I was unimpressed with the Gates speech at Davos. Looks like prof. Richard Posner was too — he explains why here:
I became acquainted with Bill Gates when some years ago I mediated (unsuccessfully) the Justice Department’s antitrust suit against Microsoft. I was reassured to discover that the world’s wealthiest person is extremely intelligent and surprisingly unpretentious. But I am disappointed by the recent speech on “creative capitalism” that he gave at the World Economic Forum in Davos last month.
Almost half the world’s population is extremely poor, subsisting on less than $2 a day; a billion are thought to subsist on less than $1 a day. Most of the very poor live in sub-Saharan Africa and in southern Asia. Gates argues that the key to alleviating their poverty is “creative capitalism,” whereby private firms in the United States and other wealthy countries seek both profits and “recognition” (praise) in serving the needs of the poor, for example by developing technologies designed specifically for their benefit. C. K. Prahalad, a business school professor admired by Gates, notes that Microsoft is “experimenting in India with a program called FlexGo, where you prepay for a fully loaded PC. When the payment runs out, the PC shuts down, and you prepay again to restart it. It’s a pay-as-you-go model for people with volatile wages who need, in effect, to finance the purchase.”
If there are good business opportunities in poor countries, however, it does not require Gates’s urging for businesses to seek to exploit them. So the only meat in his concept of creative capitalism is his proposal that businesses accept subnormal monetary returns in exchange for getting a good reputation as do gooders. But if a reputation for good works has cash value, then, once again, there is no need for Gates to urge businesses to serve the poor; self-interest will be an adequate motivator. If it is true as he says in his speech that “recognition enhances a company’s reputation and appeals to customers; above all, it attracts good people to the organization,” then creative capitalism pays because it enables a firm to charge higher prices to its customers and pay lower quality-adjusted wages to its employees. Whether this is true of a given firm’s customers and employees is something that the firm is better able to gauge than an outsider, even so distinguished a one as Bill Gates.
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