 So we're not using this one, I think. I'm sorry, the person's not speaking into a microphone. Go ahead and have the honor to interview today Paul Polak. Well, Paul Polak is quite a legend, but anyway I'm going to present you. He's the founder of International Development Enterprises in the U.S. But for 23 years he worked as a psychiatrist. And then he founded DREV Design Revolution to design services and products for people living with less than $2 a day. Then he founded International Development Enterprises IDE and over the last 30 years he has worked with thousands of farmers in countries around the world including Bangladesh, India, Cambodia, Ethiopia, Myanmar, Nepal, Vietnam, Zambia and Zimbabwe to help design and produce low-cost income generating products that have already moved 17 million people out of poverty. Currently he is founder and CEO of Wind Horse International. He's also author of Out of Poverty What Works When Traditional Approaches Fail. He has received many awards and honors including the entrepreneur of the year, social responsibility category of Ernst and Young. He was named one of the top 50 for leadership in agricultural policy by Scientific American. And he was elected by Atlantic Magazine as one of the brave thinkers of the world with people like Steve Jobs, Obama and other legends. And I want to quote a little bit Atlantic Magazine so that you really know very clearly how is Paul Pollack. He's complained with conventional charities is that they failed to consider the market potential of the world's 2.7 billion poor people. Treating the poor as potential consumers and entrepreneurs, he believes, is the best way to help them achieve self-sufficiency. Operating under the guideline Cheap is Beautiful, his companies sell affordable and useful tools like manual travel pumps for irrigation or solar power, water purifiers that poor people can use to make a living selling products to their peers. And while he's brave, says Atlantic Magazine, his companies treat the poor as consumers and entrepreneurs and his favorite quote is, talk to the people who have the problem and listen to what they have to say. So welcome Paul Pollack here. And my first question would be, after these two days here in Lima, in Latin America, what's on your mind? I'm a little disoriented. You know, you probably carry with you pictures of your children in your head. And I carry pictures of some of the $2 a day people that have been my friends and my teachers over the last 30 years. I've had long conversations with more than 3,000 of them. And I'm a little bit, as I've attended some of the sessions here, those pictures have begun to fade. And almost I want to put some of those faces up on the screen because in the discussions about macroeconomics and Gini coefficients and per capita GDP, those people who I carry with me would find that a little incomprehensible. And so to some extent I've been, I'm a little disoriented. So there was a panel yesterday on growth and competitiveness. And there was a very good discussion about how to create innovation and economic growth and industrialization. But there was very little mention of how to create economic growth and innovation with the 2.7 billion people who live on this and $2 a day. And my whole focus is on creating breakthrough frontier markets serving $2 a day customers. So you say all the time and you've written about this that traditional charity approaches to alleviation of poverty doesn't work and neither do agencies. So what did you, what brought you to that kind of thought and what's your, I would like you to share with the audience your method to develop these services and products for poor people? Well, the method is very straightforward. For any social problem, the first three steps are go to where the action is, talk to the people who have the problem and listen to what they have to say and learn everything there is to know about the context, the specific context of the problem. So I've done that. And what I do, I started with IDE working with one acre farmers who live on less than a dollar a day. I go to a village, I go with someone who is respected in the village and I meet with one typical family and I will spend seven hours with them. I walk with them through their fields, I look at their crops, I have tea and I learn everything about them, what they fed their dog, what they had for breakfast, how far their kids go to school, who got sick. And when we get to know each other and become friends, I ask them about their sources of income and how they spend their money and so on. And then I'll interview another six or seven families in the village for an hour and a half each. And each time you do that, but it requires listening in a different way than intellectual listening. It has to do with communicating non-verbally. 90% of information is non-verbal. Every time I've done that, I've come up with at least one transformational idea that is applicable to that village and beyond. So I think the process of doing this is very straightforward but you have to learn to listen with your soul to people. And it all begins with learning from poor people with the respect that is normally paid to customers. Starting from that starting point, I've tried many different approaches. I've tried the charity approach. I've looked at the approaches of government and for the most part, I've concluded after 25 years that conventional development has failed. The charity doesn't move people out of poverty. That corporate social responsibility is for the most part cosmetic. And that social impact investing has some very serious confusion about social impact versus profitability. So I think that we need a new model. My experience over 25 years has been that creating new markets is the path to scale. And so I'm working now on creating new markets at real scale by creating a whole new series of frontier multinationals that serve two-dollar-day customers. And what's wrong with charity? There's nothing wrong with it, but if you, for instance, drinking water, if you wanted to supply a hand pump or some other way of getting safe drinking water to the one billion or more people who need it, it would break the bank. There isn't enough money in the world to pay for it. Secondly, charity, so in using that example, I visited many villages in rural Arissa in India who had a hand pump installed by UNICEF or by the government and pretty much consistently all over the world, three-quarters of those hand pumps are not working after two years. And the main problem is that hand pumps or anything else will always break. And if the people in the village feel that it's a government or a UNICEF hand pump, there's nobody around to fix it. So when it breaks, they don't fix it. Quite often, now charity is useful and there are situations, but for the most part it does not move people out of poverty. Poor people have to invest their own time and money to move out of poverty. And we can certainly be there to provide some of the missing ingredients that they desperately need. But the kind of mutual respect that comes from a fair, open economic transaction works much better than trying to do it with charity. Yeah, so let's go back a little bit to the origins of all this. You were a psychiatrist and you were working with mentally ill people. Why did you decide to change your life and what got you interested in poverty? I didn't really change my life. I don't know from one day to the next what I'll be doing next. I pursue opportunities and quite often things happen that you don't expect. So as part of my work as a psychiatrist, I ran a mental health center that served a population of 100,000. One of the important mentally ill populations were people with longer mental illness who lived in the community. Some of them were homeless. And I quickly learned that their poverty was more important to their adjustment than their mental illness. And so we started to create different ways of improving housing, providing access to housing, opportunities for jobs that are tailored to different levels of disabilities, self-esteem, and that proved to be very useful. So we started doing poverty work as part of the mental health center and then I realized that in Denver, Colorado where I was working, people were living on $600 a month that were poor. And in Bangladesh it was $30 a month. So I became curious about what poverty is like in Bangladesh. I went to Bangladesh through some friends of my wife, met some small farmers, asked them why they were poor. They said they were poor because they didn't have enough money and I believed them. And they said that they needed access to water control for their crops in order to increase their income from farming. So we started looking at providing radically affordable irrigation tools. One thing led to another and I've been working in development ever since and then I handed over IDE to go to the next stage which is creating these companies. Yes. And you always say that all the inspiration of your work comes from the field, from being there and talking to people. So I would like you to share with us the insights that you developed in being there with poor people about what's the reason or the cost to their poverty and why it's so important that you help them using the market forces and not with the traditional way of giving them money or, as you were saying before. Well, it's just very natural if you talk to them because I started with farmers who made most of their living from one acre and they are entrepreneurs. Some of them are unsuccessful entrepreneurs but they have to make business decisions every day what to plant, how much money to allocate to seed or fertilizer, whether to pay for medicines if one of the children is sick. So they are naturally entrepreneurs. Small farmers are stubborn, survival entrepreneurs and I relate to that. I come from a background where my father survived by seeing what was coming when the Second World War began and we left as refugees. And his roots are in a peasant home in Czechoslovakia where the animals are downstairs and the people are upstairs. So I think I have a funny affinity with the farmers that I've been talking to. But they're naturally entrepreneurs and they understand about simple business things. So it's just a question of facilitating what they're doing already. They need access to markets, they need better planning, they need better margins, they need more income. This is what motivates them so we're simply fitting in with what is there already. There isn't anybody in the world who doesn't participate in markets. So why is important that your enterprises are for profit? Why is that one of the essential things? In my view the single biggest challenge facing development is scale. And the way to reach scale is through creating an enterprise that is profitable enough to attract global commercial capital. Not charity money but capital. Those are much bigger pools of money. So I am only interested in creating multinational companies that serve $2 a day customers that can reach 100 million customers and transform their lives. That requires the other two characteristics of each of these companies. That is that they're capable of generating $10 billion in annual sales and enough profit to attract international commercial capital. That capital in turn makes no bar to scale in terms of capitalizing. I think all the social entrepreneurs in this room or at this conference know that it's quite a challenge to get funding. So what if we could create enterprises that generate a profit and that are funded through venture capital? And why do traditional companies don't care about these consumers that you are caring about? I've talked to many of the multinational corporations and there are three reasons. One is they don't think you can make a profit at $2 a day customers. Multinationals are increasingly seeing emerging markets as the next frontier. Many multinationals like Unilever and P&G are focusing on emerging markets. But it's the middle class in emerging markets. When you get to the $2 a day and under which is just under 40% of the customers in the world, there are three barriers. One, they don't think you can make money serving that population. Most corporations don't have a clue about how to design products and services that are radically affordable, which is a necessary prerequisite to success. And three is the problem of last mile distribution and nobody has solved how to deliver products and services to villages with 200 or 300 households and do it profitably. But those are all solvable problems and that's what excites me. What I enjoy in life is tell me something that can't be done and I really enjoy trying to make it happen. Tell us a little bit about what you're developing now, which is drinkable water in India, right? Yes, one of those four companies is designed to sell safe drinking water at an attractive price to $2 a day customers. So we're selling safe drinking water for less than one cent a liter delivered to people's homes. And when you do it at scale, you can make money doing it. So I've created a holding company called Wind Horse. It's based in the U.S. And the first subsidiary is Spring Health, which is an Indian company. But it's designed to have 50 companies like Spring Health in other countries. So Spring Health basically focuses on rural villages in eastern India. Eastern India has 350 million customers for safe drinking water. So we're creating a radically... First, it begins with a radically affordable technology. We're using electrochlorination to purify the water. That requires running some electricity through a 5% salt solution, salt as sodium chloride. And so it breaks it into chlorine oxidants which kill germs. So one of those devices, it's about as big as a bread box. It costs $250 and it will purify 80,000 liters of water a day. So we put that in a market town and that's enough to purify water in 50 villages. But water is very heavy. So if you had to transport that water to 50 villages, the transport would kill you. So we don't transport the water. And to make it radically affordable, we don't create single product kiosks either because it costs too much in a village of 300. So we simply enter into a partnership with a local mom and pop store. In India, they're called Karanah shops. There are 10 million Karanah shops. In India, they are all over the world. So we make a partnership with the Karanah shop owner. We hire local artisans to build a 3,000 liter cement tank which costs about $100. The shopkeeper fills it with water from his own contaminated well and we hire local people to go around on motorcycles carrying three quarters of a liter of water purifier which they pour into that tank. And then 45 minutes later, they test the water for purity and then the shopkeeper starts selling it. Now the shopkeeper in turn hires local people with cycle trolleys. It's a rickshaw with a platform. And they deliver water to people's homes. We charge four rupees for a 10 liter jerry can which is enough for the average family of five. And then we split the revenue with the shopkeeper. We take 75% actually for the first thousand liters and then 50-50 after that. So it works like that. So we work in blocks of 50 villages and during the pilot test, pilot test has been in 35 villages serving 20,000 customers. And we've learned all of the steps that it takes to do one block to create one block of 50 villages. So now we're just finishing the next phase of investment. And when that is over, we will start to roll out 50 villages every month. We plan to be in 10,000 villages in two or three years. And we'll reach 100 million people in India alone and another 100 million people in other countries. But you have to design for scale from the very beginning. You can't do something in three villages and then hope it'll spread. You have to design for scale. And I've described some of those processes in my next book which is coming out in September. Yeah, but please go ahead. How do you scale? Well, first of all, if you talk to people in a village, in the way that I described, you can come up with four or five or ten very important projects. Well, you select the project, you give preference to the project that is applicable to a thousand villages, not just that village, over the one that's just unique to that village. And then you have to... So we do sort of an assembly line process. For a block of 50 villages, we create an operating manual that is as fat as what a pilot, commercial airline pilot, takes into the cockpit. We figure out how to mass produce the marketing at each village that is required to reach a sales of a thousand liters of water. So it's just a systematic... If you start thinking in these terms, in very basic terms, it's like this. If I ask you to sharpen three pencils, that's no challenge. If I say now sharpen 25, that's no challenge. But what if I ask you to sharpen a thousand pencils? You might come up with a different strategy. Maybe it would require more than one pencil sharpener. What if you needed to sharpen a hundred thousand pencils? How would you organize it? It's not that complicated. How would you sharpen a million pencils? You have to apply that simple step-by-step way of thinking to each of the processes required to reach scale. How do you recruit your teams? Because teams here are very key to the success of your projects. And especially, for example, in DREP, you hired top designers to work for the other 90% of the population. So you found there a lot of people really interested in making a difference and you have to take them out of the normal design kind of jobs. So how do you recruit people? How do you choose them? How do you get out of your enterprises and let them go to the next phase? So when it comes to design, there is an unstoppable global movement by students who want to learn to make a difference. That is something that in many universities the professors haven't caught up with, but it's very easy. So one of the groups, actually a group of young people in DREP were interested in creating an affordable knee joint. And they eventually succeeded in creating a $25 artificial knee, which now about 5,000 people are using in the first test. So it's not difficult to get students all over the world who are interested in working on design problems for the village. So DREP itself then works in India and has licensed one of its technologies to an Indian firm. When it comes to the water company, I look, in everything that I do I look for the top people in the world and I just call them up and some of them say yes. Are they saying yes to you? Yeah, a lot of them say yes. It's surprising and I think anybody can do that. So we're working on a company to cut the cost of photovoltaic pumping. By 80%. I have a team of designers. I have the top irrigation person in the world. I have a team of rocket scientists from Ball Aerospace who did a lot of the work for the Hubble telescope are working on creating a radically affordable solar system, as a photovoltaic solar system. Then when it comes to the field, it's again unpredictable. I needed a partner in India for this drinking water system. And one of the principles is that poor people are more, it's more important to do aspirational branding for poor customers than it is for wealthy customers. So in the first pilot test of the water company, I wanted to hire a marketing and branding firm. I ended up hiring one of the best firms in India. But I said, look, I don't want to be stuck with a flunky. If you do the branding for us, I want one of the principles. Well, somebody introduced me to Jacob Matthew, whose wife, Neelam Chiber, by the way, won one of the Social Entrepreneur Awards this year. He came to the field and he was just great. So he became the CEO of the company. And then that company had rolled out some of the large mobile phone networks in India. So we hired as a chief operating officer, Kishan Nanavati, who was responsible for 25,000 phone kiosks. So he's very good at operations. And then he ended up recruiting people, not individually, but he hired a national recruitment firm. So we made a deal with them. And if somebody that they refer to us, that we hire, leaves before three months, they have to give us somebody else. So they are doing their recruiting. But now, as commercialization begins, we'll hire 120 staff in the first month. So we've designed a batch training program, 50 in groups of 50, both classroom and then field. So everything is in this way. So the Indian company is all Indian. I'm the chairman of the board, but I'm the only white face in the group. And that's the way it works. And with IDE as well. IDE ended up from being just me in my house to an international company with a budget of about 20 million and some 500 staff, of which 13 were in headquarters. And all the rest were local staff in every country. So it just flows naturally that way. So we've talked a lot about your successes. And I want to ask you, how do you deal with failure? I love it. Why? Because you learn more from failures. I've had many failures. But you learn a lot from it. I was struck in the Paul by the fact that 40% of the rural people had to do a two to 12 day walk to carry things to their village. So we tested a jet barge, which is high tech. We designed a barge that went up on a plane like a water ski. And it could reach these villages through the rapid rivers. That project failed. But I learned so much from it. And at first I was really sort of mortified. I don't like failing. But then a friend of mine who was a managing director of the agricultural development of Bank of Nepal came to me and said, Paul, thank you so much for being willing to take such a risk to help my country. And from then on, failure has not... And what we learned from that is we started off in transport by building 500 donkey carts in the refugee camps in Somalia. That was very successful. So this was the next step in transport. But high tech has some real risks. So ever since then I've stayed with a much simpler, radically affordable technology disseminated in the millions. Okay, we are running out of time. But we want to thank you, Paul, for this great conversation. Of course it's being inspirational, controversial, different. And I want to tell you that I really envy you in a very bad way. Because all the energy you have, and yesterday we were talking, he works 80 hours a week, which is of course something that I would never do. And so I really wish you all the luck in the world for the next years to come. And I want you to invite you to buy his new book that is coming on September. It's called The Business Solution to Poverty, Designing Products and Services for 3 Billion New Consumers. Thank you very much, Paul, and you all for being here today. Thank you.