The World Bank’s plan to cut out the global middleman

One of the largest industries in our region isn’t an industry at all: it’s getting the rest of the world’s economy growing. Many people in D.C. take this as their job description, including Fannie Delavelle, managing director of the World Bank Youth Summit.

ABERMAN: Well, let’s start with the basics, the World Bank. Many of us drive by the buildings. What does the World Bank actually do?

DELAVELLE: The World Bank is an international organization, that provides loans and capacity building to developing countries, to help them develop in diverse topics and areas, from health, to education, to technology.

ABERMAN: And you’re working in technology. You and I had a panel together a couple weeks ago, and I was very struck by how the World Bank is using technology to change the world outside of the United States. Tell us a bit about what you’re up to right now with this bank and some of the activities you’re undertaking.

DELAVELLE: When you think of the word bank, you don’t necessarily think of an innovative institution. It’s usually known as a large bureaucracy. But we do have very innovative projects going on within the bank, looking at various innovative technologies that we want to apply to make our projects more efficient on a day to day basis. And that includes blockchain, which we did discuss on the panel. I particularly focus on blockchains in supply chains, to make supply chains more efficient, and fairer for small stakeholders and women-led firms.

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ABERMAN: Now, blockchain is a distributed data ledger, so that everybody knows what’s going on without somebody in the middle. That’s a big issue, right? You’re concerned about taking out the middleman, that twenty or thirty percent that people scoop out just by being in the middle. Is that what you’re talking about?

DELAVELLE: Absolutely. So there are three main areas that we’re looking at. The first would be looking at how we can give a greater share of the revenues to the initial producer, and as you mentioned, that is through eliminating the middleman, so that, for instance, a producer in IT can just use an Amazon-like service to directly export his or her products to the United States, without any additional cost from middlemen.

Another area that we are also looking at is, simplifying the business environment for women-led firms and smaller suppliers, that just don’t have the legal capacity to deal with the hundreds of legal and regulations that you are required to export to international markets. By integrating those regulations on smart contracts, you drastically simplify that procedure, and enable a lot of small stakeholders to benefit from trade preferences that they would not otherwise be able to benefit from.

ABERMAN: Because a lot of, as I recall, having been in international trade for a while as an attorney and a banker, a lot of what international trade people did was, basically standing on both sides of a transaction and establishing trust. Yes, this person actually is not a fraud, yes, this person on the other side is not a fraud, the money changes hands, things get delivered, and everybody’s happy, and I, as a middleman, get paid. That’s very inefficient, right? And what we’ve seen in the United States is businesses like Amazon have taken a lot of the middlemen out. It sounds to me like what you’re talking about, in effect, is taking the middleman out around the world.

DELAVELLE: Exactly, absolutely. And when you think that, seven percent of the global value of goods traded annually goes into documentation costs, like the ones you mentioned, you can see there’s a huge business case for it. What we’re trying to make at the World Bank is, the social case and the political case for blockchain.

We’re saying that yes, it will decrease inefficiencies and benefit certain global companies, but it can also be used to benefit smaller suppliers in developing countries, bringing them more revenue, bringing them more access to financing, by creating their own identities on the blockchain, and just revolutionizing the social contract, the social fabric of society, by creating a more direct link between the producer in the developing country, and the customer in the developed country, usually.

ABERMAN: I would suspect that, with the Youth Summit that you’re involved in, and your activities, you must meet some interesting people. Tell me about an entrepreneur that you’ve interacted with recently that really taught you something you didn’t know about yourself.

DELAVELLE: i’m thinking of Joy, who is a researcher at the MIT Media Lab, and the founder of the Algorithmic Justice League. And she actually looks at leveraging artificial intelligence for diversity and inclusivity. So, how to make sure that AI is developing in an inclusive way that does not further worsen racial and gender inequalities that we see in society. And I find that extremely inspiring.

ABERMAN: I find that really interesting and inspiring as well, because as I delve into artificial intelligence, I see a lot of concern now that, since AI is a software that’s trained through input, if we have biases in how we train the AI, they’re going to grow up as prejudiced, or worse, as we are.

DELAVELLE: Absolutely. And there were some experiments that were made, where AI machines were taught whatever’s on the internet, and they were asked to associate certain pictures with certain words. And, for instance, every time you showed the AI a picture of the kitchen, they would say woman, which is quite worrying, because it says a lot about the internet. And it says a lot about us as a society, and we definitely do not want, with these new technologies, to further deepen those problems.

ABERMAN: That reminds me that, ultimately, technology is a tool that we use to create the world we want. How optimistic are you about tomorrow based upon what you see in the young people you’re working with?

DELAVELLE: I think I’m pretty optimistic, in terms of the younger generation being more aware of these problems, which is definitely a first start. I think we do need to be careful in terms of the way we develop and implement technology, to not replicate the same social and economic structures of the past. I think this is an area where the World Bank and national governments have a huge role to play. I know that, usually, regulation is not a very exciting word in the tech space, but regulations can be an enabler for technology.

The business environment is determined by government, basically, in many cases. And governments, as well as the World Bank, have the responsibility, in many ways, to make sure these new technologies are developed in an inclusive way, rather than how we’re seeing in many cases, including in the case of blockchain. Large companies are taking over the technology more and more, and they’re developing more permissioned, and centralized, versions of the technology that are not as inclusive.

ABERMAN: So we’re a moment in time, almost another opportunity for a revolutionary change if we’re willing to embrace it.

DELAVELLE: Yes, absolutely.

ABERMAN: That’s really neat. Fannie, I really appreciate you coming in the studio, and educating us on some really great things the World Bank is doing. And it’s not just about money, it’s about social change. It’s great.

DELAVELLE: Thanks for having me.

ABERMAN: That was Fannie Delavelle, managing director of the World Bank Youth Summit.