Physics of Poverty: It’s Not a Pyramid

Note: This is an updated version of the article

Physics of Poverty series by Dr. Tara Thiagarajan, Chairperson, Madura Microfinance Ltd.

CK Prahalad’s book ‘The Fortune at the Bottom of the Pyramid’ firmly established our visual impression of the world’s economic landscape as a pyramid. So much so that ‘Bottom of the Pyramid’ or ‘BoP’ has become part of daily lingo. Except it’s not a pyramid. A 3D visualization of how income or wealth is distributed in most countries including India, looks nothing like a pyramid. It looks like this:

So what’s in an image? A lot actually. There’s a reason for the saying ‘an image is worth a thousand words’.  The pyramid suggests to us that the problem of poverty is a lot less dramatic than it actually is. The real picture presents a problem of far greater magnitude than we might ever have imagined. If you are seeking the fortune at the bottom, you might think that this suggests a far larger fortune – a bigger market. However, when you consider that the total amount of money in the system is controlled, it means that that as you get down towards the bottom, wealth becomes increasingly stretched thin across much larger segments of humanity. Maybe not as glinting and magnificent a fortune after all.With our mind focused on a pyramid, we also imagine that we can conquer it by spreading our fortunes, by a trickle-down effect. The base of a pyramid is not so daunting. But when we consider that in India, with a billion people, that only around 40 million or 4% pay taxes – that’s people earning more than 1.6 lakh (about $3500) a year and visualize that relationship, it is almost cause for panic. A trickle down is not good enough and 4% can’t possibly lift the rest. The real picture is more likely to make us sit up and recognize the need not for a top down approach but rather a bottom up ground swell.

Can the real picture help us with a solution?

As a scientist, when you are trying to understand how a system works, the first thing you might want to do is plot the distribution of how stuff accumulates across elements of the system; in this case how wealth accumulates across people. Distributions with long tails like this (or in the visualization above, a long tapering point) typically fall out of interconnected systems where there is dynamic flow, here flow of money. The more stretched the tail or the point, the larger the system and overall degree of interconnectivity. In social systems, science is increasingly showing that the degree of interconnectivity in the point and the speed of dynamics are far higher than the base. This would result in the point stretching further away from the base as the rich get richer faster than the poor get richer. This makes sense when you consider that the wealthy are more connected and therefore hear about information and opportunities at a much faster rate allowing them to act faster and thereby progress faster. The pyramid gives you a false impression of static stability and of strength. The real picture is more like a free vortex – where the point swirls faster pulling further and further away from the slow moving base or outer disc. A more dynamic and precarious kind of scenario.So if we are looking for keys to a bottom up groundswell, it is about changing the dynamics at the base or disc. Changing the degree of interconnectedness and rate of flow – flow of goods and more significantly, flow of information and ideas, to enable bottom up innovation and change.

Instead of Bottom of the Pyramid, might I suggest Disc of the Vortex? DoV has a certain ring to it, I think.