Finding the future in start-ups
You cannot get answers for the future with outdated questions. Recently, I attended a forum as a panel and was asked, “Korean economy’s growth potential is diminishing. What are the ways to find new industries to improve the growth potential?” While I could see the sincerity of the question, it is an outdated one.
There used to be a time when this question and its answer was desperately needed. From 1962 to 1986, five economic development plans were promoted, and Korea’s per-capita national income increased by 18 times. Korea’s key industries began to grow during the second and third plans, becoming the foundation of Korea’s leap from a developing country to a developed country. Steel, automobile, shipbuilding, electronics, petrochemical and machine industries are still the backbone of the Korean economy. Many ask what new industries we should nurture because they think the success equation of the planned economy is still valid or they may be worried that Korea’s key industries are losing competitiveness.
The search for new industries began from the so-called G-7 Project of the Kim Dae-jung administration and continues in this administration as well. With “growth engine” as a constant keyword and using differing modifiers like “next-generation,” “new” or “future,” the government and private sectors have invested 20 trillion won ($16.6 billion) to find new industries. However, among the growth engines chosen by the government, “green finance” is simply ambiguous, and it is uncertain if Korea could be competitive in “drone” or “big data.” The question itself is outdated and has passed the expiration date.
In a country with no electricity, communications, roads and logistics infrastructure, a plan to nurture e-commerce industry is meaningless. There is a time when a plan is meaningful and valid. Setting a priority is an effective method for efficient distribution of limited resources and nurturing fields that will be the foundation for the economy. China encourages development of new industries through a strategy known as Made in China 2025. Indian Prime Minister Narendra Modi promotes new industries under the motto of “Digital India.” There are evident reasons why India and China’s economic development strategies are similar to Korea’s success equation of the past.
The foundation can be prepared through planning, but it is about time we acknowledge the fact that creative competition cannot be planned. I wonder where 20 trillion won have gone when the money was spent base on the experiences of the past, when elite bureaucrats could designate certain areas based on research and companies could focus their investments and resources on the fields that fit their taste or strategy.
The startup businesses that have emerged in recent years and attained success - such as Kakao, Line, Smile Gate and Coupang - were not one of the government’s growth engines. Rather than getting support, they actually struggled because of regulations. They started and grew on their own to create billions of won in value and constantly hire people while conglomerates make excuses to layoff and restructure.
The trend is the same abroad. The U.S. government promotes ReMaking America, a manufacturing sector innovation policy, but it is unrelated to the success of digital business giants like Facebook and Uber. China’s Tencent, Alibaba and Xiaomi have pioneered their own paths regardless of China’s planned economy policy such as “Indigenous Innovation.” The questions and answers for the future can be found in the successful startups in Korea, the United States and China.
It is not to say contemplating future industries is meaningless. But it should be a role of market research agencies or media. In other words, information is provided for reference. There should not be involvement or promotion to take the information or not. It is not the same as the neoliberalist approach of leaving everything to the market. When the entrepreneurs are given the consideration to make and execute their own decisions and own the future, they will succeed in the end.
The best answer to stop the outdated question may be, “The growth engine is the entrepreneurs, and the future industry is all startups.”
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, Jan. 19, Page B8
The author is the CEO of SoftBank Ventures Korea.
by Moon Gyu-hak