July 6, 2008

Don't strangle real firms: they might just save the economy

Posted in Ireland · 36 comments ·

The other week, RTE reran the 1976 classic movie The Outlaw Josey Wales, starring Clint Eastwood as the eponymous hero. During a particularly brilliant exchange, the bounty hunter Fletcher, hot on the heels of the outlaw Wales, comes out with an inspired put-down to the cowardly senator who is trying to pull the wool over his eyes. Squinting into the sun, chewing tobacco, Fletcher disdainfully hisses: ‘‘Don’t piss down my back and tell me it’s raining’’.

Against the background of the worst unemployment figures we have experienced since 1975, you can’t help but conclude that over the past few weeks in Ireland, there has been a lot of pissing down backs, as ministers and other government spokespeople tell us the economy is robust. We are reassured that the ‘‘fundamentals’’ are solid. Those who query this position are dismissed as ‘‘doom and gloom merchants’’ – a phrase so hackneyed and meaningless that it again reinforces the patronising attitude of our elite towards ordinary people’s worries and general dissent.

The truth is things are now moving so quickly that no one really has a clue where all this is going to end. Historical evidence from other cycles is not comforting, but that might be because the policy response to these situations was unimpressive. If you use traditional tools to respond to modern developments, you might make a bad situation worse.

Listening to this week’s discourse, there’s a terrible feeling that those in charge do not know what they are doing. The Taoiseach and Tanaiste claimed there would be no return to the 1980s.Along with some of their spokespeople, they reiterated that the economy was a much more sophisticated beast than the one that spluttered in the ‘‘Joshua Tree’’ years.

All week, this mantra was hammered home on the airwaves by the economists who work for the banks and stockbrokers. Let’s run with the idea that Ireland today is totally different from Ireland 20 years ago. It’s not hard to agree with this assertion. The question that arises then is: if 21st century Ireland is so different, why does the solution being trotted out now by the Department of Finance sound like 1980s thinking?

Examine what has been proposed as the panacea. Everyone is talking about cutting government spending as if the root cause of today’s dilemma were 1980s-style government incontinence. But that’s not the root of the problem at all and therefore can’t be the only solution.

The root cause of today’s problems is a collapsing property market, coincident with a rapid deterioration in Ireland’s competitiveness. A credit binge disguised the underlying weakness. In fact, we lived in a Botox economy where other people’s money made us look richer in the same way as Botox makes a middle-aged person look younger. Now that the Botox economy has been laid bare, we can’t hide the blemishes or wrinkles any more. The root cause of our present difficulties is too much credit; the root cause in the 1980s was too little credit. Therefore, the solutions have to be totally different.

In the 1980s, the Irish government ‘crowded out’ the private sector, sucking up all the resources of the economy and choking the private sector’s ability to grow, innovate and create employment. Back then, the focus should have been – and was – on sorting out profligate government. By reducing the government deficit, the stranglehold the state had on the rest of us was eased.

Today, the situation is different. The absolute number on the government’s deficit is a passive residual not an active catalyst. The budget deficit figure is the end of the road rather than the beginning. In the boom, the credit profligacy determined the government deficit. In the 1980s, the government profligacy determined the credit deficit.

In short, cause and effect today are precisely the opposite of what they were in the 1980s.Yet the government’s response has been to wheel out 1980s solutions to 21st-century problems. Obviously, government spending has to be cut as credit-driven revenues dry up.

But to claim that this will have a positive ripple effect on a country facing a credit meltdown, is akin to pissing down someone’s back and telling them it’s raining. We need new thinking. We have to separate the old, toxic, property-related detritus from the new opportunities in non property related ventures. There is still a lot of wealth in Ireland. The problem is that this cash is not finding its way into the right companies. On the other hand, there are plenty of good companies in Ireland, starved of credit.

The banks are petrified of touching anyone, which means that good businesses which are employing people and exporting have been lumped in with the bad businesses that were glorified property scams. With the credit crunch, we now risk the good businesses going down with the bad because banks are indiscriminately pulling in credit from everyone.

This is where the state can start getting inventive. Why not unlock some of our personal wealth by making it tax efficient for a rich investor to put money into a real company with a cash-based business plan? We need a scheme, targeted at real businesses.

If you travel around the country you will find hundreds of small companies, starved of cash. Yet collectively, these small businesses are our national ‘get out’ cards. These companies need fresh capital. There is lots of capital about. The only problem is that it isn’t finding these opportunities. If the state made it tax-efficient for wealthy investors to back these small guys with big ideas, we could begin the process of gradually clawing our way out of this swamp.

An idea like this is simple; it uses private resources and costs little, particularly if the capital is not being used anyway. There is no burden on the state to pick winners or anything complicated like that. The private sector is incentivised to do what it is best at: assess risk. We are talking about an urban renewal scheme for the enterprise economy.

Such a move could be the beginning. The Department of Finance mandarins are obsessed with the budget deficit, but this will not solve our problem. Our politicians have to realise that the property scam is over and that we should never again become infatuated with bricks and mortar. It’s time to channel funds away from that mess and into the real economy. Little by little, this can be achieved. The beauty of EMU is that we should never want for capital. The challenge is in finding away of directing that capital into the right hands.

In this way, we might be able to limit our involvement with the late 1970s to the replaying of old classic movies rather than the rehashing of old, failed ideas.

  1. Ed

    David, It’s a nice idea to try and stimulate a VC culture among our own, but I don’t know if the people with the money have the ability to access risk outside of property area. The bricks and mortar model is so simple in comparison to modern business that the cultural difference would be almost impossible to bridge. I know this from my own experience – I’ve spent the last three years and almost half a million – no grants – doing R&D on a new product for Europe and I’ve yet to find someone who would put any value on it – it’s simply outside their experience and comprehension. This is the problem we have as a country and it extends all the way up to government. I’m now bordering on a heart condition – the demand is so great!

  2. David,
    A great article as always. But here is my problem, I know the Irish Government and the Department of Finance ain’t going too implement your ideas or any new ideas. They will eventual act when it is too late, wait and see is their mantra.
    So what can we do to help while they wait?

  3. Malcolm McClure

    David: I agree that ” There is still a lot of wealth in Ireland. The problem is that this cash is not finding its way into the right companies.” but I’m not so sure that “there are plenty of good companies in Ireland, starved of credit.”
    Most small business plans are based on the service economy, serving local needs rather than international demands. Even where they succeed on the wider stage, by establishing a sandwich bar franchise or a health food franchise or even a construction enterprise, they are all vulnerable when international economy starts to feel the economic draft. They depend not only on credit for expansion but also on consumer willingness to spend now rather than save for later. Inflation encourages the ‘spend now’ mentality. But it seems that the present crisis is deflationary rather than inflationary.
    There are four factors pointing that way- the massive wealth loss in both stock market and property, the severe contraction of monetary conditions as measured by both money and velocity, deteriorating global demand and the enormous decline in consumer expectations. These all point to a downward shift in aggregate demand, meaning lower inflation if not deflation. Consumers is drawing in their horns and spending in Lidl and Aldi instead of Grafton St.
    Retail rents and retail prices will come down as boutiques close their doors, there will be fewer visits to holiday homes as the price of petrol continues to hurt and discretionary spend is curtailed right across the market.
    Welcome to a world of tight money.

  4. Johnny Waldron

    I must agree that backing indigenous firms and start-ups offers the highest returns on investment for our economy as long as the owners don’t all re-locate to Malta or Monte Carlo. It is, however, a long term game. It is difficult to increase the pace of investment. There are only so many good investment opportunities at any one time. You’re absolutely right to propose that government create the right incentives for investment but that won’t make the next few years any easier.

    So in the medium term we must do everything that we can to protect and if possible grow the Foreign Direct Investment businesses in Ireland (Dell, Microsoft, Wyeth, Pfizer, Google, etc.) as these operations have the scale to maintain large number of jobs. The tide has already started going out on these jobs but we must do everything we can to fight tor slow the loss of these jobs as every one lost will end up on the dole queue. That means listening to these employers and prioritising their requests (e.g. telecomms infrastructure and skills development etc.)

    The FDI jobs are primarily disappearing as a consequence of wage inflation. The dominant driver of wage inflation in Ireland over the last 5 years has been house prices. We have not been able to afford the market prices for the last 5 years. We paid the prices but could not afford them on any rational financial analysis. Instead we adopted a casino attitude, made no distinction between income and capital gains and planned our financial future on the basis that it was all going up. As night follows day the bubble has burst and €1.5m 3-bed terraced houses in Ranelagh don’t make a lot of sense when we don’t have an investment banking community to rival New York or London.

    The private sector will not get a choice about a pay pause so it is imperative that the government support the suffering private sector employees by resisting Public Sector wage inflation, ruthlessly pursue increased Public Sector efficiency and resist any temptation to support the property market as it’s fall will have the benevolent effect of deflating the economy. A great opportunity for a politician with some vision and courage to do a great service for us all. It’s a damn shame Michael McDowell has left the stage!

  5. MK

    Hi David,

    The suggestion to set-up a scheme for those with capital to invest is already there, its the BES (and the EU have allowed us to continue with it). The BES can be used for a wide range of qualifying businesses. In the past, some of those qualifying were “dubious” such as hotels, etc, which were more or less property vehicles. However, BES or not, private individuals are just as wary of investing in businesses that ‘need the money’ than banks. There will be risk takers out there, but when the investment climate goes “bad”, there will be fewer of them. The corollary is when everyone makes investments without properly assessing the risks such as during the dot.com splurge. I do agree that with some careful picking, people can make money helped by BES, rich people that is!

    > The root cause of today’s problems is a collapsing property market, coincident with a rapid deterioration in Ireland’s competitiveness.

    I would profer that Ireland’s collapsing property market is not the root cause, it’s a symptom. The root causes are systemic, for example, the way that land is controlled for planning, the way that tax breaks support(ed) property development (which is okay in bad times but NOT in good times), the way that credit was given out for 100% loans, etc. Many of the Section 23′s should have been stopped as soon as the Celtic Tiger was kicking off (back in 1998!). And there are many more root causes. The property bubble burst is a symptom, not a root cause.

    In terms of the levels of our Government spending, this feeds directly into our lack of competitiveness. High wages in the public sector suck the “innovation potential” out of the private sector by stealth. Why bother be innovative in a private enterprise as I can be a lecturer in a third-level instutuite, work 22 hrs a week max, get 100k+ pa, and have 4 months off and half a massive pension which the private sector is gonna pay for! Its the life of reilly, and it literally is for many Reilly’s! And there are many more examples. Solving Government inefficiency which has occurred on a grand scale will take at least a decade or more to fix. I have no faith that it will be solved completely, as its like getting turkey’s to voluntarily vote for Xmas, they just dont do it. (Note that Government inefficiency is not measured by percentages of GDP or GNP).

    I do agree with some politicians that we are not in the 1980′s, it is true, but its a case of not yet! The 1980′s was after many years of stagnation and paying back for our ills, ironically government inefficiency of the 1970′s was one of them where public servants were getting paid far more than was necessary. Our level of payments to Government employees is at that right now. I’m sure any proper benchmarking would indicate that. But a necessary fix is not on the cards, ala Gunne, such as a 10% salary cut for ALL. And we cant devalue our currency to do that for all workers.

    Non-oil energy sources is perhaps an area we could work on as a country, such as wind, tidal and even solar, but here we are hampered by, you guessed, the government-backed body EBS.

    Although the Government may only be 30% of GDP or whatever, their footprint is everywhere. Perhaps a pizza analogy, where 30% of the surface is jalapenos. There is something ‘unpalatable’ on every slice!

    I have to laugh when I hear the likes of Brian Lenihan stating that the Irish economy has done well. Its done well in spite of you Brian and your colleagues, in spite of you.


  6. John Q. Public

    Did anybody see on the news that the Aran islands might become a tax heaven? What a joke! Is that the best idea they can come up with?
    Why don’t the commission on taxation come up with a broader all-encompassing plan that makes more sense for indigenous businesses in the country?

  7. Dermot

    Can’t see the government do anything to encourage investment in these companies.

    If they cant do basic things like encourage people to put money in pensions then we have no hope of what you are suggesting. As yet they have set up a stakeholder pension system or ISA’s as they do in the UK, or compulsion as they do in Australia.

    Man, David you depress me, we’re screwed arent we?

  8. Dermot

    Sorry Havent Set Up – So Damn depressed I cant type!

  9. Garry

    its all connected, banks can’t loan … they are looking for a bailout, the proposals to have the government revive the mortgages securities market is one example where the banks want the govt to provide funds and accept mortgage deeds as security in return… because there is nobody else in the world the banks can sell the loans on to…. as now the mortgages are bigger than the security.

    fully agree with the essence of the article that ensuring credit is available to the right industries is important. but how?

    Providing credit & investment to Irish non property business is either an opportunity to make money or its not. If it is, lets see if there is a way to provide it in the most cost effective way possible, ie. without bailing out the banks for the billions they will lose on property, it’ll be far cheaper that way.

    I know there will be EU rules regarding aid and competition but surely if the banks aren’t performing (because they screwed up on property) the government can step in, whether thats indirectly or else by helping to establish a competitor to the banks (a new ICC, or a fund)… Run on strictly commercial lines so getting credit/investment will be very difficult but not impossible if the business has a viable plan. (as it should be)

    The taxpayer needs to be more aggressive, instead of cleaning up after these wasters, why not take them to the cleaners.

  10. Philip

    I take complete issue with the main thrust of the argument that 80s are different now. We indeed have a huge issue with government profligacy and now that the masking effect of the property boom has evaporated the lunacy of the one way bet on benchmarking is revealed in all it’s rip off glory.

    The suggested solution is that the poor punters in the private sector be left sort out the mess for themselves using our indigenous wealth from the private sector. Keep the government out and let the tough get goin’ (not a bad idea – at first sight). The problem is that the wealth in the private sector is property focused (either by design or eventual corruption of honest entrepreneurs, who just threw in the can and went “property” when R&D and techie stuff was too much hard work) – all well highlighted by fellow bloggers above. I also fully relate to the guy above who spent 0.5M skins trying to get an idea off the ground – local wealthy punters cannot tell an innovation from a hole in the ground if their life depended on it. As a nation, we have no respect for tech, engineering etc at any level and the recent boom only amplified that notion becasue there were easier ways of making money. We as a nation simply lack a love of what it takes to make a 21st century environment.

    Getting back to government profligacy, we need to shrink the payroll fast. Not muck around with fuel savings, telephone bills, consultancy fees or travelling expenses. Hitting the HSE with redundancies seems reasonable (if well targetted). But this needs to extend into the core of the civil service across depts. We have to make it more lean and accessable and most of all – accountable.. Right now, it’s a big drain on national resources, does little and will inevitably result in increased taxes for no return – because the property revenues have dried up. We cannot afford this any longer. Also the Public Sector must feel the pinch in the same way as the private sector so they understand what accountability is about.

    On the wealth side, latent capital needs taxing. Never tax productivity. The latter only impacts working people. The former encourages more risk taking and investment in production. This in my opinion is the key to breaking the property mindset and creating a focus on productivity and therefore 21st century thinking.

  11. Michael


    A thought-provoking article as always. Yes, I agree it is the private sector that needs to be at the forefront of our recovery strategy. I also agree with the point that many of the investors lack the skills to properly evaluate engineering and hi-tech investment opportunities. This was partly responsible for the over-investment in property in the last decade as people thought it was the “safe bet” especially in the aftermath of the dot.com bubble. Now, I think that we have to leverage those who invested in “bricks and mortar” into other areas, perhaps related to property. One such area is the energy-efficiency/environmental products. With spiralling fuel costs, energy efficiency in buildings has become a key issue. We need to encourage investment in energy efficient products that minimise emissions. This could form part of a wider strategy on energy/environment investment which could include harnessing energy from wind/tidal etc. We also need to invest in our food sector which has promising potential. We have a vast marine resource whose area is 10 times greater than our land-mass. I’m sure there are opportunities there which, as yet, are undiscovered but have huge potential.

    So, whilst the economy is justifiably giving serious cause for concern, I agree that there are still opportunities and maybe what we need is an upskilling of some Irish investors so that they have the capacity to properly evaluate the emerging opportunities that many do not seem to recognise at the moment…

  12. RK

    It was already very difficult to get a business based on a new idea or innovation off the ground in Ireland.

    The (relatively little) money that was available went to established business needing investment for growth, or business with already well proven markets and business models (and thus not genuinely innovative). Irish conservatism galore… Though there were some good efforts to provide more funding for these types of business which deserve praise.

    With the current major credit contraction, I can only see the situation getting worse… Unless the people who used to invest in the perceived ‘safe’ bets of property and Irish banks etc. can now be shown that there is a good game (better than Irish banks and property!) to be played in punting on a stable of such companies (say eight) with the expectation that one of these stable will cover the losses on the other seven and still double their money. More business resources made available to these innovators and idea merchants would further improve the odds of winning their bets.

    I think one idea would be to encourage (and fund) more people to train up in the entire skillset of modern business, even if they are not (yet) an ‘ideas’ person. ie. sales and marketing, time management, project management, IP issues, HR and recruitment, business planning, financing etc. It’s not rocket science. They would then do an apprenticeship helping some guy or girl (like the first commenter on this page) who have a great solid idea, or have been around the block a few times… This training and investment might be funded by a combination of private investment and government.

    Then, later, have a go on their own…

  13. b

    We have been strangled for years. We have appealed to Government for basic help like broadband but it fell on incompetent ears.

    That said people still have to eat and we will have to hire more people due to increased business. We want to hire apprentices and keep the staff we have but the attitude we get from established big names and from the greedy leeches in the various departments it is going to be made as difficult as possible for us.

    There was no entrepreneurial support during the boom so we can say goodbye to any hope of any in the downturn. These idiots don’t know what they are doing. They never saw the boom coming, they mismanaged it as it was here and five minutes after the last eejit noticed it was going out they came out with the greates pile of bullshit ever to “cope” with the downturn.

    Its every man for himself here. The Government are truly a burdon on the people.

  14. Sean

    “in spite of you”


    I’ve wondered about that off and on too. We sucked in a lot of companies, mid – late 90′s, when wages were low and maybe the IDA derserves some credit for that manufacturing success. But given our low cost base, educated work force, neutrality, stability, english language and european ties it was hardly rocket science.

    How well would we have done with no IDA? I think we would have done much the same. I think the hard working individuals in the private sector who have worked like crazy to ensure deadlines are met, etc., deserve the accolades. The property and wage boom destroyed a lot of our potential attractions but we still have a lot going for us. Let’s hope the government doesn’t mess it up for people who want to work.

    BTW totally agree with the previous post discussing the exorbitant salaries that lecturers can demand and the benefits they get, it’s enough to make a person want to throw in the towel and join the civil service. Are working people expected to work to feed the public sector layabouts, is that society. Anyone can try to be a politician but if you don’t want to be one you’ll have to suffer the consequences…. hard work, no job security and generally low pay.

    If I was to be a politician my election manifesto would be:

    1. Reduce the number of TD’s from 166 to 100. This is still over twice as much as the UK on a proportional basis. In fact it takes 4 Irish politicians to represent the same number of people as a single politician in the UK.

    2. Reduce the salaries of TD’s to 1.5 times the national average. This means they are still handsomely remunerated for their position but it is more a position for people who want to achieve something in politics rather than make a living out of it.

    3. The farmers. Unlike other business which go bankrupt these guys have been getting handouts for over thirty years. Stop the handouts. I remember a few years back they were driving to Dublin in their 100k tractors to demand more money, I would have like to tell them what to do with their demands.

    4. Improve conditions for the poor especially in primary and secondary education. Inner city life is still a bleak place for children many of whom have no green areas in their schools. This needs to be tackled head on and I would like to see at least an attempt at equality of education for children.

    I’m going to stop here as I’m not a politician. Obviously it’s possible to go on forever but that would be a start to level the playing field thereby encouraging integrity, enterprise and growth.

  15. Nagelz

    Man the lifeboats ourselves rather than let the incompetent bufoons that took us into the iceberg tell us it’s allright.

    Face it, if you’re in business you’re on your own and dont ever forget it.

    An understanding bank manager who talks straight is your best bet….they’re as rare as rocking horse shit at the best of times and have gone the way of the dodo right now.

  16. Kaiser Sose

    The solution to this problem, is to find some DNA belonging to Michael O Leary, Warren Buffet, Denis O Brien, Tony Ryan and do some genetic cloning so we can replace the current imbeciles who are running this country into the ground.

    A good start would be IQ screening, this should be done on every politician in government and any found with 140 of an IQ or less should be sacked.

  17. Donal O'Brolchain

    As MK said, BES was conceived as just such a incentive. to “unlock some of our personal wealth by making it tax efficient for a rich investor to put money into a real company with a cash-based business plan” It was seens as a response to the “need a scheme, targeted at real businesses.”

    William Kingston, Lecturer in Innovation in TCD first proposed what became BES in a very interesting paper, taken up by the UK Government. The Irish government followed and progressively changed into something that was completely contrary to what William Kingston advocated. It was strangled as middle men (eg. stockbrokers, accountants) got in on the BES and started to look for exit mechanisms for their risk-adverse but tax-avoiding clients who also wanted guarantees. Then BES was extended to investments in property, also with guarantees. How the then Irish high net worth individuals loved as BES became a tax-break with an property backed guaranteed exit mechanism! So successful was it that the Government capped the amount on which any one individual could BES claim tax relief and as a
    additional noose, capped the amount that any individual company could raise in any one year. All this without any EU intervention whatsoever!

    However, recent history suggests that now Irish high net worth individuals will take a risk, without any tax break whatsoever. Dermot Desmond has quite a record of investing in early stage software companies that were not based on immobile property. I suspect that there are others. Airtricity’s first funding came from high net worth individuals before it succeeded in outgrowing the funding capacity of its corporate sponsor NTR. GPA, a “failure” spawned a whole series of businesses and entrepreneurs eg. Denis O’Brien, Michael O’Leary being the best known to the public. The DNA that Kaiser Sose sought is there

    It is always hard to get seed money for a genuinely new and different business idea. Early development funds are slightly easier to come buy. Yet some with appetites to fund such business ideas will comment that there are few enough good businesses or perhaps management teams around.

    So far, neither David nor anyone else has put numbers on the number of businesses seeking funds. Unlike incentives for property investment, anecdotal evidence will not convince the state class and their advisors to some up with something new. There is a do-minimum approach to this kind of thinking, covered by a pussillanimous checking with the EU re. state aid clearance!

    Assuming that property based tax breaks do not need EU clearance, I predict that any such scheme introduced will be focused on house builders, because “it is good for jobs”. It will not do anything for the kind of export oriented business that we on this island need!

    So the real issue is to stop the enormous profits made in property by
    1. implementing the Kenny report on the taxation of land for building
    2. removing the pure tax-avoidance nature of many transactions which Brian Cowen did not act on when Minister.
    3. stopping infrastructural development being focused on supporting only property eg. the Railway Procurement Agency now looks like nothing more than an agency designed to boost property developers

  18. Sean


    I assume you meant pusillanimous and not pussillanimous. Nice word!

  19. b

    I wasn’t talking about BES or seed capital or going cap in hand to the bank manager. I was talking about SMEs trying to keep on going.

    We work at the coal face of the economy. Right at the shitty end where nobody goes. I.e. the ports.

  20. Johnny Dunne

    The economy needs ‘significant’ investment and output from productive businesses with sustainable international businesses whether they be Irish owned or not. Relative numbers are worth considering, from 2007 to 2013 €180 billion is committed to the NDP (few real hard figures on returns?) but only €175 million to a NDP backed Seed and Venture Capital fund scheme where about a half has been allocated 2 years later and only a ‘handful’ of investments to date. Where is the urgency ? Now do we need more ‘innovative’ policies ?

  21. Donal O'Brolchain

    In contrast to Johnny Dunne, I believe that what our economy needs is a complete change of mind on the part of the state and governing classes in relation to wealth creation. They still believe that we can prosper by selling ever more expensive properties to one another and that policy has to be focused on ensuring that this paradigm continues. As an example, where did INTO’s Joe O’Toole come with the notion that benchmarking was just an ATM? He has never shown any evidence that someone has to fund ATMs. The financial institutions also seem to have forgotten that, judging by the recapitalisations going on. It is a hyped version of taking in one another’s washing!

    Our governing class assumed that a spike in property-based tax revenues is so permanent that they can pay themselves more, now and in retirement! They did the same thing in the late 1960s and 1970s! Plus ca change, plus c’est la meme chose!

    William Kingston’s point is that entities like an NDP backed Seed and Venture Capital fund will of their nature ensure that those taking investment decisions will have cover first. What he was suggested was a paradigm shift to investing in new businesses by individuals who were happy to do so without any cover other than the hope of making a good return. Trouble is when you state it like that, people point to property. This overlooks the smallness of our population at the edge of the sea and which is not good on optimising the use of resources available. Pusillanimity (Yes Sean, that is what I meant) blew the possibilities of sea fisheries when we joined the EU, in a dash to get our hands on the ATM that the CAP then was!

    Despite the failure to develop ports, there is now much more public evidence of wealth creation by people who understand that to survive and prosper on an island, one has to take to the boats, as a matter of routine, not just in emergencies or for a few hours racing around cans after work! Some macro-economic analysis suggests that in recent years Irish owned (non-property) multinationals invested more abroad than overseas multinationals did in Ireland. A micro-economic question arises from a Paul Tansey comment that overseas multinationals took €1bn less out of Ireland during the early part of 2008 compared to 2007. Could this be explained by the Airtricity sale which netted about €1bn?

    The fact that I can even raise these questions about investment suggests that much in Ireland has changed from the 1980s. IMO, such changes have yet to reach and influence the governing and state classes.
    Long may David and others continue to challenge the culture of contentment!

  22. walnut

    When it comes to energy security, we’re not very secure! Wind and solar for example are not sufficient to provide for our energy needs…yet nobody ever talks about nuclear power. Establishing one of the next generation nuclear facilities will supply the bulk of our energy needs and could provide employment to thousands. Bring in the French to build it!

  23. Michael

    Regarding nuclear, on the face of it, it may have attractions, however, there is evidence to suggest that the reserves of nuclear fuel (uranium etc.) may be exhausted before oil, especially if there is large scale uptake of the technology which, in the aftermath of the G8 conference appears to be happening. Also, if demand for nuclear is high and the expertise to build the nuclear power-stations is scarce, costs will rise and budget over-runs can be expected. With Ireland’s poor record on keeping to budget and timescales on projects (e.g. Luas) and in the context of exhaustible reserves and the problem of dealing with nuclear waste, I don’t think nuclear (fision) is that attractive. However, if a better solution concerning nuclear becomes viable (i.e. nuclear fusion where no waste is produced), then it might be worth looking at, but even then I think we will need other alternatives… Ireland has the natural conditions to be a leader in several of these, wind, tidal, wave etc all of which are better for security.

  24. b


    Why all the pontificating. We have businesses. Why not work with what we have.

    Its not very sexy but its here and now.

  25. brian kiernan

    Why does everybody forget the simple fact that the iRISH POUND IS TRADING AT 1.02 vis a vis sterling and $2 to the pound .Until the euro depreciates by 105 the traded sector is up the creek.

  26. Bobby boy

    David — the following is not that related to the article above — nevertheless — I think you will enjoy the following essay written by Paul Graham — a tech entrepreneur with unique insights.


    How to be Silicon Valley
    May 2006

    Could you reproduce Silicon Valley elsewhere, or is there something unique about it?

    It wouldn’t be surprising if it were hard to reproduce in other countries, because you couldn’t reproduce it in most of the US either. What does it take to make a silicon valley even here?

    What it takes is the right people. If you could get the right ten thousand people to move from Silicon Valley to Buffalo, Buffalo would become Silicon Valley. [1]

    That’s a striking departure from the past. Up till a couple decades ago, geography was destiny for cities. All great cities were located on waterways, because cities made money by trade, and water was the only economical way to ship.

    Now you could make a great city anywhere, if you could get the right people to move there. So the question of how to make a silicon valley becomes: who are the right people, and how do you get them to move?

    Two Types

    I think you only need two kinds of people to create a technology hub: rich people and nerds. They’re the limiting reagents in the reaction that produces startups, because they’re the only ones present when startups get started. Everyone else will move.

    Observation bears this out: within the US, towns have become startup hubs if and only if they have both rich people and nerds. Few startups happen in Miami, for example, because although it’s full of rich people, it has few nerds. It’s not the kind of place nerds like.

    Whereas Pittsburgh has the opposite problem: plenty of nerds, but no rich people. The top US Computer Science departments are said to be MIT, Stanford, Berkeley, and Carnegie-Mellon. MIT yielded Route 128. Stanford and Berkeley yielded Silicon Valley. But Carnegie-Mellon? The record skips at that point. Lower down the list, the University of Washington yielded a high-tech community in Seattle, and the University of Texas at Austin yielded one in Austin. But what happened in Pittsburgh? And in Ithaca, home of Cornell, which is also high on the list?

    I grew up in Pittsburgh and went to college at Cornell, so I can answer for both. The weather is terrible, particularly in winter, and there’s no interesting old city to make up for it, as there is in Boston. Rich people don’t want to live in Pittsburgh or Ithaca. So while there are plenty of hackers who could start startups, there’s no one to invest in them.

    Not Bureaucrats

    Do you really need the rich people? Wouldn’t it work to have the government invest in the nerds? No, it would not. Startup investors are a distinct type of rich people. They tend to have a lot of experience themselves in the technology business. This (a) helps them pick the right startups, and (b) means they can supply advice and connections as well as money. And the fact that they have a personal stake in the outcome makes them really pay attention.

    Bureaucrats by their nature are the exact opposite sort of people from startup investors. The idea of them making startup investments is comic. It would be like mathematicians running Vogue– or perhaps more accurately, Vogue editors running a math journal. [2]

    Though indeed, most things bureaucrats do, they do badly. We just don’t notice usually, because they only have to compete against other bureaucrats. But as startup investors they’d have to compete against pros with a great deal more experience and motivation.

    Even corporations that have in-house VC groups generally forbid them to make their own investment decisions. Most are only allowed to invest in deals where some reputable private VC firm is willing to act as lead investor.

    Not Buildings

    If you go to see Silicon Valley, what you’ll see are buildings. But it’s the people that make it Silicon Valley, not the buildings. I read occasionally about attempts to set up “technology parks” in other places, as if the active ingredient of Silicon Valley were the office space. An article about Sophia Antipolis bragged that companies there included Cisco, Compaq, IBM, NCR, and Nortel. Don’t the French realize these aren’t startups?

    Building office buildings for technology companies won’t get you a silicon valley, because the key stage in the life of a startup happens before they want that kind of space. The key stage is when they’re three guys operating out of an apartment. Wherever the startup is when it gets funded, it will stay. The defining quality of Silicon Valley is not that Intel or Apple or Google have offices there, but that they were started there.

    So if you want to reproduce Silicon Valley, what you need to reproduce is those two or three founders sitting around a kitchen table deciding to start a company. And to reproduce that you need those people.


    The exciting thing is, all you need are the people. If you could attract a critical mass of nerds and investors to live somewhere, you could reproduce Silicon Valley. And both groups are highly mobile. They’ll go where life is good. So what makes a place good to them?

    What nerds like is other nerds. Smart people will go wherever other smart people are. And in particular, to great universities. In theory there could be other ways to attract them, but so far universities seem to be indispensable. Within the US, there are no technology hubs without first-rate universities– or at least, first-rate computer science departments.

    So if you want to make a silicon valley, you not only need a university, but one of the top handful in the world. It has to be good enough to act as a magnet, drawing the best people from thousands of miles away. And that means it has to stand up to existing magnets like MIT and Stanford.

    This sounds hard. Actually it might be easy. My professor friends, when they’re deciding where they’d like to work, consider one thing above all: the quality of the other faculty. What attracts professors is good colleagues. So if you managed to recruit, en masse, a significant number of the best young researchers, you could create a first-rate university from nothing overnight. And you could do that for surprisingly little. If you paid 200 people hiring bonuses of $3 million apiece, you could put together a faculty that would bear comparison with any in the world. And from that point the chain reaction would be self-sustaining. So whatever it costs to establish a mediocre university, for an additional half billion or so you could have a great one. [3]


    However, merely creating a new university would not be enough to start a silicon valley. The university is just the seed. It has to be planted in the right soil, or it won’t germinate. Plant it in the wrong place, and you just create Carnegie-Mellon.

    To spawn startups, your university has to be in a town that has attractions other than the university. It has to be a place where investors want to live, and students want to stay after they graduate.

    The two like much the same things, because most startup investors are nerds themselves. So what do nerds look for in a town? Their tastes aren’t completely different from other people’s, because a lot of the towns they like most in the US are also big tourist destinations: San Francisco, Boston, Seattle. But their tastes can’t be quite mainstream either, because they dislike other big tourist destinations, like New York, Los Angeles, and Las Vegas.

    There has been a lot written lately about the “creative class.” The thesis seems to be that as wealth derives increasingly from ideas, cities will prosper only if they attract those who have them. That is certainly true; in fact it was the basis of Amsterdam’s prosperity 400 years ago.

    A lot of nerd tastes they share with the creative class in general. For example, they like well-preserved old neighborhoods instead of cookie-cutter suburbs, and locally-owned shops and restaurants instead of national chains. Like the rest of the creative class, they want to live somewhere with personality.

    What exactly is personality? I think it’s the feeling that each building is the work of a distinct group of people. A town with personality is one that doesn’t feel mass-produced. So if you want to make a startup hub– or any town to attract the “creative class”– you probably have to ban large development projects. When a large tract has been developed by a single organization, you can always tell. [4]

    Most towns with personality are old, but they don’t have to be. Old towns have two advantages: they’re denser, because they were laid out before cars, and they’re more varied, because they were built one building at a time. You could have both now. Just have building codes that ensure density, and ban large scale developments.

    A corollary is that you have to keep out the biggest developer of all: the government. A government that asks “How can we build a silicon valley?” has probably ensured failure by the way they framed the question. You don’t build a silicon valley; you let one grow.


    If you want to attract nerds, you need more than a town with personality. You need a town with the right personality. Nerds are a distinct subset of the creative class, with different tastes from the rest. You can see this most clearly in New York, which attracts a lot of creative people, but few nerds. [5]

    What nerds like is the kind of town where people walk around smiling. This excludes LA, where no one walks at all, and also New York, where people walk, but not smiling. When I was in grad school in Boston, a friend came to visit from New York. On the subway back from the airport she asked “Why is everyone smiling?” I looked and they weren’t smiling. They just looked like they were compared to the facial expressions she was used to.

    If you’ve lived in New York, you know where these facial expressions come from. It’s the kind of place where your mind may be excited, but your body knows it’s having a bad time. People don’t so much enjoy living there as endure it for the sake of the excitement. And if you like certain kinds of excitement, New York is incomparable. It’s a hub of glamour, a magnet for all the shorter half-life isotopes of style and fame.

    Nerds don’t care about glamour, so to them the appeal of New York is a mystery. People who like New York will pay a fortune for a small, dark, noisy apartment in order to live in a town where the cool people are really cool. A nerd looks at that deal and sees only: pay a fortune for a small, dark, noisy apartment.

    Nerds will pay a premium to live in a town where the smart people are really smart, but you don’t have to pay as much for that. It’s supply and demand: glamour is popular, so you have to pay a lot for it.

    Most nerds like quieter pleasures. They like cafes instead of clubs; used bookshops instead of fashionable clothing shops; hiking instead of dancing; sunlight instead of tall buildings. A nerd’s idea of paradise is Berkeley or Boulder.


    It’s the young nerds who start startups, so it’s those specifically the city has to appeal to. The startup hubs in the US are all young-feeling towns. This doesn’t mean they have to be new. Cambridge has the oldest town plan in America, but it feels young because it’s full of students.

    What you can’t have, if you want to create a silicon valley, is a large, existing population of stodgy people. It would be a waste of time to try to reverse the fortunes of a declining industrial town like Detroit or Philadelphia by trying to encourage startups. Those places have too much momentum in the wrong direction. You’re better off starting with a blank slate in the form of a small town. Or better still, if there’s a town young people already flock to, that one.

    The Bay Area was a magnet for the young and optimistic for decades before it was associated with technology. It was a place people went in search of something new. And so it became synonymous with California nuttiness. There’s still a lot of that there. If you wanted to start a new fad– a new way to focus one’s “energy,” for example, or a new category of things not to eat– the Bay Area would be the place to do it. But a place that tolerates oddness in the search for the new is exactly what you want in a startup hub, because economically that’s what startups are. Most good startup ideas seem a little crazy; if they were obviously good ideas, someone would have done them already.

    (How many people are going to want computers in their houses? What, another search engine?)

    That’s the connection between technology and liberalism. Without exception the high-tech cities in the US are also the most liberal. But it’s not because liberals are smarter that this is so. It’s because liberal cities tolerate odd ideas, and smart people by definition have odd ideas.

    Conversely, a town that gets praised for being “solid” or representing “traditional values” may be a fine place to live, but it’s never going to succeed as a startup hub. The 2004 presidential election, though a disaster in other respects, conveniently supplied us with a county-by-county map of such places. [6]

    To attract the young, a town must have an intact center. In most American cities the center has been abandoned, and the growth, if any, is in the suburbs. Most American cities have been turned inside out. But none of the startup hubs has: not San Francisco, or Boston, or Seattle. They all have intact centers. [7] My guess is that no city with a dead center could be turned into a startup hub. Young people don’t want to live in the suburbs.

    Within the US, the two cities I think could most easily be turned into new silicon valleys are Boulder and Portland. Both have the kind of effervescent feel that attracts the young. They’re each only a great university short of becoming a silicon valley, if they wanted to.


    A great university near an attractive town. Is that all it takes? That was all it took to make the original Silicon Valley. Silicon Valley traces its origins to William Shockley, one of the inventors of the transistor. He did the research that won him the Nobel Prize at Bell Labs, but when he started his own company in 1956 he moved to Palo Alto to do it. At the time that was an odd thing to do. Why did he? Because he had grown up there and remembered how nice it was. Now Palo Alto is suburbia, but then it was a charming college town– a charming college town with perfect weather and San Francisco only an hour away.

    The companies that rule Silicon Valley now are all descended in various ways from Shockley Semiconductor. Shockley was a difficult man, and in 1957 his top people– “the traitorous eight”– left to start a new company, Fairchild Semiconductor. Among them were Gordon Moore and Robert Noyce, who went on to found Intel, and Eugene Kleiner, who founded the VC firm Kleiner Perkins. Forty-two years later, Kleiner Perkins funded Google, and the partner responsible for the deal was John Doerr, who came to Silicon Valley in 1974 to work for Intel.

    So although a lot of the newest companies in Silicon Valley don’t make anything out of silicon, there always seem to be multiple links back to Shockley. There’s a lesson here: startups beget startups. People who work for startups start their own. People who get rich from startups fund new ones. I suspect this kind of organic growth is the only way to produce a startup hub, because it’s the only way to grow the expertise you need.

    That has two important implications. The first is that you need time to grow a silicon valley. The university you could create in a couple years, but the startup community around it has to grow organically. The cycle time is limited by the time it takes a company to succeed, which probably averages about five years.

    The other implication of the organic growth hypothesis is that you can’t be somewhat of a startup hub. You either have a self-sustaining chain reaction, or not. Observation confirms this too: cities either have a startup scene, or they don’t. There is no middle ground. Chicago has the third largest metropolitan area in America. As source of startups it’s negligible compared to Seattle, number 15.

    The good news is that the initial seed can be quite small. Shockley Semiconductor, though itself not very successful, was big enough. It brought a critical mass of experts in an important new technology together in a place they liked enough to stay.


    Of course, a would-be silicon valley faces an obstacle the original one didn’t: it has to compete with Silicon Valley. Can that be done? Probably.

    One of Silicon Valley’s biggest advantages is its venture capital firms. This was not a factor in Shockley’s day, because VC funds didn’t exist. In fact, Shockley Semiconductor and Fairchild Semiconductor were not startups at all in our sense. They were subsidiaries– of Beckman Instruments and Fairchild Camera and Instrument respectively. Those companies were apparently willing to establish subsidiaries wherever the experts wanted to live.

    Venture investors, however, prefer to fund startups within an hour’s drive. For one, they’re more likely to notice startups nearby. But when they do notice startups in other towns they prefer them to move. They don’t want to have to travel to attend board meetings, and in any case the odds of succeeding are higher in a startup hub.

    The centralizing effect of venture firms is a double one: they cause startups to form around them, and those draw in more startups through acquisitions. And although the first may be weakening because it’s now so cheap to start some startups, the second seems as strong as ever. Three of the most admired “Web 2.0″ companies were started outside the usual startup hubs, but two of them have already been reeled in through acquisitions.

    Such centralizing forces make it harder for new silicon valleys to get started. But by no means impossible. Ultimately power rests with the founders. A startup with the best people will beat one with funding from famous VCs, and a startup that was sufficiently successful would never have to move. So a town that could exert enough pull over the right people could resist and perhaps even surpass Silicon Valley.

    For all its power, Silicon Valley has a great weakness: the paradise Shockley found in 1956 is now one giant parking lot. San Francisco and Berkeley are great, but they’re forty miles away. Silicon Valley proper is soul-crushing suburban sprawl. It has fabulous weather, which makes it significantly better than the soul-crushing sprawl of most other American cities. But a competitor that managed to avoid sprawl would have real leverage. All a city needs is to be the kind of place the next traitorous eight look at and say “I want to stay here,” and that would be enough to get the chain reaction started.


    [1] It’s interesting to consider how low this number could be made. I suspect five hundred would be enough, even if they could bring no assets with them. Probably just thirty, if I could pick them, would be enough to turn Buffalo into a significant startup hub.

    [2] Bureaucrats manage to allocate research funding moderately well, but only because (like an in-house VC fund) they outsource most of the work of selection. A professor at a famous university who is highly regarded by his peers will get funding, pretty much regardless of the proposal. That wouldn’t work for startups, whose founders aren’t sponsored by organizations, and are often unknowns.

    [3] You’d have to do it all at once, or at least a whole department at a time, because people would be more likely to come if they knew their friends were. And you should probably start from scratch, rather than trying to upgrade an existing university, or much energy would be lost in friction.

    [4] Hypothesis: Any plan in which multiple independent buildings are gutted or demolished to be “redeveloped” as a single project is a net loss of personality for the city, with the exception of the conversion of buildings not previously public, like warehouses.

    [5] A few startups get started in New York, but less than a tenth as many per capita as in Boston, and mostly in less nerdy fields like finance and media.

    [6] Some blue counties are false positives (reflecting the remaining power of Democractic party machines), but there are no false negatives. You can safely write off all the red counties.

    [7] Some “urban renewal” experts took a shot at destroying Boston’s in the 1960s, leaving the area around city hall a bleak wasteland, but most neighborhoods successfully resisted them.

    Thanks to Chris Anderson, Trevor Blackwell, Marc Hedlund, Jessica Livingston, Robert Morris, Greg Mcadoo, Fred Wilson, and Stephen Wolfram for reading drafts of this, and to Ed Dumbill for inviting me to speak.

  27. Malcolm McClure

    Brilliant article by Paul Graham describing ingredients for a potential Silicon Bog, and thanks for bringing it to our attention Bobby boy. Trouble is that the whole computer idea has now been done to death, rather like the steam engine in the 1930s and piston engined planes in the 1950s. Silicon and its hard and soft-ware offspring are not longer the big new thing attracting the brightest and best.
    The new challenge is to discover affordable, lightweight, portable power that does not depend on hydrocarbons. The answer probably lies in some unexplored corner of the realm of physical chemistry, not in computer departments or software startups. Its practitioners will be boffins in white labcoats, not nerds with ponytails and beards.
    Its range of uses could be anywhere from hearing aid batteries to electric vehicles, perhaps even aircraft. It is practically a blank canvas, so Ireland could lead the way.

  28. b

    Its a blank canvas ok. Alternative energy exists but the Greens won’t have it. Its called Nuclear. Or if you are G Walker Bush its Nucular.

    Funny they will say fluoride is non toxic and the mess in Cork harbour is grand for bunnies and small babies but Nuclear is a bridge too far for the Greenie turncoats.

    The Greens are hypocrites of the highest order. We will be sitting in the (organic, natch) dark before they get their fingers out of their crusty arses.

  29. laura

    I suspect it will take a couple of years for the current changes to play out. I was queuing in Aldi today with my small few items, behind a well dressed couple whose laser card was rejected by the POS system. It struck me that this would have been unusual a couple of years back.

    Every second person I talked to who has a credit card has it maxed to the limit, but not just to 2000 or 4000 but anything from 7000 to an eye watering 15,000 euros. Another friend who bought in desperation at the height of the boom is not only looking at a house that has already lost 10k of its value, sinking her 100% mortgage into the world of negative equity, her fixed rate has just run out and they won’t remortgage, leaving her with a hefty increase which she can barely meet. She is driving a 9 year old car which she is entirely dependent on since all she could afford to buy in was a small country village with zero infrastructure 15 miles from anywhere else, including work, the nearest city, home, friends.

    Another friend has just watched an “investment” property in Manchester’s docklands sink in price to such an extent it would take probably half the length of her mortgage just to get back to what she paid for it, she may write off the interest because she’ll never get that back.

    Those who are renting are facing rent hikes in already grossed overpriced, poorly maintained property with ever changing neighbours who vary from barely tolerable to downright antisocial.

    You cannot but wonder…..

  30. Donal O'Brolchain

    Paul Graham’s piece leaves a lot to be desired in his analysis of Silicon Valley.
    “I think you only need two kinds of people to create a technology hub: rich people and nerds. They’re the limiting reagents in the reaction that produces startups, because they’re the only ones present when startups get started. ”

    Only two kinds of people? What about customers? Who is actually going to buy the products/services of the start-ups – regardless of where they are sited, how many rish people are involved in the funding and how many clever geeks/nerds are involved in the start-up?
    It is worth looking into the history of Hewlett Packard as a way to understand the importance of customers in innovation

    Note that Intel’s first and only customer was the US military. “A corollary is that you have to keep out the biggest developer of all: the government.” Keeping out the government? So the the US government (eg defense/space/medical spending) has been the the largest customer of all, for many Silicon Valley start-ups. Presumably, the rich people got no tax breaks either!

    For a better argued insight into how new products develop, try the classic Vernon Johnson paper on International Trade cycles and new product development, published (if memory is correct) in 1966 in the Quarterly Journal of Economics.

    This serves as complement to Paul Graham over-simplistic recipe on Silicon Valley.

  31. Malcolm McClure

    I’d agree with Donal O’Brolchain that much of the innovation over the past 60 years was funded by agencies of US government (NASA, ONR,DOD,CIA etc.), motivated ultimately by the Cold War. International oil companies also were sources of funding for significant innovations. However Ireland’s defense research budget, space budget and hydrocarbon basic research budget is negligible in total. Paul Graham provides some pointers to how we might direct our limited resources and his analysis is entirely appropriate for Irish desire to establish a Silicon Bog. We don’t have competing ideologies to conquer, so we cannot afford the scattergun approach and we need to be targeted at carefully selected opportunities.

  32. Malcolm: I’m sorry but if you don’t believe that Information & Communications Technologies remain a challenge with great commercial opportunities then you don’t know the domain. I agree that energy, bio-tech and genomics are some of the hottest research topics right now but great IT research & development underpins that. However, Paul Graham’s article can be transposed to pretty much any technical domain. As a member of the fraternity of nerds who sometimes works with nerds from different fields in what’s known as cross disciplinary research, it’s amazing how similar we all are. It’s also amazing how positively stupid our government can be when it comes to creating the world class campuses and research centres we want. In almost all cases the attitude is “do it cheaper”, “cut costs”, “what’s the value?” or “we don’t have a track record in doing that here”. As Paul Graham suggests great R&D can be bought. It IS that simple as it’s about convincing a few very smart people to work together in a nice environment. From personal experience there are many top class researchers who’d move to Ireland if the salary and funds were right. This can be achieved through government funding or private bursaries/donations. Whatever about the latter it’s amazing how reluctant a government that talks endlessly about “knowledge economy” is to help recruit the best. The best analogy I can think of is a premier league football team. Success requires massive investment and luck. Some of the best players will be mercenaries but if you’re not willing to recruit them then there’s no point in playing the game. The other problem is our national begrudgery which makes us envious rather than admiring of ANYBODY who’s being rewarded more for something as trivial as being better/more experience/etc.

  33. Malcolm McClure

    Shane: I’ve made use of interesting developments in information and communication technology ever since I wrote my first Fortran IV program 40 years ago. The point I was trying to make was that they are now a mature technology, with advances made in tiny incremental and largely predictable steps. International competition in these fields is cut-throat; they no longer form a likely basis for enhancing a national economy.
    For any innovation, of equal importance to its nerds, boffins, publicists and customers are the lawyers who patent any lucrative discovery on the international stage and reserve a share of its profits for the national interest.

  34. Ed

    Malcolm, I agree that they are a mature technology, but application is still wide open for exploitation. Shane’s cross disciplinary research, offers endless opportunities for mature technologies.
    Nokia, didn’t invent the mobile phone, but look at where they’ve taken it through R&D. Green field research is for the big boys – niche application is where we should be going as it gives a quick return that can be used to finance further advancements quickly to reinforce a lead position. The Japanese got off the ground using it – in their case it was simply the development and application of advanced quality techniques to existing product designs – look how far that idea has taken them. Hewlett Packard is purely an applications company – one of those would do us nicely, thank you!

  35. MK

    I think you are all partially right ! ;-)

    There is no simple formula for success, and the silicon valley blueprint (nerds and rich people) doesnt necesarily work. In fact most of the time it doesnt work! A lot of business success is down to chance. Intel and Microsoft only came about because of a mis-managed PC project in IBM. That is the ONLY reason. Without that IBM project there would be no Intel (as we know it), Bill Gates may very well still be failing at selling accounts software in Seattle, no Compaq, no Dell, no PC ‘world’ as we know it. It did not come about through R&D or planning, nor rich people, nor nerds nor marketing people nor customers nor US military nor anything! It came about through IBM being a monoploy, being taken to court by the DOJ, and through people’s mistakes. Yes, mistakes! It was an accident. IP and the internet, similarly, although on a different set of events, was an “accident”. The internet as we know it (or think we know it) was not planned.

    > Nokia, didn’t invent the mobile phone, but look at where they’ve taken it through R&D.

    Or was is Nokia’s success really due to lean manufacturing tied with supply-chain efficiency, plus designs that met youth demand either through market research or just luck, good marketing, and good selling and price points and what not. It wasnt that they had the best R&D nor indeed the best phones!

    I agree that ICT is a ‘mature’ technology, but that doesnt mean that there are no opportunities in it. Ireland as a small market has a disadvantage, but there are things that we can do. However, do we really want to create a Samsung that is 20% of their GDP or a Nokia that is 10% of theirs. Diversification with many small companies can have benefits too if not instantly recognisable as a brand ala Guinness, Nokia, HP, Samsung. CRH are successful, although not a well-known consumer brand. Perhaps we should have branded an Irish Bar a long time ago and like a McDonalds or a Starbucks, had a Kitty O’Shea’s or a ‘Blarney Stone’ global chain. They were established anyway!


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