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Efosa Ojomo: Reducing corruption takes a specific kind of investment
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Traditional thinking on corruption goes like this: if you put good laws in place and enforce them well, then economic development increases and corruption falls. In reality, we have the equation backwards, says innovation researcher Efosa Ojomo. In this compelling talk, he offers new thinking on how we could potentially eliminate corruption worldwide by focusing on one thing: scarcity. "Societies don't develop because they've reduced corruption," he says. "They're able to reduce corruption because they've developed."
Efosa Ojomo - Innovation researcher
Efosa Ojomo researches and writes about how innovation transforms organizations and creates inclusive prosperity for many. Full bio
Efosa Ojomo researches and writes about how innovation transforms organizations and creates inclusive prosperity for many. Full bio
Double-click the English transcript below to play the video.
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So in 2011,
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someone broke into my sister's office
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at the university
where she teaches in Nigeria.
where she teaches in Nigeria.
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Now thankfully, the person was caught,
arrested and charged to court.
arrested and charged to court.
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When I get into court,
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the clerks who were assigned
to my sister's case informed her
to my sister's case informed her
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that they wouldn't be able
to process the paperwork
to process the paperwork
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unless she paid a bribe.
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Now, at first she thought
it was part of a practical joke.
it was part of a practical joke.
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But then she realized they were serious.
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And then she became furious.
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I mean, think about it: here she was,
the recent victim of a crime,
the recent victim of a crime,
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with the very people
who were supposed to help her,
who were supposed to help her,
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and they were demanding a bribe from her.
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That's just one of the many ways
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that corruption impacts
millions of people in my country.
millions of people in my country.
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You know, growing up in Nigeria,
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corruption permeated
virtually every element of the society.
virtually every element of the society.
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Reports of politicians embezzling
millions of dollars were common.
millions of dollars were common.
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Police officers stealing money
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or extorting money
from everyday hardworking citizens
from everyday hardworking citizens
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was routine practice.
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I felt that development
could never actually happen,
could never actually happen,
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so long as corruption persisted.
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But over the past several years,
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in my research on
innovation and prosperity,
innovation and prosperity,
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I've learned that corruption is actually
not the problem hindering our development.
not the problem hindering our development.
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In fact,
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conventional thinking on corruption
and its relationship to development
and its relationship to development
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is not only wrong, but it's holding
many poor countries backwards.
many poor countries backwards.
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So, the thinking goes like this:
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in a society that's poor and corrupt,
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our best shot at reducing corruption
is to create good laws,
is to create good laws,
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enforce them well,
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and this will make way for development
and innovation to flourish.
and innovation to flourish.
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Now, it makes sense on paper,
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which is why many governments
and development organizations
and development organizations
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invest billions of dollars annually
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on institutional reform
and anti-corruption programs.
and anti-corruption programs.
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But many of these programs
fail to reduce corruption,
fail to reduce corruption,
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because we have the equation backwards.
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You see, societies don't develop
because they've reduced corruption.
because they've reduced corruption.
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They're able to reduce corruption
because they've developed.
because they've developed.
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And societies develop
through investments in innovation.
through investments in innovation.
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Now, at first, I thought
this was impossible.
this was impossible.
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Why would anyone in their right mind
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invest in a society where,
at least on the surface,
at least on the surface,
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it seems a terrible place to do business?
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You know, a society where
politicians are corrupt
politicians are corrupt
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and consumers are poor?
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But then, the more I learned about
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the relationship
between innovation and corruption,
between innovation and corruption,
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the more I started
to see things differently.
to see things differently.
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Here's how this played out
in sub-Saharan Africa
in sub-Saharan Africa
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as the region developed
its telecommunications industry.
its telecommunications industry.
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In the late 1990s,
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fewer than five percent of people
in sub-Saharan Africa had phones.
in sub-Saharan Africa had phones.
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In Nigeria, for example, the country
had more than 110 million people
had more than 110 million people
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but fewer than half a million phones
in the whole nation.
in the whole nation.
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Now, this scarcity fueled
widespread corruption in the industry.
widespread corruption in the industry.
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I mean, public officials who worked
for the state-owned phone companies
for the state-owned phone companies
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demanded bribes from people
who wanted phones.
who wanted phones.
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And because most people
couldn't afford to pay the bribes,
couldn't afford to pay the bribes,
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phones were only available
to those who were wealthy.
to those who were wealthy.
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Then an entrepreneur named Mo Ibrahim
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decided that he would set up
a telecommunications company
a telecommunications company
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on the continent.
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Now, when he told his colleagues
about his idea, they just laughed at him.
about his idea, they just laughed at him.
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But Mo Ibrahim was undeterred.
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And so in 1998, he set up Celtel.
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The company provided affordable
mobile phones and cell service
mobile phones and cell service
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to millions of Africans,
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in some of the poorest and most corrupt
countries in the region --
countries in the region --
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I mean countries such as Congo, Malawi,
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Sierra Leone and Uganda.
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You see, in our research,
we call what Mo Ibrahim built
we call what Mo Ibrahim built
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a "market-creating innovation."
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Market-creating innovations transform
complicated and expensive products
complicated and expensive products
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into products that
are simple and affordable,
are simple and affordable,
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so that many more people in society
could access them.
could access them.
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Now in this case, phones were expensive
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before Celtel made them
much more affordable.
much more affordable.
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As other investors --
some of his colleagues, actually --
some of his colleagues, actually --
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saw that it was possible to create
a successful mobile phone company
a successful mobile phone company
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on the continent,
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they flooded in with billions
of dollars of investments.
of dollars of investments.
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And this led to significant
growth in the industry.
growth in the industry.
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From barely nothing in 2000,
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today, virtually every
African country now has
African country now has
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a vibrant mobile
telecommunications industry.
telecommunications industry.
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The sector now supports
close to one billion phone connections,
close to one billion phone connections,
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it has created nearly four million jobs
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and generates billions of dollars
in taxes every year.
in taxes every year.
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These are taxes that governments
can now reinvest into the economy
can now reinvest into the economy
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to build their institutions.
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And here's the thing:
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because most people no longer
have to bribe public officials
have to bribe public officials
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just to get a phone,
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corruption -- at least within
this industry -- has reduced.
this industry -- has reduced.
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Now, if Mo Ibrahim had waited
for corruption to be fixed
for corruption to be fixed
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in all of sub-Saharan Africa
before he invested,
before he invested,
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he would still be waiting today.
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You know, most people who engage
in corruption know they shouldn't.
in corruption know they shouldn't.
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I mean, the public officials
who were demanding bribes from people
who were demanding bribes from people
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to get phones
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and the people
who were paying the bribes --
who were paying the bribes --
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they knew they were breaking the law.
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But they did it anyways.
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The question is: Why?
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The answer?
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Scarcity.
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See, whenever people would benefit
from gaining access
from gaining access
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to something that scarce,
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this makes corruption attractive.
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You know, in poor countries, we complain
a lot about corrupt politicians
a lot about corrupt politicians
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who embezzle state funds.
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But in many of those countries,
economic opportunity is scarce,
economic opportunity is scarce,
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and so corruption becomes
an attractive way to gain wealth.
an attractive way to gain wealth.
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We also complain about
civil servants like police officers,
civil servants like police officers,
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who extort money from everyday
hardworking citizens.
hardworking citizens.
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But most civil servants
are grossly underpaid
are grossly underpaid
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and are leading desperate lives.
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And so for them, extortion or corruption
is a good way to make a living.
is a good way to make a living.
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You know, this phenomenon also plays
itself out in wealthy countries as well.
itself out in wealthy countries as well.
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When rich parents
bribe university officials --
bribe university officials --
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(Laughter)
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When rich parents
bribe university officials
bribe university officials
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so their children can gain admission
into elite colleges,
into elite colleges,
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the circumstance is different,
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but the principle is the same.
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I mean, admission
into elite colleges is scarce,
into elite colleges is scarce,
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and so bribery becomes attractive.
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The thing is,
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I'm not trying to say there shouldn't
be things that are scarce in society
be things that are scarce in society
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or things that are selective.
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What I'm just trying to explain
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is this relationship
between corruption and scarcity.
between corruption and scarcity.
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And in most poor countries,
way too many basic things are scarce.
way too many basic things are scarce.
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I mean things like food,
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education,
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health care,
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economic opportunity,
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jobs.
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This creates the perfect breeding ground
for corruption to thrive.
for corruption to thrive.
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Now, in no way does this
excuse corrupt behavior.
excuse corrupt behavior.
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It just helps us
understand it a bit better.
understand it a bit better.
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Investing in businesses
that make things affordable
that make things affordable
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and accessible to so many more people
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attacks this scarcity
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and creates the revenues for governments
to reinvest in their economies.
to reinvest in their economies.
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Now, when this happens
on a countrywide level,
on a countrywide level,
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it can revolutionize nations.
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Consider the impact in South Korea.
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Now, in the 1950s,
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South Korea was
a desperately poor country,
a desperately poor country,
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and it was very corrupt.
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The country was ruled
by an authoritarian government
by an authoritarian government
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and engaged in bribery and embezzlement.
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In fact, economists at the time
said South Korea was trapped in poverty,
said South Korea was trapped in poverty,
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and they referred to it
as "an economic basket case."
as "an economic basket case."
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When you looked
at South Korea's institutions,
at South Korea's institutions,
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even as late as the 1980s,
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they were on par with some of the poorest
and most corrupt African countries
and most corrupt African countries
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at the time.
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But as companies like
Samsung, Kia, Hyundai
Samsung, Kia, Hyundai
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invested in innovations
that made things much more affordable
that made things much more affordable
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for so many more people,
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South Korea ultimately became prosperous.
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As the country grew prosperous,
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it was able to transition
from an authoritarian government
from an authoritarian government
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to a democratic government
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and has been able to reinvest
in building its institutions.
in building its institutions.
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And this has paid off tremendously.
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For instance, in 2018,
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South Korea's president
was sentenced to 25 years in prison
was sentenced to 25 years in prison
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on corruption-related charges.
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This could never have happened decades ago
when the country was poor
when the country was poor
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and ruled by an authoritarian government.
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In fact, as we looked at most prosperous
countries today, what we found was,
countries today, what we found was,
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they were able to reduce corruption
as they became prosperous --
as they became prosperous --
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not before.
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And so where does that leave us?
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I know it may sound like I'm saying
we should just ignore corruption.
we should just ignore corruption.
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That's not what I'm saying at all.
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What I'm suggesting, though,
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is that corruption, especially
for most people in poor countries,
for most people in poor countries,
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is a work-around.
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It's a utility
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in a place where there are fewer
better options to solve a problem.
better options to solve a problem.
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Investing in innovations that make
products much more affordable
products much more affordable
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for many people
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not only attacks this scarcity
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but it creates a sustainable
source of revenue
source of revenue
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for governments to reinvest
into the economies
into the economies
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to strengthen their institutions.
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This is the critical missing piece
in the economic development puzzle
in the economic development puzzle
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that will ultimately
help us reduce corruption.
help us reduce corruption.
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You know, I lost hope
in Nigeria when I was 16.
in Nigeria when I was 16.
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And in some ways, the country
has actually gotten worse.
has actually gotten worse.
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In addition to widespread poverty
and endemic corruption,
and endemic corruption,
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Nigeria now actually deals
with terrorist organizations
with terrorist organizations
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like Boko Haram.
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But somehow, I am more hopeful
about Nigeria today
about Nigeria today
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than I have ever been before.
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When I see organizations
investing in innovations
investing in innovations
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that are creating jobs for people
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and making things affordable --
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I mean organizations
like Lifestores Pharmacy,
like Lifestores Pharmacy,
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making drugs and pharmaceuticals
more affordable for people;
more affordable for people;
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or Metro Africa Xpress,
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tackling the scarcity of distribution
and logistics for many small businesses;
and logistics for many small businesses;
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or Andela, creating economic opportunity
for software developers --
for software developers --
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I am optimistic about the future.
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I hope you will be, too.
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Thank you.
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(Applause)
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ABOUT THE SPEAKER
Efosa Ojomo - Innovation researcherEfosa Ojomo researches and writes about how innovation transforms organizations and creates inclusive prosperity for many.
Why you should listen
Efosa Ojomo leads the Global Prosperity research group at the Clayton Christensen Institute for Disruptive Innovation, a think tank based in Boston and Silicon Valley. In January, 2019, Ojomo and Harvard Business School professor Clayton Christensen published The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty. In a Wall Street Journal review of The Prosperity Paradox, Rupert Darwall writes: "The authors return the entrepreneur and innovation to the center stage of economic development and prosperity."
Ojomo's work has been published and covered by the Wall Street Journal, Harvard Business Review, the Guardian, Quartz, Forbes, Fortune, The World Bank, NPR and several other media outlets. He speaks regularly on innovation and has presented his work at TED, the Aspen Ideas Festival, the World Bank, Harvard, Yale, Oxford and at several other conferences and institutions.
Ojomo graduated from Vanderbilt University with a degree in computer engineering and got his MBA from Harvard Business School.
Efosa Ojomo | Speaker | TED.com