I received an eye-opening comment via email to the series of blog entries about the Middle East WEF from one the most intelligent guys at Gartner, Jorge Lopez. Jorge and I go a long way back during my times at SAP in Enterprise Software and I had shamelessly stolen a few good ideas from him and evolved them to strategies. In this case though I will give him all credit for coming up with a few of the lines I will quote (wherever you see quotes here, attribute it to Jorge, even tough I am loosely paraphrasing.)
I’ll start with a James Burke quote about the differences amongst nations and people in one of his books –
“..the difference between the world of belief (Credo ut intelligam. I believe, therefore I understand) to the world of reason (Intelligo ut credam. I understand, therefore I believe). This fundamental mindset, and the freedom and institutions that it implies, are central to moving from a world of memory to a world of hope…”
“…In a sense “countries of memory” lack the institutions that can facilitate the social changes needed to capture the value of innovation, fundamentally requiring freedoms…”
We instinctively turn the world freedom in our minds to democracy, but Jorge is pointing out a much more fundamental freedom that seem to be missing in certain cultures and countries – the freedom to fail (forward).
“…Economies can ride waves created by natural or demographic resources, but to sustain performance over the long haul, you need to be able to handle large scale change and the social disruptions that accompany it…”
In a sense, competitiveness is moving up a level for countries in the same way it moved up for companies. It used to be that companies had physical assets as their main value – which is why most of the balance sheet reflects cash, inventory and the ability to convert supplies to inventory and cash. We realized in the last decade that the relationships a company holds are the new asset class, which is when the employee, customers and supplier contracts became assets, and the ability to connect and convert became the new skill the organization was valued for. Now we realize it is the processes that differentiate companies, and the ability to scale them, and change them in reaction to market disruptions are the new skills that make the process into an asset or a liability for the corporation.
It seems as though the same applies for countries – we are moving away from natural resources as the key asset for a country – also known as the “oil curse”. Countries shift to the “relationship” asset class when they realize how to grow a knowledge based economy by improving the real natural asset – their young generation, causing them to attract more smart people into their country. Similarly, trade relationships become key assets, allowing goods to cross borders and each country to optimize for its value and competitiveness. “Countries serving its population” is becoming less and less a cliché, and more of an economic model. “Improve the people so that you can collect more in taxes down the road” – as an economic growth strategy – sounds capitalistic but who said capitalists pigs can’t produce great bacon?
When it gets to agility – in particular that of cultures – we get an interesting new base of competitiveness. Cultures that support circulation of talent will get the small base of people who have the entrepreneur gene in their body to take the immense risk required for new ventures. The swarm of innovation (some of which disrupts industries, others fail and disappear) pulls the overall country economy upwards from recessions and circulates knowledge from large established companies to smaller startups. On the flip side, countries supporting labor laws to “defend the workers” in effect stop the music on the talent musical chairs, causing people to glue themselves into a job early and long -for fear of not finding another one. The glues get stronger in down times, exactly the opposite effect than the one you get when “freedom to fail” is accepted in society.
When you observe the effects in the Silicon Valley, or in Israel for that matter, kids out of school look for the riskiest job proposition (hoping for the highest return, financial but more importantly - personal improvement). Those economies get the aggregate agility of forming many small independent businesses that cushion an economy in slow times – creating a similar effect in the human capital side of macro-economics that state banks do in free economies. When the market is down, more talent becomes available – in a sense making it “cheaper” to start a new company due to abundance of ideas and risk takers. Every great company in the history of the valley started in a technology down cycle.
Interestingly, countries can gain and lose that agility, again as Jorge points out
“…take a look at Japan which changed many times when needed to post world war II, but was paralyzed by the cultural requirement to “support the economy” by the will to write down bad loans on trusted friends and relatives- while the very large savings and loan scandal and downturn in the US was ruthlessly written down and allowed the US to move on in a shockingly short amount of time…”
So the questions that I leave with from these 36 hours of incredible hospitality in Jordan are:
- If the Middle East discovers that freedom is the key to competitiveness, and social agility becomes the true asset (post the current oil-boom), which countries will be willing to turn the key and open a door early to the new society, and which will stay behind in protective states?
- If countries have been defining themselves in the past in terms of conflict, would they be able to look at the market economics and social changes required and define themselves outside the zero-sum inertia?
- Can the Middle-East entrepreneurs Imagineer a new set of skills and rules that are not defined through the current conflicts and engineer a region that will provide solutions to problems instead of problems without solutions - or will the region let the conflict continue to define the issues?