My business partner Jason and I just spent a week dashing through Hong Kong, Singapore and Mumbai, meeting with prospects for our venture incubator mach49. I first visited all three of these cities in 1984 after I saved a few bucks working in Japan. One of the few good things about growing older (and there are very few) is the opportunity to compare my perspective over a few decades.
In the 80’s the bustle in Hong Kong was on par with New York and London but much more chaotic. Ever since then I’ve thought of Hong Kong the economic gateway to Southeast Asia so it came as a big surprise when our hosts and our potential clients talked about a general decline in the business climate in HK. Everyone cited the same three factors driving uncertainty in the economy:
Hong Kong is becoming a tier-two Chinese City.
Everyone I spoke with seems resigned to HK’s economic clout being overshadowed by China’s major cities within 10 years. While HK’s GDP growth hovers around 2%, major industrial centers in China boast a growth of 7% (though this is slowing). It seems to me that the “special administrative region” is no longer special. Economic concerns have led to protests in HK’s central financial district, but people we met all agreed that Beijing will not be influenced by civil disobedience.
Shenzhen is overtaking Hong Kong in both innovation and entrepreneurship.
My host has lived in Hong Kong all his life and he opened our long dinner by telling me that he has watched Shenzhen overtake and outpace HK in innovation. Top talent from large Shenzhen companies like Tencent, Huawei and ZTE often strike out on their own. Shenzhen’s tech scene has achieved critical mass and there are all kinds of exciting opportunities. Incubators are popping up everywhere in Shenzhen and local government is investing heavily in innovation and technology to create sustainable local economy that can move beyond assembly and manufacturing. Again, think about what this disruption means to this old fossil with his long view. When I took a train from Hong Kong to Canton 30 years ago, Shenzhen was a tiny farming town.
Hong Kong is losing its dominance in financial services.
Hiring is weak in the financial sector which contributes about 20% of HK’s employment, and executives that I met are concerned that HK could turn into a tourism city filled with low-skilled labor rather than an international financial center. Meanwhile, a third of China’s growing venture capital and private equity companies hail from Shenzhen, a short train ride away.
More memories, at the risk of being really tiresome: Thirty years ago I arrived in Singapore exhausted and pissed off. Four weeks of backpacking through Indonesia had tired me out, and thieves on a public bus in Jakarta had swiped some things from my pack that I could not replace in Indonesia, including my prescription glasses.
Singapore was a jewel after Indonesia. I ate healthy fresh food, got my new glasses, and wandered around the streets where no one is allowed to spit or chew gum (unless the gum is prescribed by a medical doctor). That said….three days of Singapore was plenty, then I was off for more adventure hiking in Thailand.
And thirty years later? Singapore is still a jewel with a diversified manufacturing base, highly educated workforce, and effective rule of law with zero tolerance for corruption. My business partner and I met people in healthcare, transportation, and electronics and they were visibly proud of Singapore’s business-friendly, trade-oriented economy. Every single person who I met pointed to government-supported incubators and accelerators like Infocomm Investments as drivers of the next phase in Singapore’s growth.
Singapore has all the physical infrastructure that it requires and they’ve made a strategic decision to pour public expenditure into the ‘soft’ infrastructure needed to build and sustain a knowledge economy. Hell, they committed to $4B to advanced R&D in 2015 which is a remarkably large budget for a country of 5M people. Two of the incubators we met talked to us about data science as an exciting new domain, but Singapore’s Biopolis is also world-class in synthetic biology which is probably the next exponential technology that will rock the world.
Enough gushing. There’s trouble in paradise: Cracks are beginning to show in Singapore’s lack of government transparency. I met with an American petroleum engineer with a beard that scared me. He and his beard were really disturbed by the regulation of political speech and the lack of a free press, but he had to admit that the system worked pretty damn well. However, harsh judicial punishments are beginning to grate on the citizens with an increasingly international perspective. Homosexual acts remain illegal and public protests are not permitted. A new generation is quietly questioning whether Singapore is really that fragile, and they are beginning to resent the restrictions on their freedom.
Mumbai the polychromatic “maximum city” is so complex that I need to limit my observations to the attitudes that I observed about disruptive innovation. First of all, our business contacts and our potential clients all agreed that india is a notoriously difficult place to do business, despite the unprecedented economic liberalization. It was clear to me that having local contacts on board at mach49 is critical to unlocking the country’s vast potential for innovation. The good news here is that incubating innovation is a hot topic in India and we have some heavy hitters interested in working with us.
The Indian firms I met with are slowly making an adjustment from a scarcity mentality, which leads naturally to a focus on operational excellence, to a cautious interest in organic growth through innovation. I spoke to a huge firm with revenues in excess of US$40B and over 100K employees and they were unable to point to any substantial innovation initiatives. We’ll need to ease gradually into the Indian market, starting with workshops.
I sensed a palpable national pride among all the Indians I met, and this pride may be a factor that accelerates innovation. Given the massive social challenges and resource constraints, there is a huge need for innovation to drive growth and improve social indicators. India still has the world’s largest number of poor people, 70% literacy, and public health scourges such as tuberculosis. Rapid growth through innovation and entrepreneurship will raise quality-of-life and will bring in revenues that are desperately needed for social reform.