run, democracy brings greater certainty to the rule of law. Businesses require certainty for long-term investment, and this is lessened when the whim of an autocratic ruler prevails.
Aurelio Concheso, Director of Aspen Consulting, further stated that autocratic decisionmaking discourages innovation. As an economy becomes increasingly complex, feedback becomes essential to the decision process and feedback is facilitated by democratic governance. By contrast, oligarchic societies raise huge barriers to entry and innovation in order to protect incumbent political and business elites.
Selima Ahmad, Founder and President of the Bangladesh Women Chamber of Commerce and Industry, and John D. Sullivan, Executive Director at CIPE, spoke about how the private sector can act to level the playing field, for example by advocating universal property rights as guaranteed in the UN Declaration on Human Rights. Businesses ranging from small and medium enterprises to those engaged in international commerce have an interest in regulatory reform, which they can pursue collectively through voluntary associations and policy agendas.
In recent decades, technology has opened the door for many young entrepreneurs in Latin America. Not only has it offered an open space to develop projects and ideas new to their region, but it also offers them the possibility of adapting the technologies they create to the specific needs in their environment. In turn, this accommodation to different environments potentially leads to the creation of original ideas that can be duplicated and transferred to other countries with similar environments.
In view of this potential, many multinational companies, such as Intel, 3M, Cisco, and Microsoft, have held numerous technology and innovation contests for university students and recent graduates throughout the region in order to gather talent into one single space in search of the next big idea.
On April 15, Intel held its Intel Challenge Latin America 2013 in coordination with YouNoodle, a company based in California that provides a technology platform for entrepreneurs worldwide to help organizations innovate at a quicker pace. During the first round of the Intel Challenge Latin America 2013, 221 projects from Peru, Argentina, Chile, Colombia, Costa Rica, and Mexico entered the competition and only 45 passed on to the next round.
Within the last five years, crowdsourcing has risen as new phenomena both in the business world and in international development. Coined by Jeff Howe in WIRED magazine, the term crowdsourcing traditionally refers to using free or low-cost information or labor from a “crowd” to accomplish a task.
The innovative potential of this tool is impressive. Around the world crowdsourcing technologies have facilitated new ways to connect services with clients, track protests, fund businesses, map disasters, and more.
Entrepreneurs start their own businesses for variety of reasons. Some may have stumbled upon a great idea and had the right opportunity to sell a viable product. Others might have started their own business because they were frustrated with the lack of formal jobs offered in their communities. Whatever the reason may be, they all have one thing in common: entrepreneurs are all highly-motivated and creative innovators. CIPE wants to hear stories and experiences from such individuals.
CIPE invites entrepreneurs between the ages of 18 – 30 years old to share their stories about entrepreneurship in the following categories for CIPE’s International Youth Essay Competition: Entrepreneurship and Innovation: Beyond technology; Inclusive Growth: The entrepreneurial environment for scaling up business; and Social transformations: The role of entrepreneurs in building democratic societies.
In celebration of Global Entrepreneurship Week, the deadline for the competition has been extended to Sunday, November 18, 2012.
Tell us your story. Inspire others to become entrepreneurs.
People start their own businesses for a variety of reasons — not only to make a living, but also to be their own boss, address a social problem, or fulfill a lifelong dream. No matter one’s motivation, the initial step to earning that first dollar is developing and evaluating a business idea. Then comes figuring out the business’ legal structure, choosing a name, registering, preparing founding documents…the list goes on.
Imagine doing all of this in New York City. Hard work, right? Now imagine going through the same process in Tegucigalpa, where the cost of registering a business is nearly half the average annual income, or in Cairo, where it takes 193 days to purchase and register property.
Entrepreneurs in developing countries face myriad obstacles in bringing a concept from idea to the marketplace — crossing what is known in the start-up community as the valley of death. In countries with weak democratic institutions, starting a business can be exorbitantly expensive, or even impossible, without the right political connections. The entrepreneur’s list of concerns can include not only acquiring capital and creating a sustainable business plan, but also dealing with corrupt government officials, a lack of educated workers, and unreliable access to basic necessities such as water and electricity.
Panelists at the Frontiers in Development conference. (Photo: Flickr/ONE.org)
For years, growing private capital flows to developing countries, technological change, demographic pressures, and the spread of democracy have been reshaping the development landscape, as Steven Radelet recently noted. On June 11-13, the United States Agency for International Development (USAID) hosted the Frontiers in Development conference at Georgetown University to explore innovative ways of addressing the challenges and opportunities these changes have created.