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The Middle East, Business, and the Long Term

The Harvard Business Review

Vaclav Havel once made an important distinction between optimism and hope. "Hope," he noted, "is not the conviction that something will turn out well, but the certainty that something makes sense, regardless of how it turns out." His is a voice of encouragement for would-be founders and investors to consider long-term forces at play anywhere they face uncertainty. And his is a message that seems important to consider in light of the attacks on US the embassies in Cairo and Benghazi on Tuesday.

Having traveled to the Middle East repeatedly over the past two years, I decided to write a book about the remarkable and little reported on rise of a new generation of tech start-ups and entrepreneurs across the region. It is an electrifying and hopeful story, offering a new narrative about these wonderful and complicated societies in transition.

The attacks, however, were a shocking reminder that vast uncertainty remains.

The Middle East is in the throes of the same force winds as other emerging markets: some empowering, some challenging. Entrepreneurs are watching these dynamics play out in real time:

1. Recent access to technology has offered an irreversible level of transparency, connectivity, and inexpensive access to capital and markets unprecedented only five years ago. A new generation in the region, as elsewhere, that has never known a world before information technology thus has a keen understanding of how others like them live and create opportunity for themselves. Governments try to crack down on this platform of global competitiveness, but the entrepreneurs seem one step ahead.

2. This generation is benefiting from regional and global capital more comfortable with political risk than ever before. Twenty years of experience in other emerging markets, so many all but dismissed as economic engines less than a generation ago, offer interesting parallels. Many were and are equally marred by political uncertainty, opaque governments, corruption, and weak infrastructures. The precedent of real investor returns across all sectors suggests sustainable economic opportunity could happen in the Middle East more rapidly. Case in point: the horrific terrorist attacks in Mumbai several years ago have not dampened entrepreneurial efforts in India so far.

3. Changing market dynamics, growth, and opportunity in the Middle East have been in motion well before the Arab Spring. As my friend and Middle East expert Vali Nasr has noted, the Arab world has over 320 million people, nearly twice as many as Brazil, with a GDP larger than Russia and India put together, and per capita GDP nearly twice China's. Disposable income has grown 50 percent over the past three years, to over $1 trillion in 2012. And it's a young market, with over 100 million people under the age of 15, who love their connectivity and mobile phones. Mobile penetration, in fact, will approach 100 percent in three years and social media penetration just hit 25 percent in 2011, growing 125 percent year over year.

Whether these forces can be subsumed by leaders and mobs looking for 20th century solutions to 21st century realities is unknowable — but it is not where I'd bet for the long run. Great entrepreneurs, by definition, want to solve problems, to work around obstacles. The young entrepreneurs in the Middle East were well in motion before the Arab uprisings and are a stubborn lot. I'd bet on them. But they are also more mobile than ever before, and it will do untold damage to the region if they were to pick up and leave.

Originally published by the Harvard Business Review, September 12, 2012.

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