When I was a kid, we were taught in school that oil would be drying up, and so would revenues from oil. At least they got one thing right: oil revenues are drying up, albeit for vastly different reasons. And those governments that used to rely on oil revenues for income are going to have to switch to the good old taxation systems. But taxation systems only work in economies that have a thriving private sector, since a governement that takes back money that it gave away in the first place can’t last very long.
So the oil problem boils down to a simple question: how do we foster private enterprise wealth creation? And whereas wealth creation is the very definition of entrepreneurship, it is clear oil’s decline and entrepreneurship’s rise are necessarily intertwined.
Succeeding at creating a thriving entrepreneurial ecosystem is the key to any economy that doesn’t dig out natural resources. You either have natural resources or human resources. Or both. But nothing else. It’s a nice boolean setup. The Earth and/or the Brain.
Now the exciting thing in the past few years is that real attempts have been made in multiple countries in the Middle East, and we can draw some blunt and sometimes painful lessons from them.
Truth number 1: you can’t just write a check. It’s not by announcing a big sum of money to be spent on small enterprise that you’ve solved the problem. In other words, funding is a necessary but insufficient condition. Kuwait tried it with a 7 Billion Dollar SME fund, and it isn’t working so well. You can have the money, but if you don’t have the complete human capital to deploy that money correctly, nothing will happen.
Truth number 2: wealth creation isn’t for everyone. You can’t force people into starting their businesses. They’ll be miserable and fail equally miserably. But you can really help those with an entrepreneurial mindset by providing them quickly with the cash, regulatory framework for entrepreneurship, and other resources. So find ways to tap into those “customers” of yours. Which is why we are very wary of Egypt’s “cash for pretty much everyone” program.
Truth number 3: free flow of information will dramatically improve your chances of success. This includes many seemingly small things that make a huge difference. First, for countries like Lebanon, you must freely and massively open up the Internet pipes. Users must never have to worry about slowdowns or download caps. Access to information and tools for creating value must be unfettered. The blocking of VoIP (in the GCC among many areas) should stop. A stunning statistic: for every 10 percentage point increase in broadband penetration, GDP increases by 1 percent. Second, facilitate communication between people. Create work environments that are easy to get into, easy to get out of, but compelling to fall in love with. Spaces like Dubai Silicon Oasis are fundamentally flawed because they’re physically remote and managed like a real estate play. Third, get rid of non-compete agreements for non-key employees at least. Allow for the free flow of talent.
Truth number 4: without failures there are no successes. One of the great French chefs Nicolas Lebec has a signature dish: egg cooked in ash. Why don’t you go ahead and try it. Take a fresh egg and smother it under hot ash in a fire pit. Good luck. One wasted egg. So you’ll scratch your head and give up. What is Lebec’s secret? Putting a dozen eggs in the hot ash so that at least one comes out intact. It may cost the price of a dozen eggs, but that one egg that came out of the fire intact is what successful entrepreneurship is about. And it’ll be worth so much more than that box of eggs.