Friday, May 27, 2011

Technology Discovers Poverty

There seems to be an unholy alliance between talk of technology and talk of economic growth, most likely fed by the proposition that advances in technology are a primary engine of economic growth.  As a corollary, the very word “poverty” almost never appears in reports of technological advances.  Indeed, “poverty” is a “P-word,” often more of a taboo than either the “F-word” or the “N-word” in more pedestrian social circles.  Today, however, Larry Dignan has broken that taboo in his Between the Lines column for ZDNet and it was in his capacity as reporter, rather than through his own initiative.

What he was reporting was a research note by Craig Moffett, an analyst at Bernstein Research.  The note was about projects of growth in that wonderful domain of “convergence” involving telecommunications, the Internet, and cable television.  Dignan reproduced the following text from Moffett’s note:

A central theme of our research about pay TV and telecommunications for the past two years has been the growing problem of poverty, and the inherent mismatch between the expectations of media and telecom investors for rising prices and penetration on the one hand, and the lack of means among lower-income consumers on the other. Projections for smartphone penetration, broadband adoption, and pay TV prices must take account of affordability.

This is then supplemented with a second quote:

The bull case for the telecom sector rests on the notion of a rising tide of smartphone adoption that will lift all boats. For this thesis to work, operators will need to extract additional revenue from lower-income Americans. And yet it isn’t clear that there’s any revenue left to extract. Today, the fastest growing segment in the U.S. wireless market is not smartphones… it is government-subsidized wireless service for the poor. The bottom end of the market is trading down as quickly as the top end is trading up.

There you have it.  The specious premise of those who have drunk too much “growth Kool-Aid” is that, if you innovate good stuff, people will come to pay for it.  Because those addicted to this premise have never paid attention to poverty (and therefore simply do not understand it), they have never considered the proposition that people will only pay for that good stuff if they can afford it.  In other words, as a general principle, poverty is bad for business;  but this has never been a principle taught in business schools or discussed in such elevated gatherings as meetings organized by the World Economic Forum.  To the contrary, those gatherings have made it a consistent practice of ignoring those, such as Muhammad Yunus, who have staked their careers on striving for a better understanding of poverty and then trying to do something about it.  I, for one, will be interested to see whether companies like Comcast, AT&T, and Verizon decide to treat this Bernstein report the same way they have treated Yunus.

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