TED: Jacqueline Novogratz Invests in Africa's Own Solutions

Segment 1

TITLE: Remarkable people ... unmissable talks ... now free to the world. TED: Ideas worth spreading.
TITLE: Jacqueline Novogratz
TITLE: July 2005, Oxford, England.
JACQUELINE NOVOGRATZ: I want to start with a story, a la Seth Godin, from when I was 12 years old. My uncle Ed gave me a beautiful blue sweater -- at least I thought it was beautiful -- and it had fuzzy zebras walking across the stomach, and Mount Kilimanjaro and Mount Meru kind of right across the chest, that were also fuzzy. And I wore it whenever I could, thinking it was the most fabulous thing I owned. Until one day in ninth grade, when I was standing with a number of the football players. And my body had clearly changed, and Matt Mussolina, who was undeniably my nemesis in high school, said in a booming voice that we no longer had to go far away to go on ski trips, but we could all ski on Mount Novogratz. And I was so humiliated and mortified that I immediately ran home to my mother and chastised her for ever letting me wear the hideous sweater. We drove to the Goodwill and we threw the sweater away somewhat ceremoniously, my idea being that I would never have to think about the sweater nor see it ever again.
JACQUELINE NOVOGRATZ: Fast-forward 11 years later. I'm a 25-year-old kid working in Kigali, Rwanda, jogging through the steep slopes, when I see, 10 feet in front of me, a little boy, 11 years old, running toward me, wearing my sweater. And I'm thinking, no, this is not possible. But, so curious, I run up to the child -- of course scaring the living bejesus out of him -- grab him by the collar, turn it over, and there is my name written on the collar of this sweater.
JACQUELINE NOVOGRATZ: I tell that story, because it has served and continues to serve as a metaphor to me about the level of connectedness that we all have on this Earth. We so often don't realize what our action and our inaction does to people we think we will never see and never know. I also tell it because it tells a larger contextual story of what aid is and can be. That this [sweater] traveled into the Goodwill in Virginia, and moved its way into the larger industry, which at that point was giving millions of tons of secondhand clothing to Africa and Asia. Which was a very good thing, providing low-cost clothing. And, at the same time, certainly in Rwanda, it destroyed the local retailing industry. Not to say that it shouldn't have, but that we have to get better at answering the questions that need to be considered when we think about consequences and responses.
JACQUELINE NOVOGRATZ: So, I'm going to stick in Rwanda, circa 1985, 1986, where I was doing two things. I had started a bakery with 20 unwed mothers, we called the Bad News Bears, and our notion was we were going to corner the snack food business in Kigali, which was not hard because there were no snacks before us. And because we had a good business model, we actually did it, and I watched these women transform on a micro level. But, at the same time, I started a microfinance bank, and tomorrow Iqbal Quadir is going to talk about Grameen, which is the grandfather of all microfinance banks, which now is a worldwide movement -- you talk about a meme -- but, then it was quite new, especially in an economy that was moving from barter into trade.
JACQUELINE NOVOGRATZ: We got a lot of things right. We focused on a business model, we insisted on skin in the game. The women made their own decisions at the end of the day as to how they would use this access to credit to build their little businesses, earn more income, so they could take care of their families better.
JACQUELINE NOVOGRATZ: What we didn't understand, what was happening all around us, with ... the confluence of fear, ethnic strife, and certainly an aid game, if you will, that was playing into this invisible but certainly palpable movement inside Rwanda, that at that time, 30 percent of the budget was all foreign aid. The genocide happened in 1994, seven years after these women all worked together to build this dream. And the good news was that the institution, the banking institution, lasted. In fact, it became the largest rehabilitation lender in the country. The bakery was completely wiped out, but the lessons for me were that accountability counts: got to build things with people on the ground, using business models where, as Steven Levitt would say, the incentives matter. Understand, however complex we might be, incentives matter.
JACQUELINE NOVOGRATZ: So when Chris raised to me how wonderful everything that was happening in the world, that we were seeing a shift in zeitgeist, on the one hand I absolutely agree with him, and I was so thrilled to see what happened with the G8 -- that the world, because of people like Tony Blair and Bono and Bob Geldof -- the world is talking about global poverty, the world is talking about Africa in ways I have never seen in my life. It's thrilling. And at the same time, what keeps me up at night is a fear that we'll look at the victories of the G8 -- USD$50 billion in increased aid to Africa, USD$40 billion in reduced debt -- as the victory, as more than chapter one, as our moral absolution.
JACQUELINE NOVOGRATZ: And, in fact, what we need to do is see that as chapter one, celebrate it, close it, and recognize that we need a chapter two that is all about execution, all about the how-to. And if you remember one thing from what I want to talk about today, it's that the only way to end poverty, to make it history, is to build viable systems on the ground that deliver critical and affordable goods and services to the poor, in ways that are financially sustainable and scalable. If we do that, we really can make poverty history.

Segment 2

JACQUELINE NOVOGRATZ: And it was that -- that whole philosophy -- that encouraged me to start my current endeavor called Acumen Fund, which is trying to build some mini-blueprints for how we might do that in water, health, and housing in Pakistan, India, Kenya, Tanzania, and Egypt. And I want to talk a little bit about that, and some of the examples so you can see what it is that we're doing. But before I do this -- and this is another one of my pet peeves -- I want to talk a little bit about who the poor are. Because we too often talk about them as these strong, huge masses of people yearning to be free, when in fact, it's quite an amazing story.
JACQUELINE NOVOGRATZ: On a macro level, four billion people on Earth make less than USD$4 a day. That's who we talk about when we think about the poor. If you aggregate it, it's the third-largest economy on Earth, and yet most of these people go invisible. Where we typically work, there's people making between USD$1 and USD$3 a day. Who are these people? They are farmers and factory workers. They're working in government offices. They're drivers. They are domestics. They typically pay for critical goods and services like water, like healthcare, like housing, and they pay 30 to 40 times what their middleclass counterparts pay -- certainly where we work in Karachi and Nairobi. The poor also are willing to make, and do make, smart decisions, if you give them that opportunity.
JACQUELINE NOVOGRATZ: So, two examples. One is in India, where there are 240 million farmers, most of whom make less than USD$2 a day. Where we work in Aurangabad, the land is extraordinarily parched. You see people on average making 60 cents to a dollar. This guy in pink is a social entrepreneur named Ami Tabar. What he did was see what was happening in Israel, larger approaches, and figure out how to do a drip irrigation, which is a way of bringing water directly to the plant stock. But previously it's only been created for large-scale farms, so Ami Tabar took this and modularized it down to an eighth of an acre. A couple of principles: build small, Make it infinitely expandable and affordable to the poor.
JACQUELINE NOVOGRATZ: This family, Sarita and her husband, bought a USD$15 unit when they were living in literally a three-walled lean-to with a corrugated iron roof. After one harvest, they had increased their income enough to buy a second system to do their full quarter-acre. A couple of years later, I meet them. They now make USD$4 a day, which is pretty much middle class for India, and they showed me the concrete foundation they'd just laid to build their house. And I swear, you could see the future in that woman's eyes, something I truly believe.
JACQUELINE NOVOGRATZ: You can't talk about poverty today without talking about malaria bed nets, and I again give Jeffrey Sachs of Harvard huge kudos for bringing to the world this notion of his rage: for USD$5 you can save a life. Malaria is a disease that kills one to three million people a year; 300 to 500 million cases are reported. It's estimated that Africa loses about USD$13 billion a year to the disease. USD$5 can save a life. We can send people to the Moon, we can see if there's life on Mars -- why can't we get USD$5 nets to 500 million people?
JACQUELINE NOVOGRATZ: The question, though, is not why can't we; the question is how can we help Africans do this for themselves? A lot of hurdles: one, production is too low; two, price is too high; three, this is a good road right near where our factory is located -- distribution is a nightmare, but not impossible. We started by making a USD$350,000 loan to the largest traditional bed net manufacturer in Africa so that they could transfer technology from Japan and build these long-lasting, five-year nets. Here are just some pictures of the factory.
JACQUELINE NOVOGRATZ: Today, three years later, the company has employed another thousand women. It contributes about USD$600,000 in wages to the economy of Tanzania. It's the largest company in Tanzania. The throughput rate right now is 1.5 million nets, three million by the end of the year. We hope to have seven million at the end of next year. So the production side is working. On the distribution side though, as a world, we have a lot of work to do. Right now, 95 percent of these nets are being bought by the UN, and then given primarily to people around Africa.
JACQUELINE NOVOGRATZ: We're looking at building on some of the most precious resources of Africa: people, their women. And so I want you to meet Jacqueline, my namesake, 21 years old. If she were born anywhere else but Tanzania, I'm telling you, she could run Wall Street. She runs two of the lines, and has already saved enough money to put a down payment on her house. She makes about USD$2 a day, is creating an education fund, and told me she is not marrying nor having children until these things are completed. And so, when I told her about our idea -- that maybe we could take a Tupperware model from the United States, and find a way for the women themselves to go out and sell these nets to others -- she quickly started calculating what she herself could make and signed up.
JACQUELINE NOVOGRATZ: We took a lesson from IDEO, one of our favorite companies, and quickly did a prototyping on this, and took Jacqueline into the area where she lives. She brought 10 of the women with whom she interacts together to see if she could sell these nets, USD$5 apiece, despite the fact that people say nobody will buy one, and we learned a lot about how you sell things. Not coming in with our own notions, because she didn't even talk about malaria until the very end. First, she talked about comfort, status, beauty. These nets, she said, you put them on the floor, bugs leave your house. Children can sleep through the night, the house looks beautiful, you hang them in the window, and we've started making curtains. And not only is it beautiful, but people can see status -- that you care about your children. Only then did she talk about saving your children's lives. A lot of lessons to be learned in terms of how we sell goods and services to the poor.
JACQUELINE NOVOGRATZ: I want to end just by saying that there's enormous opportunity to make poverty history. To do it right, we have to build business models that matter, that are scalable and that work with Africans, Indians, people all over the developing world who fit in this category, to do it themselves. Because at the end of the day, it's about engagement. It's about understanding that people really don't want handouts, that they want to make their own decisions, they want to solve their own problems. And that by engaging with them, not only do we create much more dignity for them, but for us as well. And so I urge all of you to think next time as to how to engage with this notion and this opportunity that we all have -- to make poverty history -- by really becoming part of the process and moving away from an us-and-them world, and realizing that it's about all of us, and the kind of world that we, together, want to live in and share. Thank you.
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