The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World (36 page)

The question for Aravind, then, was how to manufacture an intraocular lens that was priced to make eye surgery affordable to the greatest number of people, and ultimately, the organization developed a lens as good as any on the market at a $10 price point. Though the very poor still would be unable to afford this, a business model could be developed to make intraocular lens transplants accessible to huge numbers of people without depending on great amounts of charity or government support.

Early in the development of Aravind's lens (through its for-profit technology company, Aurolab), Dr. V. was approached by a pharmaceutical company that offered to purchase it with the intent of selling the lenses for $60 each, which would cut the existing market price by more than half. Though the sale would have provided major revenues to Aravind, Dr. Venkataswamy refused the offer, for his goal was to ensure affordability not to the middle class, but to the very poor. He knew the poor would never be able to afford anything near $60 and wanted to find a way to manufacture the lens for less than $10. Today, Aurolab is one of the world's largest manufacturers of intraocular lenses, exporting to more than 120 countries and selling the lenses for less than $2 apiece.

Aravind's simple business model was based on a sliding-scale pricing system whereby wealthier people paid the full cost of an operation and the poor paid a token amount or nothing if they were truly destitute. No one was turned away. Aravind at that time had two hospitals in the same location, and it differentiated ability to pay by offering full-service, airconditioned rooms at the newer hospital to the paying patients. The "free" or lesser-paying patients were treated at the older facility and slept on mats on the floor, but every surgeon rotated between the two hospitals, so the actual quality of care was the same.

When we asked how Acumen Fund and Aravind might work together, Dr. Venkataswamy's team (comprised mostly of his seven younger siblings and their spouses and children, 31 family members in all) suggested we provide a grant for an experiment in establishing a telemedicine unit so that farmers in the field could have their eyes examined without traveling hundreds of miles to the main hospital. Aravind also wanted to use telemedicine as a teaching tool because it worked through five hospitals and wanted all of its students to learn from the best doctors, wherever they resided.

Telemedicine was a fairly new innovation at the time, especially in low-income areas. Essentially, it was a means of connecting doctors at a distance to patients through a computer with video capability. Given how far most rural villages are from high-quality hospitals, we intuitively understood the power of providing low-income people with access to talented doctors; however, we were unsure of how to build a business model that would enable Aravind to cover its expenses.

"Let us try and that part will come," Dr. V. assured us.

We made the grant and a year or so later, I visited again to see what had happened. Dr. V. walked me into one of the teaching classrooms in the hospital. The brightly lit room with wooden floors was filled with eager young medical students who stood when their revered teacher walked in. On the wide screen at the front of the room were live video feeds of four other classrooms in different parts of India, and in each of those rooms, the students stood for Dr. Venkataswamy, as well. Another doctor then took the floor, showing how to operate on an eye. Students in all four cities could see exactly what he was doing as if they were all in the same room.

Later that afternoon, I watched the doctors at Aravind diagnose the damage a swipe from a stick of sugar cane had done to the eye of a farmer who was sitting 300 kilometers away. The weathered farmer was terrified that he had lost sight in both eyes, which was tantamount to a death sentence: Blindness meant loss of the ability to produce income. The good doctors at Aravind could see that his healthy eye was having a "sympathetic reaction" and would return to normal after the wounded one was properly treated.

The cost to the farmer for this consultancy with some of the country's best doctors was an affordable few rupees: This could indeed be revolutionary. By 2008, telemedicine would be part of Aravind's normal business. It had been integrated into 16 vision centers in rural villages, each providing about 50,000 people with access in places where individuals previously had no access to high-quality eye care-and Aravind was treating about 150,000 patients a year. But 7 years previously, it had been only an idea-with a powerful team of entrepreneurial, resultsoriented people behind it.

By the fall of 2001, we had identified other social entrepreneurs and were feeling more confident that a pipeline of talent existed and that there was power in our model. We'd also found new offices across the street from Trinity Church at the end of Wall Street. I loved the symbolism of the new location, for Acumen Fund would be built with both a hard head and a soft heart. I loved that church bells rang every 15 minutes, which would remind me of time passing and call me to be more present with the work we did. I liked that we would be right next to the World Trade Center, for our dream would be about all of humanity and our collective future.

We were set to move in on September 11, 2001.

I REMEMBER THAT DAY as if it were yesterday. The dawn revealed a perfect world, a pink sky folding into china blue as I ran the length of Central Park, thinking nostalgically of schooldays and of how much I love the rhythms of the East Coast seasons. It was fall, and I was looking forward to the year ahead and how much there was to do.

An hour and a half later, I was standing in our offices on the 28th floor of the building housing the Rockefeller Foundation, at ThirtyEighth Street and Fifth Avenue, talking to David, our chief financial officer, as we looked through the big plate-glass windows down Fifth toward the World Trade Center Towers, near where our computers and furniture were in the process of being moved. Suddenly, a huge jetliner roared down the avenue, and we swore it was flying below the top of the Empire State Building, just a few blocks south of us. The plane continued until it neared the World Trade Center, then banked and plunged into one of the skyscrapers.

Though both of us were in shock, I thought it must have been an accident, but David recognized that it had banked. "That was an act of terrorism," he said. "That was no accident." Rustom had just returned from India, and both he and Dan walked up as David was shouting and pointing at the burning hole when the second plane entered the building. It was immediately clear that David was right. As we later watched both towers collapse, we knew the world would never be the same.

The next morning, our tiny team of four gathered in our borrowed offices at the Rockefeller Foundation. Like all New Yorkers, we wanted to do something-anything-to help. But we couldn't join the workers at the site, and it was already clear there would be few, if any, victims found alive within the rubble. The world's attention was turned on New York, and I wondered whether Acumen's prospective contributors would pull back now and focus on the city's challenges rather than international ones. We also needed to think of a way we ourselves could contribute.

The team decided to reach out and convene a roundtable to try and make sense of what was happening. We gathered our community of partners, team members, and experts, including a White House advisor on terrorism and a former Wall Street Journal writer who had covered the Middle East for years and had interviewed every jihadist from Ayatollah Khomeini to Osama bin Laden himself. The experts told us that the White House was already linking Saddam Hussein to the tragedy and predicted we would be at war with Iraq the following year.

After hours of discussing fundamentalism, terrorism, poverty, and possible solutions that focused on "soft power" rather than on forceful retaliation, I asked what an organization like Acumen Fund might do to contribute. The group reached easy consensus: "Build civil society organizations. Go to the Muslim world and provide examples of how people are working to give themselves a bigger stake and better chances for the future."

In Acumen's first months, we had focused on health care technologies in India and East Africa. Our early team knew little about the larger "Muslim world" despite our work in India, but we knew we could bring in people who did know. I remembered the health care company CEO's wise words, "Let the work teach you."

Though we explored the possibilities of doing something very quietly, by year's end, that evening's consensus was solidified via a million dollars in donations to Acumen Fund. A few months after that, in early 2002, we'd gone to Pakistan, and by the next November, just a year after that first roundtable, we had made our first investments. Working in Pakistan turned out to be one of the best moves we made.

In that first year of operations, we also gave a social entrepreneur a grant for his work on developing a $40 hearing aid that would later be tested and shown to be as effective as a $3,000 model. Like the services provided by Aravind, the hearing aid would be priced on a sliding-scale basis to make it affordable to the poor and provide revenues to the enterprise. When the test results came back after the initial trials, our entire staff whooped and laughed and cheered in the halls, sure this low-cost technology would disrupt the market and change lives. We hadn't expected such an early technological victory for the poor.

But as it turned out, it wasn't so easy.

We hadn't counted on the fact that most individuals are interested not in technologies themselves but in the services they provide. With cataract surgery, people go from being nearly blind to having sight and being able to work again; that change can be the difference between life and death. Given that a tailor, for example, depends on his eyes for his very livelihood, an investment in sight is worth the price.

Most farmers, tailors, shoemakers, and laborers can continue to work, however, with a loss of hearing. This is complicated by our human tendency toward vanity: Many feel a sense of shame at wearing a hearing aid, whereas no such stigma is attached to glasses. Consequently, individual demand for the hearing aids was low. There was-and is-still a major market for the devices among hospitals and other institutions, but, at least when we were starting, the market among the poor themselves was limited. The enterprise distributed 10,000 hearing aids, but we decided not to make a second grant or investment until we better understood the issues of distribution and demand. Price was not the only factor in delivering services to the poor.

In addition to the hearing aid, we also supported the early development of an electromagnetic immunosensor, a low-cost technologically advanced method of diagnosing diseases. From that experience as well, we concluded that we wouldn't invest in start-up technologies, especially when our organization was not set up to help develop the technology. Technology itself wasn't the answer, we realized, and we would contribute more to the world by understanding the distribution, pricing, and marketing systems for health care rather than simply the technologies involved.

From this and other ventures, we determined that despite Aravind's success, grants typically weren't as effective as equity and loans, especially when trying to create markets for the poor. An equity investment would make us real owners with the ability to negotiate with greater clarity. Loans and equity also would impose a market discipline that could lead to raising more traditional forms of capital over time-and that, we knew, was key to growing the innovations we wanted to support.

We were learning. By the end of the first year, we had modified our approach. We determined that we would no longer make grants, but instead invest equity in or make loans to social enterprises. We would establish metrics for what the entrepreneur hoped to achieve from the beginning and hold him or her to it, as we would hold ourselves to our own set of expectations and goals. This was the opposite of old-fashioned charity.

Our new approach also differed from the type of investment that a venture capitalist or private equity investor might make. Traditional investors doubtless would never touch the deals we were willing to contemplate. They were seeking returns of 25 to 40 percent and had a fairly short time horizon, usually 5 to 7 years. We were interested in enterprises run by social entrepreneurs who were unafraid to work in markets where individuals had minimal income, where the roads were terrible and infrastructure was sometimes nonexistent. Low-income markets also tended to be where corrupt politicians played, making promises that were never kept, but often requiring bribes or "speed money" just for providing the license to start a business that served the community.

We knew that the pipeline-the number of deals we could supportwould be a challenge for a number of years, yet we were convinced that the many problems of poverty could only be solved if entrepreneurs were encouraged to overcome these hurdles. This meant we couldn't simply invest and expect quick results. We planned to work alongside our entrepreneurs, offering management advice and technical help and connections to a wider network of talent. We were also willing to be realistic about how and when loans would be repaid, remembering these businesses at the bottom of the pyramid could take a long time to grow and that our primary goal was not to make money, but to effect long-lasting change.

Our investment style was focused on what we termed patient capitalnot traditional charity, not traditional business investment, but something in-between. Patient capital is money invested over a longer period of time with the acknowledgment that returns might be below market, but with a wide range of management support services to nurture the company to liftoff and beyond.

If it were easy to start a business serving the poor, patient capital would not be necessary. It's not easy. Social entrepreneurs focused on serving low-income markets work against all odds of success, facing enormous individual and institutional challenges. The only chance to overcome these hurdles is to combine an extraordinary entrepreneur with the kind of support that neither traditional investors nor charities can provide.