Month: May 2014

A democratic Africa – a basic economic model

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In business terms innovators always want to be the next disruptive innovator.  A disruptive innovator, let me deal with this first.  A disruptive innovator is someone who changes the way business works.  Not innovation with incremental improvements in an existing industry but someone who creates a whole new industry.  Of course people will challenge my definition, but without making it to complex a simple example may help.

Compact disks created innovation in the music industry, a massive step over vinyl, but in essence a step up in technology.  This is not a disruptive innovation, it was a logical progression for the music industry.

Friendster and others, created a new business model.  Social media – an engagement platform for friends and family. Facebook has gone on to turn this into a business model which was unthinkable 20 years ago.  This is a disruptive innovation.

Here is the thing about building disruptive industries.  These industries create employment for millions of people.  Think about how many people are employed building web sites, running advertising on platforms like Facebook and other technology innovations from the last 4 decades.  Not only is employment created but employment with great opportunities that prioritise skill and knowledge over raw power.  In other words brain power versus muscle power.  With the greater level of brain power the higher the standard of living.

You may read this and think, well this is not true.  I agree, it is not always true.  Look at how much sports stars are paid.  But in reality this is a fraction of the population.

To get back to the title of this blog post.  It refers a democratic Africa as the only viable economic model.

Well here is the major point.  Africa needs disruptive innovators.  Innovators which lead to the creation of millions of jobs.  My point is that it is just not going to happen unless there is an environment that fosters this.  I believe the only environment is a democratic environment.

Thousands of youngsters dream of making it really big. Bringing an idea to life and changing the world.  Improving their thoughts into something material that makes the world better.  Some do this every day now, but not by creating a disruptive industry but by working in industry that is established and one that was once disruptive.

The problem with working in an existing industry is that all industries are dominated by capital.  Capital runs the world in reality.  If you have capital in your economy you will have industries which employ people.  But mature industries want to drive costs down so capital is always looking for cheap and inexpensive labour.  One where a little bit of brain power is required, but not a lot.  Stamina and desperation are better.  Workers who need to work for meagre wages to survive.  Add this to the fact that the capital comes from well- developed industrialised countries and all the effort the worker puts in ends up returning the real returns back to those who already have the capital.

The key is to break the cycle of capital dependency by creating new industries, one driven as a disruptive innovation and then build it into a Microsoft or a Facebook.

Here is where the problem lies for Africa.  Disruptive innovations require 2 essential components to be successful.  Firstly, an environment which is stable and breeds innovation.  A place where people can go, congregate, collaborate and work with their ideas aiming to realize them.  Yes, you may have a crazy inventor in a garage but the best models are one where people share thoughts and ideas.  Where the thinking is progressive and informed.  Explicitly this implies some level of education.  People need to be enabled to go to school, to learn and to foster the right attitude.  The second ingredient is once again capital.  Innovators need backers.  People with strong business skills that know how to commercialise a product to sell in the world.  People who have money to turn the innovation into a commercial success.

Okay, so the problem is clear – you need a strong education system that encourages broad and diverse thinking.  People need to be capable of going to school to learn in a stress free environment, free from discrimination and free thinking even if this is contrary to accepted norms.  Let me deal with the proverbial elephant on the page – this means that there can be no limiting factor, be this religion or gender or social standing.  Everyone goes to school and everyone can say and think what they want.  The more people doing this the more likely the hot bed of innovation will grow.

The problem is that you also require capital.  I mentioned existing industries.  Well existing industries bring capital to economies.  This means that economies need investment to bring capital.  One thing that capitalists don’t like is volatility.  They don’t like civil wars, religious violence, rampant corruption and political bullies.  Look at many countries in Africa to see how devastating the lack of capital is and how stagnant economies are – places like Egypt, Libya, Sudan, Zimbabwe and the Central African Republic.  The list goes on and on. It is not likely that large capital injections are going to appear overnight in these countries.

From my argument I cannot foresee any of these economies becoming or developing the next silicon valley.  Arguably this is the best place to be in the world if you want to see innovators in full flight.  A place where free thinking is the most valuable commodity on the planet.  The free thinkers are there, so what else is there.  Capital.  The venture capitalists are there by the dozens.  The free thinking brought them.  The capital did not bring the free thinking – nope, it happened the other way around.  Many countries have lots of capital – the gulf states and obviously China are good examples.  But these countries don’t value free thinking.  They value cheap labour, innovating in existing industries where they can drive costs down.

So innovation materially requires free and liberated thinking. It is an absolute. I believe it is a non-negotiable.

If Africa was a person here is what I would say – “Listen up, get to it.  Build a democracy, where greed and corruption are dealt with.  Where wars cannot flourish.  Where people can be free in their faith without fear.  Where everyone goes to school.  Free thinking my friend, be free.  Yes you may be scared.  The horrible news station may say something bad about you.  You may go to jail.  You know what – to stop this from happening – just stop doing bad things.  It is that simple and let everyone be free.  Everyone, not just your friends and cousins and generals.  Everyone.  Only then will the economic dependence on oil, minerals and agriculture change.”

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