Social Capital Gains
Exactly one month ago I posted a story about some of the many projects I'm funding at my company Appfrica Labs. One of those stories was about a 19-year old entrepreneur who had created a product that I thought was particularly impressive. Together, he and I crafted a multi-faceted business plan around his idea that, is not only completely sustainable, but it's also completely scalable with the resources that we had available. Less than a month later and his project has gone from zero to 60, complete with multiple potential investors and a big media partner to bring the product to market. And his story is not unique, I can equally point similar success in the rest of my staff. But more on this later. First, I want to explain more about the role my company plays in Uganda as an investor and incubator for young entrepreneurs.
Collateral Damages
An East African teen goes to college, gets good grades, excels in University only to come out to a job market that can't use his skills, or an international job market that he's not skilled enough for. So he applies for grants, scholarships and a visa to get accepted to a school abroad. He's accepted and moves to an unnamed first-world country. There he gets a high paying job and settles down, perhaps choosing to send a portion of his income to the people he left behind each month.
What's wrong with that picture?
Expatriating for opportunity should be an explicit choice, not a necessity. Don't get me wrong, this type of story is indeed a great success and many people who've followed this path are making fantastic contributions to both the societies they come from and the ones they now live in. The problem for their home countries, however, is the collateral costs when it isn't a choice.
1) The cost to the country, to educate someone with the best of state resources available only to have them leave to create value and pay taxes elsewhere.
2) The cost to the alumni, businesses and donors who fund the universities facilities.
3) The experience, skills, and awareness gained by an individual livign and working abroad, can't be easily shared with the people left behind who might otherwise benefit from it.
4) The state then sees all of it's top students leaving, and regrets going to such great lengths to educate them in the first place (seeing it as somewhat of a waste). So they then vilify the educators and cut funding, which (not always but often) leads to corruption within the education system due to the constraints created as a result.
5) Students feeling pressure now, from both within the University and wanting to succeed for the sake of their families, make their decision to go elsewhere to study, work or venture.
6) The students left behind aren't the most skilled. If the top 10% of the class is expatriating, that leaves the rest to compete for jobs locally, usually at NGOs, or foreign companies operating on the ground. Many of these organizations also have 'western standards' for their workforces skills, thus, they often underpay locally while over paying for foreign 'experience'. They may even begin to resent having to work with any locals at all, which may lead to their exiting the market. Again, the pressures, economic and otherwise, placed on anyone left behind can lead to corruption.
This is not a hypothetical argument, I'm talking about the current state of Makerere University in Uganda and some of the various NGOs that operate here.
Affect Theory
In Makerere's Computer Science program they graduate about 900 kids per year. Of those 900 between 5% and 10% find full time jobs by the same time the next year. Those that don't find jobs by that time, now have the added pressure of competing with the next class - with a the added disadvantage of a slightly outdated and somewhat unequal education (as education should be getting better with each graduating class). Many of the remaining 90% to 95% will wimple give up, going back to tried and true jobs like taxi driving, owning a small shop or working in unrelated areas to their degrees. Again, this is a cost on the state, who've trained highly specialized individuals who are often now doing things they could have done without an education at all.
To further illustrate my point, I'll borrow some terms from behavioral psychologist Burrhus Skinner and his work with positive reinforcement. Essentially, he argues that there are two motivations for a person do anything. Either to avoid suffering (negative reinforcement) or to experience the pleasure of reward (positive reinforcement). Skinner argues that every decision in life is made with an internal dial that tilts from one degree of extreme to another. Now, this is important because if there's no reward, some people don't excel. Why would they, there's no real point. Alternatively, achieving to avoid punishment will ensure (in my opinion) that people will only ever just enough to avoid that punishment. Whether it be working everyday (to avoid poverty and hunger), abiding the law (to avoid penalty) or sending their remittances across the Atlantic (to avoid cultural and family shame) - all of these things can be done with different motivations. It's my opinion that truly remarkable results are achieved by people who are acting for reward rather than the fear of punishment. And I won't go too Psych101 on you all, but there's also a correlation between negative reinforcement and immediate gratification; and positive reinforcement and delayed gratification.
'Reward' in this sense could be anything from their own 'feeling good' about what they do or the general idea that their actions may have long term positive implications. But I digress, since I work with investors, I'll bring all right back to the topic of this piece which is capital.
Reward and Incentive
Now, there are all types of economists and people from the financial sector who can explain the potential risks of investing in a region like East Africa. But those ideas are all based on history - watching what's occurred and making informed projections of the future. What I will attempt to explain is the affect of such.
Going back to the story that I opened with, this particular student is very self-motivated. When I organized the Facebook Garage here last year, he was full of questions. Even before he attended, he had been working on web applications. But why? There's no market for this type of thing AT ALL here. In the city of Kampala, I can count the number of web development companies on two hands. If you get rid of the big corporations like MTN and the start-up companies that have been around for more than a year, then one hand. Of the ones that are here, few of them make much money and thus they don't pay very well. Yet, this particular kid was determined to do it. When his internet was cut off at home and his laptop was stolen, he was distressed. Where could he go?
Apparently I had given him my business card a few months prior at the Facebook Garage and he called to find out if I could help. But his success has very little to do with me; it has everything to do with opportunity. After a few weeks without access to his computer he'd maybe get frustrated with the curriculum at school, not being able to match his restless mind. Maybe he'd drop out and do something else, maybe he'd forge through and be one of the brilliant minds who goes abroad. If there are no opportunities, there isn't much of a choice. His call to me, was a call to something new. He didn't know it would pay off at the time, but for him it was worth the risk, and faced with those two options, he had nothing to lose.
So yes, individualism and tenacity do play a huge role but the point is those things have to be rewarded to exist. For example, people in Silicon Valley don't innovate because they're so brilliant they just can't help it. If that were the case, Moore's Law would have been trampled upon years ago. No, they innovate because of the multiple rewards that exist for being innovative. Maybe they just want the big checks, maybe it's the adulation from their peers and suitors, perhaps they just want to prove that they are smarter than everyone else in the room. But there's always some reward. Likewise, it's absurd to expect entrepreneurial people and innovative ideas en masse in markets where there's often the opposite of reward for such behaviour. Investments and other types of support represent reassurance and afirmation that something (in this case a business plan) is worth pursuing. I'm not saying investing resources is the only way to breed success. Of course there are other things that come into play like mentorship, education and the role that governments play. But it is one factor and there certainly isn't enough long-term capital investment in the region.
These are some of the many reasons, I mentor and invest in East Africa's thinkers and leaders. To help them build their visions into long-term sustainable businesses, creating jobs for themselves and others. With more of the right kinds of investors, I strongly believe that East Africa will continue to prove that there's more than enough talent, more than enough reliable people and more than enough ideas to help reshape the region.
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