Jared Cohen - The New Digital Age

Because telecommunications is a profitable business (and never more so than after a crisis, when activity levels are unusually high), there will be ample opportunity for local and transnational entrepreneurs to participate. Talented local engineers will use open-source software to build their own platforms and applications to help the nascent economy, or they will collaborate with outside companies or organizations and contribute their skills. Much of the investment in the telecommunications space will be straightforward transactions and efforts to provide helpful services to the population, but there is some risk that the business leaders who emerge will come to constitute a new digital oligarchy. They might be well-connected local businessmen, taking advantage of the post-disaster environment to capture a key industry, or foreign executives looking to expand their empire. Regulation, again, will be key: As with all reconstruction efforts, those in charge will have to be wary of such maneuvers in a chaotic and highly malleable environment, and use their oversight effectively.

Mixed with entrepreneurs and digital oligarchs will be another group of foreign investors, members of the country’s diaspora and others whose interests are personal rather than simply financial. In the future, investors looking to connect with new countries will find that global connectivity produces a much deeper and more multifaceted type of engagement. Real-time news alerts, active social networks and instant language translation will enable investors to feel much closer to the countries they operate in, akin to the deep knowledge possessed by diasporic communities around the world. This will lead to better and longer investments and a more fruitful relationship for both the investors and the societies with which they interact.

Few understand this better than Carlos Slim Helú, the Mexican telecom magnate and currently the world’s richest person. Slim is also a part of the fifteen-million-strong Lebanese diaspora—his father emigrated to Mexico from Lebanon in 1902, fleeing the conscription of the Ottoman Empire army. Today, through a variety of companies, Slim maintains business interests around the world (including an 8 percent stake in The New York Times ). He described to us how his experience as a child of immigrants has shaped his perspective. “I think that more than feeling just Lebanese, I feel I am part of the world altogether,” he said. “Today, I feel I am a compromise between being Lebanese and relating to the challenges there, but also being a businessman in Latin America and with the responsibility I feel towards countries where I am doing business.”

His experience is not unique, he explained, and in the future he predicted that everyone will become “more global and more local,” with overlapping regional interests born from personal heritage, business opportunities and plain curiosity. He described himself as part of a new group that he calls the “business diaspora,” where, as a transnational businessman, he believes, “We are not going to countries just to put money in and pull it out. We are making business to stay and be part of the development of the country.” You can look at this as something “romantic,” he added, but it’s also smart business: “The reality is that business gets better if you grow the market, the demand, the customers and the possibilities.”

As entry barriers lower for business in an increasingly interconnected world, the experience of being a member of the “business diaspora” will not just be reserved for those with the means to invest large amounts of capital. Imagine, for example, that a computer-science student in Indiana develops a game for a popular social-networking site that suddenly takes off among users in Sri Lanka. The student and aspiring entrepreneur might not even have a passport (much less know anything about Sri Lanka), yet his game becomes highly profitable, whatever the reasons. His curiosity piqued, the student adds Sri Lankan friends on Facebook and Google+, follows local news on Twitter and begins to learn about, and travel to, the country. In short order, he develops a digital kinship with the country, which will last for years to come. Millions of entrepreneurs, apps developers and businessmen will experience something similar in the future, because the markets online will be bigger and more diverse than anyone truly anticipates.

In a reconstruction setting, this outlook is of course encouraging, but even the most organized and well-meaning telecom companies will never supplant the heavy-duty work of governing institutions. There are basic goods and social services that only a government can provide to its population, like security, public-health programs, clean water supplies, transport infrastructure and basic education. Connectivity and telecommunications will improve the efficacy of these functions but only in partnership with institutional actors on the ground, as the following example shows.

With its initial collapse, in 1991, Somalia became the world’s premier failed state. Famines, clan warfare, external aggression, terrorist insurgencies and regional fragmentation have foiled transitional government after transitional government. Over the past several years, the growth of mobile phones in Somalia has been one of the few success stories to emerge amid this anarchy. Even in the absence of security or a functioning government, the telecommunications industry has come to play a critical role in many aspects of society, providing Somalis with jobs, information, security and critical connections to the outside world. In fact, the telecoms are just about the only thing in Somalia that is organized, that transcends clan and tribal dynamics, and that functions across all three regions: South Central Somalia (Mogadishu), Puntland in the northeast and Somaliland in the northwest. Only one commercial bank exists in Somalia (founded in May 2012), and until there were mobile phones, in order to move money Somalis had to rely on informal hawala networks, in which no transaction records are kept. Today, mobile money-transfer services allow hundreds of thousands of Somalis to move money around inside the country and receive remittances from abroad. SMS-based platforms allow subscribers to use e-mail and receive stock tips and weather information.

Foreign NGOs and companies regularly launch mobile-technology pilot projects to improve the prospects for the Somali population in small ways; we’ve seen attempts to build SMS-based job-matching platforms and remote-diagnosis mobile health-care systems, among others. Yet most are unsuccessful in establishing a foothold—unsurprising, given the exceptionally hostile security and business environment. So most of the innovation that comes from Somalia today comes from the Somalis themselves; in this as elsewhere in the developing world, the most creative solutions emerge at the local level, driven by necessity more than anything else.

The absence of government in Somalia has meant that the telecommunications sector is unregulated, which drives down prices because entrepreneurs can step in and build a network if they see an opportunity (and have a sufficient appetite for risk). This is a common pattern when a government stops functioning. In the weeks after the fall of Saddam Hussein, a Bahraini telecom tried to expand into southern Iraq and capitalize on sectarian ties between that area, which is largely Shia, and Bahrain, which has a Shia majority, to win new customers. The occupying military forces, concerned about inflaming sectarian tensions, ultimately blocked the telecom’s venture.

The extreme laissez-faire business environment in Somalia has produced some of the cheapest local, international and Internet rates in Africa, making mobile usage far more possible for a deeply impoverished population. When members of the Somali diaspora in the United States call their family back home, their relatives will often hang up and call them back. Without a government demanding taxes, charging for licenses or imposing regulatory costs, telecoms can keep costs low to expand their subscriber base while still turning a profit. Somalia’s mobile penetration is much higher than one might expect, hovering somewhere between 20 and 25 percent. The four main telecom operators offer voice and data service across the country, and sixty to seventy miles into neighboring Kenya as well.