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Lessons From Emerging Markets
Note: This report was co-authored by KingsCrowd Senior Investment Research Analyst Léa Bouhelier-Gautreau.
My young colleague Léa Bouhelier-Gautreau is almost as well-traveled as I am (pretty remarkable since she’s about one-eighth my age). We love to swap war stories and, believe me, she has some good ones.
One that really stuck with me was about her time in Malawi, a rather poor country in southeast Africa. Léa was conducting a study of Malawi’s startup ecosystem. One day, she and some colleagues from a local startup traveled to a remote school in order to install solar-powered lights.
When she arrived at the school, she immediately noticed holes in the wall. Teachers explained that the U.S. Agency for International Development (USAID) had installed electric wires and light bulbs in the classroom to help students study after sunset. It was a great idea except for one small problem.
The school was not connected to the grid. And even if it was, it couldn’t afford to pay for the electricity. A couple of teachers from the school took the bulbs home, where they at least got some use.
Having participated in a USAID project in a small provincial town in southern Russia, I can say this story absolutely rang true. It’s not just the U.S. Too many Western projects in emerging countries fail from a basic lack of understanding of local conditions and cultures. It seems completely avoidable, but I’ve heard many stories like this one. And so has Léa.
There are plenty of lessons here — not only for government policymakers but also for investors. This story points to how risky it is to back American (as well as Western) entrepreneurs operating in emerging markets.
Launching American products and services in these markets is fraught with difficulty. To be successful, entrepreneurs need to listen to feedback day in and day out and adjust their products to current conditions and needs. They must make a real commitment to constantly improve solutions and refine marketing strategies.
This is easier said than done. When applied to developing countries, American know-how often devolves into American know-it-all. And when that happens, everything unsurprisingly goes south. To be effective, American know-how needs to be sprinkled with large helpings of humility and patience. Unfortunately, these qualities are in short supply among American companies doing business in developing countries.
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