How Vision – and Persistence – Built Bangladesh’s GrameenPhone
Iqbal Quadir is the founder of GrameenPhone
and the founder and director emeritus of the Legatum Center for Development and
Entrepreneurship at MIT. He sat down with Karl
Ulrich, vice dean of entrepreneurship and innovation at Wharton, to
talk about his self-made journey from growing up in one of the poorest
countries in the world to building a global business. In many ways the
embodiment of the entrepreneurial spirit, Quadir explains how everything
connects.
An edited transcript of the conversation appears below.
Karl Ulrich: I want to take us
back to your origins. Tell us about where you came from.
Iqbal Quadir: I
came from Bangladesh, from a relatively smaller town called Jessore. I grew up
there and went to a boarding school inside Bangladesh. I was somewhat of an
urban kid. But in 1971, when there was a war in the country, my family went to
the rural area and I experienced the rural conditions in Bangladesh that year.
My friends were often children of peasants and other small farmers. That had
always had an impact on me, so I talk about that.
Ulrich: How did you end up
in the United States?
Quadir: I guess I was an
entrepreneur. My father died when I was 14 years old, and I somehow aspired to
get a good education. My mother had provided some funds, but I managed to get
to the U.S. with some scholarships. Eventually, I got almost a full
scholarship, and so that is how. I simply tried myself.
Ulrich: That is a common
path for some of our most successful entrepreneurs in the United States. I
wonder if you could tell us about GrameenPhone?
Quadir: GrameenPhone is the
largest company in Bangladesh, and it has 55 million subscribers. Sometimes the
stock market is valued at some $7 billion. It was really for four or five years
I tried to convince people that this is a good idea, it is something to be
pursued. But I think if we want to go back to its origin, it’s good you asked
me about my personal origin. Those impacts had certain germ of thoughts that
eventually gave rise to GrameenPhone.
This is why I think no matter how rigorously we think about
problems, at a deeper level passion is important because it drives us to find a
logical solution. Even behind logic, you may have a passionate pursuit, which
gives rise to finding a logical solution.
In my case, I knew that I came to America and there were
extraordinary opportunities here in the United States. I managed to go to good
schools and get good scholarships and whatnot, but I also had in mind the
conditions I have seen in Bangladesh. I was always on the lookout for good
ideas that could do something about it. Two really important ideas have stuck
me in to doing that. One is that the economic progress does not necessarily
come from pouring capital into it, but rather people becoming more efficient in
managing their tasks. It’s a question of improvements or skills. But also how,
in a sense, economic progress can come out of thin air.
For instance, I was actually attracted to Adam Smith because he
mentioned Bengal, which is Bangladesh, that is how I was originally drawn to
it. He said in antiquity, three places had good wealth: ancient Egypt, Bengal
and eastern China. He attributed those things to inland navigation, and his
point is that people could exchange through inland navigation, specialize in
exchange and divide the division of labor, and through that wealth is created.
Through that, there was what he called “opulence” in antiquity. I became a fan
of Adam Smith. What is interesting is that many good things come out of
division of labor, including inclusivity, because if I want to specialize in
something, I have to give up something else to you.
Separately, I had another important thing I observed. When I was
an undergraduate, I was part of a college team that decided on buying a $3
million computer — one big mainframe that took a whole roomful of machinery.
When I was doing my graduate studies here at Wharton, we learned all sorts of
application for computers. But the key point is that there is this Moore’s Law
that says processing power is getting squeezed more and more in to the same
chips, which means the prices of these processing powers is declining rapidly, which
means that these machines are going to countries that do not have very much
capital.
So I actually tried, in the middle of 1980s, to create a Bengali
word processor. But we realized that the masses couldn’t use it because most
people do not know how to read or write. But an event took place in my life in
1993, and by this time I had tried to be a budding investment banker. I was to
work in a small firm that had just some rudimentary networks, so we didn’t have
floppy discs and cumbersome activities. One time it broke down, and I was
waiting for somebody to come and fix it. That reminded me of a day in 1971, 22
years earlier, when my mother sent me to get some medicine from this rural
setting. I was from a middle-class family, my father was a lawyer, but in this
setting I walked 10 kilometers to get this medicine. And when I went there, the
medicine man wasn’t there. I walked all afternoon back.
I remembered that on productive days, sitting in New York while
waiting for someone to come and fix my network, and kind of said, networks
help, so if you are connected you can get things done. If you don’t get
connected, then you don’t get things done. And I realized two new things, which
is that microchips are getting squeezed into phones in the early ’90s as they
were becoming digital phones. Before that, cellular phones were analog phones.
I also realized a powerful point from Adam Smith, that there were many things
that come out of division of labor, and division of labor gives rise to
productivity. But he said the extent of the market tells you how far you would
be dividing. Let’s say I start focusing on fishing, but I will stop there and
not necessarily go any further in fishing only salmon if the market is small.
If the market is bigger and bigger, then I can specialize narrower and
narrower.
The point is, the ways to connect determine how large the market
will be and how far the division of labor will advance. All of this made sense
to me, so ultimately I realized that if Moore’s Law is bringing down the price
of connectivity, connectivity would be a profound force in transforming these
countries. I became so convinced of this because of these insights of these
other people. I am basically stealing their ideas. I basically said, hey I have
to stay put on this. So I stayed for five or six years, convincing various
parties to come together and create this company. I jokingly say that is how I
lost my hair.
Ulrich: You are really
saying that not only does private enterprise and entrepreneurship contribute to
an economy, but also particular kinds of innovation — these connectivity
innovations?
Quadir: Exactly. I like
analogies to understand what is happening. Let’s say I take a bucket of water,
if I [put in] a drop of ink, it will get absorbed. If it is something favorable,
other molecules will receive them. But let’s say you put a drop of oil, it may
not go very far. If you find the right technology, then it will be grabbed by
people and [all of the] water will get transformed. The whole economy gets
transformed.
I think the cellphone was such a thing because it is
fundamentally, elementally human to connect and produce more and gain more. At
the same time, the cost of these things is … going down, things automatically
come together. It is a question of bringing it together, and seeing that it is,
to me, almost surreal. Everybody knows Bangladesh is one of the lowest-income
countries, and right now we have 110 million phones. When I started, it had a
quarter-million fixed phones, so it is a really profound change, to say the
least.
Ulrich: You have spoken
very eloquently about the power of enterprise in developing economies. What
have been the legacy barriers?
Quadir: I think human
beings cannot radically absorb something completely, radically new. It is hard.
Similarly, innovation has to ride on other things. There were a lot of things I
sorted out in my head, and I said this is what gave me the resilience, the
patience to try it because I believed in those insights. Those insights were
logical and made sense to me, but there were actual, practical problems.
One of those practical problems is the lack of other things.
Let’s say I bring a good car, but without the highway I cannot drive the car.
In the early 1990s, the Internet was spreading in this country very rapidly. It
was very easy to notice. People already had computers, modems, their telephone
lines. They could easily call up something. But the real problem in poor
countries is that you don’t have those other infrastructures. Now, because of
colonialism and subsequent aid-driven, state-driven development, centralized
planning tends to be the case. Even in India you will see different states, and
within those states there is centralization. A usual pattern in these countries
is [to have] one central city, often supporting a big bureaucratic
infrastructure, and vast parts of rural areas that are relatively
underdeveloped with no infrastructure.
What happens is it creates a vicious cycle. Because the
infrastructure is there, everybody develops things within that area. Even if
you want to start something, you don’t want to go out in the rural areas and
not have your children go to good schools.
Moore’s Law would say it would be viable everywhere, and Adam
Smith said it would be useful everywhere. Then the problem is, how can I break
that vicious cycle? Because I, too, do not have engineers to go out in the
rural areas where there is nothing. This is why I tried to latch on to another
organization that may have some infrastructure and why I went to micro-credit programs.
Bangladesh was blessed with good micro credit programs. Grameen Bank, for
instance, had 1,000 branches. This is why, by the way, our name has become in
their honor GrameenPhone. My original idea was GonoPhone which means “phones
for the masses.”
One of the problems you are talking about is the ecology being
poorer. Let’s say Amazon.com is a company that is selling books and other
things, but people have credit cards. You need that other infrastructure to
bring about a new thing. This is not a conceptual problem, it is a practical
problem that you need to solve. With Grameen Bank, not only could I find those
sites where I could potentially put cell towers and some infrastructure to help
out that process, but also there were [potential] borrowers.
Eventually, I developed an idea and proposed it to Grameen Bank.
They would give money to somebody [who would] borrow a small amount of money,
$100, $200, to buy vegetable-growing facilities or ducks or chickens. A typical
loan was a cow loan. I said the cell phone could be a cow, because somebody
could borrow $200 and instead of a cow, get a phone. And the phone would serve
the village but it would be a business for that person. That idea was a little
crazy, but it was considered logical. The founder of Grameen Bank said, “Why
don’t you see if you can make it happen?” So I quit my job and flew around the
world. I got some seed funding from New York. I faced many rejections, but
eventually I managed to convince the Norwegian telephone company — Telenor
Group — to [help]. Interestingly, they had never been to Asia before.
Ulrich: The normal view of
entrepreneurship is that all this great stuff gets invented in the developed
world, then it trickles down to developing economies. Are we missing something?
Is there a different way to view this?
Quadir: In this case, it is
somewhat trickle down but rapid trickle down because of Moore’s Law .. so $100
[worth of computing power] becomes $1 in 10 years. That is one issue. The other
is that it is so fundamentally useful, it is an egalitarian thing. Everybody
can talk. In a way, there is an irony to all of this. Cellphones are actually
computers, so the computers have entered this market in the disguise of a
phone. But now, what is happening is that these computers are kind of a Trojan
horse that can do all sorts of other things.
If you look at Telenor as an example, typically a Western
company goes first to Hong Kong, Singapore, Japan or something, and then they
will go to poorer and poorer places. That, I will say, is trickle down. But for
whatever reason, maybe because I banged on their door many times, they somehow
came to Bangladesh before they went to any other Asian country. They may not
admit it now, but it took them a few years. There were some very good people
who did this, and it got an endorsement from the top of Telenor, but I
personally think they thought it’s a good thing to do, socially speaking.
After World War II, Norway was the poorest country in Western
Europe. Now, it is a very expensive place to go. They may have had a little bit
of that mindset; they have seen their own country develop. Now they have close
to 200 million subscribers in Asia. What is an interesting thing that has
evolved is that the Western world is providing an innovation, but the so-called
low-income country is providing a market. I think that is a very healthy
dovetail arrangement, [in the] interests of both worlds, and that is an
interesting model that American business schools should look at. It is not
necessarily selling consumer goods. Consumer goods have their own good
purposes, but the point is that this is empowering people. Somebody is spending
two pennies to make a phone call, and it is saving him a quarter’s worth of
time, then he is advancing by 23 cents.
I think that the cellphone revolution in Bangladesh is at least
producing $20 billion a year. If we have productivity tools supplied by Western
innovations, then let the innovators make money and let the low-income people
provide the market. Both are advancing. Today I would say that Bangladesh is
giving more aid to Norway through dividends than Norway might be giving some
aid to Bangladesh. I think that is the way it should be. We are warm, bigger
country. They are a small, cold country, I think it is a perfectly good
arrangement.
Ulrich: You are saying
something quite profound. We would often characterize impact entrepreneurship
as people wanting to do good in the world and using entrepreneurship and
enterprise as the vehicle. You are saying something slightly different, which
is that in some cases pure greed is fine. That, in fact, some of these
opportunities are exceptionally valuable economic opportunities.
Quadir: I think so. But
again, we can restrain ourselves with our conscience. Remember, the ultimate
restraint comes from people. We may restrain ourselves through our own internal
police, but as people become more empowered through economic wherewithal, they
are also able to create more checks and balances. Ultimately, it is a good
thing, but what I am also trying to say is that if we find fantastic
innovations that are empowering at the bottom, then those innovations are to be
embraced and people advance that way.
Remember another thing: We are not talking about Marxist
worries. We are not talking about a big factory where some capitalist may
potentially exploit people. We are talking about people simply becoming more
efficient with their fellow citizens. As a result, all of the value they create
often accrues to themselves.
At the same time, there is a viable business. The business makes
$1 billion in revenues and very good dividends. But these can be a model for
other kinds of innovations that are perfectly in sync with each other’s needs
through innovation. Cellphones were not invented for the poor countries, so too
much planning is not necessarily necessary. It was an unintended consequence.
We need to go in to the reservoir of various innovations that we have in the
First World and pick out those that we can tweak and make available for
lower-income people. With their income automatically rising, they can buy
things from the Western world more even. Not just the phones, they can buy
generators, they can buy other things.
The two things that are already existing on the ground is the
normal human desire to improve their lives. That desire very much has a role in
this, because without that they would not use the phone. The other is there is
entrepreneurial energy. Both of these are often squandered if these tools are
not found. With the tools, both can be unleashed.
Ulrich: I want to turn our
attention to those young people who are in developing economies. What advice
would you give to a young entrepreneur who is growing up in Bangladesh or
Pakistan?
Quadir: My own example
itself could be followed. I am not trying to sell myself, but what I am trying
to say is that I have more authority on myself. I got an education in the West,
therefore, I was informed. I tried to think clearly of what is necessary, but
nowadays that is easier than when I tried to educate myself. There was no Internet,
for example. Now you can even sit in Pakistan and learn some of these things.
The other point is, remember, I was saying you need one thing to
get to the other thing. The fact that cellphones now exist through my work or
other people’s work, then that should make their lives a little bit easier in
getting the information. You can get a lot of things that did not exist before,
but it is always important to get an education, to think clearly. Think about
things that might be available in the West that can be adapted in the
lower-income countries. There may be other ways of solving these problems, but
this is the one that I found to be profoundly transformative, and things can
hang together around that kind of economic interest dovetailing.
http://knowledge.wharton.upenn.edu/article/how-iqbal-quadir-built-grameenphone/?utm_source=kw_newsletter&utm_medium=email&utm_campaign=2016-06-09
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