The greatest technological advancement of the modern world, after sliced bread and the personal computer, has to be the cell phone. It is the one device that makes possible the notion of the global village, it inter-connects billions through wireless, satellite, fiber-optic, and microwave networks spanning the globe. Perhaps the only thing that the poor fisherman in the Kerala coast and the rich stock analyst in the New York Stock Exchange have in common is the cell phone.
What accounts for the unreasonable success of the cell phone is that it reduces the cost of accessing information instantly. I define a cell phone as a general-purpose personal information communications device. I would like to stress that the “personal” refers to the information, rather than to the ownership of the device. Here is what I mean. What is information depends on who the person is. For instance, to me “cricket scores” means a lucky locust and I could not care less, while others are willing to pay to be told some nonsense about “145 for 6”.
The rich and the poor alike have a need for information and depending on their personal interests and occupations, they differ in their willingness to pay for information. That is of course true for all things, not just information, ranging from personal hygiene products to modes of transportation. Thus while the device is common, what the poor do with the device is different from what the rich do with it. This point is important to keep in mind when looking at the market for information with the cell phone as the enabling device.
I like to distinguish between two broad categories of information: pure, and actionable. Actionable information is something that enables a decision to be made and action is prompted as a result. Pure information is something that does not result in an immediate response or action. Pure information is “good to know” as opposed to actionable information which is “need to know.” Economists may call pure information a luxury good, while actionable information is a basic good. Since the rich typically spend a greater percentage on luxury goods, and the poor a greater percentage on basic goods, it is obvious that the poor will spend relatively more on actionable information as opposed to pure information.
Examples of pure and actionable information is not independent of a person, naturally, given that information is personal. However, just to take an example, cricket scores are pure information unless you are a bookie and need to settle accounts. The price of fish at a particular market along the Kerala coast is actionable information to a fisherman out at sea because it affects his decision where to land his catch. The busy stock analyst catching up with the latest political news while commuting to work is consuming pure information, and he is willing to pay for it even though he will not take any immediate action on it. But getting news on his cell phone is a luxury that the fisherman would not be willing to pay for.
The bottom line: though the technology is universal, the needs and capabilities of different parts of the world are diverse. That is, there are different markets. And what works in one market may not work in a different one: a tautology no doubt but often forgotten in the haste to transport a solution from the developed world to the emerging markets of the developing world.
For instance, online advertising, search, etc, work in the US and other rich countries to support free or subsidize services. But in the poor countries, the services may not be supportable unless of course the market in the poor countries is defined only in terms of the small percentage of rich people in those countries. India has a population of over one billion but in terms similar to those of a rich economy like the US, I would approximate India’s “effective” population to be around 10 million. That is, imagine that India has only 10 million people, with 20 million cell phones, about 5 million PCs, a couple of million cars, and annual average incomes of around $20,000. The solutions that work for the US population, will work for this restricted population in India, with the obvious caution that the market is about a tenth of the US market.
The rich are different from you and me, noted F. Scott Fitzgerald. Hemmingway identified the difference and said that they have more money. I keep that distinction firmly in mind whenever I try to figure out what works and what doesn’t around the world. PCs and the internet works in the rich world differently than they will in the poor world.
So the opportunity for developing innovative solutions specifically for the emerging market is phenomenal. Consider the sheer size of the population which is mobile-phone enabled: there are 70 million or so mobile phone subscribers in India, and it is growing at around 2 million a month. By next year’s end, that will be 100 million. Most of the users will not be those who can afford the luxury of pure information, but will be those who need actionable information. The cabbie needs to know where his next fare is, the plumber where the leaky faucet is, the corner grocery store where which household needs supplies, ad infinitum. We all have goods and services that we need to sell or buy from the neighborhood. The cell-phone is the perfect platform to create a mobile marketplace where millions of trades can be enabled for economic efficiency and growth.
As an economist who swears by the power of the market, I predict that the biggest challenge and opportunity lies in creating solutions that will enable the mobile marketplace. Two major components have to be built: one, to make actionable information accessible for trades to take place, and two, an accounting and payment mechanism for those trades. This will identify the two parties in a trade, will connect them, and finally help with the payment.
Any economist worth his salt should be able to figure this one out in his spare time. I had enough spare time.
Good bye and have a wonderful happy new year.
Related post: Saving Private Information.