Another week, another headline from the tinderbox that is the Middle East. Youth activists from Tunisia to Egypt to Libya, fueled by social media’s real time information, are reshaping the region. But what will be the aftermath? The despots may be gone, speech may be freer but the underlying problem contributing to unrest remains: lack of jobs.
The statistics are sobering. Estimates of Middle Eastern unemployment range from 20% to 40% among young people ages 15 to 24. In Egypt, the unemployment rate has reached 83% in roughly the same age group. Saudi Arabia, which so far has avoided conflict, has over half its population under age 20 and unemployment at 40%. Many Saudi youths go directly from school to welfare without making the effort to find a job.
Unrest is rooted in dissatisfaction with the status quo, a combined frustration with political repression and lack of work. Mismanaged Arab economies have failed to generate employment opportunities and governments have done little to counter the cycle of poverty while enriching the ruling classes.
This leads us to the argument for entrepreneurship as a force for change. Entrepreneurs create products, services and jobs. They expand economies, provide employment and improve people’s lives. In the U.S., small business is responsible for two thirds of net new jobs. The Obama administration’s Startup America initiative recognized the critical role of entrepreneurship to the U.S. economy and is coordinating a public/private effort to increase the success rate of new ventures. Startup America endorses entrepreneurship education and mentorship, capital access, R&D funding and the elimination of barriers to starting businesses, all essential elements to an entrepreneurial economy.
Outside the U.S., there have been some notable successes when governments support entrepreneurship as a policy instrument.
Rwanda is a case in point. Following one of the worst genocides in history which left its economy in shambles, President Paul Kagame built a new model of economic development based on entrepreneurship. From a base of zero coffee exports in 2000, Rwanda now exports $48 million of high-quality specialty coffee annually with demand exceeding supply. Coffee production is a business of small entrepreneurial farmers, not agribusiness, and benefits 500,000 coffee farmers who have seen their standard of living improve. Entrepreneurship has been a potent force for change in the country.
Growing entrepreneurship in the Middle East will be challenging. Consider the differences between Middle Eastern culture and Silicon Valley. In Silicon Valley, openness and trust are assumed, failure is celebrated as a valuable learning experience, serial entrepreneurs who mentor new ventures are plentiful and venture capital is part of the fabric. Silicon Valley’s unique ecosystem nurtures the entrepreneurial spirit and validates the aspirations of young people who want to create something novel, often with social benefit. The great universities of the region, Stanford, UC Berkeley and UCSF, have extensive programs to educate nascent entrepreneurs and provide the networks to help them succeed.
Budding entrepreneurs share ideas in classrooms and in coffee shops, finding input from peers and colleagues can enhance their initial idea. They are encouraged to vet their concept with others. Openness is the norm.
Silicon Valley boasts three generations of entrepreneurs, many who become avid coaches for newcomers. In the oversubscribed undergraduate entrepreneurship class at Stanford’s Technology Ventures Program, top-tier venture capitalists and successful entrepreneurial CEOs devote hours to mentor and judge student team projects. .
Contrast this to the Middle East. Trust is generally reserved for family members, with outsiders accepted only when formally introduced into the circle. Failure at a business venture can be a black mark both personally and for the family. Without a history of entrepreneurship, there are few role models and mentors to help new ventures. U.S.-style venture capital, a powerful economic force, is almost non-existent. Business regulation is onorous: it takes 77 days to start a business in Iraq and one day to create a company in California.
Thirst for entrepreneurship
My first-hand view of the Middle East came as an invited professor in the region last summer. I became the second person to teach entrepreneurship in Saudi Arabia’s newest university, King Abdullah University of Science and Technology. This unusual coed university is located outside Jeddah and attracts a global mixture of students, researchers and professors. KAUST has the kingdom’s only open campus where men and women freely attend class together and women can wear Western dress instead of the abaya. Part of its mission is entrepreneurship.
I found an appetite for Silicon Valley-style education in my KAUST workshop. At the universities around Silicon Valley, teaching is experiential rather than by lecture. Student teams identify a potential venture idea and develop a business plan. They pitch their business plan to venture capitalists as if they were raising funds. They analyze case studies of the early days of ventures such as Facebook, Linkedin and Zipcar. Members of the entrepreneurial ecosystem come to class to share their knowledge. The learning experience through this combination of inputs — industry participants, case studies and hands-on business planning — is invaluable. Both technical and business students start to understand the elements needed to start a venture.
Entrepreneurship education is a good place to initiate change.
Overcoming the issues in the Middle East for entrepreneurship to flourish is clearly difficult and will take a multifaceted social, educational and policy approach. Billions of dollars of U.S. aid — $15 billion in economic aid to Egypt alone since 1975 — have gone largely for military and public-sector support, leaving unaddressed the fundamental issue of youth unemployment.
With its unique heritage and experience, the U.S. should take a leadership role in helping the Middle East become a more entrepreneurial society.
Stephanie Marrus is a management consultant and an international entrepreneurship educator based in Silicon Valley. She has taught entrepreneurship at UC Berkeley and mentors in Stanford’s Technology Ventures Program.