(Economy) Size Does Matter


The few Israelis from the workplace that I’ve interacted with were all very proud of their country’s technical prowess and their start-up culture that is second only to Silicon Valley. Yet, for all the great relationship that US and Israel enjoy as nations, most of those very same Israelis would curse the US for buying their start-ups and thus ending up taking the credit for those ideas. Because till the Israelis own it, it’s a local player; but once Google or Apple buys it, the whole world knows of that company!

Turns out this feeling runs quite deep in Israel beyond just the handful I interacted with: Israelis used to admire Nokia a lot during its peak. Why? A small country built a global technology giant. If the Finns could do it, why can’t we, they asked?

But, as this article points out, maybe the Israelis are better off not having a Nokia of their own. Here’s why. While Apple, the world’s most valuable company, is worth only 0.5% of the US GDP, Nokia was worth 20% of Finland’s GDP at its peak. Ok, so why is that a bad thing? Because, if Apple goes down someday, it won’t take down the US economy with it; but when Nokia went down, it had a huge impact on Finland’s economy. And so, says the article:
“Economies are likewise more stable and robust when comprised of a wide and diverse set of companies. An economy that relies on a few giants, let alone a single one, is fragile. When such a giant collapses, it has a profound impact on the entire economy. Israel, being a small economy, would become more fragile if a real tech giant were to emerge, and, hence, is better off with a more diverse ecosystem without any giants.”

The article continues to point out the above just means it’s a good thing for Israel (the country) that they don’t have tech giants. But surely individual Israeli companies would want to become giants: why don’t they? Apparently, founders don’t have the patience to grow the company; nor do they hire professional managers to run the company once it reaches a certain size.

So it looks like the size of the economy of a country does matter. Even in the era of globalization. Because start-ups start local and only then do they become global.

Comments

  1. Ramiah KumarJuly 11, 2018 at 3:01 PM

    Commerce and economics were forever my bugbears! I never make much sense out of them. But things like how Nokia can impact its country (of origin and HQ) Finland is understandable. I can understand Israelis grudge too: one puts in the best brain power and develop something that serves well - presto, a big country's dollar-rich company buys the whole thing outright. While that too is understandable, at least there is consolation: the fellows who developed got paid after all. Name and fame are more a notional thing; one can get over the hurt.
    ----

    Going beyond the bounds of the blog's points, I sometimes wonder about the following too; actually they bewilder me.

    If Citibank goes down in the USA for example, the US government comes to the rescue and pumps dollars from taxpayers money. Huge banks cannot to allowed quick collapse, I am told - they have national repercussions. In India, we go much farther, if my understanding is right. Air India can go on making huge losses for example, and yet the netas would go on pouring taxpayers money into the organizations and keep it going. Forget Govt. undertaking companies - I am told that Indian government would chip in if a huge private bank collapses.

    PNB and many public sector banks have gone the scam way, making losses amounting to several thousand crores of rupees. Indian government has no option but go all out to keep all such banks afloat. Nothing comes to nation's rescue like tax payers' money, once again. Beyond considering some minor possibilities of regulatory measures, no actions of sterner kind is contemplated by the government. "Don't rock any political boat" is the policy of all law makers here. Whether BJP rules or Congress rules or some temporary coalition leader had the bargaining power to rule at the Center, I generally find that economic policies do not undergo drastic variation. If we do find real policy change, we can conclude that no neta ever visioned them - our politicians abide in the inevitability of (1) international pressure or (2) Indian business houses putting their foot down or (3) people cannot take it any more procrastination (thus tell it in the elections effectively). To a large extent leadership is a very difficult thing in India, since far too much compromises are in demand. Modi is acknowledged as a great leader in India and abroad, but even he cannot influence our ways to make a marked difference; nor can he wield power beyond a limit. Our social mindset comes in the way of governance.

    Thus, how we continue to be a stable nation, with such bondage principles becoming national policies, is a mystery to me. But then, unlike Israel or Finland, I suppose we are too huge to be sunk easily. :-) Maybe we are too big having a powerful momentum which retards us too, from aiming higher and faster. :-(

    ReplyDelete

Post a Comment

Popular posts from this blog

Student of the Year

Image
As a toddler, my daughter loved Alia Bhatt’s songs, esp. the ones from Student of the Year . (That movie did have many good songs and well-choreographed dances). Fast forward to present day, when she is 12 yo. She rarely watches Hindi movies now, but one of the few ones she likes of late, Raja aur Rani ki Prem Kahani has, yes, Alia Bhatt.   If I had any hopes that there was anything to be read in the name of her toddler-time favorite ( Student of the Year ), they have been dashed. Our conversations come exam time are perfectly captured by this photo and its caption: In fact, the pic below captures how she and I look at her answer sheets – me intently, she with an expression of “It’s over, so why are you even looking at it?”   Of late, we pull her leg and tell her that she isn’t showing any signs of academic prowess, she’d better find a rich guy to marry. Some time later, she showed us this meme on the Internet: “Me No Study, Me No Care Me Go Marry Millionaire If He Die
Read more

The Retort of the "Luxury Person"

Image
Coming up with biting and witty retorts. It’s something we dream of, but rarely manage to pull off. Worse, the more we stew over the offending remark, the more likely we are to come up with that dream retort, as Calvin ruefully points out: During our last holiday at the Taj Resort, seeing my wife carrying towels to our poolside chairs, one of the kids there mistook her for a member of the staff and asked for a towel. When my wife narrated this to us, I did not imagine that my 8 yo daughter would come up with her own retort. But a day later, my daughter recapped the incident, an incident that didn’t even involve her in the first place , and said, “You know what I’d have told that kid who asked for the towel?”. And without waiting for an answer, she told us anyway: “I don’t work here. I too am a luxury person who is living at this resort. Go get your own towel.” We were highly amused by the phrase she had coined: “luxury person”. It certainly captures the kind of holid
Read more

Animal Senses #7: Touch and Remote Touch

Instinctively, we think touch is based on contact. Not entirely true, explains Ed Yong in Immense World – there’s a more important aspect than contact: “These incredible feats are possible through movement. If you rest a fingertip upon a surface, you can get only a limited idea of its features. But as soon you’re allowed to move, everything changes. Hardness becomes apparent with a press. Textures resolve at a stroke.” As you run your fingers over a surface, they hit the tiny peaks and troughs and set off vibrations in the mechanoreceptors at their tips.   At the tip of its snout, the star-nosed mole has many pairs of hairless appendages. It uses them to touch things around itself. Alive or dead? Food or ignore? It does these movements at an insane speed. In the time it takes to blink our eyes, the star-nosed mole can probe, identify and swallow its food. “Light may be the fastest thing in the universe, but light sensors have their limits, and the star-nosed mole’s sense of
Read more