Part 3: 4 Megatrends That Support Rising Tech Entrepreneurship in Iran

200,000 years of globalisation

Baldwin (2016) using World Bank and Maddison-project data

In a previous post, I talked about the 4 megatrends that support rising tech entrepreneurship amongst Iranians. In a series of posts, I’d like to explore how the demographic, economic, technology and private capital megatrends will contribute to the National Innovation Capacity and invite a discussion around reasons why this can or cannot help us build globally successful technology companies.

There are a number of ways we can look at technology trends. The most common method of studying these is to look at the most recent history starting with industrialisation of nations. In his recent book, The Great Convergence, Richard Baldwin encourages us to take a much broader view of globalisation, a 200,000 year view to be exact. His model of three cascading constraints (cost reduction in movement of goods, ideas and people) is an interesting way to look at the economic geography and history of the world and how technology has helped transform lives at each phase.

He breaks globalisation and the technologies facilitating it down to four phases:

1. Humanizing the globe (200,000 BCE to 10,000 BCE)
2. Localising the global economy (10,000 BCE to 1820 CE)
3. Globalising local economics (1820 to 1990)
4. Globalising factories (1990 — present)

The technology that facilitated the jump from the first to the second phase was the Agricultural Revolution. This was an agonisingly slow globalisation phase. Thanks to agricultural revolution food production was brought to people instead of people going to food that enabled establishment of cities and civilisations.

We graduated into phase three when Steam Revolution helped us capture energy meaningfully and made transport of surplus goods cost effective and led to population growth.

The transition from phase three to four took even a shorter time and was facilitated by the ICT Revolution. This allowed the cost effective movement of surplus knowledge and helped distribute the know-how that was bulging in one part of the world to those willing to host it and participate in increasing it.

As Baldwin puts it, revolution is a word that is often used carelessly. When it comes to ICT, however, that is exactly what happened.

The ICT revolution in numbers, between 1986 and 2007:

1. World information storage capacity grew at 23% per year
2. Telecommunications at 28%
3. Computation power at 58%

Reasons for this eye-watering growth:

1. The “I” in ICT stands for information. Governed by Moore’s Law, the computing power grows exponentially.
2. The “C” in ICT stand for communication. Governed by Gilder’s Law, the bandwidth grows 3x more rapidly than computer power.
3. The “T” in ICT stand for technology. Governed by Metcalfe’s Law, the usefulness of a network rises with the square of the number of users.

The ICT revolution allows new ways of optimising organisational and human capital to make them more productive. The ability to build distributed teams across geographies, that make the movement of people less necessary, is having profound effects on our society and economic geography.

Face to face human to human communication evolved into fixed line (but expensive) virtual communication, replaced by mobile communication and now is evolving to unified and pervasive human to machine and machine to machine communication. This gives us orders of magnitude more information about our world and how to interact with it.

The ICT revolution helped infuse a commodities super cycle by enabling offshoring of some production stages and in turn benefited those with abundant natural resources such as Iran.

Winners are those who take this platform, organise themselves in new ways to maximise productivity and create new technologies to serve the cost reduction in movement of people.

In the next post, we’ll explore the fourth and final megatrend, private capital, that supports rising tech entrepreneurship among Iranians.

This is the tenth in a series of posts about our investment criteria and ecosystem resources which was also posted on our blog. We’d love to hear from teams with crazy (but commercial) startups. Get in touch or attend our breakfast series. Finally, don’t forget to get your IV Score or talk to our FundingBot to prepare for your next VC meeting.

Thanks to Mahyar Khattak for his contribution.