Hey there, Justin here. On Thursday, we announced the launch of our newest season of The Flip, commencing this week. You can check out the trailer episode here and subscribe here on your favorite podcast app.
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Rankings and Progress
A year and a half ago I had a tiff with an organization called Startup Genome.
If you Ctrl-F for the word Africa in their 2019 global report, the report which triggered my snarky tweet above, you’ll get just three results. And two of those results are the same exact chart that they used twice, in which they include Lagos as a “challenger ecosystem”.
In their annual report, Startup Genome ranks cities as startup ecosystems, using a variety of quantitative and qualitative variables: exits, access, IP commercialization, local connectedness, infrastructure, and so on. After their top 30 list, in which Silicon Valley ranks number one, of course, they publish their top 100 emerging ecosystems. On that list appears Lagos, Cairo, Nairobi, Cape Town, all ranked in the latter half of the list.
Maybe Africa markets are appropriately ranked. I don’t know. And to be honest, I hope it doesn’t matter – I imagine that this list is just a nice marketing tool for Startup Genome to show to its prospective clients and that no real decision-makers are using it to decide where to build or invest.
But back then I responded to a reply to my tweet questioning their methodology. It felt like yet another list purporting to confirm what the rest of the world believes to be true. An instance of people’s preconceived believes lagging behind the progress that’s been made on the ground. This, despite this year’s fever pace of investment from outside of the continent, particularly in fintech, and particularly in Nigeria.
Rankings like this have me thinking a lot about progress and development – something, I believe, that rankings are particularly ill-equipped to measure.
But it was only when I recently listened to a two-part podcast series, that it all came together for me.
What are rankings ranking?
Readers of The Flip Notes are, by now, well aware of my Malcolm Gladwell fandom. His pull the goalie rule for life has inspired a lot of my thinking on risk, and a recent two-part series from his show, Revisionist History, has compelled me to write the piece you’re reading now.
The two episodes – Lord of the Rankings and Project Dillard – are a critique of the U.S. News & World Report’s annual university rankings. What started as a marketing ploy for the magazine to chip away at the sales leads of Time Magazine and Newsweek has become an important tool for young adults and their parents to help determine which higher education to attend.
Gladwell doesn’t like the ranking system and its methodology, which he argues is biased towards schools that can attract overwhelmingly white and privileged students, and biased against those who want to serve underserved populations.
He uses Dillard University, a historically black university, as a case study.
Dillard is on the liberal arts college rankings list, but it doesn’t even get its own ranking; instead, it’s dumped into the 168 to 222 range of colleges deemed not impressive enough to rank individually. Its students are 75 percent Pell Grant eligible, which gives them access to need-based federal grants for higher education; the median family income for its students is $30,000; one-third are the first in their family to go to college, and as an HBCU, virtually all of its students are black.
This doesn’t bode well for the US News & World Report’s social reputation score, in which college presidents and administrators rank each other. And Dillard’s ranking suffers further from variables like the size of their endowment (in Dillard’s case $105 million) and their graduation rate, which is around 50 percent.
But Dillard’s students come from low-income families with a low or no safety net. With many external factors facing its students, a 50 percent graduation rate is miraculous, according to Dillard’s president. Gladwell argues, “Graduation rates don’t tell you how good a school is, they tell you what kind of student the school is admitting”.
Towards the end of the second episode, Gladwell talks to Dillard’s president about the things that make Dillard special. One thing they brought up was the school’s physics program, which produces the most African American with undergraduate degrees in physics in the country. In 2019 Dillard produced 13 African American physics grads. For contrast, Harvard produced one black physics grad in 2019; five in the past ten years. Both, by the way, admitted around 300 black undergraduate students in the past year.
This is what Dillard is great at – taking students, many of whom are first-generation college attendees, and helping them succeed in spite of the multitude of environmental factors working against them. Their academic culture is developmental; unlike many of the highly selective schools that cream of the top, Dillard (and schools like it) meets its students where they’re at.
A school helps its students succeed at a subject they came to college to pursue. It creates a culture geared to helping students reach their potential, and it does all that for a price that working families can afford on a charming campus in the middle of an amazing city. Doesn’t that sound like the definition of an elite school?
And isn’t what Dillard is accomplishing – with low-income students, 75% of which are Pell Grant eligible – a tremendous accomplishment?
That’s the lens with which I choose to view the African tech ecosystem.
Now, the point of all of that isn’t to merely conclude that Startup Genome’s rankings don’t give a proper indication of the fidelity of African markets. I think that’s obvious.
But instead, it’s an important reminder and opportunity to reflect on the ecosystem’s progress. And its progress in spite of a multitude of environmental factors that are entirely outside of an entrepreneur’s control. It’s a tremendous accomplishment.
There’s a blog I enjoy called Roots of Progress, which argues that progress studies as an academic discipline is both a moral imperative and a civic duty. We take for granted conveniences of the modern, in part because “we forget how far we have come, and how hard-won the battle was.” We should be measuring progress (and rankings, I should add, only reflect where the ecosystem is currently at, not where it’s come from).
So how should we measure progress within the African tech ecosystem?
Sure, let’s start with exits and cumulative funding raised and number of startups funded. And add to that variables like percentage of women founders and geographic distribution of startups funded.
But measuring progress in a tech ecosystem needs to move beyond fundraising. And if we’re largely in the infrastructure-building phase of things, that’s where I think we ought to focus our attention.
There’s one question that I think is especially important – would it be possible for this company to exist one year ago? Or, three, five, ten years ago? And not just exist, but exist at its current scale?
A few months back, in TFN #68, I wrote,
And in an environment like African markets, where so much of the current phase of its tech ecosystem has been building the infrastructure, it becomes not only easier for newer companies to build, but it becomes easier to build more cheaply, faster, and with less employees than ever before. And it becomes easier to build companies of significantly greater value than those that came before it.
But just like Roots of Progress argues, through their history of technology essays, in order to best understand progress, we need to better understand how stuff works.
And that’s an important objective of season three of The Flip, as well, in which we “pop the hood” and look at what’s happening behind the scenes and for the benefit of consumers (launching next week, subscribe here 😁). How can we talk about innovation and opportunity and progress – or lament about a lack thereof – without a better understanding of what is required to do these things in question?
The season starts with a multi-episode fintech series. When we talk about financial services and financial inclusion, KYC regulation plays a big role. If digital identity verification may be taken for granted, it underscores the environmental challenges fintechs are overcoming.
Identity verification requires identity documents and systems. But while in markets like Kenya or South Africa, 60 to 80% or more of births are registered, in Nigeria or Uganda, that number is between 20 and 40%, according to The Economist. And in Tanzania, Ethiopia, or Malawi, that number is less than 20%.
Making matters more difficult, Nigeria, for example, has 13 federal and three state ID schemes, and the country’s National Identity Management Commission (NIMC), a body set up in 2007 with the purpose of issuing identity numbers and cards to Nigeria’s 180m people, has so far reached less than a fifth of the population.
That digital financial services platforms are scaling in light of these environmental challenges, is progress. And progress compounds.
So let us continue to assess the African tech ecosystem through this lens, and continue to develop new and better measurements for progress. I think it paints a clearer picture.