In the old days, it was the discovery of natural resources, such as gold or hydrocarbons, that drove the world’s most dynamic economies. Today, it’s technology, innovation, and entrepreneurship. As we all know by now, a one- or two-person tech start-up with no physical assets can become a multi-billion-dollar company and transform entire industries, almost in the blink of an eye.
This tech-driven revolution potentially gives developing countries a great chance to speed up the modernization of their economies. For example, Pakistan – which has 130 million young people and a largely traditional economy – and other developing countries could look for inspiration to China, which just two decades ago had a small tech start-up industry, but is now home to nine of the world’s top 20 digital companies.
I first experienced this Chinese tech dynamism when, inspired by the late-1990s Internet start-up culture, I moved to Silicon Valley and founded ePlanet Capital, a venture capital firm. I was new to the field and unsure what to expect. In 2000, I met Robin Li, a Chinese entrepreneur in his twenties who was seeking funding for his new company, Baidu. Based on conventional investment criteria, Baidu’s chances of success seemed low. The company had no track record, limited funding, and an inexperienced team, yet they were aiming to challenge search giants Google and Yahoo.
But I soon learned that in the new internet world, these obstacles were perfectly normal and surmountable by visionary, passionate entrepreneurs with big dreams and ideas. Consequently, my firm went ahead and invested in Robin’s vision. Within five years of that first meeting, Baidu went from little more than an idea to being the leader in China’s Internet search industry, leaving Google and Yahoo far behind. Today, it is one of China’s top three internet companies, forming the so-called BAT triumvirate along with Alibaba and Tencent. Robin himself is now the Larry Page (or Bill Gates) of China, with a net worth of over US$10 billion.
Baidu’s story is similar to that of many other successful tech firms. Like Alibaba, Apple, Google, and Facebook, the company was driven by young founders rather than older business tycoons. In addition, Baidu initially relied on venture capital for equity funding, avoiding the conventional bank debt that would have been a kiss of death for a young start-up. Like its successful US peers, Baidu posed a radical and disruptive challenge to incumbent market leaders. Finally, Baidu showed that good ideas can grow at an exponential pace, as its market share rose from zero to market leadership in five years.
Since then, the pace of technological innovation has accelerated further, with the computing and internet revolution morphing into a new one powered by artificial intelligence, nanotech-biotech, and cyber-physical systems. Here, too, the opportunities for visionary entrepreneurs are huge. And here, too, the global leaders are the US and China, with the latter continuing its remarkable recent tech development.
What, then, should the priorities be for a developing country such as Pakistan, which today is where China was economically 25 years ago?
At present, Pakistan’s economy is focused on traditional industrial sectors, agriculture, textiles, fertilizer, and cement, leaving it trapped somewhere between the first and second industrial revolutions. The combined market value of all 559 companies listed on the Pakistan Stock Exchange is about $60 billion, equivalent to that of a single top-100 technology company.
To break its cycle of poverty, Pakistan must create conditions enabling its broad participation in the technology revolution. Only through radical reform can the country leapfrog to the AI-led Fourth Industrial Revolution of today. To achieve this, Pakistan must recognize that its young people are its most precious resource. It should educate and empower them, and cultivate their success, particularly in science and technology. If they succeed, Pakistan succeeds.
The good news for Pakistan and other countries in a similar position is that tech start-ups require far fewer resources than traditional large-scale industrial firms. Whereas the latter typically need hundreds of millions of dollars in capital, plant and machinery, and bank loans, tech companies need only a small team of smart people, computers, modest funding, and mentorship. Young Pakistani entrepreneurs are just as well placed as their Chinese counterparts were two decades ago: they need big ideas and encouragement to build on them.
Here, of course, the provision of venture capital is essential. Pakistan should therefore establish a national venture capital fund to promote technology entrepreneurship. Moreover, China’s rise as an economic and technology leader gives Pakistan a unique opportunity to learn from its neighbour and collaborate with it in education, science, and technology. And Pakistan should leverage its historical ties with US and British universities in these areas.
Technology, innovation, and entrepreneurship are the key ingredients for economic success in the twenty-first century, as the US and China are demonstrating. Pakistan has huge untapped potential in these fields that must now be realized. The payoff could be enormous: a more dynamic Pakistan that is better placed to solve many of its other problems.
Asad Jamal is the founder and chairman of ePlanet Capital, a Silicon Valley venture capital firm.
Copyright: Project Syndicate, 2019. www.project-syndicate.org