The Long Tailpipe - Shai Agassi's Blog

Davos 2008

I usually come back from WEF events with lots of stories to share and a great new view of the world. This year however I had no time to get to a single session (well, other than 20 minutes in a Gordon Brown impressive presentation on the state of the world - the man is the most cerebral leader I have ever seen).

The general conversation around us buzzed regarding the announcement in Israel, with many participants from around the world asking us how to get the project replicated to their own country. There is a tremendous amount of good will towards project Better Place, and all people wished us the best of success and offered help with whatever we needed. The articles from around the world, in particular the New York Times article (or as most Europeans called it the IHT article, which is the same only under a different name) set the tone for all car, environment and oil discussions at the conference. Towards the end of the event we started getting feedback regarding the amazing BusinessWeek article, written by Steve Hamm, who was at Davos with us this year.

We had a very interesting panel moderated by Peter Schwartz of GBN where he brought together the entire supply chain for a virtual oil field. We started with Mike Splinter, Applied Material's CEO, who talked about solar panels and their very interesting business model of building the tools for the makers, much like they did with silicon used for consumer electronics. He predicted a cost of $0.70/W pre-installation, which in my opinion will tip the power generation market. (I probably need to run a post on that side of our solution framework - the clean generation side). He was followed by Prof. Yet-Ming Chiang, who is the founder of A123 Systems - the leader in LiFePO4 batteries. Prof Chiang is a great inventor who has worked on a number of material science issues - including one that will be key in the future - super conductivity. I followed up with a presentation that tied the generation and batteries together on "how to build a virtual oil field", which got me a few friendly jests from Peter, but I brought some support from my friend Geoff Moore, all members of the great secret tradition of Davos - the Geek dinner.

Interesting twist to the discussion was provided by Craig Venter - of Human Genome sequencing fame. Craig is sequencing thousands of living organisms around the planet which he finds in the oceans, looking for the best energy conversion mechanism. His hope is to find the most optimized way nature converts CO2 and sunlight into chemical bonds, make those chemical leftovers float to the surface as a collectable gas and generate a living refinery that can make liquid/gas energy by use of "living solar collectors". The question that was left unanswered was posed by Peter - whether the physicists or the biologists will solve the energy problem for all of us. I believe the problem is so large that all scientists will have their place in he sun (pun-intended).

Apart from that, I had the most amazing time to be together with my fellow YGLs. What an impressive group of people, so focused on making the world a better place. More important though is the spirit of friendship that this group created and maintains over the years. Whenever two YGLs crossed paths in Davos you could hear the greetings miles away, and if you saw two grown up people hug each other, it must be a couple of YGL men greeting after a few months of not seeing each other. Definitely a very different crew than the usual, serious and business like behavior around Davos. For all of you wanting to learn more about the YGLs and their amazing life stories, there is a bit of good news - one of my friends in the forum, John Hope Bryant is writing a book which will have a lot of these stories in it, but I will not give up the spoiler too early!

Blog Interrupted

I start with an apology for taking so long between posts – and I have an excuse. See, we are raising money to start this new company called Better PLC. After years of fighting for budget allocations, I forgot how much fun it is to actually go convince investors that your idea has enough merit that they should put their money, and much more importantly - their trust in you.

It is somewhat funny that everyone I talk to has heard about this new company we are trying to create, but no one really knows what we do. In every meeting I discover new ways of achieving the ambitious goal we have set for ourselves, and people really get energized about the idea. It is one of those giant small ideas that I truly believe can make a big difference in this world.

I had a conversation yesterday about all these software entrepreneurs who are moving into clean-tech. My view is that we all see a giant market ready for disruption, bursting ripe from years of very little investment. Put that with a group of people who made enough money not to be enticed by easy money, but looking for a real mission in life and you get some really interesting artifacts happening. It is almost as if the entire silicon valley is going through a mid-life crisis – but instead of looking for a new fast car (we now have our official fast car – the Tesla), we are all looking for a calling. I saw it at TED this year; I see it everyday with so many great ideas.

The people I met over the last 75 days on any part of the world are just amazing in their passion, and drive for a better world. Some solve energy issues, others education, healthcare, food, water – all problems that can really touch life. I am at awe with some of the scientists that I met; all have much bigger goal than to start a small company, or bring a new product. I personally stopped just seeing the problems in the future; I see an ocean of opportunities. 

I get people coming at me from every corner asking how do they sign up for our mission, before they even know what it is we’re going to do. When we share the vision with them you can see in their eyes that they all find their calling. I missed that sense for such a long time, it is just refreshing to be back in it. It is not that SAP was bad for me - it was a great home, it is a great company. It is just so easy to get sucked in to the daily grind of large corporate politics, that makes you lose that sense of big mission, your purpose and your sense of direction for what’s right and what’s wrong.

In any case, I promise to share this weekend some of the things that popped up on my radar over the last few weeks. I gave a few presentations, on both enterprise software and clean tech – in particular a presentation in Israel last week – which I will bring into a series of blog posts. So stay tuned next week…

shai

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?

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 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.

Geek Dinner at Davos

On the last day of the World Economic Forum gathering in Davos, all participants put on their gowns and go to a multi-cultural gala event. In years past, the techie geeks and press covering them were excluded from the event, so a few decades back they started a seperate dinner called the Geek's Dinner. the place is a small restaurant, which will remain un-named, as in recent years the place is packed on that invitation only evening. The event is a real geek fest (and it takes one to appreciate a good geek fest). You cna find yourself sitting next to Sir Branson (Mr Virgin himself), Peter Gabriel or my friends Geoff Moore (who got me in) and Chris Anderson (who we missed this year).

Every evening (hosted by uber-geek Joe Schoendorf of Accel Partners and a board member of the Forum) evolved diferently, but this year we somehow got into engineering challenges, and I brought out my best party trick. It just so happens that this trick can get you a lot of free drinks in any bar, with the exception of a bar where the drinks are free already...and everyone is well into 170+ IQ score.   every evening (hosted by uber-geek Joe Schoendorf of Accel Partners and a board member of the Forum).
Since we all sat next to Tony "AlwaysOn" Perkins the cameras started rolling. Sergey disqualified himself by showing how he can solve the puzzle in less than 1 second (he must have parallel processed it...or simply embedded google into his brain), but the rest of the fire power on our table solved in sub-minute.

Enjoy the movie