 Well, welcome everybody. We have what promises to be a fascinating session about a subject that interests an awful lot of different groups and countries around the world, and I guess one way of putting it is that everybody's envious of Silicon Valley would like to have something like that themselves. But how'd you get there? And how do you encourage the right sort of tax regime? y set of laws, copyright, all the ingredients that go into the sort of magic that works there. So, I think we're going to have some very interesting ideas. I'm going to start actually by asking both Clay, an expert on disruptive innovation, and Bill, who practices it most days, to give us maybe just one thought about if you were going to be called in to see the minister of a country and say, what are the things I should do? What's the first thing you would say? In establishing regulation, don't ever let the criminals write the laws. And the reason why that's not a stupid idea is often a regulation is a response to somebody who broke the law. And when you then put a regulation in so that nobody else can do them in that way, you impose on the deeds, the sins that you put there on everybody else, and you don't want to ever let the criminals define the rules. And just explain that a bit more. So the criminals are what the people who started up businesses are doing very well. The oligarchs, we put it like that, of content industries or other industries, the established players that shouldn't be described. No, the criminals. Actual literary criminals. I'll tell you, I'm a religious guy, I belong to the Mormon church. And every Sunday there's a Sunday school where the kids go to be taught. While the parents go over there, the kids go here. And three or four years ago, some jerk, one guy molested a child in a room in the church where there were hundreds of people around. And so when the churches came out with their next manual, holy cow, man can't teach Sunday school lessons anymore unless there's another man or woman there with them. And who wrote that regulation? It was not the 99.998% who always instinctively followed the rules. It's the one jerk. And yet you now impose on everybody else the sin or the problem that he created. So you start with what, as few rules as possible? Well, you get smart, honest people who understand how the system works. Ask them to write regulations that facilitate good work and honest work. And then deal with the problems as they occur. But you want to have regulation that facilitates good work and good judgment and good decision making, not the bad. Okay, Bill. Yes. Well, I run a technology incubator in Southern California. And we started more than 100 companies in the last 18 years. What I see is unbelievable, unlocking of human potential when you have a start-up where the founders and the employees have high equity stake. So I would like to see many more incubators and accelerators around the world. And what I think governments can do to encourage that is have matching funds, have very, very low hurdles for a new company to get started. Because I think start-ups can happen on much lower capital than ever before so you don't want high fees to get that company started to get it in the way. And I think that start-ups are still risky. So you need lots of that bats. You need lots of shots on goal. You want to give much more opportunity. So the fewer things that government can put as barriers to getting companies started, the better. And the more governments can partner with entrepreneurs in local area to get these accelerators and incubators going because they can get more companies happening per unit time, create tons of jobs. And if you start up these incubator funds. I mean it works in Silicon Valley, doesn't it? You've got angel funds, you've got incubator funds. They get to a certain, the idea gets to a certain level you have a series A funding, series B funding. There's a ladder all the way up. But a government can't create an entire venture capital sector. But it's probably easier to raise a million dollars of series A funding once you have traction from investors than it is to raise $10,000 or $20,000 to get your idea just formulated when you just have the napkin sketch. And that's where I think accelerators and government matching funds can help to plant the seed, not to grow the seed. OK. We've got an interesting example here in Nigeria. Amobla, could you maybe tell us one or two things that your government's trying to do to encourage the sort of things that these guys have been talking about? I was in Silicon Valley for the very first time in September of last year. And so we visited a few of these incubators and accelerators. And I do agree that you can't replicate Silicon Valley. There's something so special about that. You can't just take it and do it in another country. What we have done is, first of all, the fact that even the infrastructure for an innovation hub on accelerator is actually quite expressible in emerging economy. So we have actually supported the infrastructure funding. So we've put in place the building, the fast internet that they need. We've partnered with some of the big IT companies to give us just the devices by which you actually test these mobile apps. And so that has actually, and then we've literally put that capital into it and we've turned it over to the private sector. So we've put in place a governing board that actually runs that accelerator. And we have two of them now. And we're going to be doing them in about six or 10 places. What we've also done is this idea of funding. We know that it's very, like, you're absolutely right. It's very, it's easier to get a million dollars, even in Nigeria, where you've got a track record, that it is to get the $10,000 that you need to take your idea from a concept to something that can actually scale. And so we've actually, we've started an innovation fund. We've got professional fund managers to manage it for us. We put in some money, $3.5 million from government. And we're hoping to raise about $15 million. So it's not quite matching, but at least it's the catalyst. You begin to get more and more funding. And this fund is really going to be focused on that $10,000, $50,000 that they need. And hopefully a few of those companies will be the ones that will then be able to get the series. $800,000 or hopefully a million, a million dollars. And that's what we've done by just trying to catalyse the innovation and the ideation environment in Nigeria. And tell us a little bit more about the environment in Nigeria in terms of entrepreneurship and young people actually wanting to start their own companies and do something. Did they have the right education? Did they have the right attitudes? They have the right attitude, which is, you know, I want to make money quickly. And that's what capitalism and innovation is about. But I think that what we're finding is that they don't realise what it takes. So the kind of things we find is that this, it's not true innovation. A lot of it is copycat. Somebody's done this, I just tack a little bit to it and I then try and sell that as my own idea. So what we're trying to do in these innovation homes is to really test the real disruptive innovations, the real big ideas that may actually have a big impact in the country. So they've got the right attitude. But I think in terms of what it takes to succeed and what real innovation means, we're actually going through that process with them. And I suppose in Silicon Valley, classically, it's been going a long time. So people can arrive there and they can say, ah, yeah, that guy, Larry Page, he founded a company and he became a billionaire and he's world famous and that sounds like, I'd like to do that too. In a lot of countries, they don't really have that. You don't have the vision of what it will become. What's the feeling in Nigeria? You know, they do have that vision. Well, this is again the power of the internet. They will tell you that when you're talking that they want to be the next Bill Gates or Mark Zuckerberg of Africa. So they actually do have that very big vision and they see a very huge market for them to do that. So there is that vision. But I think what is lacking is actually, and they say things like all of these companies were actually founded in a garage. But I think what the difficulty that they have is the fact that there are many things that you need to do to run a business. And that's why we're actually pursuing a philosophy which is a companies and not code. Because we're all focused on writing very good code, fantastic code. Yes, fantastic code does not a company make. So we're trying to get them to focus on, yes, you're a great developer, you're a great programmer. But you've got to have a team around you that can build a company. So you've got a good piece of software. You've got to figure out a way intellectual property is one. How do you ensure that you've got a patent on intellectual property? How do you ensure that you've got to have a business plan? You know, where do you want to be in 12, 15 months? You've got to have a budget, you know, a financial plan. All of those things are things that they don't really think about. But we're trying to... The one year or so they spend in these accelerators is what we're trying to teach them. It's not just a piece of code, but at the end of the day, what you really want is a company, a Facebook or Microsoft, which is actually a company, not just a piece of code. Can I add one thing to that quickly? The incredible thing today is that you can be somewhere in a garage, you can be in Nigeria, you can be in Israel, you can be somewhere in India. You can reach the whole planet now. So your idea can touch the whole world, but you have to be good at getting distribution. That's why you need a company. Just a code won't get distribution by itself. And if you put companies together in an accelerator or incubator where they can share best practices for how to achieve those things, you really can reach the whole planet and build a company with scale, even if you start out with small resources. That's what's so exciting about today. It's a general question to the panel, but obviously lots of little mini Silicon Valley and mini cities of innovation have started up in all places in the globe. All of you will have been to different places. Other countries that you look at and you say, ah, right, they're getting it right in a certain significant way. Where's the most hopeful other places in the world? Israel is doing a great job. Some people call that startup nation. I think the number of startups per capita might even be higher than Silicon Valley. Germany, I just came from Germany, a conference there, and there's a lot of startup activity happening there, starting to happen in England as well. So there really are pockets of innovation happening all over the world, really growing fast. And I think also South America and Southeast Asia are really going to be big, big hubs too. I don't have anything to add. I think that's the way that I approach it too. Sorry. Well, maybe I'll add just that I think it's a very good thing to try to emulate the outcome of Silicon Valley, but not necessarily the process. I think many experiments go wrong in trying to follow the recipe of Silicon Valley as opposed to trying to draw on the local advantages that exist, the local talent, the sorts of things that there are locally, and making the most of that in order to develop an innovative ecosystem. Politically I'm on the conservative side of the world, but government has a role. But I think it's really important that you time the government's intervention so that you don't, like if you go to Silicon Valley and just say, take whatever the documents are that are standard. Inside of that truly are many of the sins of past generations. And I have a real aversion to thinking that we ought to be guided by the past because they impose so much. Like if you wanted to put in regulation about going public or reporting, right? My gosh, if you took the American law and impose that somewhere else, you impose Sarbanes oxley on those people, and what will we do to financial banking? And I think a minimum strategy first. But isn't it an interesting point? In the US there's been an attempt I think under the Jobs Act to roll back some of those Sarbanes oxley type regulations to make it easier, for example, to file for an IPO without giving away information immediately. There are other measures which I think a lot of venture capitalists wanted to see to free up. Are those good things, Bill? I think it's going in the right direction. It's still way too expensive to become a public company in the United States. And it's not too expensive if you have a billion dollars in revenues because $2 million a year, $5 million a year is affordable relative to your profits. But if you're a fast growing young company you can't afford those fees to become a public company. I think that's a big negative. Used to be much less expensive. And is there seems to have been some sense in the US of people pulling back from wanting to go to the IPO route? Because of those expenses and because of all the other headaches I think that's led to the acquisition binge that many companies are on. Many companies are choosing the acquisition route. I don't think that's necessarily a bad thing, but I think that founders' visions sometimes get cut short when they sell to another company compared to building the company for the long term. Do you think that then in terms of the structure of finance that a government or regulators want to put in place they presumably want to encourage more mature capital markets so that innovation can happen and it doesn't just have to be the large company? What are the measures? I agree with you that government should be mostly out of the way. The purpose of these regulations is to protect investors. What you're trying to do is get the best balance between protecting investors against fraud but making it easy for companies to grow and have access to the capital they need to do that. I think we have swung overly too far in the direction of trying to protect investors even though I think as you said some of these laws were written by the criminals so they're actually not even really protecting investors to make things more expensive. I think we need to swing back and I agree with you completely that if other countries or regions were to copy aspects of what happens in the United States they shouldn't copy that aspect. Just wanted to make a point on that and something that we've been doing. We have agreed with the Niger Stock Exchange that we will create a secondary market and the requirements for listening on that market are less stringent than the primary market so things that you would have to have you'd only need about two or three years of financial statements to be able to list. Just things that make it easier for companies to come onto the capital markets for the first time and hopefully as they grow and they progress they can then move to actually being on the primary market and even though there are not lots of well there have been any IPOs in the IT sector yet but what we're doing is now we're preparing the ground to make it easier when you're out of that the Series A funding, the venture capital funding how do you get onto the stock market and that's what we've tried to do, we're working on that now. On a different note altogether outside of what a government can do on financing or even on cost of IPOs the problem with this idea is it takes a long time but it's education it's skilled workers we have a desperate need for that in the United States we can have better immigration policy to allow us to bring in smart immigrants to participate in startups and I think other countries could do a better job than we do of attracting the best talent by allowing people to move to where the capital is and the ideas are much more fluidly, that's a big factor. It seems to work okay though doesn't it? I heard some statistic the other day that 64% of Silicon Valley engineers and work came from outside the US a big percentage that's not bad a lot of them came in grandfathered in earlier times it's much much harder for immigrants to stay now but since 9-11 it's gotten much much worse Is this a global market in that level of talent? I think it should become one I think it is I think it's an example of competition being increasingly based on innovation and this is one of the components of a healthy innovation ecosystem that everyone wants human capital and so you are seeing you're right in your statistic I think it's 66% of the engineers and scientists in Silicon Valley are foreign born as opposed to about 33% in the rest of the United States of America and if you look at foreign born inventors generally across the world you'll find that the great majority of them are resident in the United States of America so there has been a pretty good job done in attracting foreign talent in the US I kind of in two minds about that because on your side it's attracting foreign talent on our side it's a brain drain so that's the way you do it but something very interesting came out of again the trip to Silicon Valley where we're trying to balance that brain drain versus attracting foreign talent I think the things you're doing are going to keep the talent in but you're right where it would be great to put our best talent in a place where they can actually they have access to more capital and they have access to that whole mentoring idea so what we've done is what we're about to do there was an incubator called plug and play and what they do is actually we've agreed with them that some of the best talent that's coming out of our own incubation hubs will go to plug and play for a period of six to twelve months they have these entrepreneurs and residents these are people who have actually birthed and IPOed many many companies they will be resident in Silicon Valley for a year but the idea is that they then come back so hopefully we can kind of balance that brain drain versus foreign talent I think young entrepreneurs need two kinds of role models well many kinds the fantastical kind Zuckerberg, Steve Jobs, Bill Gates and they need someone on the ground near them to mentor them, they need to see someone they can emulate they need to see the body practices and body language and lifestyle and other habits of successful people and having them right in the building is fantastic so if you take a group of people and have them learn those skills and come back and stay in the same residence with other young entrepreneurs I think that's fantastic I'd just like to ask a question about the subject of the special economic zone or the special place or within a country where you set up somewhere where the old rules don't apply maybe it's tax, maybe it's regulation there's a lot of ideas about what happened in Shenzhen in China and so forth just to sort of say we've got all of this built up legislation it's kind of going to get hard to reform it all but we'll just set up a place where people can be free is that a good idea? I think it's a great idea take the Shenzhen example they could have set up that zone across the whole country but by having it in a specialised area they then got a density of manufacturing so it led to such efficiency that obviously the manufacturing that has moved there is insane similar an economic incentive zone to drive entrepreneurs in one area will have that similar kind of efficiency that there'll be talent nearby there'll be other firms to work with the cost of building a startup has gone down so much because the tools are there the open APIs are there that you can assemble things from building blocks the same thing is true of having the other talent nearby that you need to reassemble to build your company so I think establishing special economic zones helps get that density obviously that's what Silicon Valley has acidentally historically has the unbelievable density and I think that's a big idea I'd go even further to say that the specialised zones are a special case a special case of our general principle and that is whatever it is you want to change or regulate in a different way you need to create a special zone out there where it can be implemented so most people don't remember but in financial services there was this marvellous little regulation called regulation Q do you remember that and it made it illegal for banks to pay interest on checking accounts it was a nice thing and if you think you could ever in a million years change that regulation head on you die trying because they have so much power behind the regulation and the way it got built was Merrill Lynch went outside of the reach of the regulators because they weren't a bank and created things called what do they call it money market checking and then fidelity came next and the consumers went to where they were and evacuated the banks and then the banks got deregulated as a complete and the same thing happened in regulation of commercial bank airlines they did it inside of Texas which was outside of the reach of the government in Washington but I like the principle that whatever it is we're going to change we ought to figure out a way for there to be a special zone outside of the reach of the regulators do it there everybody goes to the special commercial zone and then the rest of the world will cave in and should let's just talk about tax for a bit should you offer tax incentives should you offer low taxation to individuals to companies what's the appropriate incentive to start up we talked earlier about New York offering tax incentives New York's offering tax breaks and these 68 zones for companies basically the same idea of having these zones they're offering no sales tax no business taxes and no personal income tax to the employees of a start up for the first five years of the start up that is a big incentive to go put your start up in New York and if you want to have start ups which are job creators in your area I think there's very few things better than that Silicon Valley going to become like Hollywood that it just goes around the world looking for the cheapest tax incentives in different places sets up there for a bit and then heads off not everybody likes that the idea that you've got this mobile tax arbitrage I think people jump more easily for a tax incentive for a movie because it's a three month project your company, this is a five year deal they want the company to be there for five years to give you these incentives and some people are going to hop that quickly but I do think it causes someone from nearby the area or take someone in the area who wasn't going to do a start up and convinces them to be entrepreneurial and that is great I was just going to say we have what is called a pioneer status which actually offers beyond tax incentives the other incentives that you get as well if you need to bring in equipment you get a duty wave when bringing that equipment in and really what that does and making that huge amount of revenue just offering them the tax incentive I think is great and even what it does is like you were saying it actually attracts technology partners to come in so interestingly enough the way that we started the GSM the telecoms industry was we offered pioneer status to any of the companies that won the bids and they didn't pay tax for five years they had import duty waivers on all the equipment they were bringing in and what that allowed us to do was accelerate that mobile growth very very quickly but of course it's come with its challenges now not being able to manage that growth but that pioneer status and those tax incentives are actually very important for attracting that investment attracting the skills and talent there's been a lot of controversy in Europe not so much about start up taxation but about the international taxation of established players such as Google, Facebook and others and their use of the relative ease of shifting IP to different places in the world and structuring your tax affairs so that you're paying very low rates of international tax I think from memory Google uses Ireland and Bermuda and achieves 5% or something a lot of people don't like that I mean, you know they like Google, they like Facebook they like the idea that there's innovation and there's these new digital pioneers but they don't like the fact that this industry seems to have special status that it seems to be able to get around national laws does anybody have thoughts about that? Well it's isn't it just an inevitable outcome of the fact that you have a global marketplace and you have competition operating and the competition is focusing on the regulatory framework and the thing to do is to take note of that I mean, just as you take note of the fact that that there are incentives in some countries to attract talent and you have to have a response to it but it raises the whole question of whether you ought to have any form of international regulation, let's say, in these areas to create a more even playing field but that's something that I think is very difficult to imagine because everyone wants to compete Countries are competing, cities are competing and I think that's a natural outgrowth of trying to attract innovation One other thing that I wanted to say related to what you were saying about government, you know, mostly should stay out of the way, some good examples of that and the more government can do this for innovation the better I would call it permissionless innovation the more an area does not require government permission to do anything, the more innovation you're going to see and I'd say the internet was the greatest experiment ever in permissionless innovation that anybody could build upon that platform without going to the government to get approval for their new idea or whatever another example of that is the innovation happening around bitcoin right now and even leaving aside whether you believe in bitcoin or not the incredible thing about it is it's permissionless innovation you don't need to go to a credit card company to ask them if you want to do your new payment idea you don't need to go to the government it's just completely open so that leads to the greatest disruptive innovations when you don't have to go fill out a form to say is what I'm about to do going to be okay the more areas where government can do that I think the more you're going to see great disruptive innovations that improve society of course government has to have some regulation and some rules in place and there are some places where challenges come up when we were talking earlier about say Uber or Airbnb people who are disrupting businesses like hotel rooms or taxis governments do come in at some point we talked about the example of France didn't we and it's I think tried to impose a 15 minute delay on the Uber rides as opposed to the licensed taxi rides well that seems it's a classic response to an incumbent industry not liking the disruption so it wants to sort of hold it back not stop it but hold it back just a bit how do governments resist the temptation to just say well we like innovation but we don't really like disruptions well I think that well I've been thinking about this so I'm not sure that this is a cogent idea but I've been on the board of Tata consultancy services for about 8 years plus or minus so I've learned a lot and one of the things I've learned is this was a nation that historically was just filled with corruption and it was a very slow country as a result of this and then a bunch of guys in Bangalore said let's create a conduit from Bangalore up to heaven and then it could go around and get around all of these physical regulations and holy cow you just look at what happened as a result of that and then I think that the rest of India sees the prosperity that comes and I think what they're seeing one regulation at a time is when you deregulate a node you don't just get away the regulation you remove a node of corruption because every time you regulate something it's a node of corruption and you may think that you are spawning innovation and growth by putting in these nodes of potential corruption but it'll come back to you without necessarily agreeing with everything that Clay has said I would just note that Lao Tzu said the more laws you have the more criminals you have well to the Uber case so Uber did a permissionless innovation of building an app that allows you to call the car directly pay directly and it took off like crazy wild success then some group of taxi drivers in France decide they don't like it and they go to politicians and say stop that and those politicians want to get re-elected so they've put in maybe a node of corruption at that one point in saying I'll accept your demands because I want to be re-elected and that exactly maybe proves the point that once you start requiring the permissions the innovation is going to go down and is it possible to define sort of what you might call good regulation I mean let's take the example of net neutrality I don't know whether that's good or not but I do know that Silicon Valley would like to see what is actually regulation it is a foundational regulation in their view of saying to the large telecoms carriers and cable companies you can't charge in certain ways and they would say well look that's not regulation that's opening up a market how do you define what's good and what's bad that's very difficult and that particular one is very difficult as well well the aim is facilitation isn't it the aim really is facilitation in certain areas you are needing to protect but in the case of innovation what you are trying to do is to create an environment a regulatory environment which will facilitate innovation let's talk just a little bit about IP you mentioned earlier the instinct in Nigeria to copy and we were talking before the panel started about Nigeria's film industry and the amount of copying that goes on there and piracy now do you think that you need to change the laws do you think you need to change enforcement what do you attempt or do you think you need to change culture and the entire way people think about copying versus creation what's the real challenge then is it a legal regulatory one or is it an attitude normal it's not a legal regulatory challenge because I'm not a lawyer but from what I understand we've got very good intellectual property laws one of the challenges we have is actually enforcing those laws which is why the piracy is so abundant but I think that what we need to do is actually first of all create that awareness a cultural awareness that it is not good to copy because people don't see anything wrong with it quite honestly, Microsoft and they're all making billions of dollars elsewhere so what does it matter if I just copy this word application and now that awareness is becoming greater because some of that innovation is coming from Nigeria so now it's the software developers that are worried or I had this piece of software I went and discussed it with the telecoms company or can we just take a look at it overnight and we find new it that come up with their own product or service so now that it's actually hitting them I think the realisation that this intellectual property patented is a very important thing I think that cultural awareness is actually beginning to we're seeing that a lot more now so the laws are there but it's just the case of getting people aware of it changing the attitude towards copying and piracy and also making sure that within our judiciary system we actually begin to enforce those so what we'll find is that we can't catalyse that software development, that innovation industry if people think that if I develop this software two days later somebody's going to copy it and there's no recourse of the law to say that this is wrong so it's very important for us Francis, what do you think about the general framework because if anybody you're going to be in a position to know well we're not sure about that but look I think there are many tensions obviously in the field of intellectual property one of those tensions is one that's just been mentioned we have a certain ambivalence of society to imitation we teach our children through imitation we say do this this way but at a certain stage you expect children to become autonomous human beings who take their own decisions and do things their own way and have their own capacity so there is always a balance I think in an intellectual property to find about what is permitted and what is not permitted you couldn't have a fashion unless there were a certain number of elements that were in common you couldn't have a style or a school unless there are a number of elements in common so it's a very fine balance and the trick of course in the system is to try to locate or identify that which is really new and which really makes a contribution adds value and should have the protection of a framework to get an idea from being an idea through to being a product in the marketplace and that's a very hazardous journey but if you don't have a protective framework for that nobody is going to invest in it well if you take the US example I mean it's a country that's highly innovative it's also a country which has got a relatively strict set of patent and copyright laws and there's a feeling among some people, certainly some people on the west coast that it's far too strict far too restrictive and it actually inhibits innovation what's your perspective I feel that on balance it still promotes innovation I try and come up with an idea every single day and write it down we try and take those and filter them and turn them into maybe four to six companies a year one of the filters we use is there any IP protection we can build around that idea and really look at that and say it's not the only factor but it's a big factor we look at the idea and say are there some protectable things here that have not been done before even though it might take years before we get the patent we still think it makes investors happy one of your first questions is is there something here I could patent a lot of times when we look at our ideas it is very very hard to find one that hasn't been done before and it's very very hard to find one that we can even find a name for so we sometimes have to send a lot of ideas back to the drawing board for improvement to find something that uniquely adds value to the prior art and I think that's a good thing so I don't find that to be a challenge I think that helps the business and I think it helps us apply a good filter but let's just press you on that a little bit because it's interesting you've got a bunch of people trying to come up with new ideas but you're saying that the first filter for the new idea is not is this a great idea is it disruptive is it something unique and new that we can protect about this because why is protection so important even though I believe that execution matters more than anything else even more than the idea because I could just tell you ten ideas and it wouldn't matter because how you carry them out that's the real issue I still think that people you need to attract to your company both investors and employees want to know that there's some solidity and security around that and I think that having the patent office declare that is valuable Claire sorry Francis well I wouldn't make you know I don't think the problem is the level of protection if you like or whether it's too strong or too weak as the case may be I think some of the problems we've got in the intellectual property system are really relating to the way in which intellectual property is being used so we are seeing extraordinary demand coming through everyone knows that they need some intellectual property protection so you're getting 2.5 million patent applications around the world every year you're getting six million trademark applications and so on extraordinary demand ensuring quality outcomes in the regulatory process in that environment is an extremely important thing not getting rubbish patented to get in the way of property rights getting in the way of normal activity so that's one question I think if I may just now I know where the applications take so long I didn't know the numbers would stay and then I think another whole problem is just the evolution of the marketplace in such a way which is being tackled in the United States of America in such a way that you have a class of enterprises that are not really interested in the underlying knowledge but they're interested in the exclusive right to use the exclusive right to sue people rather than to use the knowledge to generate a product or a service the so-called patent troll that of course the difficulty there is defining what is a legitimate evolution in the knowledge markets and technology markets on the one hand as opposed to a form of behaviour that I think many of us recognise as being reprehensible but we don't know how to deal with it I have a question for the team that I I don't know if it's a stupid question or it's a plausible question but as a general rule in the early stages of an industry when the technology is not well understood and the products don't perform very well almost always the successful competitors compete with a proprietary interdependent closed architecture and the reason why that's so important early on is if you try to start in the early years with an open market architecture you take so many degrees away from the engineers that they compromise the performance of the product when it's still in development but when the technology becomes well understood and the competitors in the market are really good then it moves towards an open modular architecture and the world changes dramatically because in a world of interdependence if you want to change one thing you got to change everything and so it just forces you to stay with things for a very long time whereas an open architecture you can just take out and replace it so that you have competitors around the world trying to make each component better so is there a difference between regulation of whatever topic we're talking about here that you can have an interdependent architecture for these kinds of regulations versus a modular architecture and I'd argue that most of our regulations are excruciatingly interdependent and to change anything oh my gosh how many lawyers do you need to have and all the regulations who have nothing to do with the issue of play you know and if we could just fast and pray together and have a team to try to take the interdependent architecture and bring us the android operating system you know just the lines are clear and then you'd have people around the world who are saying you know that node that yeah there are eight different ways to improve that one and you could just this is like the new github for government this is like using the really great open source method of sharing software to make improvements but for regulation that'll be very challenging but it would be a great idea have you tried these ideas out on Capitol Hill yet? okay I'm going to turn to the audience for questions could you just wait for the microphone which is just coming and maybe just identify yourself as well Mr Shirley Jackson we all come from the worlds we come from and I'm a university president we mainly educate scientists and engineers but I also chaired the nuclear regulatory commission for the United States so my question relates to the following you all talked a lot about startups and businesses getting started but innovation depends upon game changing ideas you did mention human capital development it requires infrastructure and then there's a specific form of regulation which you really didn't talk about and that has to do with safety regulation all of us flew here I came over on a 787 and so you know that matters and we do not want our engineers designing airplanes that will just go up and fall out of the sky so I think there's a little bit of a difference between the sort of tech type industries versus those that are very capital intensive and that can range from those that involve chemicals processing resource extraction you know airplane design and development et cetera et cetera et cetera and many of those safety regulation does create the framework within which these things can operate but I didn't hear you talk about it I guess then the question is are we talking about just a small subset of the world or the whole world I think we probably were talking about too small of a subset because the next great e-commerce site or social network is not going to cause a plane to fall out of the sky and people's lives won't be put at risk I think you do need a completely separate set of regulations for anything where someone's life would be at risk and I totally agree with that I think the question is can you have one set of regulations you can't you have to have sectoral and differentiation and this also applies by the way to intellectual property increasingly in the future probably it's different variety for pharma it's good that you brought that up that gentleman there this seems to be rather there is an underlying assumption that innovation is best left to the private sector and to the capital markets but even if you take the experience of the United States wasn't innovation really bootstrapped by actual government hands-on funding the NSF, the space program even the defense program, the university network so why are we assuming that the private sector is better and especially in the current situation where there is widespread economic stagnation should the public sector really be stepping in and funding it there's one example many examples but even one current example ARPA-E is a program in the United States where the government has provided funding, grant money for research and development and company creation in the energy space and they did it very smartly I believe where they put out requests for proposals in hundreds of categories new forms of energy stores that reach certain objectives new forms of solar energy that reach certain cost points new whole list of things and they actually took submissions from many many different competitors and awarded grants and I think it was very very effectively done One project or not I'm saying of 100% of innovation should 80% be funded by the government or should 10% be funded by the government I think it depends on your political philosophy your political economy really I mean there is market failure you know take neglected tropical diseases there's very very almost no R&D that goes into neglected tropical diseases because the consumers don't have any money to purchase the drugs and so it's a classic case of market failure and then you can only rectify that by government intervention but there are also questions be funding the banks or should that money actually be going into funding the kind of innovation that you said I think we might be moving into difficult areas thus the Fed but I was going to say briefly before we go on you could argue that one way to create a Silicon Valley a massive defense budget and a space race which would throw off grab innovation there My name is Sotar Mansuri I'm the Minister of Economy of the UAE Actually I'm left with a challenge from the government we have a strategy that we have developed and that's by the year 2021 up to 5% of our GDP should be coming from innovation now of course a lot of government are facing the same challenge also I want to hear your advice and what are the tools I need to focus on to start with this is one question second part we are sitting under the title of committed to improving the state of the world there is a question about the brain drainage that is happening right now from some of the developing nations the west some countries including also my country in this case which in a way doesn't give really a fair value to these kind of innovators when it comes to their mother countries and whether there is a way of repaying these countries either through establishing some kind of a special structure in these countries or some other ideas thank you one thing we didn't even bring up is the cultural aspect of entrepreneurship and innovation and I don't know exactly how it happened in California for example that there is such a wild west mentality of risk taking and if you fail that's okay and if you fail that maybe makes you even better for your next job like when we see someone who comes to us who has a failure on the resume but learn from it they are even more valuable to us than someone who has it a success which might have actually been accidental but having other companies around that change the culture of risk taking that's a hard thing to do because that's a cultural thing that takes time but I do think that that having those examples can make people want to stay avoiding the brain drain I would love to talk to you afterwards but other things that could be done but I think maybe it takes some combination of all the things we've talked about here to try and encourage people on a safe route of going for a regular job and doing something that's innovative which has risk associated with it which has huge upside and huge personal and psychological gain not even the monetary gain but the rewards are so high and the benefits of society are so great I want to try and find more ways to encourage that I completely agree with you that cultural attitude no change is very important but one thing I would also say that we have been managing the science and tech ministry the search for a new minister but one thing that I have learned is that as a country you've got to figure out where do you have your greatest strengths and so therefore where can you innovate because what I find is that many of us the emerging countries are talking about how innovation is important to the development of the economy and everything but if you're trying to innovate in almost every industry you're not going to make much progress so it's actually focused on one or two areas of huge agricultural economy so innovation around biotechnology is something that we should really focus on and put funds in because that's where we can really begin to make a difference innovation around the size of our mobile market we've got 100 million mobile subscribers and so innovation around mobile technology mobile applications and I think that really helps to focus the money and also focus funds because innovation in a sense does require some level of funding so you've got to be able to focus what you want to do and put the funds and the skills and the capacity in those few areas Hello, my name is Akudo Anyawa Ikemba and I'm a young global leader with the WEF my question is actually for my minister Johnson I'm from Nigeria and we see that in Nigeria it's not commonplace for people to be brought up to think outside the box so when we're discussing innovation and my background is in public health when I look and see that we have a life expectancy of 45 for men and 47 for women I can't help but think innovation every day because I think that's the only thing that's going to help us leapfrog and increase our life expectancy in the shortest amount of time so the main challenge I see though is that it's still going to take people to do this and our educational sector doesn't necessarily train people to think outside the box so minister Johnson what do you think about that how does all of this apply to the education sector and how can we get our young people to be trained to think like innovators a bit more to be more of risk takers and entrepreneurs and innovators I mean I think that's a fantastic question it's actually what about driving passions yes it's true I mean I went to school in Nigeria it's very much a road learning you learn by road time stable and all of that and you just regurgitate it in the exams and if you're good at learning at memory you're a great student but that's where technology and education and that's where we can really begin to leverage how ICTs can change the way that we actually educate and we train train our young people what we found is we introduced technology into schools the young students are actually much more intuitive than the teachers so you put this computer in front of them and they're doing all kinds of things with it before the teacher even understands what they're supposed to do and that begins to create that sense of I don't have to follow what the teacher says I can actually go on the internet I can learn and that spirit of creativity that thinking outside of the box really begins to happen so I think it's not a civil bullet but I think introducing ICTs into education is a very important way of changing the way that we think and encouraging that innovative creative spirit in our young people next gentleman oh sorry I have three questions that are interrelated or related to the EIP I'm Bernard Charles from Dassault System we provide a software design software for most of the airplane the world on cars and they are related to the following do you think all countries have the same rules for qualification of patterns second how and when do you think the troll process will stop because it's really a real issue you know the process you receive a letter okay you said no I respect the patterns six months later you receive another letter and they ask you to prove or they ask you to pay 2 million and you have to compare the cost of the lawyer versus paying 2 millions right away it cost me already 10 million so on the third question about that is do you think what do you think about Prism on the first one all countries do not have the same laws I mean there is a debating nationally as to whether one size fits all you have the tension between on the one hand a globalised world in which there is global economic behaviour and global use of technologies and therefore a necessity for a certain amount of standardisation and on the other hand individual countries feeling that they have differing levels of development and that different regulatory models are appropriate for different levels of development and that's a tension that is unresolved and is always there and it has temporary resolutions from time to time trolls I think it's a predominantly American phenomenon and I think two of the preconditions to trolls the birth of trolls were a litigious culture and a legal system which did not award costs of legal representation to the winning party so there's no downside risk for a troll so you had two conditions that gave birth to I think the phenomenon of trolls I think it will stop because I think there is a very very strong feeling that certain forms of behaviour here are really damaging to entry into the market and thus to innovation and on your third question I'm sorry I didn't understand the last word prism prism, we had a programme about capturing metadata around the world and asked is this related to the business or is it IP related I think it's IP related that's why I put it on the top I think I might rule from the platform you've had two questions answered because I fear that that question is a very big question and we'll take another smaller question Hi my name is I'm a professor at MIT I'm an associate in for innovation I am an entrepreneur I have many patents and I have recently been surprised if the patents really can be because indeed any time we start a company we try to make a picket fence so what surprised me is this if I follow patents the allowance rate is 50% that's first rejection if I choose to modify my patents the allowance rate is 90% so as long as I have money to follow patents I'll get it how does this affect the innovation culture I think that's not a necessarily good thing but it's very challenging just as you said there's different patent approval rates and requirements for around the world you're really applying into a little bit of a black box with game and chip possibilities like what you described so I think that is a lack of transparency that hurts innovation I guess I have a question the reduce system I'm sorry to interrupt it sorry if I may just quickly there's a fair amount of work going on trying to develop quality metrics what is a quality patent is it one that earns a lot of money is it one that survives on appeal a court challenge we don't actually have an agreement about what is it's like beauty we recognise a good one when we say it but we can't define it necessarily so I think work on quality metrics is very very important and quality is essential to the system okay well look thank you very much for the panel we ended on a naughty difficult question and we've covered lots of interesting topics that we could dig deeper into but it's given us a great overview so thank you very much