| The Fortune at the Bottom of the Pyramid |
| C K Prahalad, Wharton School Publishing/Pearson Education, 2009 (revised and updated 5th anniversary edition), 432 pages, $29.99. |
| This is an intriguing and, at the same time, an irritating book. It is based on the claim that by focusing on the ‘invisible, unserved market’ of 5 billion poor (p3) and by creating “market-based solutions for the world’s poorest consumers” (p4), businesses could help solve the problem of global poverty |
| It is a huge, undemonstrated claim which clashes with the kind of hard evidence that economists use to support their arguments. The book makes no effort to define the global poor or, using the more colourful expression, ‘the Bottom of the Pyramid’. Who are they? The author, C K Prahalad, a professor of business strategy at San Diego University, embraces the convention of using an income level to identify the global poor, but it is not clear where he draws the line. Is it $1 a day, the conventional level for extreme poverty – now revised to $1.25 by the World Bank – or is it $2, or even more? The figures in the book do not seem to make much sense. The World Bank estimates the number of extreme poor at approximately 1.4 billion. Where the book’s estimate of 4-5 billion poor consumers comes from is not clear. Does Pralahad include the ‘Middle of the Pyramid’, or the aspiring middle class? If this is the case (although the book is not clear about it) then the numbers seem to stick together. The Middle of the Pyramid numbers about 2.6 billion people and this added to 1.4 billion extreme poor gives 4 billion in total. Bingo – even if it is not clear how we can stretch the figures to 5 billion! |
| People at the Middle of the Pyramid, those living on $2-13 a day, do have some discretionary income and some spending capacity. Logically it is the aspiring middle class rather than the extreme poor that “constitute a significant market and represent an engine of innovation, vitality, and growth” (p7). But the author insists on using the expression ‘bottom of the pyramid’. This confusion does not help the argument and the reader is uncomfortably trapped between unmatched numbers and definitions. The impression of being misled persists throughout the book. |
| The Fortune at the Bottom of the Pyramid promises too much for what effectively is a collection of good case studies. These are successful stories of companies that have managed to adapt processes and products to developing countries’ markets. They have created capacity, good practice, scale, skills and a viable ecosystem. The author tries to draw a theory from these examples without, however, rigorously testing his theory and providing evidence that these stories are not just isolated success cases, but can be easily replicated. As a result the claim of eradicating poverty through profits remains undemonstrated, however enticing. |
Paola Subacchi
Research Director, International Economics, Chatham House |
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