Asia Sentinel

Rice and Chips
Technopreneurship and Innovation in Asia
By Dennis Posadas

Published in 2007 by Prentice Hall
Pearson Education South Asia Pte Ltd
23/25 First Lok Yang Road, Jurong
Singapore 629733

If you were a Martian venture capitalist tasked with setting up a new office somewhere on the Asia side of planet Earth, you could learn something from Rice and Chips, Dennis Posadas’ new book on the state of play for VC-style technology development in Asia Pacific.

If you were an Asia Pacific technology company founder, you might find one or two parts of the book useful. However, not everyone would find net value, disinterested analysts for example. There is a lot to find fault with in this book.

What Posadas does well is lay out the mainstream – and by mainstream I mean venture capital mainstream – view of things and cheerlead accordingly. He lets you know who is doing what and where the “hot” equity and government money is currently placed on the roulette wheel. He goes down the list of names of many of Asia’s key universities, research institutes, science parks and successful tech companies. He also presents a series of “Silicon Valley Rules” in little boxes that point to what a transplanted technology development culture could look like in Asia.

His analysis however favors glib over serious. In a discussion of why Silicon Valley “beat” Boston’s Route 128 in the technology war, Posadas repeats the VC lines about California’s small tech shops being beautiful and fleet while he characterizes the Massachusetts companies as big, lumbering and “Cold War” in their mentality and orientation.

Sociologists, legal scholars and economists point to a very different cluster of causes for the differentiations that took place, a key one being State of California right to work laws trumping the Commonwealth of Massachusetts’ hard enforcement of non-compete clauses in employment contracts. The point being that California people who are free to mix are also free to form new companies on the basis of what they have just learned from their old companies. Boston people looking at crippling legal costs and the prospect of personal bankruptcy, don’t run out and start new ventures. They tend to rein in their creativity accordingly and go find another job instead.

Academics point to other contributing factors including initial low input costs (remember the days of cheap rentals in California?), investment risk transfer opportunities (think of NASDAQ all dolled up and looking like Macau’s biggest casino) and macro-economic high liquidity periods at crucial junctures – lucky timing in short.

If the scholars are right, then the facile VC success stories all miss the mark. It’s not about how smart the VCs are. It’s about time, circumstance and the basic market and legal framework.

That the VCs might have gotten it wrong would not be surprising. Much published analysis suffers from bias, i.e., a business magazine surveys 100 successful executives and finds that 87 percent of them get to work early, so the magazine concludes that getting to work early contributes to success.

But of course missing data might well show that 90 percent of failed executives get to the office early too.

This matters — if Posadas is right, then the Singapore government’s decision to make the lion city a biotechnology hub might well succeed and Hong Kong’s Cyberport and new science park might work too. If he’s wrong, then mercantilist interventions, no matter how well executed, are likely to fail.

If he’s wrong, the best things Asian governments can do to incite innovation are to improve general education and ensure freedoms under the law, for instance freedom of association, work choice, expression and movement, like California did.

Then there is the implicit question of vested interests. Angels, VCs, investment bankers, headhunters, lawyers and new-venture accountants — these folks form and reform loose clubs whose mission statements might read something like:

Our goal is to push the financial risk inherent in this tech company idea all the way from the angels to the investors in the VC funds to the public markets while at each stage creaming off bits of cash for ourselves.

Granted, alternatives involve anarchy risk. But economies like Taiwan have done very well out of loosely managed anarchy over the last half century or so.

Why dump what works and instead recommend the wholesale importation of your Western neighbors’ foibles?

Posadas argues, for example, in favor of strong intellectual property law as it exists in America.

The granting of method patents on software is a highly contentious issue. Many critics argue that large companies (one set of vested interests) use ownership of often spurious method patents in cross licensing deals with other large companies, the net effects of which deals are the stifling of innovation and the locking out of smaller companies.

There is a strong movement to unwind all software patents in America right now but VCs resist. They love patents because patents feel like assets.

But the truth is squishier. Software patents are hard to get and harder to defend. Some of the time they constitute a bit of pre-funding show, a way for Silicon Valley technology companies to attract the next round of investment, knowing that the patents would likely prove indefensible in the long run.

The point being that the attempt by Asian governments and vested interests to mimic California’s technology success may not make any sense. What used to work in California may never work again in California, or anywhere else.

These are serious issues, but Rice and Chips does not deal with real issues; it assumes the conventional VC answers and tells you how to understand and implement them in Asia.

The book is not a policy guide that’s likely to prove useful over time.

But still, the book is a fun read and a good primer on certain Asian technology and innovation issues. If you’re curious about VC-style technology funding in Asia from the perspective of the VCs, Rice and Chips is worth a look.

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written by Patrick Lambe , November 15, 2007

A nice sharp review - I like it when a reviewer gets into dialogue (or debate) with a book rather than just being descriptive - would love to see the two of you - Jay and Dennis - on a conference panel together!

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written by Ron Yu , October 30, 2007

The author makes some interesting and valid arguments. As I have not read the book I cannot comment on the author's views re: government led innovation projects like the Cyberport and HK Science Park - which to me are either utter wastes of money or more cynically, excuses for real estate developments.
(with regards to Biopolis, while it looks good on paper, biotech is a risky area and won't really make much impact on that nation's overall employment situation given that biotech is not a labor intensive business and requires highly specialized skills)

As for software patents, I don't know how I feel about them. ( I do feel more strongly about biotech patents given that they may, in fact, cross certain moral boundaries)

While I agree that many such patents are silly and are abused there are many innovations in software (that were ironically not patented) that deserved patenting - for example Xerox's first Windows based system.

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