In thinking about the future of technology in Malaysia, post the KL20 event in Kuala Lumpur in April, it is worth revisiting a pivotal moment in technology history. In 1987, Microsoft Corp’s MS-DOS operating system was coming to the end of its natural life cycle. Given the explosive growth in personal computing in the 1980s — at least in the US — corporate giants in the computing space were hungrily eyeing operating systems of their own. For instance, IBM — which had previously partnered with Microsoft on MS-DOS — was developing its own OS/2 system. AT&T collaborated with companies such as Sun Microsystems and Xerox to create an operating system based on the Unix system. Hewlett-Packard and Digital Equipment Corp were also trialling their own version of Unix. And, Apple remained a threat with its Macintosh computers.
So if you were Microsoft, or Bill Gates, at the time, what were your options? According to The Origin of Wealth by Eric D Beinhocker, Gates had three. First, he could fire a cannonball and bet the company’s future by investing in a new operating system (let’s call it Windows) and try to migrate existing DOS users to Windows. Second, he could exit the market, and reprioritise applications for which Microsoft might be better suited, given its market size and positioning. Third, he could sell Microsoft to or team up with a larger player.
Given that, as of January 2024, Microsoft Windows had a market share of 73% of operating systems for desktops and laptops, it would seem that Gates would choose the first option and bet big. But that is not actually the case. In fact, what Microsoft did was far more fascinating — it pursued six experiments simultaneously. First, it continued investing in MS-DOS. Second, it continued its joint venture with IBM to work on IBM’s OS/2 operating system. Third, Microsoft initiated discussions with a bunch of companies, including AT&T, about potential collaborations on Unix.
Fourth, Microsoft purchased a major stake in the largest seller of Unix systems on PCs, namely Santa Cruz Operation. Fifth, Microsoft continued investing in applications, including for the Apple Macintosh. Finally, it also made major investments in Windows. It was not possible at the time to know which would work — indeed, journalists “cried that Microsoft had no strategy and was confused and adrift”. And it wasn’t as if Windows was a smash hit right from the start. The version that launched in 1987 suffered from technical problems and delays. It wasn’t until a Version 3.0 in 1990 that Microsoft began solidifying its dominance on the operating system market. Over time, each of the other five initiatives were either killed off or scaled down.
Coming back to KL20, whose goal, as stated by Economy Minister Rafizi Ramli, is to move Kuala Lumpur into the position of a top 20 global start-up hub by 2030, with the ultimate objective of transforming the Malaysian economy into a high-income, high-value economy. During the event, the government announced a slew of measures to better enable the ecosystem, the most exciting of which I found to be the “Innovation Pass”. The Pass is a visa programme that makes it easier for high-skilled founders and talent to work in Malaysia; growing our collective brain is critical and immigration can help with that. It would be good, of course, if work visas for other high-skilled talent outside of the start-up ecosystem could also be approved more quickly.
However, in the next 6½ years or so, the success of Kuala Lumpur in becoming a top 20 global start-up hub and the success of Malaysia in becoming a global technology and innovation hub more generally will need more than just more funding, more liberal policies on flows of people and technology, a more coordinated government regulatory system and other such institutional and financial support. What is just as important is a society that is willing to tolerate risk and, therefore, be comfortable with failure.
In the venture space, it is impossible for any venture capital firm to get 100% of its investments to be profitable. Indeed, the hope for such a firm is for, say, out of 10 investments, one makes it big enough such that it more than covers the losses incurred in the other nine investments. Failure is exceedingly commonplace. And this isn’t just a public versus private thing; maybe pure private sector funds are better able to make venture capital work than, say, purely state-owned funds, but even their hit rate isn’t great.
And to be clear, this is also true not just in the venture space but also among large technology giants. Look at the failure of the Metaverse so far despite about US$15 billion (RM71 billion) being invested into it or the Google Glass or Apple’s attempts at an electric vehicle and Amazon’s Alexa. The list goes on and on. What we should realise is that this is a feature, not a bug, of any healthy innovation ecosystem. These technology companies are doing what they have always done — trying to build what’s next and to be disruptive before they are disrupted.
Even further, I would argue that if these companies were not experiencing failure, they actually are not innovating enough. They aren’t utility companies which should probably return their profits as dividends. These companies should be reinvesting. Given their natural risk thresholds, and the types of personalities it takes to build such technology giants, it is actually very natural that they will take on higher risk, higher capital expenditure projects, which means more failures in general. But all they need are one or two to really pay off.
As such, if we (broadly defined) as a society are going to be risk-averse and we are going to be extremely critical of every single investment that fails — whether by a private fund or a public fund — it is tough to have a culture of innovation. No one in 1987 could have predicted that Windows would be the Goliath that it is. Microsoft employed a portfolio of strategies to diversify its bets, not knowing which one would actually pay off, hoping that at least one would. And as it turned out, one did, to the failure of others. That should be the real lesson of Windows; it is not that every bet must be a home run, it is rather that venture and experiments will have failures, but we need to continue trying out new ideas if we are going to have one stick. Imagine if we focused only on Microsoft’s failure to develop OS/2 with IBM.
And so, as we try to become a real hub for innovation (which I would argue is more important than being a technology hub), we also need for our attitudes to evolve accordingly. We must understand that trying new things means that some will fail, and that what is important is that we must fail in a way that allows us to move forward. For every Bill Gates, there are plenty of other entrepreneurs whose projects failed, and these entrepreneurs and these projects matter too. Because who knows how successful the next projects of these entrepreneurs will be?