The Mideast's New Resource: Entrepreneurs

Event Overview & Logistics

• Host: Milken Institute, with Skip Reimer (Executive Director of Programs and Communications) introducing the session.
• Speaker: Christopher Schroeder, author of Startup Rising: The Entrepreneurial Revolution Remaking the Middle East.
• Moderator: Jonathan Spalter, Chairman of Mobile Future.
• Key Upcoming Forums:
  • November 21: California Summit with Governor Jerry Brown.
  • December 3: Forum with former Nevada Governor Bob Miller regarding his book Son of a Gambling Man.
  • April 27–30: Annual Global Conference.
• Charitable Initiative: All proceeds from the sale of Startup Rising are directed to RUAD, a social enterprise in an Amman, Jordan refugee camp providing technological training and community engagement.
• Book Sales: Copies were available for purchase at the event, with author signings scheduled post-program.

Core Thesis & Narrative Shift

• The "WAMDA" Spark: Schroeder identifies "WAMDA" (the spark of innovation) as the defining force of the Middle East's transformation, challenging the dominant Western narrative of sectarian violence and instability.
• Epiphany Moment: Schroeder's pivotal realization occurred at a 2010 "Celebration of Entrepreneurship" conference in Dubai, where 2,400+ young people from 18+ countries focused exclusively on business and problem-solving rather than politics.
• Narrative Bias: The speaker argues that Western perception is distorted by "narrative bias" (e.g., post-9/11 trauma), causing audiences to reject data contradicting the view of the Middle East as a region of chaos and stagnation.
• The "Fire Starters": The discussion highlights a generation of entrepreneurs who are building ecosystems from the ground up, bypassing traditional institutional bottlenecks.

Systemic Barriers & Challenges

• "Wasta" (Cultural Patronage):
  • Defined as a nepotistic system where success relies on "who you know" rather than merit.
  • Schroeder notes that while "Wasta" hinders traditional business, it is less effective in the digital realm, citing the rise of LinkedIn (6 million Arab users before the company opened a local office) where profiles are based on verifiable records.
• Regulatory Fragmentation:
  • E-commerce is estimated at a $1–1.5 billion opportunity, yet faces immense hurdles due to fragmented regulations across 22+ countries with varying customs fees and logistical barriers.
  • Logistics firms like Aramex are attempting to unify cross-border shipping codes to mitigate these friction points.
• Educational Deficits:
  • Despite higher per-capita education spending than parts of Southeast Asia, public school systems suffer from rote learning, large class sizes (70+ students), and outdated curricula.
  • A "shadow education" industry in Cairo alone is worth $2–3 billion annually, indicating that families are privately funding education the state fails to provide.
• The Language Gap:
  • Only 1% of global internet content is in Arabic, despite 80% of the region's 350 million people speaking the language.
  • This has spurred a boom in localized content startups (e.g., Karabish for video, May Habib's translation platform) aiming to digitize Arabic culture.
• Political Instability & Rule of Law:
  • Uncertainty in regulations and property rights remains a significant deterrent for investment, though entrepreneurs are increasingly adapting by operating "in the cracks" of these systems.

Demographics & Social Dynamics

• Youth Bulge: Over 50% of the region's population is under the age of 35, creating a demographic dividend that contrasts with aging populations in Japan or Europe.
• Women in Tech:
  • Women comprise approximately one-third of tech startups in the region, with specific events (e.g., MIT Arab Forum) showing female participation rates as high as 41%.
  • Female entrepreneurs face unique challenges, such as legal driving bans in Saudi Arabia, which have spurred innovative solutions (e.g., Hind Hobaka's wearable fitness tech) and a culture of "working around" constraints.
  • Many female founders reject the label "woman entrepreneur," insisting on being evaluated solely on merit.
• Religious Compatibility:
  • Entrepreneurs assert that core Islamic values align with American principles of individualism, accountability, and anti-corruption.
  • Religion is viewed not as a barrier but as a framework for ethical business and a source of identity that fosters community trust.
• Faith-Based Innovation:
  • Startups are emerging to serve the Muslim market, including Anabasali (prayer reminder app) and Ideal Ratings (financial screening for Sharia compliance).

Economic Landscape & Investment Trends

• Mobile-First Economy:
  • The region skipped the landline era, moving directly to mobile penetration rates exceeding 100% in many countries (multiple devices per capita).
  • Smartphones and "dumb phones" are driving the majority of connectivity, commerce, and educational access.
• Capital Challenges:
  • Early-stage angel funding ($10k–$50k) is available, but securing "A-round" funding (millions) remains a significant hurdle.
  • Investors are cautious due to a history of difficult returns in emerging markets (e.g., China), though they are developing strategies to navigate political risk.
• Venture Capital Flows:
  • Early cross-border investment is occurring from South Africa (Naspers), Germany (Rocket Internet), and the US (General Atlantic), though volumes remain small compared to Israel.
  • Schroeder notes that while VCs often prefer proximity to portfolio companies, the "bottom-up" nature of the ecosystem forces a re-evaluation of investment geographies.

Technology & Infrastructure

• Infrastructure Growth:
  • Sub-$40 smartphones and competitive data plans are driving mass adoption, making infrastructure less of a concern than capital access.
  • Broadband expansion is seen as a higher-impact investment than traditional aid, aligning with Jeff Sachs' view that connectivity yields higher GDP returns.
• Incubators & Accelerators:
  • Organizations like WAMDA, Flat Six Labs (Jordan), and Oasis 500 are fostering "bottom-up" learning, where peer-to-peer mentorship is replacing traditional top-down education.
  • These hubs operate with Silicon Valley-style environments, providing broadband, workspaces, and networking to replace deficient local university programs.
• Cross-Border Collaboration:
  • Despite political barriers, "great talent knows great talent"; Israeli and Arab entrepreneurs are beginning to collaborate informally, though high-level institutional cooperation remains slow.

Government & Policy Stance

• US Government Limitations:
  • Schroeder criticizes the discrepancy between the Obama administration's rhetoric on "Internet freedom" and bureaucratic realities (e.g., visa delays for entrepreneurs).
  • The State Department's Global Entrepreneurship Program is praised for moral support but criticized for lack of budget and resources.
• Regional Government Responses:
  • Varied reactions range from supportive (Jordan's King Abdullah) to restrictive (vague press security laws in Jordan).
  • Many governments are slowly recognizing the economic necessity of engaging with the tech sector to diversify away from oil dependence.
• The "20th vs. 21st Century" Battle:
  • Schroeder frames the current moment as a clash between top-down, hierarchical state structures and the bottom-up, decentralized nature of the digital economy.
  • Governments that fail to adapt to this shift risk becoming irrelevant to their own youth populations.

Forward-Looking Statements & Call to Action

• Reframing the Future: Schroeder urges audiences to adopt a "hockey player" mindset (Wayne Gretzky): focus on "where the puck is going" rather than where it currently is, anticipating a different future from the past decade.
• Global Economic Integration: The rise of the Middle East tech sector is expected to integrate deeply with global markets, driven by mobile-first adoption and shared cultural values.
• Direct Engagement: The speaker advocates for physical travel to the region ("just go") to experience the innovation firsthand, arguing that knowledge gaps are the primary barrier to investment and understanding.
• Hopeful Realism: While acknowledging significant obstacles, Schroeder characterizes the current era as a "golden age" for entrepreneurs, driven by the unstoppable momentum of digital empowerment.