Reform of Chinese people’s Economic Perspective (3) – Legacy of Innovative Ideas

One has different responsibilities and situations in different stages of life.

Of course, the responsibility of a guy in his fifties or sixties is not innovation. But it doesn’t mean that they can just keep on the old ways. If you are in your fifties or sixties and successful in your career, your responsibility is to nurture the growth of the younger generation.

The West is more advanced in the East in technology, as a result of more favourable social atmosphere to entrepreneurship. Entrepreneurs are more willing to try the unprecedented new technology and management methods, which lead to more diversified new technologies and business operation methods.

When we say the atmosphere of investment in new business is more zealous in the West than in Taiwan, we should pay attention to the role of the “Business Angels”. These angels are the investors who invest their money into the new and risky businesses at their infant stage. In such stage, they have not even reached breakeven. Institutional and fund investor will only participate much later, when they see these businesses can really generate profits.

The rate of failure of these angels is very high, with less than 5% rate of success. Therefore, such investment must be something unusual – an action not simply guided by the objective of making profits. An investment in infant stage is often caught in a situation with unforeseeable prospects of the company and unstable model of profit generation. So what are in the mind of these angels actually?

I raised this question to some foreigners, and they said, “It is quite often that we see some rich elderlies to support the enthusiastic youngsters financially in their innovative projects. Of course they know the young guys may fail, but they just think that it is meaningful to give support to the ideals of the youngsters.”

In other words, they invest their money not because they think the projects are likely to be successful, or that they can forecast the rise of innovations like Facebook. They just think that they should support the new thinking, new idea and new technology of the youngsters. We once were youngsters full of aspirations. Why don’t give them a chance?

These old men knew their social responsibilities of their age and after their success in career. They know they can no longer be innovative, but they can still contribute by providing source of capital to innovations. As investors, they can also contribute their connections and experience for capable youngsters. These people are often the guys who donate their legacy to charities or the society after death.

For the Chinese at the same age, what they are focusing on, is the arrangement for their descendants to succeed their business, or to accumulate more assets (mainly real estates) for descendants. That is the difference.

Today, most young artists in Hong Kong entertainment industry are the children of actors. It seems whether they are really interested in the art of acting is less important than family background. Similarly, for many young officials in China, they are often the children of some powerful officials. The effect of family background is too apparent to overlook in the Chinese society.

Their parents simply want to pass their career legacy to their children. It is often the case for a business empire to pass for several generations within the same family, even the descendants are no good entrepreneurs.

If you treat the youngster sharing same aspirations as your inheritors, you should support them when you reach your fifties or sixties. In the Chinese society, we often treat our children or someone with blood linkage as successors, requesting them to succeed our aspirations, so we end up being busy in training our children to succeed our business in our fifties or sixties.

Innovation is always costly: no matter it is innovation in technology or business model or anything else. First you have to accumulate capital from wages and profits, so that you can make research and development. It may take ten to twenty years for this process of capital accumulation. So when the innovation finally comes to the market, it may no longer be something innovative anymore.

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