But I am writing today, not about hatred and folly in general, but about a narrower point – namely, the need for an actual peace treaty in Lebanon, after decades of a formal state of war. Such a treaty is, in my judgment, essential for Lebanon’s economic future. And so it is essential for Israel’s security too, and by extension for the security of many other countries as well. For if Lebanon does not thrive — if the people of Lebanon lose hope — Lebanon will remain what it has been for three decades, an unstable and uncontrollable enemy of the Israeli state.

Lebanon is, in essence, a Third-World country – but one with access to a First-World talent pool, both in its diaspora and in its own educated and entrepreneurial resident citizenry. Yes, I’m aware that the ones I’ve met are probably the very best, the very brighest, and the most drivenly energetic. Even so, I have high confidence that there’s a large group behind them who can also, without apology, compete and win at the forefront of the world’s growth industries. Lebanon’s economic future depends almost entirely on whether that talent pool can be used to grow a modern, information-heavy, export-oriented economic sector. But that growth is impossible as long as non-Lebanese – and for that matter Lebanese themselves – rightly fear that the bombs and bullets will fly again. It’s a matter of investment prudence. Nobody is going to depend on a Lebanese partner for anything important, when the country itself can be torn to shreds again at a moment’s notice. There are too many other, safer places to turn.

I ran a panel at the recent TechLeb conference. On that panel, we extrapolated from the successful experiences of countries such as Ireland, India, and the United States itself, trying to figure out how best Lebanon could grow a technology industry, with all the benefits tech-led economic development brings. And there were lots of good, specific suggestions. But those details aren’t important now. What is essential — more than anything — is that there be a reliable peace. Nothing else matters – not pride, not vengeance, not even justice. Just a secure peace, internally and externally alike.

If such a peace comes, the world will step up to help Lebanon, for a variety of obvious reasons. There will be hope – justified hope. And if they can maintain their hope, and if outsiders maintain that hope too, then the Lebanese people, of multiple religions and ancestries, will build a vibrant, even booming country. But if peace once again does not come – if there is merely another tense ceasefire and temporary accommodation — then a generation or two will rightly despair, outside Lebanon for sure and probably inside the country as well. And if that happens, it will be decades before Lebanon has another chance to be a healthy member of the community of nations.

If you’re reading here, you’re probably familiar with my software industry credentials — top-ranked stock analyst, top-tier product analyst, sometime entrepreneur, etc. If not, there’s always my official bio. But I also have some non-trivial public policy and economics chops. I spent two years at the Kennedy School of Government after getting my Ph.D. Then, turning down an assistant professorship at the Kellogg School of Management as well as research jobs at RAND and IDA, I went to Wall Street — which is, if one chooses to make it such, one heck of a further education in economics. And then in the mid/late 90s, Linda and I actually got active in the internet services market, analyzing, consulting, etc. Indeed, we even (re)wrote a few speeches for Steve Case of AOL, including some Congressional testimony.

Bottom line: Yes, I actually have some idea what I’m talking about.

1. Worker culture — people don’t have the same entrepreneurial, hard-working drive in France as they do in the US. Based on what I know of Business Objects and also of Dave’s tenure there, my gut reaction is to say this is 2/3 justified, 1/3 Dave just being Dave.

2. A lack of specific skillsets. Also, a lack of connection to the most important market, the US. I agree completely, except that these considerations apply more strongly to well-established industries than they do to truly new ones.

3. A wealth tax that drives rich people, including previously successful entrepreneurs, out of France. Ouch.

At best, he greatly overstates the case. Much more product development has been done by Indian outsourcers than Russian ones, going all the way back to Release 1 of Microsoft Visual Basic. Even so, it’s a distinction worth thinking about if you’re trying to kickstart an outsourcing business (or considering using an outsourcer) in a less-commonly-used outsourcing country.

1. There’s a whole section on privacy, censorship, and freedom, both domestic and abroad. You can also find a link to it in the left sidebar.

2. I proposed two modes of hands-on involvement in fighting authoritarian-government censorship and repression. One is to immediately adopt the quick-and-dirty tactics of http://www.irrepressible.info, by adding a little code to your websites. (I’ve done that already on four sites.) The other is to help me theorize about a badly needed next-generation improvement on those.

3. There’s a whole section on technology-related economic development (again, also accessible from the left sidebar), most of it added recently in connection with my preparations for or ruminations after TechLeb. The most actionable private-sector idea in the lot is probably this one.

Please help. Everybody can.

Even so, if you care about technology industry economic development, the essays are worth skimming.

Technorati Tags: Paul Graham, Silicon Valley, economic development

Kevin Carroll confirmed something I’ve long thought was true – the Irish success story shows that you do NOT need engineering-driven businesses to have technology industry success. Ireland now has the second-highest per-capital GDP in the EU, largely on the strength of its tech industry (including life sciences). Yet that industry has been concentrated in manufacturing and call centers. There’s certainly also some R&D, but that hasn’t been the engine of growth in the way that, say, Finland’s tech prosperity stems almost totally from the product-driven success of Nokia and, to a much lesser extent, open source software creators. Other examples of engineering-light success include Costa Rica in call centers and various Southeast Asian countries in electronics manufacturing. Engineering-led success has been wonderful for a considerable number of countries – e.g. the US, Germany, Sweden, Finland, Japan, India, Israel, and Estonia, among many others – but it’s not the only way to participate in technology industry opportunity.

That said, there are plenty of product-driven opportunities as well. Anybody could strike it rich with a dotcom success, whether global (Skype) or regional. Enterprise products localized for language, enterprise size, etc. are still needed in many categories, all around the world. Arabization is still a big opportunity, since global vendors haven’t done a great job with right-to-left languages. Particularly needed is a run-time screen-scraper so lightweight that it could be plopped willy-nilly on top of existing apps, localizing screens on the fly with acceptable performance. Fortunately, both dotcom and SaaS businesses have the option of locating their main servers offshore, should telecom service or data protection be deficient in their home countries. Frankly, I think just about every developing country should try to set up at least a small software/web incubator, if for no other reason than to ensure access to the best technology and web marketing for that country’s other businesses.

But beyond that, it is not necessary for every country to pursue an IT/communications/electronics development strategy. If you don’t already have a lot of well-educated engineers working in the global tech industry, it may be too late to make that an emphasis now. Life sciences will be at least as big a business over the next century as electronics, and in many ways it is much less mature. For example, it currently has almost no regionalization, in terms of agricultural biotech, focus on regional diseases, medical differences among people of different races, etc. What’s more, the US – while still very strong — isn’t as dominant in life sciences as it is in classical high-tech. For one thing, the Germanic world has always been strong in that business. Military research, a traditional source of educational subsidy, doesn’t have the same spinoffs in life sciences it does in IT. And if the political trends don’t reverse, the US will be weakened further, as radical religious rightwingers seem intent upon sabotaging both elementary biology education and advanced biological research.

Given all that, I shall now proceed to theorize about how to construct an environment for fostering technology development. And please note that government does not have to play a leading role. Instead, universities or even private entrepreneurs can and quite possibly should take the lead.

1. Technology incubators need first-class infrastructure. That’s a requirement, not a competitive advantage. They’re competing with developed-world facilities. In particular, bandwidth is utterly crucial — so much so that, if the country generally lags in that regard, “preferential” access to and pricing of bandwidth need to be arranged.

2. Similarly, technology incubators need to have or have proximity to first-class amenities. The individuals you most want to have working in them could, if they chose, probably get jobs in the US. And they’ll need to have meetings with individuals who visit from the US/Europe/etc. Gymnasiums, fast food, etc. — whatever techies expect in Boston or Frankfurt should also be available in the incubator. Indeed, this may be even more important than in developed countries, because working from home may not be a real option, making the office environment even more important. If you need a checklist of requirements, just take a look around Burlington or 1 Kendall Square or Silicon Valley or the Market St. area or the Flatiron District.

I first realized this point when I learned about how the Indian software services industry has been growing.

3. They should be physically structured so that people keep encountering each other. That’s a prejudice of mine from my university days. I selected my grad school (from among Harvard, MIT, and Chicago) based in part on its physical layout and people flows, and went from there to the Kennedy School, whose new building was carefully laid out for this purpose. I possibly learned more in dining halls and common areas and faculty dining rooms at Harvard than I did in classrooms. (In fact, I’m sure I did, given that I didn’t really go to a lot of classes there.) And the Sundeck Restaurant serves a similar purpose at the granddaddy of them all, 3000 Sand Hill Road. (Which incidentally is a complex owned by Stanford University.)

4. Rapid critical mass is important. Here’s where universities, government agencies, and/or larger companies are crucial — they can commit to being anchor tenants. The secondary services and serendiptious encounters that make incubators work rely on there being serious businesses or other relevant enterprises there in the first place. Somebody has to get the ball rolling. That’s the consistent message I carried away from TechLeb.

5. If business barriers are a problem elsewhere in the country, they need to be alleviated in the incubator. Just cutting taxes for companies in the zone can have a huge benefit — and incidentally can create a critical mass really quickly. The same would go for regulatory issues of all kinds, and for any infrastructure failings. If you are short on bandwidth, electricity, transportation, etc. — well, surely you have enough resources to supply them in a limited area. So pour everything you can muster into one place, and watch it thrive.

The classic model for an incubator is a “public/private partnership,” often with a university as a major partner. I suggest that while serious capital commitment needs to come from somewhere, and some government help is usually needed, government does NOT need to be the driving force, except perhaps when barrier-removal is a crucial aspect. In many countries, an entrepreneur who buys the right land (preferably near a university), hires the right people, has the right government and university relationships, and hires the right tech-business-savvy staff could make a huge difference on his own. (He doesn’t need tech industry relationships going in; sales and listening ability will do just fine as substitutes for preexisting know-who.)

And here’s what would be best of all — a global investment entity that seeks out local partners and creates such incubators/technology parks, one after the other, in a broad range of developing countries. They would really have the clout to kick-start things with tenants from global tech companies …

Most of the rest of the answers were of the nature “Well, in addition to X and Y, government should also have done Z.” But that’s a story for other posts.

1. Removal of barriers

2. Education

And of course in some countries, even higher education can be provided by the private or at least non-governmental sector.

To see why I believe that’s all that’s necessary, just look at some success stories. What else did the US government do? Yes, military research, but that’s really just another form of education. Ditto Israel. India’s government didn’t do much except fund the IITs (Indian Institute of Technology) and create some zones in which barriers to commerce were removed a few years faster than they were in the rest of the country.

Looking further at the US, one might think that regional advantages of some sort are crucial. After all, look at the concentrations of activity in Silicon Valley, around Rte. 128, etc. But a closer look shows this is largely a myth. For example, over the course of my analytical career, I’ve visited software vendors in over 20 states — all up and down the Eastern Seaboard, all through the Rust Belt, up and down the West Coast, in Texas, in Arkansas, in Wisconsin, in Minnesota, and so on.

That’s the good news. The more challenging point is that there’s a LOT involved in “barrier removal.” Categories include but are not limited to (and of course I picked a lot of this up at or in connection with TechLeb, most particularly from Kevin Carroll):

• Taxes.
• Licensing requirements for starting or expanding businesses.
• Labor mobility.
• Telecom and transportation availabiity and pricing. Ditto any other infrastructure failings.
• Intellectual property protection — this turns out to be a much broader and more important area than one might think.

And finally, it is highly desirable to have a government agency provide “one-stop shopping” for navigating the bureaucracy and, where needed, learning about the local business landscape. Even in the US, cities have this. It is certainly a good idea for developing countries.