Saturday, June 10, 2006

Tyger, Tyger, burning bright.

I'm in the middle of a two-week trip through Asia for work. I landed in Singapore on Monday of the week just ending. I spent a day and a half there, then flew to Shenzhen in southern China for another three days. I'm on a plane to Beijing as I type this on Saturday afternoon, and will see Seoul and Tokyo next week.

This is the first trip I've ever made to Asia, and if you ignore the time taken to get here, I have enjoyed the trip a great deal. The people and the food and the sights have all been great. The work days have been very full, but productive and fun.

After just a week in the region, I certainly don't qualify as any kind of expert, but I've seen a consistent pattern that I think is interesting and worth writing about. Economic development is a major focus of public and private activity in the cities I've visited so far, and the difference between those cities and the Silicon Valley, where I spend my normal work days, is stark.

Singapore NYP

In Singapore, I visited Nanyang Polytechnic (Wikipedia here), or NYP. NYP is a curious sort of hybrid: It's a training facility for workers in engineering, design and biotechnology, but also a development laboratory for businesses in Singapore and elsewhere that want low-cost, high-quality help with technical projects. In the US, we have academic and commercial collaborations, but nothing so focused and unapologetically commercial as this. NYP's job is to use real commercial contract work as projects for students who want to learn professional skills.

NYP has a full-time professional staff that oversees the contract work, and that does the heavy lifting required by more demanding parts of the projects. They parcel out work, in three-month internships, to NYP students who take a break from their coursework for a quarter of a year to complete these tasks. NYP is funded by the Singaporean government, and by the companies for whom it does contract work. In some cases, NYP even negotiates rights to the intellectual property that its staff and students create, which can pay off significantly in relicensing or reuse later.

NYP produces three things. First, and most importantly, it educates students in the practical skills that they need to get jobs in knowledge industries after they graduate. Second, it generates a continuous stream of quality commercial contract work at good prices for local companies. Third -- and less obviously, but most importantly -- NYP creates an environment that helps small businesses to flourish, by offering piecework and people to help them get started. This is clearly the intent of the government in the operation of NYP, and it has clearly been successful -- five thousand students graduate from the institute every year.

Granted, there are academic and commercial collaborations in higher education in the US, but I can think of no institution that is as expressly focused on this as NYP is in Singapore. Most major US universities have fundamental research as their first mission, with undergraduate education coming in somewhere after that. In no case is there so explicit a mix of practical training and commercial contracting.

South to China

In Shenzhen, the concentration on business is even more pervasive. Shenzhen is in Guangdong province, just across from Hong Kong, and has served for some time as the gateway to Hong Kong from the mainland. In the late 1970s, the city was just a fishing village with some 30,000 residents. After two decades of investment and development, it's a city of 5 million people with a large industrial base, including manufacturing, shipping and high technology.

Shenzhen is impossible to describe in a few words, so I'll give a few statistics that I learned during a visit to the government's Shenzhen High-technology Industrial Park (SHIP).

The port of Shenzhen ships between 20,000 and 40,000 cargo containers per week -- Walmart, the US retailer, has a large operation there to acquire and transport Chinese manufactured goods to its stores worldwide. After establishing low-cost manufacturing industries in the 80s, the city has established electronics manufacturing and, more recently, software development industries. Shenzhen exported US $102 billion in goods in 2005, including US $2 billion in software -- a huge total for a new industry. Where once Shenzhen was just a place where foreign companies manufactured their own designs cheaply, it is increasingly the place where new systems are designed and new intellectual property is created. Per capita income is high and new building and infrastructure are everywhere. I heard, but cannot prove, that 500 new cars take to the streets in Shenzhen every day.

That kind of hypergrowth certainly offers cause for concern. However you feel about it, though, it is astonishing to see. China has decided to join the first world by developing an information technology economy. The question is not whether it will work, but when the West will notice that it is buying its most innovative high-tech products from the south of China.

Just anecdotally, I visited one major telecommunications company in the city on Thursday. Because they're an Oracle customer, I won't name them. Unless you know the China tech market you would not likely recognize their name anyway.

This company designs and builds its own technology products, including hardware and software, which it ships to customers around the world. So far, most of those customers are in Asia, Africa and Eastern Europe -- I bet that low price was one of the reasons for the market success in those places, early. Now, though, it is beginning to rack up customers in North America and Western Europe. The company did US $8.4 billion in business last year. Its products have matured in their established markets and are now ready to challenge competitors in more mature tech markets elsewhere.

We walked through a software development facility to a meeting room at the company. At least a third of the desks had sleeping bags rolled up and stored beneath them -- clearly, the engineers there are used to long hours and demanding schedules. When we left at nearly 7pm, the lab was full and no one showed signs of packing up for the day. It is a small thing, too, but the conference room where we had our meeting had a threadbare carpet, some beat-up chairs, a well-used white board and a cable-strewn conference table with power and network jacks spread across it. This was clearly a place where people got real work done, not a glamorous place to entertain vendors.

I don't remember the last time I saw that kind of concentration at a startup in the Valley, and this was an $8.4bn-a-year company with more than a hundred people just in the room I walked through. Again, you may have some concerns about balance and quality of life in a work environment like that one, but it's there however you feel about it. From my conversations with local people around the city, that company is no anomaly -- the people of Shenzhen, as much as its corporate leadership and government, are extraordinarily focused on improving their economic lot.

I'm no expert on Asia after just one week, but I'll tell you this: Something remarkable is happening over here right now. My impression of the US and Western Europe is that we have become complacent with our economic success, and perhaps it is right for us to relax after working hard to do well. Singapore and China, though -- and I bet the other countries in this region -- are working extraordinarily hard to challenge Western dominance in high-value industries. If we do not notice what is happening here now, we will certainly notice it in five years.

I want to add a brief disclaimer to this post: Despite highlighting the differences between Asia and the West, I don't mean to be xenophobic, here. I've seen some very interesting government and industrial projects in the last week. Smart people are working hard and doing amazing things -- if anything, I am a little jealous of the speed and scope of change I see around the region. I agree with Thomas Friedman in The World is Flat: If you look, you can see that the economic balance is shifting globally. Blake's fearful symmetry is staring right back.


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