This is big news. Leaders NG reports that the “Nigerian Army says that it is monitoring the activities of Nigerians on the social media for hate speech, anti-government and anti-security information”. This is a huge deal, because if the Nigerian Army could do this effectively, Nigeria will be exporting the most sought-out social media technology to the likes of Google, Facebook, China, Venezuela, and indeed the whole world.

According to the information released by Director of Defence Information, Major-General John Enenche to Channels Television, the became necessary in the light of troubling activities and misinformation capable of jeopardizing the unity of the country….

Having observed the possibility that the social media can be misused the military has taken steps to address that. One of such steps is the establishment of strategic media centres.

“What are we doing? In the military, we are now taking on it more seriously than ever. We have our strategic media centres that monitor the social media to be able to sieve out and react to all the ones that will be anti-government, be anti-military, (and) be anti-security,” the military chief continued.

“We tackle them appropriately with appropriate responses. Ahead of that, we are also proactive. We have measures in place, scientific measures to be able to sieve this information and also to get the public and let them know that some of this information they are getting is not genuine are not true and their objective is an anti-corporate existence of this country.”

I sincerely wish the Nigerian Army good luck. I am hoping they succeed because if they do, our forex problems will be gone. From China to Russia, Facebook to Google, everyone needs fake news detector and terminator. If our military invents that and deploys it effectively, we could say goodbye to NNPC and just like that, our main foreign exchange earnings will be Fake News Detector and Anti-Govt Social Media Buster. Go figure, people.

Largely, I think the Nigerian Army is right to have a strategy to handle the misinformation which we are experiencing in social media. If we expect the Army to defend the territorial integrity of the nation in the meatspace, the cyberspace must be a fair game. it must be seen as a threat, depending on the veracity of the misinformation. It has to be dealt with and managed. That is why I think the Army is right on this.

Yet, it is very important that they handle this project with decency and civility, making sure that they do not use it to silence and oppress Nigerians. They must honor the tenets of freedom of speech while understanding that nothing is really free. No one that perpetuates fake news  should expect to hide under privacy and freedom of speech.

I wish the Army good luck as they work on the technology. They have to invent one that understands pidgin, Igbo, Hausa, Yoruba and indeed dozens of other languages. It will be a challenge indeed.

About five hundred years ago, generations that lived apart did not experience any major change in their standard of livings. Global productivity was very low and man was generally poor. Yes, there were empires and kingdoms, but on average the world was on static economic expansion.

But with emergence of mass penetrated technology, things began to change. The industrial revolution was a quintessential moment in modern history. Technology brought productivity and man became richer. Largely, human standard of living improved. It remains till today that when technology penetrates en masse in any economy, national productivity improves, and living standards advance.

There is another caveat to this argument: Intellectual property right (IPR) is a cardinal part of this productivity. Without it, technology will not improve and innovation is stalled. The old world was an era of absence of IPR and that contributed in no small measure to the lack of wealth creation. Sure, people invented things in arts, and science, but there was only minimal wealth created.

Lack of IPR prevented meaningful market success in one major way: It prevented the pursuit of innovation since ideas could be stolen and commercialized with no penalty. The return to innovation was very low. That was why the world had many inventors and few innovators.

Yes, we read about inventors that developed nearly all the engineering principles in use today. They had ideas, bright people and created prototypes. They were celebrated as icons and legends. But many died very poor. They could not transition from inventors to innovators, not because of market issues, but because lack of IPR made it difficult to attract funding, since there was no guarantee to success. No funding, no mass commercialization and no human impact. In our contemporary time, the legendary venture capitalists will tell you that if you want to get them involved, you need to have a protected intellectual property, if the business requires one.

Two things changed the world: technology and most importantly IPR. Between the two, IPR was more important. Why? Without it, we would still be celebrating inventors with no impact on human lifestyles (just note that I respect inventors.)

Nigeria’s Productivity Problem

That brings me to the Nigerian, or indeed the African challenge. In many parts of the continent, the IPR there is still like the one that existed 500 years ago. It does mean that Africa cannot prosper, if my logic is correct, until they get a practical and working IPR. It does not matter how much aids and loans they get from foreign agencies. Without IPR, nations cannot innovate (at deep technical level) and without innovation, any economy dies a natural slow death. IPR is the catalyst that drives national technology policy, making it implementable and sustainable. You cannot have a better technology policy than a strong IPR. With strong IPR, inventors could become innovators. Without it, everyone sits on his/her ideas and the nation suffers on productivity.

In essence, Global Productivity = Technology + IPR, and productivity translates into good standard of living. When nations cannot create technology, the LHS (left hand side) of the equation suffers. Also, if they have no IPR, that suffers even more.

See the reason why Africa is not making progress? It is an illusion when boys and girls in Accra, Lagos, and Nairobi use pirated foreign software, and think they are smart. They never know that it would have been better if their nations have laws to prevent the illegality. With such laws, they have an opportunity of not needing those foreign software by developing their own and selling them locally, profitably.

In the absence of the IPR, they cannot do business because immediately they release software in the market; it appears in all shops illegally. After three months, they close their shops! It is a vicious cycle that makes innovation difficult in Africa since no guaranteed return exists. Why invest your hard earned money when there is no law to protect your creations? Why do research? You see why our businesses prefer to import and distribute than create things?

All Together

When boys hawk Microsoft Windows for N300 (about $1) openly and no one arrests them, no major creative business can incubate in that land. Nigeria is not really cheating Microsoft. Rather, we may be making it harder to build an innovation system. This goes beyond technology: it also affects our arts where people pirate Nollywood movies and resell. The reality is that productivity cannot flourish in an ecosystem with weak legal protections for creativity. The creators will be scared to invest, and that is a problem for any nation.

Nigeria’s Joint Admissions and Matriculation Board (JAMB), an institution that coordinates tertiary education entrance examinations in the country, likes controversy. Otherwise, it would not have  made 100  (out of 400) a pass mark. There is no credible institution in the world where 25% is considered a PASS.

The Joint Admission and Matriculation Board, JAMB, had on Tuesday stated the cut off marks as 120 for degree awarding institutions, 100 for monotechnics and polytechnics and 110 for innovative enterprising institutes.

But JAMB has reasons. It wants to prevent Nigerians from sending their kids to foreign schools. So, it has to make the pass mark so low that everyone could possibly qualify to study in Nigeria. It does not really matter that the country does not have the capacity to absorb all the students.

THE Joint Admissions and Matriculation Board, JAMB, explained, yesterday, that the decision by stakeholders in education sector to reduce tertiary institutions’ admission cut-off points, beginning with the 2017 academic calendar, was to stop the quest for foreign education by Nigerians.

JAMB has forgotten that the foreign schools have standards and will not have accepted those it is accepting with 25% score.

The Problem with 25% Pass mark

I do believe that JAMB does not collect retention data of Nigerian students after first year in colleges. That would have helped it to examine if there is a correlation between cut-off marks and freshmen (first year students) dropout rate. Empirical data shows that when you have extremely unprepared students, you end up having many dropouts. These students would have pushed their parents to take loans for the unfinished journeys, making things harder, afterwards, for the poor parents. Also, cultism is primarily driven by students that need help to keep going even when their brainpower cannot sustain them, in schools. They band together with their fellow cult members to stay in schools through any means possible.

I will share data from U.S. News which tracks the top U.S. universities.

• The average six-year graduation rate is 95 percent for the top 10 National Universities and 93.9 percent for the top 10 National Liberal Arts Colleges.

• The average freshman retention rate is 98.1 percent for the top 10 National Universities and 96.6 percent for the top 10 National Liberal Arts Colleges.

• For comparison, the average six-year graduation rate among all numerically ranked schools on the National Universities list is 71.3 percent, and the average freshman retention rate is 86.9 percent.

• For comparison, the average six-year graduation rate among all numerically ranked schools on the National Liberal Arts Colleges list is 75.2 percent, and the average freshman retention rate is 85.6 percent.

Checking the data, it is very obvious that students of the top 10 U.S. universities graduate; they record 95% graduation rate. These students are well prepared to pursue tertiary education. Also, they do not have many dropouts after first year of study, enjoying more than 98% retention rate. I can argue that the other 2% could be those changing to other schools which are recorded as dropping out even though they have merely transferred to other colleges. The elite schools’ average graduation rate contrasts with all nationally ranked schools at 95% vs. 71%. While the top 10 national U.S. universities enjoy a mere 3% gap between freshman retention and graduation rates, the whole ranked schools have a spread of 16% (71% vs 87%). Simply, the students survived first year but could not cope in subsequent years, causing 11% to further drop out.

This means that as the quality of the admission process increases, both graduation and retention rates correlate positively with it.

All Together

Nigerian authorities cannot be talking of poor educational quality, vices in our schools, and all challenges in the schools if they cannot manage the admission process. It is an illusion to think that everyone graduating from secondary school is ready for post-secondary education. We simply have to expand opportunities so that some students can go into vocational training and other endeavors, where it is evident they cannot cope with college education. Reducing the admission pass mark to 25% will not advance any known cause in Nigeria, except that we will have more graduates adding to the statistics of degree holders, but largely unprepared for emerging opportunities.

I am truly troubled by this decision by JAMB. JAMB is failing in its primary purpose to our schools. It is either it is not testing the right things causing the students to fail en masse or it is simply incapable of serving as a gatekeeper into our post-secondary institutions. It quickly needs to find a solution fast because what it is doing is very shameful to the nation. It is not JAMB’s duty to fix a broken secondary education by lowering pass mark into the colleges. That is so obvious that JAMB does not need to be reminded of that.

Nothing is more important in a startup than having the capacity to acquire new customers, easily. A startup must grow because without growth, the alternative is bankruptcy. So, over the last few years, we have seen companies introduce new roles like Head of Growth, and Vice President of Growth. In a network effect business, the most important product is “many users” because the more the users, the more useful the product becomes.

Facebook understood this at the early phase of its business when it appointed Chamath Palihapitiya to lead its user growth unit. Simply, the goal was to add as many users as possible. There is a reason for that: for all the features in Facebook, without users, Facebook offers only marginal value, to users. Understanding that construct in a digital business is very important. It cuts across fintech, insuretech, social media and indeed anything that happens on the web from the consumer angle.

But knowing that growth is important is certainly obvious, for every founder. The challenge is executing the growth strategy. Companies like Google and Facebook which can acquire customers at ease, even at low or zero costs, have huge scalable advantages. It means they can scale without much burdens, financially.

When a startup has a huge scalable advantage, it becomes very exciting to investors. Also, its valuation moves up because the path to huge returns is very clear. Such companies have defined trajectories for success because there is nothing that is more impactful in a digital business than growing customers, at scale, and then doing so easily at low cost.

In a perfect internet market, as I have noted many times, the marginal cost for a digital product tends to zero. Companies like Google and Facebook that get close to this zero cost find huge success. Others like Groupon and Blue Apron that may require incurring costs to add new users or serve them, cannot see big valuations. (Groupon employs many people to meet and market merchants on its mass discounting business, disguised as an ecommerce operation).  While Groupon is limited by the physics of locations, Facebook does not have such burdens since the latter can add users easily. While it seems that Groupon has users as the main customers, the supplier base is more strategic for its business. So, I think it has to do more to handle the supplier (the real users, in my opinion) before the consumer facing side can do well. Facebook deals with publishers but the publishers largely come to it, and not the other way round. Facebook product is very appealing even without publishers, unlike Groupon, which must first perfect the suppliers’ side before value can be created for the typical consumers.

Pricing is very important and making customers to feel like winners is very important. If you know how to do that, you will have a great product launch. That is why understanding your customer matters. If you do not understand them, you will be leaving money on the table. If your business is selling digital products, the best strategy is value-based pricing since cost-based model does not make a lot of sense: in a perfect market, the marginal cost of a digital product, under most scenarios, is zero. I am confident you will not give out the product for free, unless your business model is freemium, since theoretically the price should be zero.

Another illustration is using Blue Apron, the digital company that sells meal-kit. For Blue Apron to add new users, it must have business presence in that country and also have the capacity to serve the customers, physically. Facebook and Google rarely have to worry for such. We were using Google Search in Nigeria before Google came to Nigeria. Simply, users go to Google and Facebook. Blue Apron does not have a good scalable advantage, compared to Google and Facebook.

Your Scalable Advantage

Your digital startup cannot grow if you do not have a scalable advantage. You must have a means to add new users at a cost model that tends towards zero. In essence, if the market has been perfect (it is not, and nothing is), you must serve customers at zero prices, on the web. But you do not do that since you need to make profit to exist as a business. That is why you have a cost on your apps or you extract tax via advertising.

If your startup has that scalable advantage, the next level is to defend the flanks. That means, you have to think how others can come and attack the advantages that you enjoy. Initially, MySpace, the social media company, had a huge advantage but it did not defend its flanks when it made it nearly impossible for third-parties to build apps and plugins on MySpace. Facebook introduced a way for companies to connect Facebook and their web apps, opening a new feature that moves many users away from MySpace. Of course, there were many other reasons, but this was one of them. The largely open architecture of Facebook that helps others to make plugins to interact with its ecosystem was critical to companies. Companies did not just want to be in MySpace. They also wanted to interact with the users who were following them. MySpace did not support such apps, then.

One of the main things you must do in your startup is to understand your cost model. Most times, entrepreneurs do not spend efforts to know how much it is costing them to acquire customers. Also, it is also important to know how much it costs to retain the customers as well as to serve them.

The business strategy does not end in acquiring customers. I have seen websites spend money to build traffic, and within months the customers disappear. There is nothing more valuable than having great products that delight customers. That is the main rule for customer acquisition and retention: provide value to the customers.

Playing The Advantage in Africa

Running a business in Africa is naturally hard because of infrastructure. Yet, for the fact that many things are broken provides an opportunity to demonstrate value to customers. Personally, I always ask people to ensure they stay away from businesses the ICT utilities like Google and Facebook are involved, unless you can find a pipeline to integrate in what they do. For example, you can have a digital marketing business that feeds on Google. But running your own advertising network may not make a lot of sense in the age of Google and Facebook.

Google, Twitter, Facebook and other big firms in their categories enjoy immense scalable advantages which are largely unbounded. But in some specific areas, they have weaknesses in Africa. For example, Google may not know much about healthcare owning to the unique nature of the business where medical data are not public. Also, agriculture is there and Google may not offer the best value since the data it needs are not available online for it to enjoy its usual aggregation advantage. You can take advantage of the data asymmetry in many sectors in the continent and build a real business. That Google makes it services free does not mean that you have to make yours free. Sure, I understand the challenge in monetizing digital products. 

In this piece, I explain why it is very hard to monetize digital products in Nigeria and indeed Africa. The core reason is that in a perfect market, the marginal cost of producing digital product is zero. This implies that its pricing will inevitably go to zero. This is the heart of the freemium model where you get many things free, which is possible because of the aggregation construct, where companies provide those digital products and then create an ecosystem to sell adverts. They benefit more than the suppliers by providing the platforms. As noted in the plot, great companies deliver the $0 marginal price even at high value, making it challenging for anyone that carries a non-zero marginal cost to compete, exacerbated if the product is even not top-grade.

All Together

In military, they talk of closing the flanks to avoid the enemies from gaining advantage. In an internet-based business, the best defense is really acquiring customers at the cheapest cost possible. By the nature of the web, this cost should be zero, marginally. But it does not have to be for you to find glory in your firm. Pursue a business model that gives you a clear scalable advantage that brings a fusion of growth at low cost, removing the limitations posed by physics of location, unlock-able via new investments. Ecommerce business in Africa does not have a high scalable advantage because new customers require expanded logistics. You need a business that can scale, at low cost, even with the flanks well protected for attacks by competitors. When you discover and execute such, valuations go high because the trajectory to success is visible to all stakeholders.