Rather than trying to copy what others have done, what can we do first?
It’s ironic, and frustrating, that whenever we turn our mind to innovation or technology or startups or investment or even branding our first instinct seems to be “what solution can we import from overseas?”
We seem very attracted to the idea of being second (a la Hollywood vs Wellywood).
But, what are we the first of?
One of the ideas we seem to love, almost as much as being world class and punching above our weight, is the idea that we could be the next Silicon Valley.
For example, speaking to the McGuinness Institute “Mission Aotearoa” event in 2021, NASA Chief Scientist Dennis Bushnell proposed that NZ should become “the preferred place to live and operate from for folks that ideate [Ed: 🙄], invent and create the future” and noted that “his friends all over the world wanted to move here”.
Reading between the lines, in case it’s not obvious, he’s saying that the type of people who create and build things come from somewhere else, not here, and that the obvious solution is to take all the Silicon Valley imports we can get (who presumably can’t wait to get out of where they are right now).
This is really misguided, in my opinion. We don’t need an influx of rich old folks, towards the end of their careers, to come here to retire. That won’t help us as much as some imagine. It’s well established now that investors from overseas are happy to put capital into businesses started here without us having to attach a residency permit to that money1 (although, of course, they want to have the option to live here, so if that is offered expect them to take it without question!) The price we put on our passports should be much higher. And, anyway, when we have tried this specifically in the past there hasn’t been a high retention rate!
It also massively overlooks the factors that led to the creation of the first Silicon Valley.
If you’re reeeeeally interested in this stuff then I throughly recommend you watch this dense talk by Steve Blank (this is definitely one you can watch at 1.5x):
Secret History of Silicon Valley (not so secret when you post it on YouTube, eh Steve!)
The tl;dr is: the formula to create a Silicon Valley is simple 🤨, all you need is an established world class university, a cold war and the corresponding massive increase in military funded R&D projects, ex-military professors and managers with radically different views on the link between academic research and private business, a government willing to be a significant customer of the new businesses created by this via large defence contracts, and a bunch of wealthy families prepared to take risks on funding the various private companies that are created (incentivised by cuts in capital gains tax rates and changes to pension fund rules).
Let’s not pretend that we can re-create any one of those inputs in New Zealand at short notice, let alone all of them.
And, even if we could … then we’d be Silicon Valley.
What I think people pushing this idea really want is all of the good bits of Silicon Valley but without all of the bad bits. This is a little like hoping that your kids will inherit all of your favourable traits but none of your vices.
To pick one example: You sometimes hear people saying we need to embrace failure like Americans do. You rarely hear those same people say we need to tolerate success like Americans do. But they are two sides of the same coin. Viva la inequality, eh!
So, when you say that New Zealand could be the next Silicon Valley I assume either (a) you don’t really understand Silicon Valley; and/or (b) you don’t really understand New Zealand.
Another country that we are often encouraged to emulate is Israel. Perhaps because they are about the same size as us and have been very successful.
In the early 2000s we enthusiastically copied their program to bootstrap a local venture capital sector, with remarkably poor results. We called ours the New Zealand Venture Investment Fund. The pattern here is frustratingly familiar…
What we wanted was their outcomes. And we copied their strategy. We seemingly didn’t pay any attention to their context, or the unique factors that enabled their success, that we were never going to re-create (what we might call “competitive advantages”).
Specifically in the case of Israel, their compulsory military service and the massive immigration they experienced immediately prior to their boom.
When you visit Israel and speak with startups one of the biggest lessons is the first question potential investors ask founders: “What unit did you serve in?” This is a simple filter to quickly understand more about the sort of training and networks the founders were exposed to during their two years in the military. When the answer is “Unit 8200” then the next question is quickly “How much can I invest!” Of course, in New Zealand, we have nothing that even approximates that.
Then you discover how many of the senior people you meet working in their ecosystem, as investors, mentors and/or advisors, are folks who moved to Israel from former Soviet states in the late 1980s. There was a 25% population increase in 10 years, and a large number of those people were qualified scientists, engineers and mathematicians who played pivotal roles in many of the early successful ventures and venture funds.2
Throw into the mix a lack of natural resources and a constant existential crisis (another repeating pattern) and you have a good mix of ingredients that we in New Zealand will never have (fingers crossed!)
And then we wonder why it didn’t work here!
A third and final example:
Older readers may nostalgically recall when what we really really wanted in New Zealand was our own Nokia, so we could be a bit more like Finland.
Nokia was an old company that transformed itself from a pulp and paper producer into a hugely successful electronics companies in the 1990s. At one point Nokia accounted for 25% of all R&D spend in Finland and nearly 3% of GDP. More remarkably in 2000 they represented almost 33% of total GDP growth for the whole country. We loved the idea of turning a primary producer into an innovation powerhouse for the whole country.
Curiously, you don’t hear that specific goal referenced so much any more, post iPhone. In 2013 Nokia sold its once dominant mobile phone division along with a giant pile of patents to Microsoft for just €5.4 billion.
Even in Finland they have changed their strategy. Business Finland’s CEO Pekka Soini has said:
Finland shouldn’t rely on ‘one national champion’ like Nokia again, but should push smaller companies to increase their R&D spending and to adopt new technologies.
Just mindlessly copying others’ solutions has not worked for us and is not going to work. Our context is different. Our values are different. We need to think much better about the future than that.
The questions we should be asking instead are: What are our strengths and how can we leverage those to create success for ourselves? And, what are our constraints and how can we reduce or remove them?
Paul Callaghan’s mantra, in response to this question was:
Be the place where talent wants to live
There are, of course, multiple ways to read this:
Are we the place where talented New Zealanders, born and educated here, want to stay?
Or, are we the place where talented people from around the world want to come and work - that could be to study, or complete research, or start a business, or work on an existing business?
Of course, both! But the tactics required for each are very different.
We’re not going to convince anybody to stay by turning ourselves into a second-rate derivative version of what people can easily get directly overseas.
And, those we need to attract are more usefully qualified immigrants, hungry for future success, than billionaires wanting a comfortable retirement playground. A much more interesting question is: why don’t we currently welcome more of them?
Pre-Covid this got to the ridiculous situation where government agencies were paying for successful investors to visit New Zealand to sprinkle some of their magic dust on us. In my opinion, when high-net-worth folks from overseas are so excited about visiting that we need to pay for their flights then we’ve likely misunderstood their enthusiasm. Hopefully that’s one thing we can consign to history after borders are reopened. ↩︎
Interesting to note, in the most recent stats I could find, from 2019, Israel reference the country of origin (73.8% from former USSR states) and education levels of immigrants (74.8% of them had 13 or more years of schooling), but don’t mention wealth at all. ↩︎