The Long Tailpipe - Shai Agassi's Blog

WEF Middle East - Second day

Some great quote ran around during the second day -

"If goods do not cross borders - Armies will" -Sam Hamdon, French Liberal Economist (Must be the only one...)

Al Makhtoum, Dubai's leader gave a great speech in the middle of the second day. he illustrated the danger in the current state of education in the middle east by bringing up two statistics:

• "Arab books printed last year represent only 0.08% of the total books printed - less than the books in Turkey" - very sad given the great Arab scholars of previous ages.

• "Due to unemployment the region is short 15M jobs, and given rate of population increase the region needs to manufacture 75M new jobs in the near future" - Definitely not a sustainable situation, requiring an immediate shift in priorities in favor of education.

Then he announced an amazing endowment of $10B fund (yes that was not a typo...ten billion us dollars) - dedicated to building knowledge base, research and leadership in the private and public sector across the region. The endowment will provide scholarships to the best universities around teh world, construct research centers in the Middle East and invest in the creation of mid market companies across all sectors. They will focus on the improvement of governnance and creation of job opportunities.

I loved the statement he used

"Get out of tone of dispare and arm our people with opportunities, motivate the young to explore the unknown - it is our responsibility to encourage them and motivate them."

Arming the young with opportunities is the right tool to put in their hands. If this mega initiative works it could be a key transformative initiative in this region. Improving the real natural resource of the Middle East - the young kids.

Again, an echoing of the messages from the first day - echoing the success of "silicon valley" as replicated around the world

"A key advantage to the venture economies is the social acceptance and willingness of people to fail. Countries that do not know how to live with the individual failure will not get the overall growth coming from a swarm of ideas - some good and some failed"

A great comment later from Rachid - minister of trade of Egypt

" Governments are realizing that they work for their local businesses - they have to set the policy that will make the businesses succeed or their economy will stop growing. The policy has to encourage companies to take risks"

to understand the countries that transformed themselves one must look at Sheikh Mohammad Al Khalifa's observation about his country - Bahrain - where oil is only 11% of the GDP but financial services already account for 26% of the GDP - showing the road for a country that will become a net importer of energy in 7 years' time.

Minister Rachid from Egypt made a very interesting observation that shows how much the region understands the short lived nature of this oil boom -

" the future does not depend on oil - it depends on people. Look at history and learn about the future"
"The world will not accept that all the money syphons off to the region through a global "oil tax" - they will invest in other solutions"

At the end we had a great panel about the future of green energy - but that's in another post.

WEF Middle East - Plenary Panel

Right after the kings opening speech we had a great panel with a few regional as well as global leaders, (including WPP’s chief Sir Martin Sorrell & YGL Linda Rottenberg, who runs Endeavor Global - great organization growing entrepreneurs). Two of the most impressive leaders
On the panel were Khaldoon Al Mubarak – CEO of Mubadala (the development company of the UAE – United Arab Emirate), and Saeed Al Muntafiq – Chairman of Tatweer (a member of Dubai Holding) who is managing 10 different companies across every sector of the economy.

It is obvious that they understand this could be the last ever major oil boom. Al Mubaraq stated early on that they must invest in R&D in particular in renewable energy and build an IP portfolio around clean energy. UAE is not just talking big, they are putting their money where their mouth is – in creating a strategic clean energy fund together with CSFB of $250M. They will use the fund to buy up IP and technologies in the US (working closely with MIT) and bringing companies into Abu Dabi and Dubai. These guys put more into the fund than some large oil companies put into R&D.

Al Mutafiq shared similar observation as I have earlier in the day regarding the need to grow a generation of entrepreneurs in the region – in particular allowing the young generation to fail without the stigma of being a failure. I must say that Israel has really benefited from the old established corporate structure (jobs for life) into the young, aggressive entrepreneurship model of failing forward. There is no doubt in Israel today that the economy was propped up by this social shift towards willingness to take greater risks.

It seems as though all members agreed on the need to grow a mid-market in companies that are privately/publicly funded and growing with a new generation of young owners. A move like that would break the social order to heritage, and move towards a meritocracy. The transition of knowledge between the previous generation and new companies was highlighter by Fadi Ghandour who shared his observation of the pollination of talent coming from the global companies. The second influencing element is the privatization of the educational system – for example 35% of the schools in Abu Dabi had been privatized, demonstrating great improvement in curriculum in 2006. BTW, I was coincidently sitting next to the MD of one such private school Ms. Tamara Malhas, who echoed that point of view from the daily reality she drives on the ground in Jordan.

An interesting point of view came from R. Seshasayee – the MD of Ashok Leyland, India’s largest commercial vehicle manufacturer. The guy is a class act, we shared a few other sessions and he has an incredible perspective of the invisible link between the Middle East and the Far East, in particular India. His view was that India should cooperate with the MENA region in developing water desalination and purification technologies though the focusing of talent across the country and potentially the region. In his view that is probably the largest most valuable national project that can be driven right now.

Finally, Sorrell brought into the conversation aspects of social responsibilityin brand management in particular around carbon neutrality, and the great power the consumers hold today on corporations that need to respond to the shifting need for better education, and better behavior. Similar ideas echoed in the need for transparency and  better governance in the region and the industries influencing the region.

All in all – an eye-opening discussion. The region is getting ready for the “end of oil” – some countries more aggressively, others more conservative in their actions. But the wake up call has been heard. India is staring west to see whether the region is a supplier of oil and jobs or maybe a potential partner to solve big problems together, and the opportunity to re-invent through education and social reform is the biggest leveerage point we have for change in the region.

WEF Side post - for readers from Israel

For me the WEF last week was a great opportunity to immerse myself into a world we rarely get to see. Out of 2,200 people present, there were probably less than 50 from Israel, and I would estimate roughly 1,500 or even more from various Arab countries in the region. The conversations held on- and off-stage were naturally geared towards the Arab world and the view was unfiltered by the media neither changing the perspective nor creating a need for taking a position due to their presence.

When I sum up the 36 hours, one topic was virtually non-existant and minor in its importance and mentioning – The Israeli-Palestinian conflict. Yes, it was somewhere in the background, and I am sure that it was heavily discussed during the session where Shimon Peres and other leaders talked about resolution for the conflict (I had to leave before Sunday sessions), but in all other sessions a very different picture of what worries the region emerges:

• How long is the current oil-boom?
• What to do with the windfall profits?
• What about Aleternative energy? How to embrace it?
• Is there a need for a pan-arebian unified region a-la EU?
• What are the boundaries and control element of such region? Unified currency? Defense pact?
• How do you create jobs in particular in the mid market?
• How do you wake up the entrepreneurial spirit in people?
• What to do about education?
• How do you treat a huge group of migrant workers coming from Asia into the region supplying the need for construction workers?
• Are unions legit or problems?
• What is the link to India and China?

A list of questions that would surprise the west, which I beleive is getting a very distorted view of the region – I am sure the distortion applies to both sides…

That also makes me wonder why we cannot get this great view from the WEF direct into the living rooms of ordinary people the minute the TV camera intervenes.

WEF Middle East - King Abdullah II

Last weekend I had a rare opportunity to spend 36 hours at the World Economic Forum in Jordan. As I wrote, the event happened on the east shore f the dead-sea, the hospitality was amazing, and the discussions were fantastic. I made a lot of new friends from countries I had never visited before, and got invited to come visit them and see development for myself in first person, which I hope to do in the near future.

Since I had a crazy week this week (we are raising capital for a new company), I didn’t get a chance to share the stories, but I took some time in the middle of a quiet Friday night to write a bit of the impressions I collected out there. I will set the blog to post once a day so if you follow through the long weekend/week you will get the entire story.

The first session was the one I already discussed about shaking the tree (or the oil-rig), so I will not repeat it. The plenary met afterwards for a special address by his majesty King Abdullah II, king of Jordan. The king is probably the most impressive head of state I have ever had the pleasure to see, hear, and in his case – shake hands and discuss with. Whenever I have the opportunity to hear his thoughts (he spoke extremely eloquently in Davos to a group of YGL members) I hope that he can project his ideas to the rest of the Middle East. If you subscribe (as I do) to Daniel Lubitsky’s view of the Middle East today – we do not have an Arab-Israeli conflict or an Arab-West conflict, we have a conflict between moderates and extremists, King Abdullah is probably the leader of moderates in the Middle East. The king was also one of the only people to mention the Israeli-Palestinian conflict, and project hope that we can resolve it this year, as he sees new opportunities (which we can avoid squandering this time) coming into discussions on both sides.

The king highlighted his views on a number of the issues facing the region which included:

• Water is probably the most essential resource in the region – we have to solve the issue of water availability or we will go to war over water sooner than we realize. Peace depends on water today and in the near term.
• Relying on fossil fuels is not a sustainable approach – The region will have to realize the industry is cyclical and find a path beyond fossil fuels for economic growth
• Transport system solutions are required – 70% of the region’s population will end up in urban centers. We need to transport them efficiently (SA: …and we need to avoid what is happening right now in Amman, where the influx of immigration is creating transport nightmares)

Interestingly all of these issues, including water are directly linked to an energy/fuel strategy for the region. Most states in the MENA (Middle East / North Africa) region still subsidize fuel at the pump one way or another (some more than others), mostly for historic reasons. All would like to walk away from that reverse tax (giving to the car owner at the expense of taxing and spending on the poor), yet that move is a very tough move for social impact reasons.

The king made a great observation about the current state of conflict -

"Stop thinking of Peace as an end [of the conflict] but the beginning of an era that opens opportunities for growth. We must think of the day after Peace"

his point is we all must create the future we want not wait for others to do it for us.

His three action items to the assembled group were

• Think large
• Focus on results
• Dare to achieve them

There was a very interesting panel later on in the day – more tomorrow

Shaking the Tree

I spoke at one of the sessions at the WEF today, and shared a reciepe for how to get rich in the valley I heard when I got to the Silicon Valley...

There is a classic three stage plan for success in our neck of the woods.
(1) come up with a great idea for a startup, write it down on a business plan (make it short and concise, practice on a napkin), go to Sandhill road (where all the Venture Capitalists reside), shake a tree (any tree), shake it well, shake it until a Venture Capitalists drops, show him the plan and take $5M in funding
(2) take the money, find a great team, build your product, see the company grow, take the company public, sell your shares
(3) Go climb a tree on Sandhill road

Now the problem with the middle-east is that whenever you dig in the ground to plant a row of trees you are bound to find oil, so there are no trees to climb and no one to climb on them. Yet every great industry is bound to come to an end not because you run out of its product, but because a great disruption occured. As they say the stone age didn't end because we ran out of stones...

So what are the enterprenures in the middle-east to do? I proposed to the assmebled leaders from the region it might be a great time to start shaking an oil rig. With the money that is coming into the region it is time to find the energy experts who have climbed the rig and show them some great alternative energy ideas to get funded. This is the best time to use oil money to extend the definition of the oil industry into a true energy industry that goes forever, with projects that are sustainable leveraging project financing and balancing the risk of a portfolio that is too heavily fossil based.

I got an increadibly positive reaction from all assembled about my comments.

shai

Earth shot

I am at the World Economic Forum in Jordan on the east side of the Dead sea. We are hosted b his majesty king Abdullah II, and the meetings are going increadiby great from my perspective.

I am collecting a long list of comments, all of them are on my berrry which had lost signal today (I can get SMS but no email - I wish I could selectively do that at home on weekends). Yet before I share the content piece I wanted to share an experience with you that is a bit surreal for me. Looking west to the dead sea.

You see, as Israelis who grew through the years where we could not travel outside the country to any neighbor sitting on the other side of the dead sea and watching a sunset into the mountains behind the dead sea is very surreal(you can actually see the Jerusalem skyline at sunset and Jericho is right there on the road). It is as surreal as the famous shot where we for the first time took a picture of the earth from the moon (I think it is called Earthset). I guess we found a way to get to the moon before we found a way to bridge the  Jordan river, but at least we have done it and I was able to cross-over.

BTW, What is more real are the great discussions we are having here about how to deploy the windfall profits coming from the oil boom into building a great economic and social development in the middle east, and in particular the gulf countries. Over the next 24 hours I will try to post a few of the learnings I will pick in the sessions here - 2,200 of the best leaders from the region, great atmosphere of growth and opportunity. Tremendously different than what you'd expect reading American media about the region. Iraq is not front and center on everyone's mind - it is all about the 200M under 25 kids in the region who are coming into the market and how can we build a future for them.

WSJ Article

I debated real hard with myself (I can be really stubborn, even when arguing with myself), whether I should comment on the WSJ article this Friday. I know most of you can’t read the article, as it is a subscription service, so this post is only for those who can read it. The article, I hear, has given a lot of people back at SAP some hard feeling, as if I threw rocks at my own house after I left. So this post comes to correct the impressions that are running in the SAP halls.

• Phred is a great reporter. She worked really hard on this article and interviewed so many people in SAP for almost six months. My interviews were all conducted 4 months prior to my departure – the article was supposed to be a piece on how SAP got globalization right. To a certain degree, I ruined her piece when I decided to leave, and Phred had to re-edit to reflect that departure.

• The only comment in the article attributed to me that was given after my departure was the following quote

Mr. Agassi says his mission was "to bring the best talent we could find anywhere into SAP, regardless of location."

That comment was given as a response to a comment made by one of the employees in a German article saying “Shai tried to move as many jobs from Walldorf to Palo Alto as possible”.

• Globalization is hard, as cultures tend to become perfect separating lines in times of hardship. I believe SAP globalizes more than any of its peers and probably more than most global companies we know. I did not make SAP globalize, but I was a great supporter of the move to globalize and became a symbolic figure to demonstrate the true global nature of the company (as the article says, “a lightening rod”.) There are many great global executives at SAP today, and that shift is not one that can be easily turned back because of one person’s departure.

• SAP globalizes because talent in our industry is distributed around the entire world, and the company is committed to get the best talent it can find into the company. The software industry has been blessed with what feels like an infinite supply of engineers coming mostly from China and India but also from places like Israel and Bulgaria. This industry is lucky that it can acelerated growth and innovation – I can only hope other industries get this influx of talent as well. At the same time, that influx of amazing talent changes dramatically the social contract for many employees in the “home countries” of global companies. That change is documented in many articles and books – one of the best is “The world is flat” by Tom Friedman.

I do not believe in throwing rocks back at a place you helped build – and SAP was my home for the last 6 years. I still hold it dear, and am a big fan from outside, wishing the company only the best. I know that departing executives always cause friction despite their desire to leave a positive imprint even on the way out, still I do believe that the conclusion in the article’s sidebar will hold true and SAP will grapple with tensions and persevere.

E3G - Layers reloaded

Boy, some amazing comments in the talkbacks to E3G. I am just overwhelmed with some of the ideas, and I am trying to fit them somehow into the framework in a way that enhances the picture before I move on to the next part of my E3G thesis. I realized as I was explaining the blog entry to some of you that I was really describing a polarization of each layer - from a "one size fits all" model of E2G into a "fit for need" hybrid model in E3G. In a sense we moved from this graph

To this graph

on every component layer.

Let me illustrate better by looking at the data layer - Instead of putting all the data in a single relational store in house (too expensive for exceptions and too slow for google-like fast access to large collections) we will be seeing a shift to remote storage for exceptions and shared data a-la S3, and fast access locally to in-memory data warehouse which is still cheaper than relational (when you account all dba human operational cost). SImilarly, when you look at every layer you see the same polarization:

• Cloud computing in conunction with high availability local appliances
• As I just explained, cheap remote stores next to in-memory high performance dedicated stores
• Open XML business event networks routing into an internal highly-optimized (as in XML bypass) bus for object routing and handling in the network itself
• Desktop with smart browing client next to smart mobile device with personal awareness and intelligent routing

Now, one of the smartest comments started building the next axis of the framework which is the experiences we see across these components. I just want to quote some of the text from that talkback before I post the full view on the second axis (mostly because I have not formulated it all yet - I am busy on the alt.energy side of the hoouse these days...). Here goes, from Armando -

"...I was picturing your layers on a slide with four blocks, one on top the other, Store, Compute, Messaging, Presentation. There is one block that to me is just crying out to be drawn vertically alongside: People..."

and

"Gen3 moves even more power and control into the hands of end users. Distributed computing is enabled and complete business objects live on the network. Tools like Visual Composer evolve and live up to their full potential allowing the creation of ad-hoc applications without compromising the core platform integrity. The user interface is split completely from the underlying rules and data. Beside new user interfaces I can also imagine the development of specialized enterprise bots that interact autonomously (or semi-autonomously) with the system."

Read the rest of his comment - it's worth the time. I think this is probably an aggregation of the view I have about the second axis. My view currently breaks the second axis of the framework across multiple different experiences as the users end up tackling a much more complex world (in the physical world with high volume of events and less time to process), the systems are getting more proactive, with more complexity in IT and but with a lot more power and resources availabale.

• In that sense the users are going from Data Entry to Exception handling and co-authoring
• Systems are going from Aggregation to harmonization and more importantly Automation
• As structure is added into information, its ability to route intelligently increases by orders of magnitude, hence the value-add of data moves away from the store and into "right-time routing"
• forcing developers to go from transactional programming to Event centric resolution

As you can see, this is not as formulated as the previous axis, but you triggered some great questions - so keep shouting.

Shai

Enterprise 3rd Generation

With everyone talking about Web 2.0, I was looking at what is the next generation for the Enterprise space, and how far are we from there. My view is that we are on the verge of the third generation of Enterprise software – the first being mainframes, second was three tier client Server and the third one still not here. A lot of people considered the web versions of 3-tier C/S as the next generation or Software as a Service as 3rd Gen, I view those more as 2.5 Gen. The generations have a lot in similarity to the wireless industry in that you can get a lot of the promise of 3rd gen with 2.5 gen, but to do it right the underling infrastructure needs to shift to the new architectures.

I will try to take this week to discuss my views of this next generation of enterprise software. As a general framework I looked at the following four layers in the stack: Store, Compute, Messaging, Presentation; yet I am happy to hear from you guys about any layer I have missed of great importance. More importantly than the layers (which I have talked about many times in the past) I am interested in the experience resulting from the right mix of those components

With that in mind, Gen 1 was about storage on tape, computing on mainframe, communicating proprietary internal networks, consumed through green screens. We all learned how to optimize because all resources were scarce and problems we were solving were bigger than the compute platform was really capable to deal with comfortably. In Gen 2 we moved to the dominance of Hard disks abstracted through a relational data store; The computer platform got distributed and abstracted by an open operating system, TCP/IP network stack and messaging queues on top, Finally a GUI which over time got the Windows interface into the user’s muscle memory.

What is coming in the 3rd generation? Well, my first approximation shows that we are moving away from single model for each layer, and into a combination of remote and local solutions for each of the layers. In a sense we are getting more domain specific and optimizing for usage instead of for unified architecture.  My current thinking revolves around the following:

• Storage moves to some combination of Network Storage (think S3) in combination with in-memory stores
• Compute will be disrupted on the server by cloud computing (which is an evolution to higher level of distributed than C/S) together with local grids as represented by appliances.
• Networks will move from packets to events – in a sense sending business objects around, with the network aware of the content and able to route them using local enterprise bus that understand the relationships between roles and resources using rules.
• Finally on the client side we will see smarter browsing – able to scale up the experience and fit the experience to the user and the content. At the same time, mobile clients with higher fidelity of experience but lower level of resources (screen and keyboard) will overtake the role of the desktop as the dominant platforms for user interaction.

A much more interesting question in my mind is what meaningful new experiences do you get from these innovations when they come together. What is E3G going to solve that the previous generations could not address. I am going to start digging into that question over the next few blogs.

In the mean time, if you think that I missed something fundamental up to here in these layers – shout!

Electric Scooter

Since Today we are a bit off topic and onto alternative vehicles, I decided to follow the guide of one of our posters and check out the Vectrix, and electric scooterers in general. If you have not seen it yet, go check the making of Vectrix - a beautiful animation that shows the full monty of the insides of an electric scooter.

The site claims that this all electric scooter can go at pretty good speeds (100km/h) in the city - which is pretty credible given its weight and size. It also has a pretty good range on a two hour charge can get you to 80% full battery and a full charge can go 5 hours in simulated urban driving conditions (70 miles or so - must be London, they are referring to...)

I hear they are still a bit pricey, and yet there is a waiting line. I wonder if they have already included the DSP feature that allows you to make the noise of your choice. Imagine a toggle on the handle that allows you to go from Harley noise to Honda - or just for fun make the bike sound like a motor boat...

I have been told that electric scooters are the latest rae in India where they were recently introduced at sub $500 with cost of operation in the pennies. Since they were limited to 25km/h speed the government allowed them to be treated as a non-vehicle, hence people did not need a license to operate them. They seem to have caught up big time in the cities where they were first introduced and a new version is coming up now. The product is called Yo Bykes, and there is a real good explanation on how these operate on the company's website. Their slogan focuses on cost of operation - 100km for the price of 1 liter of oil. and I like the fact that there is no polution. India is key to solving the problem, before it escalates out of hand - as the market for transportation is soon going to explode with half the population under 25 years of age. If they have a choice between an electric scooter at $500 or a small carat $3000, I sure hope they pick an electric solution.