Go East, Young Man, Way East
So to bastardize an expression of one of my forefathers, Horace Greeley, everyone should at some point in the near future “go (to the) Far East.” I am traveling through the region as I write this and am constantly amazed by the vitality and energy in all of my meetings. This enthusiasm is present even in the face of what are clearly signs of turbulent economic times ahead.
I grew up for a number of years in Hong Kong, which is where I started my trip earlier in the month. For all its chaos and over-crowding, the former British colony “just works”—and perhaps even more so now that the Chinese have reclaimed this gateway city into the mainland. The level of entrepreneurial activity is overwhelming—everyone I spoke to wants to start a company, has a brother/uncle/grandparent/niece/roommate who has/is/will start a company. Even the expat spouses are starting companies—and these are people living the charmed life of deep-pocketed expense accounts. What is so extraordinary is that the people of this generation of Asians are doing things that their parents could not have even understood—much less fathomed—only a few generations ago.
I had the great fortune of meeting a handful of other regional country investors the last few days as well. It is clear that the broader economic issues—energy prices, commodity prices, broader inflation, extraordinary weakness in the U.S. dollar, volatile interest rates, credit and liquidity concerns—are having profound impacts on the near-term public investment climates throughout the region. As I write this, the Shanghai stock exchange is down nearly 8% for the day. New investment pace has slowed, broader growth rates are off measurably, IPO activity is nonexistent, regional M&A volumes are way down.
But the entrepreneurial enthusiasm appears unwavering. It is clear that people here feel they are establishing the next generation of great companies that will go on to be local and regional winners—much less companies that will compete aggressively on an international scale. And the private investment markets still are showing great fortitude: in Vietnam alone $5.5 billion dollars was raised by 50 new private equity and venture capital funds established last year—this for a country which has only 200 public companies listed on the local stock exchange.
It is not just the regional pride of hosting the Olympics in a matter of weeks which is getting them through the turbulent economic conditions—or the unfathomable devastation caused by the earthquake in Sichuan province or the typhoon in Myanmar—but the sense that Asia is coming of age. I tell my children constantly that although we today think of the centers of the world to be Boston/New York/San Francisco, the centers when they come of age will Beijing/Shanghai/Bangalore—and it takes being here to realize that.
So as Xconomists, what are we to do? Well, in this case, ignorance is not bliss. We risk being eclipsed in a very real and painful way if we continue to be complacent about our competitive position. We are not just competing with the Valley to build the next great Web 3.0 or medical device companies, but a whole host of cities many of us have never seen—much less are able to point out on a map.
I did not set out to develop a set of “cure all” strategies—maybe in my next posting—but rather share my observations from the economic front-lines. And it is rather scary…