00:00hi everyone welcome to the a6 & Z
00:01podcast today we're talking about
00:03startup and innovation ecosystems I know
00:06those are a pretty loaded set of
00:07buzzwords in this case though it
00:09actually really is an ecosystem because
00:10we're talking about cities communities
00:12of entrepreneurs government's
00:13universities companies and others and we
00:17want to talk about what makes these
00:18innovation ecosystems around the world
00:20work or not especially since the
00:23question we hear often for better or
00:24worse is how to create the next Silicon
00:27Valley the notion of trying to create
00:28the next Silicon Valley is completely
00:30the wrong question and it's a lot of
00:34question for lots of reasons so that's
00:36why we have three special guests on the
00:38pod today who are experts in different
00:39aspects of this topic
00:40Annalee saxenian who's the Dean of the
00:42UC Berkeley School of Information and a
00:44longtime researcher who has studied
00:46competitive advantage around the world
00:49Brad Feld VC at founder group in
00:52Colorado and the author of the book
00:54startup communities and who has written
00:56a lot about the power of networks over
00:58hierarchies and Chris Schroeder who's a
01:01serial entrepreneur and investor and who
01:04also once served in the staff of former
01:05secretaries of state he wrote the book
01:07startup rising last year which is one of
01:09the first books to document the
01:10phenomenon of startups in the Middle
01:11East and more recently he's written
01:13about the impact of software eating the
01:15world and how that's been playing out in
01:16the run so let's start by having you
01:18guys talk about what makes a successful
01:20innovation cluster like Silicon Valley
01:22I'm not even sure if that's the right
01:23assumption for us to begin from given
01:26the question and given how many of those
01:28government led experiments have failed
01:30but since the three of you have
01:32different perspectives on this topic I
01:33think it'd be great for us to begin
01:35there I think the fact is that most
01:39places that have tried to create the
01:41next Silicon Valley have not succeeded
01:44largely because they focus on specific
01:48institutions and isolation without
01:50understanding that one of the most
01:52important dynamics is the opening of
01:54boundaries between firms between firms
01:57and finance between industries and
01:59government that really allowing we talk
02:03a lot about how information has opened
02:05up global access and that has allowed
02:08new parts of the globe to compete but
02:10opening up flows of information locally
02:13the local level between between people
02:16you know really from the bottom up I
02:18think has been critical in to making
02:20places like Silicon Valley dynamic
02:23because ideas move much more quickly
02:25than they do within vertical
02:28corporations where they they tend to get
02:29trapped and people can act they can use
02:32center capital they can invest they can
02:34reform they can recruit teams much more
02:36quickly when information flows openly
02:38between them and so a lot of the things
02:40that we look at whether it's a
02:42university or a venture capital
02:45you know sector or whatever those work
02:48especially if they are open to the rest
02:51of the ecosystem so that people can
02:55learn across boundaries much more
02:56quickly I think that people are learning
03:00across boundaries much more quickly
03:01exactly as I said I think there's
03:03something that's very different from any
03:05time before as these ecosystems have
03:07risen and that is a very autodidact
03:10nature of young people with mobile
03:12devices to learn not only from each
03:15other and to share and innovate and
03:16collaborate on things that might be
03:18relevant within their markets but they
03:20are instantly seeing the best practices
03:22and the best writings of people like on
03:23on people like Brad and people like Ben
03:25Horowitz and they have an ability to
03:27access and engage and ask questions and
03:30and improvise on where best practices
03:34elsewhere in ways that we simply
03:36couldn't have talked about I think even
03:38five years ago I had a conversation the
03:40other day with a bunch of young people
03:43in Iraq who were drilling me about
03:45different valuations of startups now and
03:47drilling me about different kinds of
03:49ways social networks are functioning the
03:51United States and making analogies of
03:53what are relevant in Iraq which of
03:55course was completely unprecedented and
03:56when I was in Iran a month ago all the
03:59young people wanted to show me on their
04:01smart devices not only how they were all
04:03on our social networks which allows them
04:05to see each other as well to see other
04:06parts of the world all of them had
04:09access to course there are all of them
04:10are on Khan Academy all of them were
04:13looking at Quora all of them were
04:15looking at what other people are doing
04:16and building something bottom-up which
04:19is not a replacement for some of the
04:22challenges that are still essential in a
04:24traditional Silicon Valley story but
04:27an opportunity and something that's
04:29happening in parallel that again could
04:31not have talked about a few years ago
04:33now I think the these two constructs are
04:38profound and collide nicely you know
04:41this notion of making opening up
04:44boundaries making them more porous which
04:46Anna talks about and it has very
04:49articulately for a long time a lot of
04:50the the writing I've done about networks
04:53especially networks versus hierarchies
04:54is built on that and you know what
04:57Christian said about the technology
05:00enablement which we've been talking
05:01about for 20 or 30 years but it's
05:03actually now reality in terms of how
05:06information flows across geographic
05:08boundaries and what I think it resulted
05:11in the notion of trying to create the
05:12next Silicon Valley is completely the
05:14wrong question and it's one question for
05:19but most importantly each different
05:21geographic region any city in the world
05:24have different natural resources and you
05:27know a natural resources is just
05:29physical natural resources but
05:30structural dynamics about how the city
05:33works about what in that fiag rafi or
05:35region is powerful or unique and then
05:38you have this layer of knowledge that's
05:41pervasive that transcends geography and
05:44over a period of time not short period
05:47of time 20 years 30 years 40 years you
05:50can have really amazing things happen in
05:52different startup communities if you
05:54take that very long arc with this notion
05:57of the permeability of this information
05:58across all kinds of boundaries not just
06:01geographically but within whatever that
06:03region is right what are some of those
06:05assets um when you're Brad when you talk
06:08about you know these are assets that
06:10aren't just necessarily natural assets I
06:12mean we're now talking about information
06:13economy so the assets can be in the form
06:15of human capital what are your thoughts
06:18about how that varies across regions and
06:20what it takes to sort of make those
06:21communities thrive support the level
06:27send realize in every single city on the
06:29planet was once a start-up phenomenon
06:33where people decided to create a city
06:35somewhere for some reason and it might
06:37have been you know a hundred years ago
06:39it might have been five thousand years
06:40and so there are unique characteristics
06:43all over the globe about culture about
06:47how the economy works about how
06:49information flows about what people care
06:50about about the types of people that
06:53collect and grow over a period of time
06:56independent of the academic institutions
07:00with business institutions that could
07:02build into those geographies and all of
07:04that is then wrapped around by how
07:06people interact with other people in
07:07that geography so the thing that comes
07:11from that that's so powerful is if you
07:13have founders or entrepreneurs who are
07:18leading the efforts of trying to do
07:21things in their geography again over a
07:24long period of time from learning and
07:27taking from other places you get this
07:29self referential phenomenon and if you
07:31look at Silicon Valley a great example
07:33of it's not a phenomenon that happened
07:35in the last ten years the last twenty
07:36years have a book on my desk that it's
07:40called a hundred years of Silicon Valley
07:41and it was written in 1994 I gots a very
07:46very long term arc and I think that you
07:48know what happens with a lot of people
07:50who want to create you know the next
07:51Silicon Valley in my geographies they're
07:53taking a very narrow short term year
07:55versus saying what is it about the city
07:58were in that's so special and why people
08:00are here and what can we do over a long
08:01period of time to build on that I think
08:04I agree with everything that's been said
08:06I think that we often have to short
08:08review and that also each region is
08:10distinctive and needs to identify its
08:12distinctive capabilities I do believe
08:15that different places have just for
08:17historic reasons have different skills
08:18and it's those skills as well as their
08:21institutions and the social structure so
08:23for example Don and so the first thing
08:25is to really think about what what your
08:28sort of advantage is so for example in
08:32Israel they've been able to tap a lot of
08:34the military technology that has been
08:36funded for decades you know in India
08:39entrepreneurs have been able to sort of
08:42bootstrap from low-end body shopping
08:45sort of software programming into its
08:47larger scale software development so it
08:49really is the opportunity for
08:52entrepreneurs to identify
08:54abilities within a region and then build
08:56on them over time so that they become
08:59more valuable not only locally but to an
09:03export market as well
09:05how does history and timing play a role
09:07here in the case the case of Iran is
09:09actually particularly interesting given
09:11the recent news about sanctions and the
09:13existing groundswell of entrepreneurial
09:15and tech activity that's already there I
09:17think there's no question that the arc
09:20of time is something that people really
09:21do wrestle and the idea that you can
09:23build these things overnight is if they
09:25point out a mistake I think
09:26interestingly though in a lot of these
09:28emerging markets time is and also
09:31they're friends and what I mean by that
09:32is you've got a lot of countries in Iran
09:34is a perfect example of this where 30 to
09:3640 percent of the population is under 30
09:39and doesn't have jobs and so people are
09:42kind of looking each other and saying
09:43can technology help us to leapfrog can
09:46technology help us to light maybe some
09:48of our natural advantages so that we can
09:50not only do things within our markets or
09:52within our regions but possibly and more
09:55controversially enter into markets more
09:58broadly in the case of Iran of course
10:00it's been so locked down because of the
10:01sanctions there's been a two-edged sword
10:04to it for them at one edge they've been
10:06locked out of some of the best practices
10:07except as I pointed out even with the
10:10crackdown on you know access to the
10:13internet everyone I've met there of all
10:15ages have access to VPN every mobile
10:18phone I looked at had access to all the
10:19same things that we have access to they
10:21know a lot about what's been going on so
10:23they've always been able to enter on
10:24that I think at one level but the other
10:26edge of the sword has been that with
10:28other companies not being there they've
10:30been compelled and forced in
10:31particularly the new generation to build
10:33a lot of interesting technology to
10:35effectively replace things so for
10:37example I saw a startup Google you used
10:40to be able to get almost any app from
10:43the App Store's from Google and if you n
10:44run it a little bit from iPhone but it
10:46became very hard and obviously you
10:48couldn't get anything that you would
10:49have to pay for because of the sanctions
10:50so what happened a bunch of startups
10:52came up to fill that gap and create apps
10:55so people could use them for a period of
10:57time and so there was this interesting
10:59both creativity and and fire to make
11:02something happen but at the same time he
11:04was out of necessity because the options
11:07what they can do and the good news is
11:09are now very talented very capable very
11:12tenacious as good as almost any emerging
11:14growth market I've seen in early days at
11:16the other hand they're about to enter
11:18now a very very competitive place and I
11:20think it's gonna be interesting to see
11:21how that plays out i jus wanna add that
11:23iran has an incredibly highly educated
11:26population of course it has been cut off
11:28in all sorts of ways and there's also a
11:30huge very successful a train E&P aspera
11:33which i suspect will I know insult
11:36entirely they've been dying to
11:37contribute back to Iran is very nicely
11:40positioned in some important structural
11:44ways to continue contributing and to
11:48build on this innovative and
11:49entrepreneurial story that we're seeing
11:52already I know what does the research
11:54show about when because I agree
11:57completely with Brad that starting with
11:58the question of trying to emulate
11:59Silicon Valley is exactly the wrong
12:00question yet whether people are emulator
12:03Silicon Valley or not there is a
12:04tendency to sometimes start innovation
12:07by imitating and and as Christopher
12:09calls it improvising what are what is
12:12your research show about that the
12:15innovation grows out of imitation and
12:17improvisation so people learn by
12:20improvising by trying things by first
12:22imitating and then improvising because
12:24often you can't you know you think
12:26you're building the same thing but
12:27actually you're building something
12:28different that's adapted to local
12:30conditions it takes advantage of local
12:31capabilities that don't exist elsewhere
12:33so I think we need to be really aware
12:36that that innovation you know builds on
12:39an imitation we have a sort of a fence
12:42often that you know it's stealing
12:44intellectual property but every you know
12:46every industrial region every innovative
12:49cluster that we've seen has started you
12:52know from imitation and improvisation I
12:54I had the man who is the founder
12:57effectively of the Yahoo the Middle East
12:59was a company called Mark tube which
13:01Yahoo in fact bought for 160 117 70
13:04million dollars went five years ago and
13:06he said to me you know Chris II just
13:07don't understand how these things staged
13:09there's a lot of risk in startups under
13:11the best practices but we're dealing
13:13with cultures often have zero experience
13:15in this you know there's plenty of money
13:17in places like the Middle East there
13:19plenty of money in a lot of emerging
13:21markets but people are used to
13:22deployment to real estate they were used
13:24to deploying them to something that's
13:26hard and a construct the idea that 80 60
13:29or whatever it is percent of your
13:30portfolio go to zero it is just not yet
13:33part of the culture in many of these
13:34instances so if all of a sudden as he
13:37said some kid five years ago would come
13:40home and tell his parents in Egypt that
13:42I'm dropping out of college because I've
13:44got this great idea for something I'm
13:45gonna call Facebook and trust me 650
13:48million people are going to be on it and
13:49I'm gonna make billions of dollars yes
13:51his friends would have laughed at him
13:53his teachers would have laughed at him
13:54his parents might have kicked them out
13:55of the house but if all of a sudden you
13:57come home and say you see this thing
13:59called Yahoo or there a lot of people
14:01speak Arabic yes other people who'd like
14:03to have email yes are there a lot of
14:05people in fact might even want to sell
14:07things yes and all of a sudden you say
14:09well that worked there maybe a smaller
14:11version that can become a bigger version
14:12works there and then you get the
14:14flywheel starting because what ended up
14:16happening in the case of Maktoob is it
14:18has literally kicked out 25 other
14:20companies one of the Lich's sue calm
14:22which is the largest e-commerce player
14:24in the Middle East which just got valued
14:26at over a billion dollars and I can
14:28assure you out of that will be you know
14:30another 50 entrepreneurs who will come
14:32out and kick out money and the flywheel
14:34will continue and so I just think that
14:36this improvisation stage is an
14:38absolutely natural early stage so that
14:40people will build upon can this all
14:42really happen at a bottom-up level
14:44though is there a role for top-down
14:46government and creating these innovation
14:48clusters especially when it comes to
14:49things like rule of law yeah I challenge
14:53the assumption that you you need
14:55top-down I think I think that a lot of
14:57people approach the top-down as
15:00necessary but it's effectively not
15:04sufficient and so when you have top-down
15:08in the absence of bottom-up entrepreneur
15:12you know entrepreneurial ed phenomena
15:14grassroots whatever phrase you want to
15:15use nothing really happens you get this
15:18this stagnation if you have a bottom-up
15:22phenomena where all of a sudden the
15:24startup community starts to develop and
15:26grow because you've got entrepreneurs
15:28and you have to christopher's last point
15:29if they're successful they reinvest back
15:32in the community often
15:35and especially you know in different
15:37parts of the economic cycle you have
15:39top-down focus and you have government
15:42start to try to organize what's going on
15:44in the startup community or you have
15:46academia university and the city try to
15:49become the central point of what's going
15:51on and that is not going to be a
15:55successful path what is a successful
15:58path is when those institutions figure
16:00out how to attach to the chaotic network
16:02is being built and participate in the
16:05network rather than try to control it
16:07and that's that's where the conversation
16:10about top-down starts to get complicated
16:11because it's not that those
16:13organizations and institutions don't
16:16have a role or shouldn't be involved or
16:20quite the opposite they're very
16:21beneficial however when they start
16:23trying to organize and control the
16:25activity or legislate the activity it
16:29tends to generate a lot of second-order
16:31effects that are cycling and in some
16:34cases actually constrict the growth and
16:37development of what's going on in terms
16:39of the startup community yeah I couldn't
16:42agree more with that I think you know we
16:44have this model of government leading
16:46and that just can't be the model this
16:47has to be it you could have a public
16:51sector or other agencies be I mean and a
16:55minimum they should be permissive I mean
16:57I think we have a lot of places where
16:58you'll go and find government's that are
17:00not even permissive that controls loads
17:03of information or control capital
17:05markets in a ways that don't work but
17:07just because they get in the way doesn't
17:10mean that they can also be they need to
17:13be in conversation with entrepreneurs
17:16with innovators about what will
17:18facilitate what what are the you know I
17:21think that the ideal role for a public
17:23sector or even for a university or other
17:25institution in the region that's trying
17:28to be innovative is to talk to the
17:31people who are innovating and say what
17:32what are the obstacles and what can we
17:33do to helps for you you know do you need
17:36more skill is there something that we
17:37can do to help generate more skill are
17:39there certain kinds of policy change
17:41that would help these are all valuable
17:43things but they cannot be they can't be
17:45tough down they can't you they cannot
17:47have the census table
17:48either plan in the traditional top-down
17:50sense or lead this they have to be
17:53contributors really almost co-equals
17:56with the entrepreneurs and the
17:58innovators that makes a lot of sense
17:59actually but I do think that I don't
18:01want to assume that we're being naive
18:03about it but I do think that there is a
18:04certain purity to how we view government
18:07sometimes because when I think about
18:08travels in third-world countries I mean
18:11I'm sorry not the appropriate face at
18:12certain developing world countries
18:14I think of corruption bribery you know
18:17the fact that some governments can just
18:19seize your assets without notice and
18:22these are not beings that are familiar
18:24to us because we for any complaints that
18:26we have about different governments we
18:28are still used to living in a society
18:29that's actually very well-run and
18:31organized and I want to hear your guys
18:33has thoughts on how to deal with that
18:35when it comes to an entrepreneurial
18:36ecosystem but but more importantly I
18:43actually don't think that for example
18:48American democracies are particularly
18:49well organized or well structured
18:52phenomenon I think part of the reason
18:54it's so resilient is that it's not and
18:58the difference the difference is we have
19:00a framework of rules which by the way
19:04have a very very hard time keeping up
19:06with innovation and and that framework
19:09of rules has been a way they're enforced
19:12and that's the challenge when you go
19:15into a country where there either isn't
19:17a framework of rules or there's not a
19:20way in which they're enforced
19:21consistently then you have lots of
19:25erratic phenomena where you know the
19:27thing you're trying to do can be you
19:30know stolen out from under you I mean
19:32I've been on the receiving end for
19:33example you know deals that I did in the
19:37late nineties yeah I thinking of one in
19:39particular with the Chinese company
19:40where you know the merger agreement came
19:43back entirely in Chinese we really had
19:47no choice but to sign it and you know
19:49when it was translated the signature you
19:51know the document basically said you're
19:52giving us our that your company and we
19:54are giving you nothing and you will be
19:59and at least at least they sent us the
20:01document right now you know I I just
20:05sort of start with that I don't think at
20:06that it's structured correctly that
20:09there is a framework that has some
20:11consistency and the warning there and we
20:14see it all the time we see it with you
20:15know the phenomena innovator versus
20:19incumbents of course lubbers is the one
20:21that everybody points out that there's
20:22many many companies that are struggling
20:24with this and lots of places in the u.s.
20:26right now because the laws don't keep up
20:28with innovation so let's talk a little
20:30bit more about that as applied to some
20:32of the cultural aspects beyond the
20:34institutions that happen sort of tacit
20:36implied you know for example attitudes
20:38towards failure you know Christopher
20:40you've talked about how on one of the
20:43podcasts with some of the students in
20:45Iran who were building startups that you
20:48know the thought of doing a start-up
20:49would be so taboo before and now is
20:52something that there's still not
20:53something that their families understand
20:55and Brad you talk a lot about the
20:57psychology of entrepreneurs in
20:59everything from depression to the
21:00mindset of how to deal with failure and
21:02the reality the hard slog of building a
21:04company how do those attitudes play out
21:06internationally and uh no does any of
21:08your research show how that plays out
21:11I'm curious you're from all three of you
21:12about about this you know my husband and
21:16I joke I wrote a book that glorifies
21:18entrepreneurs when I wrote about Silicon
21:20Valley and then I had to live with one
21:23being an entrepreneur is really hard I
21:26mean it's easy to glorify it in it but
21:29the ups and downs the you know the
21:31unanticipated changes nobody within the
21:33right mind would do it and yes you know
21:34we have to growing numbers of people who
21:37are doing it all the time and very
21:40successfully as well I think I think
21:42there's a long arc on this which is I've
21:49heard for many many years when I want to
21:52talk about startups how you have
21:57cultural norms in different mostly
21:59country specific cultural norms around
22:02things like failure and now the US has
22:06this structural advantage because of our
22:10cultural norms and then I end up in
22:13Iowa sort of Iowa and you know having
22:17pizza so you know midnight there's 20
22:20founders of different companies and they
22:23start off sentences by saying things
22:24like in the Midwest were more
22:26conservative and I remember that that
22:29nights so visibly because at some point
22:31I said will you just get over it like
22:34it's not about being conservative like
22:36you're all here doing this crazy thing
22:38where you're starting companies you're
22:39not being conservative
22:40oh by the way you know three or four
22:44generations or earlier you're you know
22:46five generations earlier whoever whoever
22:48settled in Des Moines those people were
22:51not concerned that like they drove in
22:53wagons across that row called in time
22:55across the United States and you know
22:58had to deal with you know starvation and
23:00disease and you know you know just the
23:04chaos of trying to get to where they're
23:06going that's not conservative so you let
23:08go of those thing and interesting
23:10because that construct then collides
23:12with something that Christopher said at
23:15the very beginning which is so powerful
23:16which is that the information about this
23:19is ubiquitous you you can get
23:22information about the notion and
23:25philosophy of how to be successful how
23:28to think about failure not to revel in
23:31it but to understand that it's part of
23:33the process you know some of my my own
23:36writings and others writings on
23:37depression in the context of
23:39entrepreneurship have started to D Sigma
23:41ties the fact that leaders actually have
23:44emotions and you know human beings you
23:48know we're just dig back to chemicals
23:49and it's not just that sometimes we have
23:51a lousy day but sometimes we're in a
23:54place where you know in terms of how we
23:56relate to what's going on around us we
23:58might be functional but it's really
24:00really hard that can is not
24:02geographically constrained because of
24:05lack of information flow you know but
24:07the kids in Iran are reading that stuff
24:11and they're they're they might be able
24:12to relate to it directly they might not
24:14be at least permeating and influencing
24:16the way they think about what they're
24:19doing in the context of the next isms
24:22they create and I've seen this very
24:26through some of the work that I've done
24:28through tech stars which now owned up
24:31global which runs Startup Weekend which
24:34is around the world and it's amazing to
24:37encounter entrepreneurs from everywhere
24:40that have the same language
24:42an example would be I was in Rio at
24:47Startup Weekend Global Summit a couple
24:49of years ago and you know a kid to look
24:52like any other kid in his 20s looked
24:55like anybody else in that plane came up
24:57to me handed me a startup toran to Iran
25:01hat and gave me a giant hug and
25:04industrial real good thing thank you so
25:07much for teaching us how to think about
25:09when things don't work my son Jack who
25:13is a teenager just came back from seven
25:14weeks in Taiwan working for a start-up
25:16there and so we went out for Chinese
25:17food and spent hours just getting caught
25:20up about what he saw and I found myself
25:21pressing I'm you know because he's
25:23worked for startups in New York and
25:25others for a 16z and you know what's the
25:28differences so what was it like in
25:29Taiwan how was it different and he would
25:31come up with a couple of quick things
25:32and at one point he just sort of looked
25:34off in the distance and he turned to me
25:36he said dad I got to tell you the
25:37biggest surprise I had is house the same
25:39everything was and I said what do you
25:41mean he said people they come at
25:43problems the same way they're undaunted
25:44in the same way they're constantly
25:46looking for the next new idea in the
25:47same way they support each other in the
25:50same way they think about culture in
25:51very similar ways it really is a lingua
25:54franca now I think of this era that also
25:56will not go back that's great so one
26:00thing we haven't talked about is what
26:02happens when these local innovation
26:03clusters are exposed to global
26:05competition for example in the case of
26:07Iran as sanctions lift what happens when
26:10the eBay look when the local eBay like
26:11competitor is exposed to the actual eBay
26:13or in India when Amazon competes more
26:16directly with the like of Flipkart and
26:18other competitors is it really I mean is
26:21local really an advantage when they're
26:23exposed to these companies that have
26:24this unprecedented scale and operational
26:27efficiency one of the things we're
26:29seeing is that while Amazon may be able
26:32to go anywhere it's certainly they have
26:34the resources to hire the people often
26:37what you see and you see this in China
26:40that the local imitators who get a first
26:42start actually innovate in directions
26:45that are more appropriate for the local
26:47constituencies that's know yeah so that
26:50I do in China was it was a knockoff of
26:52Google but it figured out what Chinese
26:54people want much more quickly you know
26:56so I think again you really the local
27:00has an advantage they understand their
27:02community and what the needs are and the
27:05markets really are not completely
27:07homogeneous globally at the moment so
27:09I'm curious what you guys think about
27:10the distinction between what makes for
27:12that local advantage versus what in the
27:15end is really the best software engineer
27:19wins which obviously at least for the
27:20time being put some emphasis on the
27:22silicon valley's and take a place like
27:24India I mean they're linked in of India
27:25is linked in the Facebook of India is
27:27fundamentally faced in the Twitter of
27:29Facebook of India is fundamentally again
27:32this is not true in e-commerce in the
27:34Middle East I can tell you that the
27:36American great social networks are
27:38dominant forces there but there's a
27:40reason why SOCOM is worth what it's
27:42worth and so there is something about
27:44understanding the market understanding
27:46unique payment issues so for example the
27:48Middle East credit cards is not a usual
27:51thing so you have to navigate Co D in
27:53very different ways logistic companies
27:56have gotten incredibly sophisticated on
27:58the ground there about how to even
27:59deliver products and great efficiency
28:01and that kind of thing and I'm wondering
28:02if you guys just think about certain
28:04kind of general criteria by which you
28:07say there are things at the end of the
28:08day they'll move very very quickly and
28:10maybe they'll come from Silicon Valley
28:12maybe someday they'll come from Beijing
28:13maybe someday they'll come from Tehran
28:15but once they take off they tend to be
28:17easily dominant versus these enterprises
28:21or industries that naturally lend
28:23themselves to such local need and
28:25execution and assets that there will
28:28constantly be seeing that type of
28:29innovation I remember a friend of mine
28:31out in Silicon Valley who's talking to
28:33me about some of these emerging markets
28:35said to me something very interesting so
28:37you know you look at a couple of great
28:39ideas these are mobile first societies
28:41these are folks who have never known
28:42landlines we ought to be able to think
28:44that some interesting innovation will
28:46come from such places and he said but
28:48you've always got to ask yourself you
28:50know once that idea starts to move is
28:54that a Silicon Valley entrepreneur is
28:55going to take global faster than they
28:57can and Pisa was a very tactical
29:00specific need at a specific time that
29:03allowed it to become the largest payment
29:05mechanism in texting specifically in
29:08Kenya and not around the world and so
29:10I'm sort of curious how you guys wrestle
29:12the idea of what makes for a global
29:14software for which perhaps even Silicon
29:16Valley will continue to have a great
29:18advantage and what in local you know two
29:20or three things or whatever really stick
29:23out that gives that kind of advantage
29:25for these emerging markets so
29:26Christopher the examples that you gave
29:30lay right across how I can to think
29:34about it which is the more complex the I
29:40mean I would say value chance if a
29:42supply chain but it's really value chain
29:45you know you're going back to michael
29:48Porter's value chain framework the more
29:51complex the value chain is between the
29:54end customer and the supplier of the
29:59product or the manufacturer of the
30:00product and the more complex that is the
30:03bigger the local advantage and I think
30:06you can probably dissect it across
30:08now I'm not being precise in my language
30:10when I say manufacture and I'm saying
30:11value chain but I think you could you
30:13probably take you know even cores
30:16framework and look at the different
30:18steps of it and say is there a local
30:20advantage to this stage in you know
30:23whatever you're looking at and if the
30:25answer is no then you know that's that's
30:29going to have the less defense ability
30:32against it well about comment and I
30:33think that's why Commerce is such a good
30:35one there's no getting the product like
30:37your example I really heard the best way
30:39to ship something purpose the buddies
30:40did one country in the Middle East in
30:42other countries annalisa through New
30:43York okay like that's not going to work
30:46for you know the model that Amazon's
30:49executing on the last comment they make
30:53in this I can remember who I camera is
30:56talking with his first emergency buy and
30:59I met with a Saudi and Fazal of Pakistan
31:03and they were describing suit to me they
31:05had a relationship through there
31:07investment in their company and they
31:10were describing the logistics and how
31:13the logistics dynamics of companies that
31:17were physical logistics companies they
31:20have such an insight into the way that
31:22goods services move throughout the
31:24region that really nobody that was
31:27outside the region who's going to have a
31:28chance of getting that implemented
31:31anytime soon and so in some ways it
31:33almost wasn't worth it to somebody else
31:35to try to do that I don't think that's
31:39you know limited to e-commerce I think
31:41it's limited to anything that has a lot
31:43of complexity in that value chain it's
31:46the only thing I would add to that is
31:47that the example you gave us was India
31:50and South Korean that the language
31:52differences do matter so a lot of our
31:54social media transports very easily to
31:56India because of the English language
31:58there were probably not as successful in
32:00Brazil but but I agree about the
32:03complexity of these supply chains being
32:05a key variable okay well given the topic
32:08that were on about local and regional
32:10advantage I am curious about what you
32:12guys think about an argument that mark
32:14makes and that he actually made in an
32:16op-ed in Politico last year about
32:19entrepreneurs and regions being able to
32:20use the sort of regulatory arbitrage to
32:23their advantage to help attract
32:25innovation and become leaders in like a
32:27particular technical area so for example
32:29like with the UK embracing Bitcoin and
32:31being more thoughtful about FinTech is
32:34it you know as a way for them to be more
32:36likely to get an early advantage there
32:38or a Canada moving faster on drones
32:41regulation and and so on not only do I
32:44agree with him I think there's actually
32:45a physical manifestation also which is
32:48that this is the most mobile generation
32:50in history and when I say Mobile in this
32:52case I don't mean phones or smart
32:55devices I mean they will move to where
32:57talent is and this in a way brings us
32:59back to the conversation of whether
33:00Silicon Valley or whatever I think one
33:02of the things that we didn't quite touch
33:03on about Silicon Valley here and it's
33:05odd to me that people often don't focus
33:07about it which is just simply the
33:08network effect of talent that's there
33:10that the more better the more the
33:13excellent people are there the more
33:14excellent people want to be there and so
33:16what I'm finding for example this is
33:17going to be very interesting to watch in
33:19the Middle East is that if you go
33:21by now as compared to three years ago I
33:23see Egyptians everywhere I see Lebanese
33:25everywhere I see Jordanians everywhere
33:27because as things have been a little bit
33:29rougher in other parts of the country
33:31and because in fact the environment has
33:33opened up the rule of law some of the
33:35top-down stuff has opened up people are
33:37saying this is a place where I want to
33:39be and so not only will they be
33:41attracted by the opportunity to do
33:43things like Bitcoin and cryptocurrencies
33:45blockchain things but they'll also want
33:47to go to a place which simply they can
33:49succeed physically as as entrepreneurs
33:51and I think that's a very interesting
33:53thesis to look at it as an arbitrage as
33:55you suggested yeah the mobility is real
33:59it's staggering like I've a 22 year old
34:02who has lived both in China and India I
34:05mean I grew up in the time when you know
34:07I lived in Hong Kong for two years and I
34:09never called home because it was so
34:10expensive so we are mobile not just our
34:13mobile devices but we move everywhere
34:15everything can move now okay well that's
34:19all we have time for I wish we could
34:20keep the conversation going but thank
34:22you very much a know Brad and
34:24Christopher really appreciate your time
34:26and thanks for joining the a 6nz podcast