Anita began by asking Tim about his work on the informal economy in places like Delft near Capetown and in Nairobi’s Dagoretti Corner neighborhood.  You are finding a lot of cooperation is important in ways that we don’t customarily consider in entrepreneurship research.  What are you finding?

Tim explained the common phenomenon of colocation of businesses that look like competitors:  car repairs, furniture, electronics.  This type of organization occurs in low-income cities like Nairobi.  What’s going on is a mythic story that they grow together and then collapse together over time.   What we find in reality is that these groups of firms – such as the 105 car repair shops at Dagoretti corner in Nairobi – are a fibrant interlocking system of collaborators that work on a system of apprenticeships, enforced norms, pooled collective welfare insurance, referrals, and mutual support.   It’s like a village in the city created through business. 

If this were examined through the lens of Western cluster theory, you wouldn’t understand this and your interventions might really disrupt this.  And its important to understand, because it’s a key vehicle for the entry into cities of the 800m people on the African continent that will mature into work over the next 2 decades.  We need to know where their opportunities will come from. 

Anita asked Tim about the problems of organizing this way.

He explained that these collocating groups exist in spite of the government, not because of it.   The businesses have been pressed to the fringes.  But there are downsides:  

-          The insurance funding is one-off and non-enduring

-          “Nairobi spits you out” back to your village if you have longer-term problems

-          Collusion

-          Sexual exploitation – and labor exploitation

The clusters literature by Porter and Marshall does not describe what is happening fully.  Through the lens of these established theories, this looks like a failed cluster, but they are bigger and more persistent than the theory would predict.  We need to understand this as emerging from the absence of the government – the failure of the legacy of the colonial system.

Tims new article on “asset-based” ideas coming out in the SSIR deals with some of these themes.

Tim explained that the DeSoto ideas about taxation, assets, leveraged borrowing, etc., are very grounded in a way of thinking about individual businesses that is very westernized.

What happens if we think instead about collectively owned systems as the assets of the community of entrepreneurs.  We come up with very different ways of thinking about what is being accomplished.  The perspective becomes:   How do we build on ways of organizing that exist in the community to avert despair and failure?  How can tech be deployed to solve specific moral-hazard problems that are relevant in the local system?

Don’t erode the social fabric!   If you go into Dagoretti with entrepreneurship training on a western model, you may wreck what’s working.  Traditional competitive advantage analysis would lead you to pick a winner, when in fact the winning is a collective outome, not an individual outcome.   By ruining the underlying system behind the winner, you drown the asset.

Assets are the agglomerated system of solutions:  The apprenticeships, insurance, referrals, cooperation, etc.   All rise and fall together.

Tim closed by pointing to what he wants you to know.

He is thinking about shaping frontier markets.   What’s the locus of change?   Tim believes that it may not be within Africa alone, but rather outside thinking about what’s happening in Africa.  It’s the syncing of inside and outside insights that will lead us forward.