A small but certain happiness…

Taiwan has some world-class innovative companies, but it also has many examples of the saturation copying of once-innovative ideas and business models. That limits the diversity of the economy and isn’t a good harbinger of economic progress.

By Lee Faulkner



Taiwan is at the forefront of semi-conductor innovation and production; in fact, without Taiwan the world’s supply chains would be in a parlous state. Entrepreneurship and risk-taking are, therefore, evidently part of Taiwan’s culture. And yet Taiwan is simultaneously showing the limits of its innovative capacity and entrepreneurship by copying what were once innovative products to exhaustion. Why is this?

Bubble tea and coffee rock!
Before I start, I should say that I have nothing against bubble tea outlets or boutique coffee shops - they are a welcome part of Taiwan’s retail landscape. Neither do I have any problem with the ubiquity of convenience stores, particularly as I use them day and night. But I do wonder how all these outlets manage to be profitable when there are so many of them - the basic laws of economics would indicate that the supply is matching the demand, so the margins of profit must be there. But it is beginning to look like saturation coverage now, and this dependence on a few business ideas isn’t healthy - if, for example, some future study proved that drinking bubble tea was dangerous (yes, extremely unlikely, I know… but it is calorific) then a whole lot of businesses would go bust at the same time.

If you ask any young person who wants to give up the security of being an employee to start their own business, the chances are they’ll want to start their own bubble tea or coffee shop. This is probably because they use the products and services themselves, they may well have worked in one at some point so will be familiar with how they work, and it seems simple enough to do. If they ask around, they’ll probably find out that the idea-to-launch timescale, and the capital investment required, aren’t that onerous. And the margins will probably be there. This is all good, and I would never knock anyone showing entrepreneurial gumption, but why isn’t this same process being followed for other, fresh ideas? Have bubble tea and coffee shops become too safe now, almost like being an “employee-lite” alternative, and is that safety holding innovation back?

Opportunity cost
If you decide to cease being an employee in exchange for starting your own business then the opportunity cost of doing so is clear - the salary, benefits and security you’ll no longer have from the job you’ve left. Take that thought process one step further and ask what the opportunity cost of starting up a brand new business would be compared with opening a bubble tea or coffee shop - in both cases you’d have the freedom and responsibility of being your own boss, and the downside of the irregularity of income, but with your new idea you would have the additional opportunity cost of giving up the certainty of following a proven idea. That makes it more daunting, certainly for someone younger who will probably have less money to invest; however, and very importantly, the payback could be significantly higher.

If your average young person knew that the potential profit from a new product could be vastly superior to an established idea, would that help them do it? Do they understand that the potential loss to them of not following their idea or dream could be massive?

What are the factors that are fostering the taking of some risk, i.e. by copying established ideas, and yet preventing people from genuinely innovating? I posit that there are two main ones - the way we treat risk, and complacency.

Risk blindness
If you don’t understand risk, then you can’t manage it. If you treat everything as a risk, you lose the ability to see when something really is risky. That makes you risk blind - you avoid everything and anything that you think is risky while completely losing the ability to judge whether there is, actually, any real risk at all. Unfortunately there are many manifestations of this in Taiwan today.

The one sector that suffers from risk blindness more than any other is the banking sector. The way they treat Gold Card holders is a case in point. The Gold Card scheme is a key government initiative that seeks to attract highly skilled migrants and entrepreneurs to Taiwan, both groups being key to the development of a diversified economy. So you would think that the banks would accompany such a key policy rather than stymie it, but you’d be wrong. Many Gold Card holders come to Taiwan specifically to look for a job or to start a business, and many use temporary accommodation like serviced apartments or Airbnb while they settle in. But most banks will not let Gold Card holders open a bank account without a job and a rental contract. Offering even the most basic and risk-free of banking services - a current account and ATM card - is apparently impossible. Why? Because banks think that without a full-time job and a rental agreement you are too risky even when the risk is zero. This is risk blindness gone mad.

Our young people are simply not going to develop their skills at understanding business, of opportunity cost, or opportunities lost, if we teach them that everything is too risky. We have to find ways of getting the message across that risk is to be understood and managed, not avoided - if we do that, then we’ll have fewer bubble tea and coffee shops and more fresh ideas. With risk in general, the best way of managing it is to diversify, i.e. spread it - on a macro-economic level that means diversifying the economy, not concentrating it still further, and we need our youngsters and our Gold Card holders for that.