Philanthropy's New Prototype

In the decades after the Civil War, libraries were scarce in much of the United States. Many towns had no library at all, and those libraries that did exist were typically small and private, run by clubs or lodges that had scraped together collections of books to lend to their members or, on occasion, to outsiders who paid a fee for borrowing privileges. For the most part, towns did not have library buildings; book collections were housed instead in cheap offices or in unused space in public buildings. Even in bigger cities, it was often difficult to borrow books. Until the very end of the 19th century, Pittsburgh, for instance, had just one private lending library, and it struggled to stay afloat. And few people, if any, took seriously the idea that every town in the country should have a public library where citizens would have free and equal access to books.

Andrew Carnegie changed all that. Carnegie was an embodiment of the American Dream; born poor in Scotland, he had emigrated to the United States and built a fortune in the steel industry, turning himself into one of the country’s wealthiest and most powerful businessmen. As Carnegie told it, when he was a young boy, he’d had to work instead of going to school. But a wealthy local man named Colonel Anderson had put together a small library of about 400 books, and every Saturday, Carnegie was allowed to read and borrow some of them. The experience, Carnegie wrote later, convinced him that there was no more productive way to help children develop than to build public libraries. And so, beginning in the 1880s, he set out to do just that, in towns all across the country.

Strictly speaking, Carnegie began his campaign outside the United States; his first library, built in 1881, was in his hometown of Dunfermline, Scotland. The first library he built in the United States, eight years later, opened in ­Braddock, PA, where Carnegie Steel had one of its biggest mills. A year later came the Carnegie Free Library of Allegheny, PA. The Allegheny library was important because it was the first funded according to the model that Carnegie would follow thereafter: instead of simply paying for and endowing the library, he offered the town a large initial grant on the condition that it agree to pay for the library’s operations thereafter. (In what came to be known as the “Carnegie formula,” towns generally committed to an annual budget–for maintenance, new books, and so on–that equaled 10 percent of Carnegie’s original gift.) These were, in other words, to be genuinely public libraries, dependent not on the largesse of a single person but on communities’ willingness to subsidize their own access to knowledge.

That willingness was not always easy to inspire; in some towns it was actually illegal at first to use tax money to pay for libraries. But as more towns accepted Carnegie’s deal, and as it became evident that the libraries were generally very popular once they were built, more towns decided that they, too, needed free libraries. By the time he died in 1919, some 30 years after the Allegheny library opened, Carnegie had given away $350 million of his fortune; he spent more than $60 million of it to build more than 2,800 libraries, including almost 2,000 in the United States and almost 700 in Great Britain. His donations had so effectively revolu­tionized public opinion that by the middle of the 20th century, it was the rare American town that dared go without a public library.

Carnegie is usually talked about today as a precursor to people like Bill Gates and Warren Buffett, multi­billionaires who have dedicated most of their wealth to philanthropic endeavors. But when you look at the way Carnegie built libraries–seeding institutions around the country and encouraging local involvement in the hope of convincing people of the virtues of free access to knowledge–what it calls to mind most is not Gates’s prodigious effort to fund the fight against infectious diseases but, rather, an endeavor called One Laptop per Child (OLPC)–or, as it’s colloquially known, the $100 laptop.

The $100 laptop sprang from the fertile, utopian mind of tech guru Nicholas Negroponte, who is the cofounder and chairman emeritus of the MIT Media Lab, a successful venture capitalist, and the author of Being Digital, the 1995 paean to the digital economy. The concept behind the project, which Negroponte unveiled at the World Economic Forum in Davos, Switzerland, less than two years ago, is as simple as its name: give all children in the developing world laptop computers of their own. If we achieved that, he believes, we could bridge what’s usually termed the “digital divide.” The laptops would offer children everywhere the opportunity to benefit from the Internet and would enable them to work with and learn from each other in new ways. OLPC, the nonprofit organization that Negroponte set up to manage the project, has taken responsibility for designing the computer and engaging an outside manufacturer to produce it. But the nonprofit is not going to buy the computers. That, at least for now, is the responsibility of governments, and Negroponte has said that the $100 laptop will not go into production until he has firm commitments from governments to buy at least five million units. Would (or should) any government be willing to lay out the cash? Negroponte answers that question with characteristic bluntness. “Look at the math: even the poorest country spends about $200 per year per child. We’ve estimated what a connected, unlimited-Internet-access $100 laptop will cost to own and run: $30 per year. That has got to be the very best investment you can make. Period.”

Despite the appeal of this vision, Negroponte’s project has attracted skepticism as well as support. In part, that’s because of Negroponte himself, whose self-assured optimism makes him a permanent lightning rod. More than that, though, OLPC is effectively trying to do two dramatic things at the same time. It’s trying to lower the cost of computing to the point where it’s accessible to the world’s poor–which is to say, to most of the world’s population. And it’s trying to succeed with a new model of philanthropy, albeit one that harks back to Carnegie–blending private, nonprofit, and governmental interests to create a project of vast scale and scope on a budget that is, even by philanthropic standards, surprisingly small.

Of course, this will only work if OLPC can deliver on its promise, and the problem is that at this moment you cannot buy anything resembling a computer, much less a portable one, for a hundred dollars. OLPC had to design and build an entirely new kind of laptop from scratch–one that would endure rough handling, function even in the absence of a steady power supply, and allow easy networking and Internet access, and whose readable if small screen would use startlingly inexpensive technology. Not surprisingly, critics doubted that it was possible. Yet in the past year, Negroponte has lined up an impressive array of partners to furnish the innards of the computer, including AMD and Red Hat, while Quanta, the Taiwanese manufacturer that currently makes around a third of the world’s laptops, is on board to manufacture the machines.

OLPC designers claim to have cracked the toughest problems they faced. When the laptop is not plugged in, it can be powered by means of a foot pedal (or pull string, depending on the final decision) that will generate 10 minutes of power for every minute of exertion. Out of the box, the laptops will connect with one another to form a mesh network that will make each computer a transmission node, allowing the laptops to talk to each other and greatly magnifying the range of any Internet connection. And the screen will have both a high-resolution black-and-white mode, in which it will be readable even in bright sun, and a backlit, lower-resolution color mode. The designers say the display will be at least as readable as today’s LCD screens but use far less power, and they expect it to cost about $35, which is roughly a quarter of what a typical screen costs today. It will be a very small screen for a laptop–seven and a half inches–but if it works, it will represent a genuine engineering breakthrough.

Nevertheless, the $100 laptop is not yet a reality. (In fact, the name is something of a misnomer: for more than a year now, Negroponte has been predicting an initial cost of closer to $150, though he expects that, as with most electronic products, the laptop’s price will fall as time goes on and units are produced in greater volume.) OLPC has yet to demonstrate a working version of the laptop; Negroponte says that the first working models, so-called B machines, will come off the assembly line in November, after which they’ll be put through a torture course of testing in five developing countries–Brazil, Argentina, Libya, Thailand, and Nigeria–to see how they hold up. And even if they do work, the task of persuading governments to buy them still remains. Negroponte has made real progress on this front. In October, Libya signed a memorandum of understanding that effectively commits it to buying a million laptops, assuming the B machines pass their tests, and the other four test nations seem nearly as likely to sign up if the machines work as planned. But five million laptops is, by OLPC’s self-defined standards, just a start. No matter how well things go in the next few months, Negroponte can almost certainly count on continuing to spend a great deal of time negotiating with government ministers around the globe. In that sense, just as we’re waiting to see whether OLPC’s laptop will work, we’re waiting to see whether its “business” model will work, too. If it doesn’t, the project will be remembered as an interesting side note in the history of computing. If it does, OLPC will become integral to one of the more remarkable narratives of the past decade: the revolution in philanthropy.

Enterprising Philanthropy

As the names of the Carnegie, Ford, and Rockefeller Foundations suggest, American philanthropy has always depended heavily on American businessmen. But with some exceptions–like the Carnegie libraries, or the Salvation Army, which Peter Drucker once called “the most effective organization in the United States”–the fact that foundations were mostly funded by business did not mean they were businesslike in their approach. Over the last decade or so, that has changed dramatically. Beginning sometime in the mid-1990s, two trends came together to remake philanthropy in the United States: the tremendous boom in the U.S. economy and stock market, and a growing desire on the part of wealthy businesspeople to apply their moneymaking techniques to other, less commercial endeavors. The economic boom meant a lot more money floating around: charitable donations in the United States rose 10 percent annually in the late 1990s. It also meant a lot of newly wealthy people, many of them entrepreneurs, who were interested in figuring out how to spend that money in the smartest way possible. The result has been an explosion in new forms of philanthropic investment and a concentrated effort to identify what might be thought of as the philanthropic equivalent of business opportunities: areas where neither business nor government has been meeting a need. And although the growth in charitable donations slowed with the stock-market crash and recession, it’s picked up again, with donations rising about 23 percent between 2001 and 2005.

Some philanthropies are taking on immense global problems. The Gates Foundation, most obviously, has become one of the world’s most forceful promoters of research on malaria, tuberculosis, and AIDS, while Bill Clinton is currently raising billions to improve AIDS treatment and research. Some are taking on smaller, local problems. The Acumen Fund, for instance, operates as a kind of philanthropic ­venture capital fund, working with companies in the developing world on products and services designed specifically to serve the four billion people who live on less than $4 a day; its projects include drip-irrigation kits in India and malaria nets in Africa. The Omidyar Network funds both profit-seeking and nonprofit enterprises, while Google’s various philanthropic enterprises invest in everything from traditional nonprofits to projects like OLPC to for-profit ventures.

What all these organizations have in common is a much greater focus on the return they get on their investments in charities, with “return” defined more in terms of its social than its financial value. Often, they explicitly demand that grant recipients meet performance goals just as any corporate division would be expected to. The premise is that it’s possible to bring greater rationality not only to the grant-making process but to the actual operations of philanthropic organizations. This new model is sometimes called “high-engagement philanthropy”: just as venture capitalists often play an important role in shaping the strategies of the companies they fund, these new foundations tend to be more directly involved in their grantees’ operational decisions.

One Laptop per Child is part of this broader movement: though it is receiving grants rather than making them–Google and News Corp. are among its donors–it is an excellent example of the application of business logic to social problems. From one angle, in fact, OLPC looks more like a company than like a traditional charity, in the sense that it is designing and marketing a product and outsourcing its production to firms that are expecting to make a profit. Instead of circumventing the market, then, OLPC is working within it, and Negroponte is counting on the efficiencies generated by market processes to drive the price of the laptop down over time. At the same time, because OLPC is relying on governments to buy its product, it needs to spend a great deal of time lobbying and cajoling government officials, a task that is very familiar to activist organizations.

OLPC is unusual in relying on three different kinds of enterprises–private, nonprofit, and governmental–to carry out its mission. On the one hand, this structure arguably makes the project more robust, since OLPC can draw on the different strengths of each. On the other hand, it also makes things more complicated. Negroponte, for instance, says all his advisors believed that OLPC would need to be a for-profit company in order to attract the necessary talent. (“They were wrong,” he says.) More important, because OLPC is not simply a charity, it has a much harder time making things happen than it would if it were giving money away. Dealing with governments is not easy, particularly since OLPC has initially chosen to try to do business primarily with big governments: Argentina, Brazil, Nigeria, Thailand, and China. (Perhaps it’s not a coincidence that it was a small country, Libya, that was the first to make a commitment to the project.) “Governments are hard; large governments are harder; ministries of education are harder,” Negroponte says. “So we have indeed tackled the hardest of the hardest of the hard.” The course of OLPC’s efforts in this sphere has not run entirely smooth. In June, Sudeep Banerjee, India’s education secretary, wrote a letter to fellow members of his government saying that the country was not interested in buying laptops for its students and that “we cannot visualize a situation for decades” that would justify the program. China, however, remains a possibility. Negroponte has met with the Chinese minister of education twice.

For all the challenges that OLPC’s odd structure presents, though, it’s hard to see how such a novel project could succeed, at the scale Negroponte has in mind, as either a charity or a for-profit company. “We’d like to move five to seven million units in our first year,” says Ethan Beard, a Google employee who sits on the board of OLPC. “That’s already a pretty sizable amount of money. But eventually, we’d like to move 20 million units a year, which is $2 billion or more, and there are very few, if any, nonprofit institutions that could handle a project of that size.” And had OLPC been a for-profit company, persuading governments to buy the $100 laptop would have been far more difficult. “If you’re going to be going in to government ministers and pitching them on education, especially with a project this new and ambitious,” Beard says, “you need to be able to say, ‘We’re not doing this to make money,’ because otherwise your motives are always going to be in question.” Interestingly, there may be at least one important exception to this rule. “China does not understand nonprofit structures,” Negroponte says, “and many people just cannot believe we are doing this philanthropically.”

The Critics

From the start, there have been objections to the $100 laptop. Many people simply assumed that the project was hopeless, that there was no way to build a functioning laptop at that price and no way to enlist partners with adequate resources. “Let’s see, build Xbox 3 for Microsoft or build PCs for charity. Hmm, tough choice there,” wrote Doug Mohney of the technology website the Inquirer; Tony Roberts, the CEO of the U.K. charity Computer Aid International, said the entire project was based on a “misunderstanding of the history of technology.” Others insisted, and continue to insist, that even if a real machine is produced at the end of all this, it will be little more than a toy. In December 2005, Craig Barrett, the former CEO of Intel, dismissed the product as a “$100 gadget.”

More substantively, and more recently, critics have charged that as a means of bridging the digital divide, the $100 laptop is simply the wrong technology. The success of the laptop, the argument goes, depends on building an entirely new infrastructure in the developing world, rather than relying on the infrastructure that’s already there. In OLPC’s early stages, there appeared to be a good chance that Microsoft would supply the laptop’s operating system. But around the time that deal fell through–Negroponte decided to keep the software open source–Bill Gates and Craig Mundie, Microsoft’s chief research and strategy officer, were proffering an alternative to Negroponte’s plan, in the form of an amped-up cellular phone for the developing world. Cell phones–and cell towers–are ubiquitous in the Third World, and they’re already somewhat affordable, whereas Internet connectivity is much harder to come by. Most of what can be done on an ­Internet-­connected laptop can also be done on a cell phone, albeit more slowly and less comfortably. Gates and Mundie argue, essentially, that we would be better off using this existing infrastructure to put Net-enabled cellular phones in the hands of kids and parents than trying to build something from scratch. In July, Mundie unveiled a rough prototype of Microsoft’s phone, called FonePlus, and suggested that it would eventually allow users to read e-mail, run applications like PocketOffice, and surf the Web. It’s also possible that the phone could be hooked up to a TV and a keyboard.

The simplest and strongest argument against the $100 laptop, though, is that even if it can be built, and even if it will work approximately as well as Negroponte promises it will, it’s still a waste of money. In an ideal world with unlimited government budgets, the argument goes, putting a laptop in the hands of every child would be a marvelous and valuable feat. But in the far-from-ideal worlds of developing countries, which generally have limited budgets and pervasive social problems, millions or billions of dollars’ worth of computers are a luxury that governments can ill afford. Brazil, for instance, which seems likely to buy a million laptops from OLPC as soon as they become available, has around 45 million school-age children: equipping all of them would cost something like $6.3 billion. Given the desperate poverty of many Brazilians, are laptops the best use for that kind of money?

The technology website ZDNet U.K. put it this way: “If Bill Gates and $100 laptop progenitor Nick ­Negroponte were to look at the places without light and listen to those without a voice, a laptop per child would not be first on the list.” Philanthropists’ efforts would be better directed, in other words, to figuring out ways to help the truly needy. The reality is that in most countries, towns don’t even have libraries. Are we really better off spending money on computers instead? When the Indian education secretary wrote his letter in June declaring that India would not be participating in the program, he made precisely this point, arguing that there were more cost-effective ways to improve student performance than buying laptops from OLPC. This objection carries so much weight precisely because of OLPC’s unusual structure. If the organization were purely a charity, building and buying the computers with its own money, we might question its priorities, but we all know that charities spend billions of dollars every year on less-than-urgent projects with which their donors are obsessed. And we accept this, because we assume it’s better that money get spent on some philanthropic endeavor than on none. In the case of OLPC, though, tax dollars are at stake.

Ultimately, the critiques of OLPC can be divided into two types: those having with to do with technology and those having to do with what one might describe as ethics. Some of the technological objections can seem frivolous: a machine with a readable 7.5-inch screen, three USB 2.0 ports, power-saving features, 512 megabytes of flash memory, and a working operating system is not a “gadget.” Some will be answerable only a few months from now, when we find out whether the laptop passes its field tests. As for the argument that cellular phones will be a better route to Internet access in most of the developing world for the foreseeable future, their advantages have to be balanced against their disadvantages: a minuscule screen and no keyboard. “Suggesting that cell phones are an alternative is like saying we can use postage stamps to read textbooks,” Negroponte says. “Books have a purposeful size, based on how the eye works and the ability to engage peripheral and foveal vision at the same time for browsing. It is not by chance that atlases are bigger than timetables.” It is true that connecting the phone to a keyboard and a television would yield what amounts to a personal computer. But that would erode the cost advantage of cell phones and, worse, tether students to particular spots (assuming, of course, that they even have televisions).

And while connecting laptops to the Internet is obviously fundamental to OLPC’s vision of how the project will change kids’ lives, the mesh-networking technology embedded in the laptops will be valuable even when Internet connections aren’t available. “To me, nowadays, a computer that’s not connected to the Net is useless,” Beard says. “But allowing kids in a school to network all of their computers together, even when they’re not on the Net, is actually important from an educational point of view, because it allows them to collaborate and to learn from each other in a way that they wouldn’t have been able to before.” In any case, cell phones don’t need to lose if OLPC wins, and vice versa: on the contrary, it’s clearly best for the developing world if lots of companies and nonprofits are competing to supply them with new technologies.

It may be difficult for poorer governments to justify spending a good chunk of their education budgets on laptops. But the ­reality of both philanthropic and government spending is that money often goes to projects that do not help as many people, or people who are as needy, as other projects might. These projects may not be perfect, but they can still do tremendous good. In the post-Reconstruction United States, after all, there were lots of worthwhile things Carnegie could have done with his money; in fact, in many of the towns where he built libraries, citizens grumbled that their tax dollars should be going to something that really mattered. Yet in the long run, one would be hard pressed to say that either Carnegie or the taxpayers wasted that money, because the social benefits of disseminating knowledge are so immense.

Similarly, it may be a mistake to assume that technology is something only wealthy nations can afford, and that poorer nations are better off concentrating on basics like health and water. On the contrary, a country can, as the prime minister of Ethiopia recently put it, be “too poor not to invest in information and communications technology.” Information technology is often a useful way of improving connections to the outside world, and thus creating greater possibilities of exchange. And for children, access to new technology promises to speed learning dramatically. “I have not met anybody who claims they are too poor to invest in education, nor anybody that said it was a waste of money,” Negroponte says. “If somebody is dying of hunger, food comes first. If somebody is dying from war, peace comes first. But if the world is going to be a better place, the tools for doing so always include education.”

It may seem curious to buy laptops where there are no libraries, but the promise is that computers will bring the world’s libraries inside a student’s home. Despite the element of wishfulness in this vision, the idea that the Net allows countries to leapfrog traditional stages of development is almost certainly correct. C. K. Prahalad, the University of Michigan professor whose book The Fortune at the Bottom of the Pyramid analyzes the tremendous market opportunities in the developing world, argues forcefully that these countries are surprisingly fertile ground for new technologies. “We assume that the poor will not accept technology,” he says. “The truth is, they will accept technology in some ways even more easily than we will, because they have not been socialized to anything else. They accept technology rapidly, as long as that technology is useful. We have a very long forgetting curve. They don’t. They have only a learning curve.”

It is, in any case, important to recognize that the $100 laptop is not currently being pitched to truly poor countries, although Negroponte certainly envisions them as eventual customers. On the contrary, the five nations currently on track to buy the laptops–Libya, Brazil, Argentina, ­Nigeria, and (even after the coup that removed Prime Minister ­Thaksin) Thailand–all have relatively healthy economies and relatively large state budgets. That makes it considerably easier for them to justify investing in a new technology, particularly one that seems to offer the prospect of mitigating one of the biggest problems they face: the sharp divide between rich and poor. It also means that the $100 laptop could have a bigger impact sooner than it might otherwise, since the students likely to receive it first would use it to expand on skills they already possess; students in very poor countries, by contrast, are more likely to be illiterate and innumerate.

While those involved with OLPC seem genuinely confident that the project will work, it could still be derailed by any number of problems. The laptops could end up being stolen from kids and resold, or the distribution of laptops could simply create a new digital divide. (In Brazil, after all, one million kids will suddenly have laptops, and 44 million won’t.) More important, relying on governments to buy a product guarantees that the process will be capricious (especially in the case of undemocratic regimes), and certainly Negroponte’s failure to get India to commit to the project was a blow to at least its short-term prospects. But even if we don’t know whether OLPC will succeed, we do know that if it does, it will represent a dramatic step forward for both computing and philanthropy.

What OLPC will have done, after all, is figure out how to put computing power in the hands of millions more people by using dramatically new technologies. Just as important, OLPC will, should it succeed, serve as a new model for getting the nonprofit, private, and public sectors to work together efficiently and productively. In part because of frustration with government corruption and bureaucracy, and in part because of the American preference for private rather than public solutions to social problems, the idea of working with governments in the developing world has become increasingly less attractive to philanthropists. But there are problems too big to be solved by NGOs or corporations (or governments, for that matter)–problems that demand new kinds of alliances. OLPC is, in that sense, not just building a new computing machine. It’s also building a new philanthropic machine, one as cobbled together and untraditional as the $100 laptop. The question that remains is just how well either of those machines will really work.

James Surowiecki is the financial columnist at the New Yorker and the author of The Wisdom of Crowds.