Mobile Phones End Poverty!

I plan to write about my application and interview for MiF, but this is something I just couldn't pass up. This is a New York Times piece about mobile phones in the developing world and the HUGE impact they have on people's lives and economic well being. It's a long article - 8 pages - but absolutely wonderful. The article centers around a Nokia employee who's job is to track how mobile users in developing areas use phones, and what their 'ideal' phone would be. He then feeds this info to the Nokia design teams.

http://www.nytimes.com/2008/04/13/magazine/13anthropology-t.html?pagewanted=1

The article brings up a few amazing points. As income rises for a given person living in poverty, where is the largest increase in spending? Healthcare? Better housing? Better food? Nope, mobile phones. People who previously had basically no means of communication with people who are not close by can not be connected with everyone. Imaging the productivity gains when a poor farmer can call ahead to wholesalers or retailers, communicate what he has to sell before traveling all the way to market, and arrange for sales? The seller can plan and manage inventory much better and the farmer can get good information on what is in demand and what isn't. He can pre-arrange sales, eliminating some of his risk and perhaps getting better prices too. LBS published a study in 2005 that showed that for every 10 unit increase in mobile phones per 100 people GDP rose 0.5%, incredible!

The article goes on to discuss how phones are changing lives in other ways too, like for money transfer for people who don't typically have bank accounts. A city dweller for instance who want to send money to family in a village can buy a prepaid mobile phone card and instead of using it, he/she can call a 'phone lady' in the village, who hires her phone to villagers when they want to make a call, and give her the code of the prepaid card. The phone lady then gives the cash amount of the card to the family member, minus a commission. Ingenious!

The article wraps up with what Nokia and others are doing to sell phones to the poor. Can they make money selling to people who only earn $1-2 a day? Looks like they are working on ways to bring cost down low enough that they can sell to this segment. This must one of the greatest uptapped markets in the history of mankind.

Why is this so good? The more I read the more I believe that the solution to the poverty issue isn't more aid. Aid gets wasted or even stolen by the hands it passes though, and it doesn't seem to be effective in creating sustainable economic growth. Mobile phones however give people an asset that substantially improves their productivity. Higher productivity brings higher economic well being, and this is a self reinforcing cycle - high well being provides opportunities to further raise well being.

A big hats off to Nokia and the other phone makers for tackling this and The New York Times for writing about it.