Corey Hajim: I'm so excited to be here today with Carlos. He's a leader I really admire, because he uses his business acumen to take on big challenges, and he's done so in his home country of Peru and beyond. He has built a group of affordable schools called Innova, and they serve about 65,000 students. He also has a chain of maternity health-care clinics, he's taken on infrastructure projects and public-private partnerships, among other things. Now I have to tell you, it's taken me a couple of years to convince Carlos to come speak with us here at TED. He's not really a spotlight guy. You're more likely to find him doing deep research, "Undercover Boss" style, than talking about his work in the glossy pages of business magazines. Not that he doesn't deserve to be there -- he really does. And so we're so lucky to have him here with us today to tell us more about what he’s done, how he’s done it and what we can learn from it. So thanks for being here, Carlos.
Carlos Rodriguez-Pastor: Thanks, Corey, glad to be here.
(Applause)
CH: Let's start with education. What was the problem you saw there?
CRP: So let me just put it in context and tell you a little bit about Peru. Peru is a middle-income country. It's right in the middle of South America, on the Pacific Coast. And from 1990 to 2017, we grew our economy close to five percent, so it's one of the fastest-growing economies in the world, and certainly the fastest in South America. At the same time, the poverty rate came down from 55 percent to 25 percent. So we were feeling pretty good about all the things that were going on in Peru, and it seemed like there was a possibility that eventually, 25 years from now, we could become a developed country.
But there are a lot of hurdles along the way that we have to overcome in order to get there. And some of them include the basic things that happen in most developing countries, like education, health care, infrastructure. Now during the same time, I remember, in about 2007, they did an assessment of all the public school teachers, and the results were not very encouraging. A very small percentage passed basic math, basic reading comprehension. And in the year 2000, we were ranked last in the PISA rankings, which are these rankings for 15-year-old kids in various countries. And 12 years later, we were also dead last. So despite all this growth, we had a real issue, to improve our education system.
And so we decided to get involved, to understand what was going on, because it was obvious that we could not become a developed country without having world-class education and health care.
CH: And you said that the public schools were in rough shape. We wanted to share a photo of the state of the public schools. And you were saying it's not just the way it looks, it was what was going on inside.
CRP: So this is a typical public school we saw when we started our research. You can see it kind of looks dark outside, but what's worse is what's going on inside. Kids aren't learning. Low attendance, low engagement and poor quality. And as a result of these public schools, a lot of small, informal private schools started popping up all over the country. And they were just as bad as some of the public schools. And they have catchy names, right?
(Laughter)
CRP: And here's another one with a catchy name.
(Laughter)
CH: Some of you may have gone there.
(Laughter)
CRP: And so when we did our "Undercover Boss" research, we went to one of these schools. I remember going with a couple of colleagues and asking a lot of questions to the person who gave us the tour. She didn't believe that we were parents with kids looking to go into those schools. She was getting suspicious and asked us to please leave, because she was the director and also the owner. And before we left, we asked her one final question, and that is "Why did you decide to do a private school?" And her answer surprised us. She said, "Because it's more profitable than a Chinese food restaurant." Now, sadly, this is the level of commitment in a lot of these private schools. So we decided it's time to do something about this.
CH: Not quite the right motivation. Education is so complicated, so when you started this journey, what were your goals?
CRP: I didn't know anything about education, except from being a student and a consumer of it for many years, so the first thing I did -- and this is a true story -- I watched every TED Talk on education.
CH: I promise, it's not a plant.
CRP: And then started reaching out to the different people I thought were interesting, and were doing wonderful things there. I grew up partly in California, I worked on Wall Street, so I started looking at my contact list, and I remembered an innovation company that, when I grew up in California, was always behind a lot of the product innovation. So I called them up, IDEO. And with them, along with Sal Khan, who we were introduced with, and some academics from Berkeley and from Harvard, we put together a system to really try to change education in our country.
So in Peru, we have eight million K-12 kids, and our target was about 1.6 million of those kids over time, which we call the emerging middle class. And what we codesigned was a system that had four characteristics. The first one, it had to be affordable. And by affordable, I mean 150 dollars a month for the regular students, and for our scholarship students, one dollar a day. Second, it had to have academic excellence. These are schools that have to move the needle. Otherwise, it doesn't really make sense. And they're well-designed, they were modern, they were safe. Third, we wanted a project that was scalable. Not just to build one or two schools, but why not aspire to build hundreds of schools, and perhaps cross borders and go to other countries. And fourth, we thought it was very important that the schools be sustainable. And "sustainable" is our code word for "profitable."
CH: So profitability, let's talk a little bit about that. Why is that so important? Because we talked about the woman and the Chinese restaurant and that she didn't seem properly motivated. So why, for you, is profitability so important?
CRP: I think it's very important, because that way, we can keep building more schools and we can go across borders and keep this project going. You know, it's very ambitious for the teachers, so I imagine someday, in some neighboring country, you know, a mom and dad having a conversation about where to send their kids to school, and maybe one of the parents says, "What about that school where the Peruvians are teaching?" So imagine that, going from last in education in the world to being the teachers of our region. That would do so much to the self-esteem of our country, Peru.
CH: That goes back to what you said about sustainability: profitability, for you, equals sustainability. There must be some trade-offs that you're making to make these schools reach profitability. What are some of those trade-offs?
CRP: When you start with a fixed price that you can charge, you can't do everything. So sometimes, our students have to share tablets, we don't have swimming pools, but we have very nice spaces where kids can learn, they can collaborate. We use a blended learning model, which is solo learning and classroom learning. This is an image of one of our schools, and the next is an image of our rock-star math teacher, in middle school, Sal Khan.
It's a funny story -- when Sal came to visit us in Peru many years ago, when we were just starting out, he came to our math lab, where we have 60 kids and one monitor, looking and helping the kids that need help. I was talking to Sal and a couple of other people with him. As you know, he never appears in his videos, it's just his voice. And one of the young kids said, "Hey, that sounds like Sal Khan. Is that Sal?" And before you knew it, word got around, and a huge line of kids asking Sal for his autograph. You know, their math teacher.
(Applause)
CH: It’s a really wonderful story, a nice rock star to have stop by. So let’s shift gears a little towards healthcare. What did you want to do there, and what have you done in that space?
CRP: Healthcare was as broken as the education system. Maybe the slight difference is in education, you have to have a real sense of urgency -- otherwise, you miss the entire generation. And in healthcare, we are fairly lucky that we still have a young population, so perhaps we have a little more time to go through this. But, you know, our healthcare system is universal healthcare. Eight million informal workers have that from the government, and then four million pay a tax of the formal economy, that's slightly better, but this is a typical picture. You make a long line. Sometimes, it's hours. There’s a lot of informal ... just like the private schools, and they'll offer two-for-one medical procedures ...
CH: Bring a friend?
CRP: Exactly. It’s not good quality. So again, we teamed up with IDEO and a lot of different institutions to design something for the emerging middle class. The first call in Peru is pharmacies. So if you're sick, you go to the pharmacy first, because you'd waste a whole day, and you really can't afford to leave work for a day. So right around the time we started Innova, we got involved in buying a small chain of pharmacies that today has 2,300 locations throughout the entire country, including the most remote areas you can imagine, in the Amazon, where you have to go in canoes and ships to get there.
And as an extension of that, we also developed a clinic called Aviva, where we give good quality, about 40 to 60 beds in each one of our clinics, and we're focusing on the most important part of life, which is birth. This particular clinic in Lima had the most births of the entire country last year. And so now, we have an alternative to give good health care to the emerging middle class.
CH: Now another thing you've dipped your toe into, in pretty big ways -- infrastructure, and that's a whole different kind of project. And you did it through a public-private partnership. Can you talk a little bit about how that came about and how it worked?
CRP: So years ago, I remember going to Arequipa, which is the second-largest city in Peru, with my father and my grandfather. And in that visit, hearing about a bridge that was going to be built. Years later, I went back, and I heard about the bridge again. And it turns out that this bridge has been on the planning board for over 50 years, and it never got done. It was because this party was in power, whatever the reason, it just didn't get done.
So a few years ago, the government came up with a very clever plan. It's called "Projects for Taxes." And what that does is it allows companies to use up to 30 percent of the taxes they pay -- instead of paying it to the central government, to use it for projects that the community needs. They have to be pre-approved ... by the government, but then you kind of do it yourself.
So we teamed up with the largest beer company in Peru and one of the large mining companies, and together, we put 100 million dollars of the taxes we would have paid to the central government, and we built this bridge, which connects one side of the city to the other. It was done on time and on budget. No corruption, no drama, the bridge is still standing.
(Laughter)
And now, you know, thousands of people every single day use this bridge and, as a result, improve the quality of their life. This is a very good example of how private-public partnerships can work. And what we've done in our group is we've set a goal to have an iconic project, like that bridge you just saw, in every one of the 25 states across Peru. So far, we've completed five, in five different states, so we have 20 to go, but we're excited about that.
CH: When I read about that, I thought that was such an interesting project and an interesting partnership. So a lot of the businesses you've started and your projects are focused on the middle class. So why are you so focused on that particular segment of the population?
CRP: The middle class, for the last couple of decades, has been the fastest-growing segment of the country. It was, in a way, low-hanging fruit. A lot of services were unmet, and so we tried to develop answers for those. And it was also a way to scale fast, because a lot of the emerging middle class is in urban settings. So you can actually go from zero to relevance relatively fast. What we're working on now is what we call the next frontier, which is rural Peru, which is still a big part of the population, and all the cities in our country that have 20,000 or less people.
But really, the reason we got involved in areas like education and healthcare is that the government wasn't delivering. If you're familiar with Peru, and you know what's been going on, we've had six presidents in six years. Now the last president before the current one had so many cabinet changes that on average, every five days, we'd have a new cabinet minister. So ask yourself, if you're running an organization ... You can't get even through the weekend. Maybe Monday, he's here, Friday, they're gone. So it's very hard to get things accomplished from the government side.
So what should we do? Should we wait for that Batman president to show up? Or should we get involved? And I have to admit that for many years, I would attend conferences and would do what a lot of people do, the golf clap, and then go back to your work, and say, "I'd like to help, but ..." And then the next year, another golf clap, and, kind of, the same thing. But we really believe that the private sector has a very important role. It's 80 percent of the economy in our country. And we can really push the leaders along to take on the most difficult, most challenging problems in the country.
Because education takes 20, 25 years or more to solve. A political term may be only four or five years. So I think we have more staying power. And we don't pretend to run the whole education system or to educate the eight million kids that go to schools. But if we do our job correctly, maybe we can put it up at the top of the agenda, maybe we can show how it can be done. We can continue to partner with the government, and together, as a result, make a better country.
CH: I mean, a lot of the things you've done, you've stepped in where government has fallen short. Do you feel like you're letting them off the hook, though? Or do you feel they're responding to this?
CRP: I would say it's the opposite. We're putting pressure to get these things resolved. I believe that, by showing what can be done, perhaps we can inspire them to work together, not just with us, but with all the other fine companies that we have in our country that do world-class things. But we can't just fold our hands and wait, in the hope that a savior someday comes and helps us. And I think that's what's behind all these projects.
CH: There was one more picture you wanted me to share with the audience, of the protests in Peru. Why did you want me to share this with them?
CRP: This is a horrible picture. It's horrible for a number of reasons -- it hurts our tourism, and the image of the country, etc. But what makes me really sad about this picture -- and this happened not too long ago, a few weeks ago -- is it's Peruvians against Peruvians. And I think we both want the same things. We want a better life, we want opportunity. We want the ability to reach our dreams and go as far as we can go. And when I see this, I wonder, is this just Peru? Or can this happen in other communities? And how can we stop this from happening?
So I have some suggestions. The first one is find out what are the most difficult challenges in your community and your country, and try to understand them. Get involved. Put a sense of urgency, raise your hand. Not some day. Make "some day" today. Second is seek out help. Most likely, the problems have been solved somewhere else. And you can add to that and continue to build. And the last thing is have a mindset where you're trying to make the pie bigger. And even if you come from the private sector, I guarantee you, if you focus on making the pie bigger for your country, you'll do well yourself.
Our objective is to make Peru the best place to raise a family in Latin America. Our long-term objective is to push Peru to become a developed country. And that's really hard. And then, it comes to execution. And this is where we lose a lot of that impetus, a lot of that "let's get it done," because it's hard. And what we found out is that, when you have a big challenge, many times, you'll say "yes, but." And that "but" is followed by lots and lots of excuses. In Spanish, it's "sí, pero." "Pero" is the "but." So we decided to make it a little easier. And why not change that "o" to a "u," and wake up every morning, and say "sí, Perú."
(Laughter)
(Applause)
CH: Well, I think you can see why I admire this guy. (Laughs) Thank you so much, Carlos, for all that you've shared with us. I think we all have a lot of work to do, so thank you.
CRP: Thank you, Corey.
(Applause)
(Cheers and applause)
