Paul Polak's strategy involves helping the world's poor earn more by seeing them "as customers rather than charity recipients"
Most of us look at the 1 billion men, women, and children in the world who live on less than a dollar a day and see poor people. Paul Polak sees market failure. He sees 1 billion potential entrepreneurs who would rather earn money than accept handouts, if given the opportunity. And if companies would develop the products these people needed, he sees 1 billion potential customers as well.
This might sound a bit starry-eyed, except that Polak's innovative approach has already helped 17 million people escape poverty. His strategy is to develop tools that even the world's poorest can afford (often using microcredit) and that will help them earn more money. Say, a $25 drip irrigation system that would allow a subsistence farmer to grow higher-value crops that he could then sell.
It may seem obvious that poor people are poor because they don't have enough income, but most anti-poverty programs don't actually focus on helping people earn more. "So much money is wasted on big infrastructure projects and government-run programs," says Polak, from his airy office in Denver. "We need to change the way we approach development. We need to see the poor as customers rather than charity recipients." On a roll, he adds, "we need a revolution in how multinationals design, price, and market their products. There is a huge virgin market out there!"
To foment this revolution, Polak launched Windhorse International, a for-profit based in Denver, in 2007. (Endlessly energetic, Polak, 75, is also agitating for a design revolution through a new nonprofit that he co-founded called D-Rev—Design for the Other 90%.) "Windhorse is a combination of disruptive technologies and microfranchising," he says, offering the example of a "Windhorse Energy" franchise. The company has developed a cheap device made of plywood and mylar that will reflect sunrays on a solar panel, intensifying the light by a power of 10. The concentrator essentially turns a 20-watt solar panel into a 200-watt unit for marginally higher cost. Customers who buy the $200 setup become micro-utilities, reselling the electricity to anyone who needs to charge, for instance, a cell phone or a motorcycle battery and, says Polak, earning back their initial investment within six months.
A second Windhorse franchise is based on an inexpensive device that uses salt and a small electric current to create a water-purifying chlorine compound. People who buy it can generate—and sell—more than 1,000 gallons of potable water a day. These so-called "water kiosks" are not a new idea, but the Windhorse technology cuts the price to less than $500. Although the franchise-related fees will push the total cost a bit higher, it's still a fraction of the $3,000 cost of today's most affordable kiosks. Polak and his partner, Kurt Kuhlman—an engineer and serial entrepreneur—are still tweaking both the solar and UV product designs and hope to begin beta tests in Nepal and Kenya within a year.
"Multinationals will only enter emerging markets seriously when other companies have already demonstrated that you can make profits," says Polak.
Although weak intellectual property laws in many developing countries could discourage multinationals from entering the markets, Polak's premise is based on his experience at International Development Enterprises (IDE), a nonprofit he co-founded in 1981 to develop income-generating tools for subsistence farmers. Consider Tel Aviv's Netafim, the world's largest producer of drip irrigation systems, which declined Polak's proposal to co-develop a low-cost system for small farmers. IDE designed its own version and after two successful years, Netafim introduced a competitor.
"Paul's approach is brilliant because it is so simple: know your customers," says Melissa Ho, a program manager at the Bill & Melinda Gates Foundation, which has given IDE $40.5 million in grants. "He won't develop a product if he hasn't spoken to 100 potential buyers. It's not rocket science, but in the world of NGOs, it's an innovation."
Despite the billions of dollars Western governments have given in aid to Africa over the past four decades, the per capita growth rate of the median African nation is close to zero, according to William Easterly, a former senior economist at the World Bank and now a professor of economics at New York University.
"How much poverty has endured because individual entrepreneurs were shunned in favor of the likes of the $5 billion state-owned Ajaokuta Steel Mill in Nigeria, which never produced a bar of steel?" Easterly wrote in a piece for The Wall Street Journal last October. "We will never know. But we do know that the free market has a long-run track record of creating prosperity."
And so does Paul Polak.