Prosperity through Innovation

  
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I had a conversation with Efosa Ojomo of the Clay Christensen Institute. He is the co-author of the book The Prosperity Paradox - along with Karen Dillon and the late Harvard management guru Clayton Christensen. The central argument of the book is that economic development happens when businesses innovate by creating a previously non-existent market. The book has been largely shunned by development scholars and this is where I started my conversation with Efosa. I also go through some other criticisms of the book, and Efosa had interesting answers. The book relies on case studies and might be considered not empirically rigorous by development scholars. Regardless of critics, the argument is powerful and hard to ignore. I read it as changing the overall incentives of all stakeholders in the process of economic development - when bureaucrats, the private sector can all benefit from making the pie bigger, things can move very quickly.

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Transcript

TL: Hi, and this is Ideas Untrapped. My guest today is Efosa Ojomo. Efosa is a senior research fellow at the Clay Christensen Institute. He has written a book called The Prosperity Paradox. It's a bestseller, and personally, one of the most refreshing books that I have read on the subject in the last couple of years. You're welcome, Efosa.

EO: Thank you very much, Tobi. It's a pleasure to be here with you. I can't wait to dive in. Thank you.

TL: Okay, so I'll start with the book and the central thesis, which I know as also appeared in your other publications, be it essays and articles. You talked about market-creating innovations as the key to prosperity, to getting the process of development started, to fighting poverty. What is your convincing evidence, so to speak, for this particular paradigm you're advocating? And why is the "Development Establishment", you know, aid agencies and scholars working in that area, why are they missing that point of view?

EO: Wow, so that is a great question to start. Unfortunately, it's not a question I can answer with one answer, so let me unpack the question. Because you asked what's the evidence for market-creating innovation? Why do development practitioners approach development and antipoverty programs a certain way? And why haven't they bought into this idea - the notion of market-creating innovation? So let me start with diagnosing the problem. When you want to address any issue you have to make sure you spend a lot of time diagnosing it. Let's go back to the aid industry and when it really began.

1949, Harry Truman gave a speech where he actually, unintentionally, I believe, catalyzed the beginning of the modern-day development industry. And in his speech (it was his inaugural address, you know, president of the US at the time), he defined the problem of development as rich versus poor. Developed versus undeveloped. First world versus third world. He didn't use all that language, but that's essentially how he defined it. As, you know, we are developed and we have all these resources, these poor countries are not developed, they don't have these resources, let us transfer resources to them and help them develop.

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That is the main way the development industry works today. It's this idea that you are not developed, we are developed, we're going to transfer resources to you. So that's number one, right, [on] why the industry operates the way it does. Number two is that the development industry is an industry that attracts certain types of people. And so if you look at big players in the development industry, what you're going to see are people who have gone to school to get typically a PhD or Masters degree in the area of development. And so they study development as a whole as an entire entity and the research they do is often very focused on how one element impact entity.

So you might write a PhD thesis on how education of girls in this part of Ghana impacts their ability to go to school. Now, that's an interesting paper and you may find out, oh, if we educate girls, more of them will have fewer kids and they'll get advanced degrees, but that will not lead to the development of Ghana as a country. It answers, oftentimes, what I think is an inconsequential question. And so the development industry has a lot of players trying to do good work, unfortunately, they're answering the wrong or I would say inconsequential questions.

The third thing I would say with regard to development and why it's practice the way it is [is], in a weird way, we know what the answer is. The answer to development looks like, right, in our minds, whether it's right or wrong, it looks like America. It looks like Japan. It looks like France and England. In other words, you go to these countries that are wealthy, and generally speaking, things work. The roads are good, the electricity does not go out, the law enforcement, for the most part, works. And so you say, "you know what? The problem in our countries that are not yet developed is all these things don't work. So let us make them work." Let us fix the roads. Let us fix the laws. Let us fix the schools.

What these three things I just discussed are missing is the fundamental mechanism that helps these things work. Right, the fundamental mechanism that actually provides the resources or creates the value that really enables these things to work. And that fundamental mechanism is market-creating innovations. Which is connected to the initial question you asked: "what's the evidence that this actually worked?" Again, to answer that, we have to go back in time. We have to say, "if we have this hypothesis that market-creating innovations work, how can we show that? We had to go back to a time when these wealthy countries, the United States, countries in Europe, Japan and so on were not wealthy. We had to go back to when they had demographics that are similar to many poor countries today. And we said, what happened? Did these countries simply build the great infrastructure all of a sudden? The government, were they never corrupt and they just woke up one day and began to institute good laws and practices? Or was it a more dynamic nonlinear process of entrepreneurs across the country creating new markets, employing people, generating tax revenues, enabling the government to overtime improve its institutions? What we found was the latter. It was a more dynamic and nonlinear process.

And so that kind of finding is really hard to document at scale and what I mean is, you know, when you pass a law, it's in the record books, we know exactly when this law was passed and so we can look at society before the law and we can look at how society evolves after the law. The problem with innovation is it's really hard to say, okay, this is the date - on November 5th, 2006, this is the date this innovation came and created all this impact. It's a process. And so instead of looking at oh, these were the laws that were passed, this is how society evolved, that's how the institution changed the society. What's more important to do is say "what led to the passage of those laws? Who fought for the passage of those laws? Where did they get the resources to fight for the passage of those laws? Where did the government get the resources to enforce the laws?"

And so these questions are a lot more difficult to answer, but when you begin to unpack them, it's hard to divorce development from innovation and more specifically market-creating innovation. My hope is that development practitioners begin to ask the tougher questions and begin to engage in what a wise man, once called "intellectual honesty." And really assess - are our programs working? Are they working the way we want them to work? We've been doing development like this for over the past 20 years, over the past 30 years. How has that resulted in prosperity? COVID-19 has come around and all of a sudden development is pushed back 25 years. Uh, was it really pushed back 25 years or were we celebrating a false sense of progress? Because development is not pushed back 25 years in Japan, it's not pushed back 25 years in France, I can tell you that. And so we have to get to the point where we are asking the difficult questions on how to truly do sustainable development.

TL: I want to go to your latest article in Project Syndicate where you challenged African entrepreneurs and business people to rethink the way they do business, and invests more in market-creating innovations. My question is why are they not thinking about this already, what are the barriers if the returns are there given some of the examples and evidence you've cited?

EO: Well, first of all, market-creating innovations are innovations that transform complicated and expensive products into products that are simple and affordable. Now, these innovations make these products more accessible to many, many more people in society. And so an example would be the proliferation of mobile phones all across Africa, for instance. Or a company in Ghana called mPharma that is making medication drugs more affordable, more accessible to people. Micro Insurer is another example, making insurance more affordable to people who historically would not be able to afford existing insurance products. So examples abound. Now the question you ask about why if these things are so interesting and exciting, why are they not being pursued?

A couple of reasons, the first is there is a sense that innovation is something that happens after a society develops and becomes prosperous [because] it's only people with, you know, disposable income, with extra income that can actually afford many products on the market. So that belief is widespread. And unfortunately, it's really hard to go against a belief. One of the things we're trying to do is say no, no, no, innovation is not something that happens after a society develops, innovation is the process by which society develops. So that's one. The second thing is this concept of non-consumption.

Now, non-consumption is a phenomenon that happens in every society, but it's more prevalent in emerging economies or poorer countries. It describes how many people in the society would benefit from gaining access to a product or service, but because of the cost of the product, because of the skill necessary to use the product or the time needed to actually purchase and consume the product, or the simple fact that the product is just not available, many people cannot access these products. It doesn't mean they wouldn't benefit, but there are obstacles or barriers.

Now, the non-consumption economy as we like to call it contains all these individuals. The problem is when you do market research on opportunities, a lot of times the insights we get from our market research point to what we call the consumption economy. It points to people who already consuming. And so when you look at the market research for televisions in Nigeria or refrigerators in Ghana, what you are measuring is not all the people who would benefit if they had access to these products or services. What the market research data is measuring is all the people who can afford the services. And so? You say oh, refrigerators in Nigeria, only 2 million people have them, as an example - I actually don't know the number off the top of my head. Only 2 million people, that's a very small market. That doesn't warrant our investment especially when you compare it to a hundred million in the US, there's no market in Nigeria.

What market research does not take into account is what about nonconsumption? What about all the people who would benefit from gaining access to these refrigerators? [But] because we don't measure and value nonconsumption, it's hard to even see it as an opportunity. And the last reason I would give, you know, I'd be remiss if I didn't say [is] it's really difficult to go after nonconsumption. It's difficult for the first two reasons I described and it's difficult because you are literally creating a market that does not exist.

And so in the research that we've done on just studying market-creating innovators, whether the ones in the US, in Europe, in Africa, in Asia it doesn't matter. Before these innovators create the market, there is widespread disbelief, especially from those who are experts these economies. They tell them there's no way that this market exists. These people are too poor. They're not educated enough, they can't afford these products. And so, to go against the grain when there's no market, the people are poor, the environment is difficult to work in, those are obstacles that are really difficult for entrepreneurs and investors. And so part of our work, what we're trying to do is, say, look, many of these demographics we see, many of these characteristics of these economies are very normal. They're not easy, they're simply incredibly normal. You're not doing what has not been done before. And if we can normalize these difficulties and say if you take a more predictable approach to innovation and investment, we can't guarantee success but we can help mitigate failure. We think you can actually do better in these emerging economies.

TL: Do you think that there are conflicts of interest in most of the boardrooms of African businesses? I mean, in that piece you challenged Milton Friedman's opinion of the responsibility of a business in society, which he says is solely to the shareholders or the stakeholders. So, do you think that there's a conflict of interest in most boardrooms, where some of the things that entrepreneurs and some business leaders are interested in, in this case, market-creating innovations, are not things that investors really think can give them returns on their capital?

EO: Yeah, so I think there's a lot to unpack in that...because of the abundance of data all over the place, unfortunately, we now live in a world of short-termism. There's more short-term thinking going around. What do I mean? Well, you know, if I'm watching the news and I hear about this company, this investor that made a lot of money on some investments, was able to cash out in a few years, that affects the way I think, it affects the way I measure my own performance. And so this abundance of data has created short-term thinking.

In addition, what you also have is a lot of the literature on finance, what constitutes a good investment comes from countries that are already prosperous. They come from countries where I would say they are no longer, generally speaking, in the market creation phase. And so they are more in the efficiency phase. So they have roads, they have institutions, they have organization building companies and the question is often, oh, how do we make this more efficient? How do we make better products? When you use those same metrics to analyze projects and organisations in Africa or other emerging regions, you have a mismatch because the continent is still in a market-creating phase. And so to use private equity metrics that I would use in New York to measure projects in Lagos or Abuja or Accra or Nairobi makes absolutely no sense. Literally no sense. It's akin to using the same metrics to analyze the development of a 3-year-old and a 30-year-old. It makes no sense. And so instead of a conflict of interest, I think I would say it's a mismatch of metrics.

If, as the CEO of an African company or the board chair of an African company, I had the goal to grow my market size and capture 60 percent of the customers in Africa. Say, I make baby food or something 'cause you know Africa is a growing continent. Well, I'm not going to measure my performance the same way Gerber babies measures its performance in other countries. I'm going to say look, what did baby food companies go through when the US was a poor country? What did they invest in? How long did it take? How did they manage the relationship with government? How did they manage relationship with the community stakeholders? How did they develop their staff? And I'm going to use those metrics. 'Cause if I use the metrics that these companies today are using, I cannot develop. It's not like it'll take time. No no no, like, we will never develop.

Now, you know, there will be some wins here and there, there will be some lucky breaks here and there and that's what we see from time to time. But to truly develop in the circumstance we find ourselves, we need to step away from using metrics that are propagated all over the place and develop a core set of metrics that are contextualized to our own circumstance.

TL: Do you think that this framework that you describe - [that is] businesses really innovating their business models to target nonconsumption and grow the pie, so to speak. Do you think it's the absolute fundamental thing that has to happen, 'cause the way I read your book and some of your works is like a chicken and egg problem, right? Like, what has to happen first, you know? Some in the development literature would say that you need institutions, you need good institutions first before you can do some of these things that you say. What is your response to that?

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EO: I mean, I empathize with those who say we need good institutions, but that is not really a value-add statement. The reason I say that is, okay, we need good institutions, what do we do next? We look at the Nigerian government, at least the federal government...in addition to the lack of managerial and technical capabilities, the government has roughly $200 or so to spend per year per Nigerian. Of that, maybe fifty to $75 goes out the door to service its debt. So roughly $125 to a $150. In addition, when you look at where it's starting, I mean, nobody would look at Nigeria and say we practice good governance, so it's starting from the back of the pack, and so it needs even more resources to get to good governance. When you compare where Nigeria is and what it has, the resources to, again, you know, whether it's Norway, Denmark, America. Norway spends twenty to $30,000 per person per year. And so the idea that, oh, Nigeria needs good institutions, that's like saying a homeless person needs more money. If they had more money, they wouldn't be homeless. That's not a value-add statement.

The question is, how do we get to good institutions? How did the US get to good institutions when it was poor? And so if somebody comes up and says - you know what Efosa, Nigeria spends $150 per year per person, here's how they can actually get good institutions and it's a realistic model. Then we can start the conversation. But when, you know, these experts throw out blanket statements oh, we need good institutions... I'm like, okay, what am I gonna do with that? What is the police officer who is demanding brides, making $50 a month going to do with you need to have better institutions? What is that politician who has made a bunch of deals before he or she becomes a senator or a governor and they get into office and they have to square all those they made deals with? They have to figure out how to amass as much wealth as they can because there are little to no economic opportunities in the country, what are they going to do with the "you need good institutions?" There are no incentives. Right? To live out that statement. So we do need to move a lot further from the "we need good institutions" argument because it has not done anybody any good.

You know, there's a paper we referenced in the book - how not to fix problems that matter? And ultimately what happens is a majority of institutional reform programs funded by big development players do not work. You know, you come to my country, you tell me, oh, I should behave this way, I should do this, I should make sure this is easier for people and many of the public sector participants on the ground just listen, they take the development dollars, they reformed the institutions in a way that makes the donors happy and they keep doing what they're doing. Because it doesn't cut deep. It doesn't fundamentally change how people think about society. The incentive systems, they don't change. So, do we need good institutions? Absolutely. How do we get there? That's a tougher question.

TL: Staying with that thought. Now, isn't there a case for, well, maybe it depends on what we mean when we talk about institutions right? And I know that scholars and even people who work in development are guilty of trying to imagine already formed institutions in developed nations and trying to graft a lot of their features in countries that do not have them. But for businesses to take risks, you know, don't you think that institutions like basic property rights protection, contract enforcement and things that create the environment for you to be able to take risk, however minimally, don't you think those should come before market-creating innovations or targeting non-consumption in the way you describe it?

EO: It's a good one. I think the better question to ask has to be more specific. Now, I'm not saying investors should just go and put their money in any country. And there no, at least, limited guarantees, that's not what I mean. I mean, after all, businesses are operating in Nigeria as we speak. I mean you are speaking to me through an Internet service connection. So the idea that somehow institutions don't work and we need better institutions, I mean, it's not too mature. We have to mature that idea. So we have to be specific. We have to say, if you are going to invest in this space, in this country, in this region, you have to ensure the specific fundamental requirements that as best as you can, no investment is ever secure or ever guaranteed... But you have to ensure there are fundamental, sort of legitimate, base-level institutions exist.

And I think if we went in with those sorts of questions, not ways Nigeria on the ease of doing business index, how is Nigeria's corruption perception ranking? That's too broad, generic, and that's not helpful to anybody. If the folks who are providing us with this Internet connection went into Nigeria with that thinking they would not have gone in. And so, somehow, that question forces an answer that is not helpful. The question has to be, look, I'm a transportation investor, I wanna go and make transportation more affordable for people in Malawi. Alright, let me look at who the transportation players are. Let me understand that sector. Let me understand who the government players are. Let me understand what the regulations are, how have they changed it over the last five years. How might they change it over the next year?

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You have to do your homework. And, no offence, many investors are not willing to do the homework. And so of course, you're gonna not find Nigeria attractive when you go in with the oh, don't we need the baseline this and that? No, no, no, no, that's a lazy way to think about investing and more specifically, development. We go in more targeted. And if we do that, again, no guarantees we will be successful but that's a much better problem-solving exercise than oh, yeah, let Nigeria move up some rankings. Let's improve. What does a good institution look like? I mean, like you know, in the broad sense, what does that really even look like?

I mean, I think I would be more targeted than looking at Nigeria or, really, any country from a high level, like, how are the institutions? Don't we need this base level?

TL: That's a good point, but here is another way to look at this from my perspective. Some of the examples you cite like Mo Ibrahim, Celtel; Tolaram in Nigeria, don't you think that there's a bit of a survivorship bias in some of those examples? Like, for example, if we look at the case of Tolaram, yes, it has done really well. Well, "well" is relative here, so, but it has survived.

EO: It has.

TL: Yes, and it's become a household name and it may well be a replicable model for investing and doing business in this environment. But you can also argue that over those decades, a lot of businesses have also tried and failed.

EO: Yes.

TL: And aren't you picking winners? And in that sense, not really robust with your sample set in that sense. Because a lot of entrepreneurs who are trying to do things differently would tell you how hard it is. Some of them are losing money, some of them are losing their skin, some are highly demotivated and these are people that really, really want to do bold and innovative things. But the general, again, institutional environment, and in this case, specific policies that worked against them are serious barriers. So aren't you effectively simply picking winners and just ignoring the other side?

EO: It's a good question. I think I would answer, yes, if there was something anomalous about Tolaram in the context it finds itself. And so if I did not see similarities between Tolaram and Isaac Singer, who we wrote about, or Henry Ford who we wrote about, if I did not see similarities in how they had to engage with government, how they had to raise capital, how they had to almost lose their skin (in your language), then I would say, oh, yeah, we're just picking winners. But there's nothing anomalous about what they've done. In fact, I expect winners to look like Tolaram, Mo Ibrahim and several other companies that we talk about.

If they don't look like them, then the chances that they will win, at least market-creating, are very very slim. The other way I would respond to that is, I have never once and I will never say this is the easy path. This is incredibly difficult. It's so difficult that I am convinced this is the critical missing piece. It's paradoxical, but that is why we are not developing. Because there is this incredibly difficult thing we have to do, but we believe the only way we can do it is if the environment allows us do it and so we have to fix the environment. Now we believe that so strongly that we are willing to invest billions of dollars to try and fix the environment, with no connection to this mechanism that's gonna make the environment thrive. That's how strongly we believe in educating the public, in institutional reform, in fixing infrastructure whether or not it makes sense.

We're trying to do all that and we're paying little attention to empowering entrepreneurs. And so if I, for instance, were Mo Ibrahim, after I sell my Celtel and I become a billionaire, I would say okay, what's the next industry I want to democratize? And I go, and I do the hard work of building that I will not do governance. Nobody is winning the prizes. It's incredibly difficult to do any meaningful reform because the equation, we have the backwards. Development is difficult. There are no easy answers here. What we have to do is ask, what gives us the best chance? Does wishful thinking in light of poorly paid civil servants who have little to no incentive to improve the system give us the best shot at success? Or does figuring out a way to empower and create new markets where some of the revenues from those markets can be pumped into the institution and overtime maybe it gets better. Does that give us a better shot? I think I'm gonna put myself in that camp.

The last thing I would say on this is, there's a professor out of [the] University of Michigan. Yuen Yuen Ang who just published a book called China's Gilded Age - The paradox of economic boom and vast corruption.

TL: I know her.

EO: Yes, and so she talks a little bit more about the public sector side of things. I mean, no two countries are alike or identical, but she does a really good job of explaining how even in light of China's vast corruption, there was an economic development push that prioritized investors, markets and as a result, China, for all its problems, has been able to lift a billion people out of poverty, grow 10 percent over the last four decades, and improve. So, there no easy answers here, it's just we have to pick the camp we think makes the most sense, and I don't think the camp where a monopoly entity with little to no incentive to change, trying to incentivize them to change by giving them more resources and empowering them when the incentive system in society hasn't changed, like, somehow, that makes no sense to me.

TL: I like the Ang Yuen Yuen example. It's a great example and I've read both her books, I think what she's doing is fantastic. So here is my question on that. You gave the example of Mo Ibrahim. Now, don't you think that people like Mo Ibrahim - and of course this is not really about him - or people like him who focus on the issue of governance... now we may critique or find some fault in how we've been going about this. But don't you think they focus on the issue of governance because it is through governance, again, I reiterate, that you can get a hundred Mo Ibrahims?

Because, Tolaram may have adapted well, it may have really found a way to survive through thick and thin in Nigeria, however difficult others may say it is, by doing its homework and making targeted informed investments like you said. But, in the end, Tolaram doing well may not necessarily raise the GDP per capita of Nigeria.

EO: Yeah.

TL: Which in terms of poverty and prosperity that is what really matters at the end of the day, income for people. So don't think governance may not be the only way, but it's an easier, faster way for the kind of entrepreneurship that you are advocating to scale, really, really fast, you know. I mean, in America, yeah, Ford had an innovative business model that changed its generation and maybe the way business was done in America after. But also, there was an environment that did not entrench Ford, but that allowed others, Dodge, GM and most of these other companies to emerge and improve on those things and create tons of jobs.

So don't you think that governance is vital in a way that it allows businesses that really want to innovate to scale their business model really fast and for other businesses to look at their success and be encouraged to enter that space and do even better things?

EO: Absolutely governance is important. We say it in the book. Entrepreneurs ignite the fire, the government fans the flame. You can not have a developed prosperous society without ultimately getting governance involved, it's a matter of sequencing and incentives. Now, I would agree governance is important insofar as we're talking about the same thing. Again, I don't want us to limit our conversation to oh, good institutions are important, you know, that's a non-value-add statement. Governance is important if what we mean by that is working with economic development stakeholders to make sure the incentive systems in society benefit those who work in government. I, right now, can give you not one reason why a poorly paid civil servant who exists in a system that is steeped in corruption to go to work every day, do a great job, do as much as he or she can for the society that already thinks he or she is stealing money, not have enough money for rent, for health care needs, education need and go home because Mo Ibrahim Index says you need to have good institutions. No, No, No. That makes, again, no sense. I would not do that. You would not do that, I don't think.

Now if what we mean by governance is vital is, look, let us sit down here and let's do it the way the Chinese did. Let us align your incentives with how much investment dollars are coming into your state. Let us make sure that, you know, yeah, you get paid $100 a month, but if you are able to attract this much investment, if you are able to make sure these entrepreneurs thrive, then you get a 50 percent bonus. You get a 100 percent bonus. You develop the incentives to help the government do the job that we're asking them to do. Because it is a thankless job. It is a terrible job. It is a job where everybody thinks you're stealing money, whether or not you are. And we know this. So the idea that we should just keep measuring, saying, "what's wrong with these guys? Why we need to fix it" without sitting down and saying, how can we realistically fix this so we limit the incentive for government officials to steal? We're going to be spinning our wheels for years to come, right? That is what I think we can do from a governance standpoint. Align incentives, make sure, me as a public servant, I benefit if my society benefits.

If my society benefits, and I don't benefit, well, forget about it. It's not going to happen.

TL: I agree with you, we need to move away from some of these useless indices, to be honest. So do you think that changing incentives the way you analyzed, do you think that there are some, I don't want to say natural disadvantages or barriers that are specific to certain societies. For example Nigeria, there is oil and the so-called resource curse.

EO: Yeah.

TL: How do you think that can work with incentive problem? You know, because you have bureaucrats and public servants who have no incentive in the success of the private sector. They can simply sell oil licenses and drilling rights and keep collecting taxes from that same sector and borrow to plug the other fiscal holes and live like that for decades.

EO: Yeah. So, that's a tough question, right? And, again, I want to be as practical ask as possible. If you had a trust fund baby, you had a really wealthy person who didn't manage their money well, allowed their kids to do whatever they wanted, the question you're asking is, how can we incentivize this trust fund baby to actually care about self-improvement and development? I mean, that's difficult, right? What I would do is try and find the officials who will be open to a different way of creating value and wealth. I can guarantee you not all 36 governors in Nigeria are extremely corrupt, or at least corrupt at the same level. Not all of them will be uninterested or disinterested in an idea to create a new industry in their region.

TL: Certainly not.

EO: So it's not to say this is an easy road or, you know, you're just going to find people willy nilly. But you go to the first governor... I'm simplifying because we're on the podcast, right? I know people in government right now, and I can give names of people I trust. People who are trying their best to do well by the community. So the idea that oh, everybody 'cause I think that is what we imply when we say the government has access to oil and you're right, they do. But there are still going to be people in government who we take interesting ideas to and in communicating those ideas, we help them see if this works out, you would have generated this much income for this state. You would have created this much value if you allow this to work out. These many constituents would get jobs. You can talk about this in your next campaign.

Now, if you take that message to every governor in Nigeria, maybe they will all say get out of here, I am not buying it. If that happens, then go to Ghana. Go to Cameroon. Go to Rwanda. Go somewhere until you find a country where it will work. Again, I'm not advocating this because I think it's easy. In fact, I'm advocating it precisely because I think it's difficult. But, unfortunately, I do not see another way we can develop. I just do not. And once I do, I will start promoting that because before we started the podcast, you and I discussed the idea of intellectual honesty and I suppose I just do not see how we get out of the rut we're in if we don't start to think differently.

TL: One final area I'll like us to explore is culture. I mean, one of the books you cited in the book, which I like very much, is Deirdre McCloskey's Bourgeois Dignity, and she talked about how the social embrace, so to speak, of the culture of Commerce, sort of laid the groundwork for some of the things that happened in the West, you know?

EO: Yeah.

TL: So what role do you see for culture here? I mean, it's easy to talk about hard metrics and talk about governance and you know, but we know that culture is the software of society. So what role do you see for culture in this?

EO: You are absolutely right, culture is key. Culture is the software. But culture runs on hardware. And culture is connected to hard metrics. And so if I use your analogy of software and hardware, there is no software I know that runs on software like every piece of software runs on hardware and depending on the makeup of the hardware, if you have a really fast processor hardware, then your software will run faster if it has the capabilities to. And so culture might seem like software that's malleable, and it is valuable, but it is not malleable without hard metrics.

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What do I mean? Well, let's think about why we may not value commerce as much as we should or why we value corruption as much as we do. Well, look at the hard metrics. If you're fortunate to get into a position of power in many of our countries, there are hard metrics in your life that increase - your access to the elites in society, certainly your bank account, your homes, your car, your children access to better education. Those are hard metrics. So the idea that somehow our culture values that practice makes complete sense. The idea that we value entrepreneurship and innovation in the US is connected to hard metrics as well, right? Look at the richest people here. It's all these innovators.

So for me, the two are sort of one and the same. What we know is that you can't change the software if it has no bearing on the hardware, if you don't change the hardware. In other words, if we don't figure out how to increase or improve those hard metrics, it's gonna be very difficult for us to change the software, sustainably. We might for a little while, right, we might for a political term or two. But what we're talking about here is long term development, decades-long. And if we don't figure out how to help people in society make progress in a way that they lead better lives, their kids lead better lives, they have access to better healthcare and so on... Unfortunately, the software is not going to change, the culture is not gonna change. And so I do think we can connect the two better.

TL: One final questions before I let you go, which is also a tradition on the podcast is, what is the one big idea right now that... it may be something you're working on or something you'll like to see. So what's that one big idea that you're thinking about right now that you will like to see spread and see the world adopt and see people believe more?

EO: Yeah, so I think for me, in the context of my work, it is this - innovation and entrepreneurship are not things that happen after a society fixes itself. They are actually the process by which society fixes itself. If more people can believe that then we can begin to talk about the “how”. We can begin to say okay, Efosa I get that, but this is my circumstance, this is my context. How can that hold true in my circumstance? There are things like political innovation. When I talk about incentivising the government, that is an innovation. When I talk about entrepreneurs figuring out how to manage the governance issue, that's part of their innovation. So, I think, for me, it would be innovation is something that happens not after society fixes itself, but it's the process by which society fixes itself.

TL: We'll do our best to help that idea spread.

EO: Thank you.

TL: Thank you so much. My guest today has been the author and prosperity researcher, Efosa Ejomo. Thank you very much for being with us, Efosa.

EO: Absolutely, it's my pleasure. Thank you.

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