15 November 2014
Grenada Trade Centre
Morne Rouge, St George
Audio of Feature Address:
Governor-General, Excellency Dame Cécile La Grenade, Prime Minister the Right Honourable Keith Mitchell, Ambassador Angus Friday whom I haven’t seen for many years, Permanent Secretary Timothy Antoine, President of the Grenada Industry and Commerce Ruel Edwards and Mrs Edwards, US Chargé d’Affairs, other specially invited guests, ladies and gentlemen, members of the media.
First of all let me say what a privilege it is to have the honour to speak with you tonight. I always look forward to coming home, and anytime I have an opportunity to share my insights and thoughts with Grenadians, it’s always indeed a pleasure. Coming here was not so easy. You know usually I’d come here from California, but this time I was actually working on an investment opportunity in France and had to fly here from Paris just for this, and then I have to take off tomorrow to head back. But being here and even despite my fears of chikungunya, my friend Petipha promised me that she would be sure that no mosquitoes would bite me, and so far she’s kept that promise.
Tonight I might share with you my thoughts on several topics, and it’s kind of some musings regarding entrepreneurship, technology, innovation, the diaspora, and our pursuit of socio-economic advancement.
But before I start, I’m going to start by talking a bit about the global economic crisis, and the reason I decided to do that, is that I try to read several Caribbean newspapers. I read about seven or eight newspapers from the Caribbean every week, and I recognise that politicians and businesspeople seem to not be able to give a speech without talking about the global economic crisis, so I thought I would keep that trend going, and I’ll start with that as well.
You know, 2008 was an interesting year. In 2008 I was running a semiconductor company. Our fiscal year began in September and we started off at a great pace. In the month of September 2008 we had monthly revenues of 75 million dollars and we were feeling pretty good. There were rumblings about the global economic crisis, but we certainly not feeling it and we were feeling pretty good. And then by November, we lost two–thirds of our revenue. Within eight weeks, our revenue went from 75 million dollars a month, to 25 million dollars a month, and we had to react to that. You know the global economic crisis hit like a nuclear bomb. Many business and even complete industries, such as construction and housing in the United States were completely devastated. Business globally experienced dramatic reductions in revenues and market value.
I remember a friend of mine calling me from China and said all the cranes have stopped; nothing is happening. Lending activities were frozen. These led to business closures, mass layoffs, drastic restructuring, and drastic rearchitecturing of many businesses. The Caribbean experienced even greater shock than many. For most Caribbean countries, the crisis resulted in lower tax base, decline in tourism, reduction in FDI, decrease donor activities, higher spend for social welfare, and decreased national borrowing. But businesses reacted to the new economic realities, and many have rebounded. If you look at many businesses today, they have actually enjoyed a pretty good ride over the past five or six years, and most businesses are stronger today than they were just before the economic crisis.
In the Caribbean however, the effect has been lingering. Probably because we spend too much time talking about it and not enough time acting on it. I believe the comparatively slow recovery in the Caribbean can be impacted if start acting and talking less. But to all the people who like to talk about the global economic crisis, I’d like to say one thing — enough already. We are tired of hearing about the global economic crisis. We do not need to be continuously reminded. Some of us have lost our jobs, many of us are underemployed, some have had to quit school or delay our education, and several of us are barely making ends meet. We’ve got it. Message received, no need to resend. No more excuses.
What we need is a credible strategy for sustainable strategy for sustainable economic growth. We must now respond and adapt to a new economic reality, and we should have done this sooner. In this new reality, we face a daunting challenge. Economic growth will require establishing businesses that can compete in a global marketplace. And falling behind in the technology revolution may stagnate our economies for decades. Serious changes are required. No doubt, we’ve made progress over the last 35 or 40 years, but we have not made enough progress.
Governments and business still operate based on old practices and traditions. Philosophically, many of our practices are still tied to old colonial ways. How many times have we heard “that is not the way we do things down here.” Traditions are important, but we cannot allow those traditions to weigh us down. We have to be willing to try some new approaches. Over the last few decades, a lot of our focus has been on FDI and tourism. These are important; they’re necessary; but they’re not sufficient. Economic diversification must be more than just buzzwords.
New economic pillars must become more than just manifesto promises. In Grenada we seriously need to add one or two businesses that can scale into serious enterprises, and we need better, more viable, small businesses. FDI is important and we need it, but there is no direct correlation in the Caribbean over the last several decades, between FDI and growth.
Barbados is an example. Grenada is one too, but in order to not offend anybody I decided I’ll use Barbados. So for all the Bajans in the crowd, sorry. Although FDI in Barbados increased substantially since 2005, economic growth in Barbados has actually remained slower than in many Caribbean regions. In Grenada also, the trend is similar. We’ve seen significant increase in FDI in the decade between 1990 and 2001 or so, but we didn’t see necessarily the same type of economic growth associated with that, and that’s because just FDI by itself is not enough. We need to be able to attract the right type of businesses, and if we do, there is a significant multiplier effect that can be seen.
Many of the examples that I would use and case studies come from the technology world, because that’s my world. That’s the world I live and play in. If you take the case of Apple, the number of indirect jobs created by Apple is about 5.4 times the number of jobs, the number of people, that Apple actually employs. 6.8 times for Microsoft, and the technology industry in general is 5 times. If you compare that with manufacturing, and even the average Fortune 500, and many large enterprises, you can clearly see that if we attract the right type of businesses, we can have a significant multiplier effect on job creation.
I’ll share with you a couple of case studies, and I’m going to try to do this quickly, so that when our moderator pulls me off, I’ll be complete. I was telling Miss Lewis–Smith that I think it’s a little bit unfair to have me fly all the way here from Paris to talk for 20 minutes or so, but I’m going to do the best I can.
The first case study is a company called Global Foundries. In 2008, AMD which as many of you might know is a competitor of Intel, announced plans to build a $600 million semiconductor facility in New York. People thought that was crazy. Everyone was moving these facilities offshore, and AMD decided they wanted to locate that facility in New York. And they worked with the New York government, and the new facility was created. That new facility is estimated to have created almost 1,500 direct jobs, and 5,000 indirect jobs, with an annual payroll of 290 million dollars. But not only that — associated with that, we now have a tech alley that has begun to emerge, with key suppliers of engineering services and production inputs supporting that industry.
The second case study I’d like to mention is Tesla Motors. Our own firm, Riverwood Capital, was one of the first investors in Tesla Motors when it was first started. In fact one of the first vice-presidents of engineering of Tesla Motors used to work for me, and we invested in that company. I have to admit we didn’t hold the stock for long enough when it went public. We sold at $50 thinking that we were doing great, and now the stock is $280. But in 2014, earlier this year, Nevada approved a 1.3 billion dollar package of subsidies to try to lure Tesla Motors to establish their battery facility in Nevada. They competed against Texas, New Mexico, Arizona, and California. Nevada won. But Nevada currently lacks all of the needed skilled workforce, and even the supply chain to make this happen.
By the way, I should also mention that there’s actually a Grenadian who is now involved in helping to set this up at Tesla Motors — Jumie Yuventi — some of you might know him. Over the next year, Tesla will hire 6,500 or so direct workers, with the expectation to provide 16,000 additional jobs in the area. And the economic impact for Nevada is estimated to range somewhere between 15 and 115 billion dollars of the next 20 years. And right here in Grenada, we have examples, like the medical school.
But in order for us to achieve things like this, we need change. We need to embrace and encourage change. We live in a culture where we tend to resist change. And sometime ago I gave a talk in Grenada when I said that change is inevitable. The stone age didn’t end because we ran out of stones. The stone age ended because somebody decided to find a better way to do things. We need to start thinking the same way instead of holding on to the old practices.
I also want to make a point that speed matters. We talk a lot about renewable and non-renewable resources. The most important non-renewable resource is time, and we seem to have no problem wasting it. We have to realise that we must move faster, and you can’t recover if you waste time.
We must become less dependent on government and politicians. That is not intended for you, Mr Prime Minister. But we do need our governments to do some things. Governments should focus on strategic planning processes and performance, they should develop and improve infrastructure, they should eliminate bureaucracy, they should develop policies specifically aimed at encouraging the transfer of technologies and know-how, they should develop policies aimed at fostering entrepreneurship and innovation; we need a coordinated policy framework that will result in consistent long-term policies that will not subjected to changes just because they were implemented by a different political party. We need government to provide at least as much attention to local businesses and entrepreneurs as they do to foreign direct investors. We need the government to clear the path for progress, and then we need them to get out of our way.
We need to re-edit our economic strategy, and I came up with this acronym. It took me like 3 days, so I hope you guys appreciate that:
- E — We need to foster Entrepreneurship
- D — we need to leverage our Diaspora
- I — Promote Innovation
- T — And promote the early adoption of Technology
And I’d like to talk about each one of these:
It is time to unleash the entrepreneurial energies of our young people. Unlike some of us older folks, the young people have an innate desire to pursue opportunities that we used to be afraid of pursuing, and we need to allow them to do so. But we must realise that entrepreneurship, even though it doesn’t have an official definition, or everyone has their own definition, is not what many of us think it is. First of all, when you hear someone complaining about not having money or not having resources, they’re not an entrepreneur. I don’t know too many entrepreneurs who started businesses with a whole bunch of money in their pocket. Entrepreneurs relentlessly pursue opportunities, without regard for who controls the resources. They believe so much in what they’re trying to do, that they believe they can convince the people with resources to back them.
The younger generation must obviously play a major role, but everyone is needed. The younger generation brings energy, exuberance, fearlessness, and a great entrepreneurial drive. But we need to clear the obstacles that are getting in the way of their entrepreneurial spirit. And one can argue that bureaucracy is one of the greatest of those inhibitors. We need to eliminate bureaucracy. But successful entrepreneurship requires more than just youthful exuberance and fearlessness. We also need technical or domain expertise, vision, leadership, competence, understanding of global competitive landscapes, access to markets, mentoring, marketing skills, and experience. This requires the younger generation to partner with the older generation to make this happen.
There’s also a lot of talk about venture capital. I’ve seen a lot of people talking about we need more venture capital in the Caribbean, and that is true. But I want to share with you, that just venture capital is not going to make a difference. What we need is smart capital. If you look at the venture capital industry, it has not performed well over the last several years. In fact, there are few companies that do well. You look at Google, you look at Yahoo!, you look at eBay, and many of the successful companies — it’s the same investors that invested in them. Over the last several years the number of venture capital firms has declined. in the technology space in 2000, we had over 200 venture capital firms. Today it’s less than 100, and the number continues to drop. Success in venture capital is not just based on money. The successful venture capital firms bring value-add, in additional to the financial capital. So you need financial capital and intellectual capital. Just putting money to work is not necessarily going to yield results.
We need people to help the entrepreneur not to make the typical entrepreneur mistakes, and there are 5 of them that I’ve seen throughout my career:
- Almost every entrepreneur tends to overestimate the size of the market
- Then even worse, they tend to overestimate the percentage of the market that they can capture
- They underestimate how long and how much money it will cost to develop their business
- They do not spend enough time studying the competitive landscape
- And they almost always underestimate the competitive response.
Now if you’re starting a company, and you make a mistake in one or two of these, you’re okay. But if you get all of them wrong, you have no chance.
Let me spend a bit of time talking about the diaspora: Often times when we talk about the diaspora, we think about remittances and barrels. We talk about how much money is being sent home, and we talk about things like $50 billion, $60 billion to the Caribbean and Latin America, and all of these kinds of things. If we think about the diaspora in that way, we are completely missing the point. Our diaspora tend to be highly educated. 80% of the higher degree Grenadians live outside of Grenada. We have to find a way to tap into the intellectual capacity of the diaspora. The government must encourage all of our nationals and people of the region to get involved in nation-building. The diaspora has to be seen for more than just remittances, and we need to pursue and harness the skills of those of us in the diaspora with as much urgency, as we pursue foreign direct investment.
Innovation: Many people have their own definition of what innovation is. This is mine: Innovation is the productization, implementation and commercialization of unique, viable ideas. You notice I said nothing about technology. Innovation has nothing to do with technology, it has to do with ideas. Innovation is driven by relevant and deliberate inputs, and not based on happenstance. I don’t know of any innovation that just happened. In government and in business, we will not be competitive if we just continue to do the same thing we’ve always done. We need innovation in government, and in business practices, to create differentiation, improve productivity, and improve competitiveness. But we have some barriers we must overcome:
Grenadians tend to be very risk-averse. I once told my deceased mother that if I lived in Grenada, I don’t think I’d have any chance whatsoever of accomplishing some of the things I did, because one of the most common things you in Grenada is why you can’t do something, or all the reasons why probably isn’t going to work, and not enough encouragement to allow people to overcome their risk aversion.
We must encourage our youth to take risk. Which means bankers — do not blackball somebody because their first attempt failed. That is the number one cause of risk aversion. In Silicon Valley, when you try something and you fail, it’s called experience.
We lack market intelligence. We lack the ability oftentimes to attract and retain human capital. We have to work on eliminating some of the restrictive labour laws, and in some cases the overly aggressive anti-business labour unions. I’m not specifically targeting anybody.
We need to eliminate government interference or perceived unfairness, and we need to create better access to markets. By the way, on many of these, the diaspora can help.
Let me talk about technology: First of all, let me say I’m a technologist, because I’m a gadget guy. I have 10 cell phones, 5 tablets — I don’t think there’s ever a gadget that I didn’t like —if there’s a gadget that I didn’t like, then it’s not worth making. And many of you are the same. We Grenadians love technological gadgets, but for entertainment purposes. For us, technology is about entertainment. But we need to embrace technology as a platform for economic transformation, and not just technology for technology sake.
For the young people, this is a great time to be a technology entrepreneur. We have some technological changes and trends that create opportunities that are perfect for young entrepreneurs in developing countries.
One of them is called computing. I don’t know of any new technological trend in the past decade that is more relevant to developing countries than cloud computing. For the first time, you don’t have to try to sell people hardware. So now small businesses can afford to have the same capability like large businesses without having to invest in hardware. With cloud computing, the network is now what you worry about, and the computer is now the data centre. The computer resides somewhere else, you leverage the network, you don’t have to buy hardware, you can invest in services, you can pay as you go, it is a fantastic opportunity. Young people should be looking at leveraging cloud computing, to create new businesses targeting the kind of markets that we live and work in. That’s a free piece of advice I’ll take 2% for every successful business started in that space.
But businesses, it is sad to see how little we have leveraged technology. When it comes to cell phones, I think the Caribbean has some of the highest penetration rates in the world. Many of you have two cell phones: Digicel and LIME, and whatever else, I’m not sure I understand how that works. But technology should be leveraged to improve productivity, to reduce cost and to improve global competitiveness. I am excited by this new award that the GCIC has come with. It’s humbling to have my name associated with it, but I hope that it will encourage more companies to look at leveraging technology to improve their businesses.
Technology can also be use to bridge skills gaps, and create new business opportunities, and we should be using technology to develop applications and technologies or products that are related to our business environment. You know we tend to be smaller businesses, and they’re lots of small businesses. We don’t have to try to compete with companies in the United States. The big companies are not focus on the kind of businesses that exist in the Caribbean and many of the businesses that exist in Latin America and Africa. We should be developing products and services aimed at those types of businesses that we understand and where we can win. We must also target larger markets, and by larger markets, I’m not necessarily talking about larger in terms of economic power, but larger meaning more than just Grenada.
We only have 100,000 people here, we’re not going to have too many big businesses if all we do is try to sell to each other. But to do so, we must improve competitiveness and create differentiation, and the way to do that is to be early adopters of technology. If you wait until other people have adopted the technology, you’ll be behind. You want to be early adapters so you can be in front, and you can establish a competitive position before other people realize the advantage that you have from the use of that technology.
The benefits of technology: We can improve and streamline our business processes, improve efficiency, reduce bureaucracy, eliminate corruption, increase productivity, improve ease of doing business and customer service, reduce cost, expand market opportunities, increase differentiation, improve competitive advantages, and improve revenues and profits, and that is way more important than tax holidays.
We must move towards a knowledge-based economy. The competition is global and they’re stronger, which means by the way, if you choose a trade, you must be really good at it. Potential alone is not enough. We talk a lot about the potential of Grenada. We need to work to realise that potential. There’s a role for academia. We must work to accelerate job growth, improve the quality of jobs, increase wealth creation, and that starts I think in the schools, especially your colleges and universities. It is one thing to offer classes in entrepreneurship, and I notice a lot workshops. But I actually think we doing it wrong. Hiring somebody who just went through a workshop themselves to come here give a workshop is not to going to make us any better. It is time for us to get people with credible experiences and accomplishments to get involved and let get involved in the schools. I am working on a proposal that I hope to present to the Government relatively soon, on partnering with the Ministry of Education to transform T A Marrshow [Community College] into the premier tertiary college in the Caribbean.
I have already got my alma mater McMaster University to agree to partner with us in that, and they are actually working on developing a certificate programme for teachers, but they will come and help improve the standard of teaching, and help us improve our curriculum, and the goal here is to better prepare our students to get into the top universities in the world.
In conclusion, we need to the government, businesses, trade unions, and NGOs, to work together as stakeholders, with the common goal of building a better Grenada for everyone — not as skeptical, untrusting, opponents, with selfish and narrow objectives. I noticed nobody clapped for that, that’s alright. Success will require the ability for us to attract capital, but I do not believe we will be able to address our lack of capital problem until we address some of our other problems: cultural, political, and lack of ideas. I actually think our biggest problems is not the lack of capital, but the lack of ideas.
Innovation can sometimes require a large amount of capital, but not always. One of our portfolio companies GoPro went public in June. GoPro was started by a young entrepreneur with a loan of 35 thousand dollars from his mother — the company is worth 10 billion dollars today. Capital is needed — along the way, however, I should add that our company Riverwood Capital did put in about 90 million dollars in it to help, but he already was fairly successful by that time. Capital is needed but before capital infusion there needs to be supportive long-term government policies, reliable infrastructure, a highly trained workforce, and the transfer of know-how and knowledge.
I want to thank you very much, and I want to offer one last thing — It is a pleasure to be involved in anything in Grenada. I left Grenada when I was only 14 years. I have not lived in Grenada for most of my life, but I love this country and everything I do for this country, I do out of love for this country and not out of obligation. I thank you for the opportunity to speak to you today.
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