While many problems around the world require public sector intervention, the private sector and its unique advantages have been underutilized in the worldwide effort to reduce poverty, promote education, deliver healthcare, and serve the world's poor. This is the viewpoint of the Bill and Melinda Gates Foundation and, in particular, that of Julie Sunderland, the Foundation's Director of Program Related Investments.
As Sunderland explains in her recent Big Think interview, the Gates Foundation is excited at the prospect of leveraging the private sector because it understands the importance of strengthening markets to better serve the interests and needs of the poor. At the moment, those markets aren't currently working well for those in poverty. The Gates Foundation wants to change this by fashioning a system in which the private sector seeks to reach out to the poor.
One of Sunderland's key goals is to overcome the obstacles currently in place that prevent such change from happening. Among these obstacles is the fact that the poor don't have much money, which means they're low margin and not a very attractive market. Linked to this is that the poor are often hindered by inadequate distribution channels, which makes them difficult to reach even for companies interested in branching out. Therefore, the thought of marketing to the world's poor is often rejected as a high cost/low reward proposition.
This sort of market remoteness leads to poor communities remaining relatively unknown and being perceived as risky:
"So a lot of companies are like 'ah, you know, I don’t understand these markets. I don’t understand the risks.' They don’t have a lot of information about them. So whereas you can go and get minute detail on consumers in the U.S., you don’t even know what these [poor, remote] consumers look like. 'What are the basic information about these markets?'"
The final obstacle is one of procurement and collaboration. Much of the buying of goods and services for the poor is handled through governments and donor agencies. Historically, this sect of society hasn't necessarily meshed with the private sector, and vice-versa:
"And it’s hard for companies to – it’s hard for those two worlds to talk together and work effectively together."
The reason overcoming these obstacles is important is because the private sector sports many of the most knowledgeable and innovative people on Earth. If the Gates Foundation and other organizations like it are going to play a major role in solving the world's problems, they need to tap into the private sector's potential for creativity and action.
"You know the private sector brings skills that we absolutely need. It brings, you know, scale manufacturing and an understanding of how to optimize manufacturing to drive down costs. It brings innovative capacities."
With that understood, Sunderland's task is to figure out how to forge partnerships between the private and public sectors. To do this, the Foundation has to find ways to overcome those glaring obstacles preventing the private sector from investing in the poor. There are two avenues toward this goal: one financial, the other social.
"For the Foundation we think about it in a number of different ways. We think about how do we derisk, how do we work with private sector partners to derisk their interest and their capital allocation toward these markets. And we can use our investment tools to do that... We can think about using our capital to derisk."
The Gates Foundation has the unique advantage of having an endowment higher than the nominal GDP of over 100 nations. It can strategically invest that capital in ways that open markets and lower risk. This includes boosting infrastructure and communication technology.
"The other thing that’s really important is getting people to talk to each other."
Also important, the private and public sectors are the Beatrice and Benedick of the charitable world. They're perfect for each other. They just don't know it yet and need a little convincing. Sunderland believes opening dialogues and channels for discussion will help get the juices flowing:
"So one of the things that we’re doing is really thinking about how do we catalyze those multi-stakeholder discussions where we can bring together foundations, we can bring together governments, we can bring together the private sector such that those two cultures can begin to talk to each other and figure out how do they use the different resources to really tackle these big social problems in a way that has the potential to open up these markets for these companies and solve problems for the people that are really focused on the social problems."
For more on getting the private and public sectors to collaborate in order to solve the world's problems, be sure to watch the following clip from Julie Sunderland's Big Think interview: