In January I went with a large group of Babson students to Ghana. In the evenings, students meet with individuals who have concerns about their own businesses, most of which are located in a small kiosk, in the market, or on the side of the road. As always, the students find grappling with the everyday problems of poor Ghanaian business people an extreme challenge. One night a student came back from consulting and said to his friend, “It is just so hard;” and this was a student who will be working for a large multinational corporation after he graduates. But he is right, it is really hard.
My favorite story this year was the conversation with a local rice seller. She buys two bags of rice a week on credit for $100, as do two other women in her village. Everyone sells rice for $1 cup, and there are usually between 98 and 105 cups in a bag. She also thought there was enough demand in the village for 8 bags of rice every week, but neither she nor the other women could get any more rice. The woman wanted to know how she could make more money as she wanted to save enough to stop buying bags on credit (a bag is only $80 if one pays cash). For the students, the solution was obvious: if there is excess demand, she should raise her prices. The rice seller thought it was the craziest thing she had ever heard, insisting that simply no one would pay more than a $1 a cup as everyone knew rice was a $1 a cup; everyone in the room agreed.
Later I told this story to a friend who is an agricultural economist working in the developing world. When I asked her if she thought the rice seller was correct, she responded, “Absolutely,” and then proceeded to explain how we need to throw our understandings of supply and demand out the window in these cases as prices for many products in villages are socially determined; if you violate the norms on prices, you will be ostracized.
In The New Entrepreneurial Leader, Lisa DiCarlo and I tried to emphasize the necessity of understanding social context. Working with poor Ghanaians, Babson students come to quickly realize that some things they were taught as basic laws reflecting human nature are really social behaviors and perspectives that have been deeply ingrained in our society; in other societies, even basic economics looks very different. Only by understanding this can one think about truly radical innovation and change.