WEF Middle East - concluding thoughts

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?

Comments

[Ezry Keydar]

Dear Shai

We must remember that the Israeli-Palestinian conflict is only a fraction or a micro cosmos of a greater conflict between west and (mainly) Muslim blocks. Basically, there are two main aspects to this conflict – economical and cultural.
Reasonably, the economical aspect is depended mainly on fossil oil (no one can turn his eyes away from the American/western interest in the Iraqi or Iranian oil) but economical conflict could have been solved noon harmfully if it wasn’t so deeply interleaved with the painful cultural conflict.

What the region needs is education for peace to make a real conscious change, along with vast investment in peace oriented targets rather than in arms. Changes will always being within the individual. Countries or governments cannot compel a mental change but can and should support it in the right direction.

Shai, I’ll appreciate it deeply if I could exchange few words with you over an email. Write me if you may : [email protected]

[Rick Bullotta]

I had the pleasure of listening to Colin Powell speak this week on similar topics, and interlaced in his message were a number of domestic and international themes, notably that we MUST find ways to change our mindset now that we collectively lack any significant "common enemies" such as we did in the cold war, that we can no longer think in isolation if we want to be part of the global community, and that we want to be open to attract to brightest and best minds regardless of their national origin.

I thought it quite enlightening as well that his primary domestic concerns were our failing K-12 education (a passionate cause of mine as well) and his support for immigration reform.

On the education front, if the rest of the world continues to develop passionate and creative scientists and engineers while the US churns out more and more attorneys, tectonic shifts in economic power are inevitable...

----------------
A woman and her little girl were visiting the grave of the little girl's grandmother. On their way through the cemetery back to the car, the little girl asked, "Mommy, do they ever bury two people in the same grave?"

"Of course not, dear." replied the mother, "Why would you think that?"

"The tombstone back there said 'Here lies a lawyer and an honest man.'"

[Oded Roth]

Rick,

Although many Americans share the opinion attorneys have no backbone, heart and brain but sleek snakeskin, attorneys are no different than any human being with their vices and virtues.
As any human being, and even attorneys if counted as such, not all scientists and engineers are motivated by care for public purpose rather than self interests. What is more important and dangerous is the abuse of tools created by engineers and raw material revealed by scientist. Alfred Nobel is rolling in his grave for this reason. There are endless examples relevant to the “Long Tailpipe” forum with this context, such as: The use or abuse of cars. Balance between the freedom of movement supplied by vehicles and environmental harms. The social price of a SUV or a limousine as public road volume consumers. The environmental price of a filthy small moped that carries poor household feeder.

The proper use of science is “social engineering” which learned at Law Schools. Unfortunately the skills of discern between right and wrong is many times abused, manipulated and maneuvered by canny politician and advocates. Maybe the main problem of affluent society is not too many educated people, but the ability of society to absorb too much new knowledge and facilities without shattering the moral foundations.

Oded Roth, an attorney, who tries to advocate a vision to enhance optimal use of transportation innovation.

[Rick Bullotta]

There's a few good attorneys out there, but I maintain that our society produces far, FAR too many lawyers, which results in a substantial amount of unnecessary litigation, which directly affects economic competitiveness.

As long as our political leadership continues to be culled from the ranks of these litigators, no reform is possible.

I would much rather see our universities demonstrate some of the "care for public purpose", "moral foundations" and "social engineering" that you discuss in your post - by graduating more students that add measurable value to society rather than creating a "circle jerk" of litigation that drains the economic life (and bright people) from our nation.

Don't even get me started on Wall Street, which used to be more a vehicle for capital creation than an online casino, where insiders get to peek at the cards and decide which hands they want to play long before the rest of us... ;-)

[Rick Bullotta]

Another nail in the coffin of the hybrid?

http://www.cnn.com/2007/AUTOS/06/05/honda_dropping_hybrid/index.html

Bring on the EV's...

[Rick Bullotta]

Another nail in the coffin of the hybrid?

http://www.cnn.com/2007/AUTOS/06/05/honda_dropping_hybrid/index.html

Bring on the EV's...

[Rick Bullotta]

Good news/bad news from Tesla Motors. Bad news is that their EV will not achieve its original targeted range of 250 miles, good news is that it will still exceed by a large margin what other EV's are aiming for. By comparison, the Chevy Volt has a 40 mile range with a gas/ethanol backup.

More info at:

http://gizmodo.com/gadgets/gadgets/tesla-roadster-wont-meet-original-range-promises-253287.php

[Amir Idan]

Thank you for blogging about your experience at the WEF. I have to say it has been surprising at times, enlighting and most of all - inspiring. I now share newfound hope for the future of the middle east.

[Oded Roth]

An interesting site about: “World's first zero carbon, zero waste city in Abu Dhabi”.

http://www.fosterandpartners.com/News/291/Default.aspx

[Mark Dalton]

Hi Shai,

I have a quick comment on your first question, at the end of you post:" 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?"

This question is based on a condition. (As an ex-Enterprise Apps guy, you know that there are too many conditions to take into account at any one time.) The real question seems to be: how can freedom be articulated in a way that shows the power of social agility? The existential notion of freedom, without real world applicability, will invariably lead to the continued cycle of violence that haunts the middle east. The world needs leaders to articulate a message, and show demonstrable results.

Just a thought.

Thanks for the postings, I enjoy your thoughts.

Mark Dalton

[Avi Shaposhnik]

The actual acknowledgment of the “big picture” conflict or as it was described, by greater and smarter then me, a clash of civilization, is a thought and understanding that I share with Mr. Keidar, but in sight of such acknowledgment find it reasonable to draw the opposite conclusions.

To continue that line, I would like to rephrase the reasons the conflict is based on and call them Economics and Religion, when each of them serves as a main guide for the two opposite sides. The Western side mainly, but not totally, influenced by the Economic reasons, when the Muslim is mainly, but not totally, influenced by religion (this is even the source of its name). The economic side is fairly easily resolved – if it was the core of the problem (and as Shai said: “sounds capitalistic but who said capitalist pigs can’t produce great bacon?”). On the other hand the other side of the equation is getting more and more complicated as time goes by. As the Muslim society is growing more fundamental and radical (not only in the region but globally) combined with inflated population growth and increasing socioeconomic problems, the possibility of a solution vanishes on the horizon, if it still exists al all. From this point one might say (as Mr. Burg suggested) we all should get some “other” passports, but true understanding will show that the process is global and our migration will not solve the problem.

The naïve conclusion that the investment in arm needs to be shifted towards education for peace and “peace oriented targets”, is completely unrelated to the reality in the world and especially in the Middle East. Even if we ignore the painful lesson we had to learn about 70 years ago, we can not ignore the warning lights today.

The only thing that we as a country that is interested in any kind of future, must do, is to create/gain a competitive advantage that will assure our survival in the world – not only today (investment, creation and use of arms will assure that) but tomorrow too – creation of the world’s dependency on us. At this point I would like to touch Shai’s electric car project, and ideas as of more then just as “save the world/environment” or even a pure business venture (and I can see the points and future of both) but as a possibly strategically important project on the national level. If Israel will be able to become the new “energy god” of the world, its bright future will be secured for generation. WE NEED THE WORLD TO NEED US!

Sorry for the Zionist preaching or whatever you may define me… just some stuff that came to my mind…

Avi

[Ilse Pauwels]

Shai,
Yesterday I spoke to Tom Pfister from SAP. I used to work for SAP in the Benelux region. Today I am working as a marketing & alliances manager for a local ICT Consultancy company Ordina. I am currently organising an "innovation trip" to the USA. Main topic will be "clean technology". Seen your latest initiatives, I would like to get in touch with you! I really hope this will work!!!!!