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December 3rd, 2008
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SEVEN Fund Essay Competition Submission: Virtual Onshoring
The following essay was submitted to the SEVEN fund for a scholarship contest.  The purpose of the Essay was to give the President of Rwanda policy recommendations about how to fulfill his vision of improving entrepreneurship within his country. 

The Vision

Your Excellency, I understand your mental model and vision. You recognize that Rwanda is an equal player in the global marketplace. And you, as chief entrepreneur, are building a future where Rwanda’s brand identity is no longer associated with genocide, but rather innovation, talent, potential, and opportunity.

You recognize that in the 21st century, success will have less to do with whether a nation is landlocked, but more to do with whether it is mindlocked into a limited mindset. Furthermore, you understand that competition is one of the best strategies to help change the mindset of a nation and a people, realizing their true value and capability. And you are engineering the structure of the government to give all Rwandans the opportunity to compete.

Using ICT to facilitate Global Virtual Existence

Your Vision 2010 already incorporates Information & Communication Technology (ICT) as a major part of its strategy. (1)  ICT - and specifically the Internet - is the cornerstone to realizing your full vision.

But to do this, it is critical to have an accurate mental model of what ICT can do. I emphasize this because in the U.S. there were many people who blindly thought the Internet changed everything. Many businesses had inaccurate mental models, which led to the "dot com bust". (2)  In reality, there are only certain things that the Internet changes; the most important being the fact that the Internet enables global virtual existence.

The Internet allows anyone to virtually exist throughout its entire structure. Marshall McLuhan talked about the media being an extension of human beings. (3)  ICT brings this concept to nearly full capability, because with the Internet, any person or business that is online has no apparent geographic difference to anyone else.

For example, someone in America, Europe or Japan who goes to a website owned by a Rwandan has no more or less a sense of a geographic difference than if they were on a website owned by someone in their native country. The only sense of geographic distance is created by the content itself, which is created by the minds of the content creator.

This mental model of Global Virtual Existence is neither well recognized nor well understood, and has only started to be exploited competitively. Those who truly understand this concept and utilize it will gain a major competitive edge over those who don't. And thus, this needs to be a major part of Rwanda's strategy.

Virtual Onshoring: A Seventh Pillar for ICT

Your Vision 2010 already uses ICT to support six pillars: Good Governance, Human Resources Development, the Private Sector, Infrastructure, Regional Integration, and more Productive
Agriculture. (4)  By using the mental model of Global Virtual Existence, your vision of entrepreneurship naturally leads to a seventh pillar: Using ICT to support Virtual Onshoring.

"Virtual Onshoring", as coined and defined by this essay, is the ability of an entrepreneur anywhere in the world, to exist virtually in America, Europe, Japan or anywhere the Internet touches, and to do business in those prosperous markets without ever needing to step foot upon their shores.

Evolving Away from Offshoring

In many ways, the process of Virtual Onshoring is the next natural evolutionary step of Offshoring. Offshoring of knowledge-based jobs, such as technical support, engineering, programming, transcription, etc, from more-developed economies to lesser-developed economies has paid large dividends to the developing nations involved. But Offshoring has become a somewhat saturated market. Those nations that were the first to get in already have a large market share, and those who enter that market now will generally need to compete by selling their services cheaper. Thus it has become more of a commodity market, leaning in the direction of lower wages, in essence "competing to see which country can stay poorest the longest". (This does not mean there aren’t any opportunities still left in the Offshoring market, but I do not recommend it is a major place to focus on.)

Evolving to Virtual Onshoring

Virtual Onshoring works by using the same technologies that have supported inexpensive Offshoring (primarily the Internet) but in reverse. Virtual Onshoring can work because there are many technologies now available on the Internet to Americans that by the very nature of the Internet can also be used by Rwandans. A Rwandan entrepreneur can now virtually be in the United States by:

  • Obtaining a ".com" web and email address (approx $100/year) (5)
  • Using IP Telephony to have a U.S. phone number  (approx $50/year) (6)
  • Using IP Fax technology to have a U.S. fax number (approx $50/year) (7)
  • Using a mailing service to have a U.S. Physical Street Address (price varies)

The above-mentioned tools would put Rwandans on an equal playing field with entrepreneurs in other countries. For about $300 per year (the costs listed above, plus other misc. expenses), any Rwandan connected to the Internet can tap into the entire U.S. market. And there are additional opportunities on the Internet that allow entrepreneurs to tap in with very low starting capital. For example, there are now services on the Internet such as Cafe Press and Zazzle that allow custom product creation and distribution, with low risk and only potential profit.

These are only two examples. I am sure a Rwandan, through the human spirit of entrepreneurship, will take this idea far beyond what is presented here.

Policy Recommendations

Educational Policy

Since your vision centers around helping people expand their minds, we must first focus on educational policy. It is important to understand that education extends beyond the classroom, that it encompasses all areas of knowledge dissemination and learning. Thus all of "public relations" and communication are critical components of the education system.

Rwandans need to learn a systems-based approach and a systems-based view of the world. This will allow them to be able to comprehend how they can do Virtual Onshoring or other entrepreneurial endeavors. A systems-based approach will allow them to understand the new mental models of Information.

Rwandans need to learn the tools of technology that will allow them to compete in the markets that Virtual Onshoring opens up to them. Rwandans also need to learn how to harness their cultural heritage and how to export this to the United States. Since the lowest cost/highest profit opportunities involve media content, the Rwandan Culture Capital of art and music can become an economic asset.

Further, the education can not simply be pedantic; it must also include open-ended curriculum that challenges people to think for themselves. Education must be less about teaching specific tasks, and more about getting people to question their assumptions, and to look at the world in new ways. By doing this they may find the creative methods of using the tool of Virtual Onshoring to bring prosperity to themselves, their families, and to Rwanda.

Policies to Build Trust

Beyond all this, it must be recognized that traditional "public relations” is the most essential educational component, and one that must be undertaken by the Rwandan government if it is to succeed in the global marketplace. For Virtual Onshoring, it is critical that people in the developed markets associate Rwanda with reliability, stability, and a good reputation. Other countries must learn that it is safe to deal with Rwandan entrepreneurs. For economic prosperity to occur, Rwanda must make this the number one priority because without trust, there will be no business. And with the prevalence of con-artist spam that originates from Africa (8), there is already a widespread lack of trust that needs to be overcome.

It is also critical that systems are in place for Rwandan entrepreneurs to have the motivation to develop and merit the trust that will be tentatively given by customers in developed markets. As we have seen recently in China, when one company breaks the trust to their customers, people tend to lose trust in the whole national brand identity. (9)


 

Banking Policy

Banks are essential to Virtual Onshoring, and to all entrepreneurial endeavors because (a) They provide loans and needed capital; (b) They allow businesses to safely store money; and (c) They allow money to be transferred from anywhere in the world.

It is important to recognize the mistakes that other countries have made and to take measures to avoid making those same mistakes. These must include setting in place regulation to stop banks from self-detrimental practices.

Rwanda’s basic financial structure should also facilitate and promote microloans to entrepreneurs. I estimate most entrepreneurs can start a Virtual Onshoring business for a capital outlay of $300, and be able to recoup their costs within a year after selling only 60 products. But I realize that with a per capita median income of only $260 (10), $300 is an extremely large percentage of the average person's income. This is why microloans are critical.

The most important banking policy centers on the transference of money to Rwanda. Rwandan banks must be able to offer affordable methods of transferring money from the U.S. and other markets to Rwandan entrepreneurs. Rwandans must be able to use services such as PayPal to transfer money to their bank account.

Wireless Regulation Policy

The NICI 2010 plan for Rwanda states that you need to reduce the cost of wireless access. This is key to Rwanda's ICT success. But a comprehensive strategy on how to achieve this needs to be laid out in detail.

To build an effective strategy, we need an accurate mental model: The Internet has been likened to the "Information Superhighway", but in fact it is more like the whole transportation system for Information. Wireless is more like a highway system. Just as nations have discovered that it is more important to regulate how people drive on public roads, instead of on who controls the roads, the same principle applies to the regulation of the electromagnetic spectrum.

Much of the electromagnetic spectrum needs to have the digital protocols regulated, not the spectrum itself. And the development of smarter protocols needs to be encouraged; These must allow mesh-network technology to become far better than it is today, by providing smart communication that uses different transmitters and receivers to increase or decrease power "on the fly" to optimize bandwidth usage. The goal is to minimize interference with other transmitters. These "smart" protocols are important because I believe all computer protocols must be designed to inherently preclude issues that can lead to a tragedy of the commons.


 

Technology Tariff & Recycling Policy

While it will ultimately be important for Rwanda to have a vibrant technology manufacturing sector, protectionism needs to be avoided at this time.  In order to "leap-frog" the economy with Virtual Onshoring, it is critical that entrepreneurs have access to the tools they need at a low cost. Given that the most important tools are computer systems capable of connecting to the Internet, there should be no tariffs on any internet appliances (computers or other technology capable of connecting to the Internet).

Further, it is recommended that Rwanda takes advantage of the glut of "older" computer systems that people in developed markets are trying to dispose of. Many older systems are quite capable of connecting to the Internet, and by developing a recycling sector, Rwandan entrepreneurs can gain internet computer technology at an extremely low price point.

Conclusion

Your Excellency, having been immersed in both business and computers since the inception of the Internet, I am excited to realize what potential Virtual Onshoring has for transforming Rwanda’s economy and standard of living. I am happy to discuss any thoughts, concerns, or questions you might have. Whether or not I win the scholarship, I hope you will strongly consider using what I’ve presented here about Virtual Onshoring to make significant improvements in Rwanda and the lives of its people. Intelligent policies that inherently foster competition are not only crucial to improving the human condition, but are also a vital steppingstone to helping us improve as a human species.

References

1. Government of Rwanda. The NICI-2010 Plan. 2006.

2. Reingold, Jennifer. What We Learned In The New Economy. Fast Company. 2004, 80.

3. McLuhan, Marshall. Understanding Media. s.l. : University of California, 1964. ISBN 041525549X.

4. Towards 2020: ICT in Action in Rwanda. The World Bank, 2007.

5. SiteGround. [Online] http://www.siteground.com.

6. MagicJack. [Online] http://www.magicjack.com.

7. eFax. [Online] http://www.efax.com.

8. Mikkelson, Barbara. Nigerian Scam. Snopes. [Online] September 6, 2003. http://www.snopes.com/crime/fraud/nigeria.asp.

9. Sommerville, Quentin. 'Brand China' at risk after toy recall . BBC News. 2007.

10. Bureau of African Affairs. Background Note: Rwanda. U.S. Department of State. [Online] U.S. Government, June 2008. http://www.state.gov/r/pa/ei/bgn/2861.htm.



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[User Picture]
From:the_7th_guest
Date:December 8th, 2008 10:24 pm (UTC)
(Link)
Very excellent and informative essay. I agree with your major points about Virtual Onshoring. Especially about the fact that Offshoring may not be the way for them to go because it has become such a saturated market and that if you weren't a country that was on the major bandwagon when Offshoring first began happening, it's not a very good idea to get involved with it now, although you bring up the fact that it can't be entirely discounted as an option.
From:(Anonymous)
Date:February 20th, 2009 10:16 pm (UTC)

The average IQ in Rwanda is 70 based on actual IQ tests.

(Link)
Here is the evidence:

http://knol.google.com/k/alexander-emilfaro/iq-by-country/kpxsjkpzgwux/5#

And if you don't like that study, use GOOGLE to find another.

What this means is that your thesis is nothing but WISHFUL THINKING. Rwanda will not change anytime soon. Get over it.








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