Having just returned from a weekend spent exploring Mexico City, what struck me the most (other than the tremendous hailstorm) was the slowness of life in San Martin. Stepping off the bus was akin to entering a new country. This is no fault of the people, it is simply the nature of what economists call a ‘dual economy’. I had seen it before in Shanghai; a brand new Maserati racing a rickshaw down a back alley. Life is fundamentally different once you leave Mexico’s major cities. These differences show why doing business in the developing world can be so difficult.
Entrepreneurs exist everywhere. In Mexico City you can see it in the street hustle; the guy who buys big packs of gum and cigarettes and sells them individually at a mark up. In rural Mexico things are simply more complicated. Corner store after corner store sells the same processed junk food and coca-cola products and almost every farmers grows corn. Within the same economy, within the same country, there are two vastly different modes of living. The trouble with rural markets is that they are simply too unpredictable. In three short weeks we have experienced this unpredictability ourselves. Our water was shut off for a week because enough people in town hadn’t paid their water bill. Now we were fortunate to have the resources to buy bottled water and wait it out, but there are many more without the reserves to wait out these surprises. For many, surprises (or externalities as they are called in the business world) like these can be devastating. For those living in rural or remote areas, there are rarely many options or resources to hedge against these surprises. If there is a bad harvest one year, you can’t simply walk down the street and fill out an application to work at a supermarket or fast-food restaurant. This is something that is hard to fully grasp until you are faced with it first hand.
In Economics, it is easy to get misled by the elegant simplicity of models and theories and believe that the world follows these laws. However, stepping out of the classroom and into a developing country forces you to come to terms with the parts of the world we like to sweep under the bell curve. These are not necessarily cases where theories of markets fail, but rather places where people serve markets rather than markets serving people. For example, cheap food is great, it means that fewer people around the world will go hungry, yet that isn’t the whole story. It ignores the farmers who’s income was just cut in half by falling corn prices, and the grand irony is that his family may now go hungry, while the rest of the world has unprecedented access to affordable food. Dual economies, like China and Mexico, make this dichotomy painfully apparent; wages rise in the cities, while the rural communities are stuck watching the price of corn fall and the price of everything else rise.
How then do we stitch together these two pieces of Mexico’s economy? I don’t know, no one is really sure. Those who enter developing nations with pre-fabricated plans to solve all of the nation’s problems, are usually met with a few unpleasant surprises. Pre-fabricated solutions can work well in business in the developing world. We see this with franchises, or Steve Job’s ‘if you build it, they will buy it’ theory on consumer demand. But when you are dealing with rural communities where basic things like food, water, shelter and energy are not always guaranteed, it is hard to create a one size fits all plan. Instead you first have to understand the circumstances under which people live day-to-day, and what assumptions you can make about access to transportation, or land, or resources. Only after that can you begin to develop a plan. And this is exactly what we are doing. After over 70 interviews we are starting to get a picture for what life in rural Mexico is like, what challenges there are, but also what resources and opportunities there are. Randy Pausch said it best when he said that brick walls aren’t there to keep us out, they are there to keep out those who don’t want it badly enough. This is the job of social entrepreneurs, to climb the walls which everyone else believe to be too high. We may not succeed, but even then we will, at the very least, have a better understanding for the lives of those who’s reality is quite different from our own and that is quite a big step towards creating markets that serve people rather than people who serve markets.