A Plug for the Unplugged $100 Laptop Computer for Developing Nations

By HAL R. VARIAN

February 9, 2006
Economic Scene

ONE of the more interesting technology sessions at Davos, Switzerland, this year was Nicholas Negroponte's presentation of a $100 laptop computer intended for developing countries.

Mr. Negroponte, the founder of the Massachusetts Institute of Technology Media Laboratory, announced that Quanta Computer would be manufacturing the device, based on a chip from Advanced Micro Devices and the Linux operating system. Quanta, a Taiwan company, makes about 30 percent of the world's laptops, so its involvement lends considerable credibility to the project.

The mock-up that Mr. Negroponte demonstrated had a spill-resistant keyboard and a carrying handle. The final version will have a screen that can be read in direct sunlight, wireless networking capabilities and a hand crank to generate power.

Despite the technological ingenuity of the device, it engendered considerable skepticism. One audience member asked what good a $100 laptop was when network connections cost at least $25 a month. Mr. Negroponte responded that the laptops would send and receive Internet data only when higher-paying commercial data was not being transmitted, leading to lower networking costs.

Microsoft's vice president and chief technology officer, Craig J. Mundie, argued that a cellphonelike device would make more sense than a laptop computer in developing countries, because the demand for wireless communications services is strong and growing.

As he suggested, there are proven uses for cellphones in developing countries: migrant workers use them to call relatives back home and farmers use them to check crop prices. There are also successful business models like the one pioneered by GrameenPhone of Bangladesh, which has fostered a network of entrepreneurial "phone ladies" who provide communications services for entire villages. Often cellphone use among the poor in developing countries involves text messaging, which is much cheaper than voice.

In the discussion after his presentation Mr. Negroponte emphasized the educational value of laptops, while Mr. Mundie and others focused on the business models enabled by cellphones.

These views are not necessarily at odds: as with cellphones, there are many potential business models that can be built around cheap laptops. After all, the most important application for personal computers back in 1979 was VisiCalc, an early spreadsheet used by businesses.

Going even further back in history, the must-have technology of 1853 was the sewing machine. Its success was largely because it offered purchasers a way to make money by taking in mending. Isaac Singer capitalized on this application by inventing a new way to sell products to consumers: the installment plan.

What is the 21st-century equivalent of taking in mending? Let me suggest that using the $100 laptop as a cash register could be quite attractive. These days, a cash register is nothing but a personal computer with a different interface. A simple cash register program plus accounting software would be useful to merchants whether or not a network was available.

If the computer was networked, there could be other valuable commercial applications. One could imagine using a networked laptop as a way to transfer funds, something like an A.T.M. with a human operator. Such an application is quite compatible with the Hawala system of monetary transfer that has been used in the Middle East, Africa and Asia for more than 1,200 years, providing a solid tradition on which entrepreneurs of the cyberage could build.

Low-cost laptops could also serve as a way to record and preserve contracts and other legal documents. The Peruvian economist Hernando de Soto has argued that the lack of formal titles to land and other property has prevented the poor from posting collateral to secure loans. Perhaps cheap, networked laptops could serve as repositories for such documents. Replicating legal documents across a network using peer-to-peer technology would ensure that they would remain accessible even if an individual laptop were lost or stolen.

Telephones are now viewed as an essential device for commerce, but it was not always so. The phone was not taken seriously by businessmen back in the 1870's, since there was no written record of transactions. The telegraph, which provided such a record, was viewed as far more trustworthy. Perhaps the virtue of having written (or at least electronic) records of transactions would be as useful in developing countries today as it was in 19th-century America.

Of course, written communication requires a literate population. But that is a good thing. If reading, writing and typing are the key to employment, people will be highly motivated to acquire those skills. And, circling back to Mr. Negroponte's education vision, the $100 laptop can help people become literate. There are already computer programs to teach reading from scratch using simple pictures and animation.

The great thing about computers is that they are what economists call general-purpose technologies. That is, they provide a platform on which other applications can be built, whether they are cash registers, A.T.M.'s, document repositories or instructional tools.

Ultimately, both sides of the Davos debate are right: cellphones have proven uses and will continue to spread rapidly in developing countries. But cellphones have their limits. Offering general-purpose technologies like low-cost laptops is a riskier strategy, but it just might have a big payoff.

Hal R. Varian is a professor of business, economics and information management at the University of California, Berkeley.