Creative Industries and the Financial Crisis

因 势 利 导 - “Yīn Shì Lì Dǎo”

Creative Industries and the Financial Crisis

Presentation at the 3rd International Creative and Cultural Industries Forum in Beijing December 17th 2008.

Dajiahao! (‘Hello everybody’!)

I want to tell you that I am very proud to be learning to speak Mandarin - slowly but surely. But I must say that it is still much more ‘slow’ than it is ‘sure’. So please accept my thanks for hearing me speak in English.

One of the ways that I am learning Chinese is to engage with Chengyu - the four character sayings - that are so beautiful, concise, and profound. I practise translating them and I feel this really gives me a great insight into Chinese ways of thinking.

So the way I want to introduce my topic today – ‘Creative Industries and the Financial Crisis’ – is to begin with a Chengyu that I learnt just last Saturday, at a Cultural Industries conference in Shenyang, in which one of the speakers there, a professor from Beijing, used a Chengyu to make a point about the development of the cultural industries in China.

He summarised: ‘因 势 利 导’ (‘yīn shì lì dǎo’).

The translator in Shenyang translated this as saying: ‘Let everything happen according to the real situation’.

I really like that translation – it’s beautiful. And she was translating in real time. So impressive. But I’d like to explore the Chengyu further, and those four characters, and try to get a more considered understanding of them, because the Chengyu of course will contain many, many meanings, and with great sophistication.

So here are a couple of other possible ways I think we could translate ‘yīn shì lì dǎo’ into English:

‘From the prevailing, take the lead.’

I’m translating ‘yīn shì’ as ‘from the prevailing’ – i.e., to recognise the real powers at work in any given situation; and ‘lì dǎo’ as ‘take the lead’ – utilising all the meanings in English: ‘take the lead’ meaning: ‘read the signs right’, ‘take your direction from’, and ‘follow the signs’

I’m also utilising the other English meaning of ‘taking the lead’ in terms of ‘to get in front’, ‘to get ahead’, ‘to be the leader’.

So ‘from what prevails … take the lead’.

Another way of rendering ‘yīn shì lì dǎo’ in English might be: ‘Reckon with … then proceed’

‘To reckon with’, using its multiple meanings in English, where ‘reckon’ means both ‘to calculate’, ‘account for’, and secondly, ‘to grapple with’, ‘to come to grips with’ the ‘yīn shì’, the situation.

And ‘then proceed’ – both in the sense of ‘proceeding’ (‘dǎo’), and in the sense of ‘proceeds’ – income, finances, interest, and interests (‘lì’).

From preceding, proceeding.

因 势 利 导

So with all these kinds of wonderful, intricate, and deep meanings in mind, all condensed into such a beautiful Chengyu, what I will now do is to divide the Chengyu into two parts, and ask two questions in relation to my chosen theme: “Creative Industries and the Financial Crisis”.

‘Yīn shì’?: ‘What is the real situation, now’? ‘What are the prevailing circumstances’? ‘What needs to be reckoned with’?

And secondly, ‘lì dǎo’?: ‘How to take the lead’? ‘How to proceed’? ‘How to get in front’ from that situation.

So these are the two questions I am asking as I go forward with the thought of the “Creative Industries and the Financial Crisis”: “What is the situation?”, and “How do we proceed?’.

Here is the Situation.

Let me list my Yin Shi –what I think are the most important points we need to be aware of in the real situation we face for the cultural and creative industries in China.

Firstly, we have to recognise that there is a Chinese Renaissance, and not only in industry and trade, but also in creative powers.  And it’s also important to remember that it’s a re-naissance. People in the West always refer to China and its ‘emergence’, but it is, in fact, China’s ‘re-emergence’.

As you know far better than me, up until the mid-1700s, China was by far the world’s biggest economy – it’s the re-establishment of that fact, taking place now.

The second Yin Shi: ‘understanding of the situation’ - I think we must be aware of is that this ‘financial crisis’ is a permanent change in the economic and political order of the world. What’s happening in the US, the UK, and Europe is a permanent change, not just a temporary problem. It’s going to take generations and generations for them to recover from this. In my opinion, the 19th and 20th Century structures of international power have ended.

The conspicuous difference between the Chinese stimulus package and the US and UK stimulus package is that China is drawing that from reserves, while the UK and the US are drawing that from debt. Yet more debt.

This is going to be compounded, literally, for generations to come.  If you follow the economic debate, you’ll know that the German Finance Minister has just attacked the UK on the grounds that they are bequeathing national debt to the people who will be paying it off forever. The existing order is now collapsing, at the same free-fall speed as the Twin Towers.

Third Yin Shi: a lot of people say that, well, China is in the same boat, because China relies on exports and foreign demand for manufacturing, and that’s very true. So the situation is definitely dangerous and the future is not certain.  But one suggestion is that China can and should develop domestic demand. China has this huge domestic demand potential, plus the highest relative per-capita savings ratio in the world – and that this under-developed resource may be able to compensate for the decline in exports to the West, and I think that this is a very hopeful point. I will come back to domestic demand in a minute.

The Fourth Yin Shi – ‘the reckoning of the real situation’- is that in the development of the creative industries, the cultural industries, the IP industries (the intellectual property industries) let us see recognise this: available investment cash is going to be totally decisive.  From here on, whoever has the cash is going to win. I’m sure you know where the cash is. And I mean actual real reserves, not more paper debt to cripple future generations.

China knows all this, I’m just restating it.  China has been on this path for a long time, long before I ever came here. But may I just concur in the observation that China’s huge investments in the development of intellectual property in 1) the green and environmental industries, 2) the hi-tech and knowledge industries, and 3) the creative industries – this will result in power and wealth.

Fifth Yin Shi: Innovation and creativity enter into every process, of every economic activity, at every point, in all industries.

I think that China’s investments in science and technology innovation in China will prove decisive.  For example, one statistic amongst very many: China is producing 800,000 engineering graduates every year, America is producing one tenth of that. Sheer quantitative numbers will, over time, make a qualitative difference.

Sixth, and very important to note, is that China’s hi-tech zones are proving completely resistant to the downturn.  That’s not actually surprising when you think about it - because that is where the infrastructure is, that’s where the investment is, and that’s where the best educated people are.

So that’s my list of the Yin Shi – these are the facts to which we must pay our attention. That’s the real situation in which we’re operating, with which we must reckon.

Do What?

Now I’m going to move onto the Li Dao – the other side of this beautiful chengyu’s equation - the taking the lead, proceeding, reading the signposts, finding the way, and creating wealth - the question of what should we do? 

I frame this question as a relationship between three orders: capital, infrastructure, and people.

So let me work through these three things…

1) Capital is funding – how do you get funding for your project?  At X|Media|Lab almost every company that comes into the Lab asks us whether we can help them get funding for their project ideas. Everyone knows – money makes ideas real, and ideas make real money!

2) By Infrastructure, I mean institutions - and in China, I think that system of  Technology Parks that are so active and so widespread, and their tight-coupling with  universities and government policies, will be a decisive factor. To a foreigner like me, the resources, the integration, and the commitment to world class excellence is really awe-inspiring.

3) And by People I mean ‘Talent’ – Creative skills, technical know-how, business acumen.

So now, here are my Li Dao – these are my ways ahead to make profit in the creative industries in the financial crisis.

1. Invest in People.

In digital media, as in all the creative industries, here is the truth: it is always people with great ideas that make things happen. You must empower these people and you must skill them and you must invest in them and you must invest in their ideas. 

So after all the investment in infrastructure, in buildings and roads, and computers, and airports - it’s equally important (to be factual, it’s the decisive importantance) to invest in people. That is my first Li Dao, my first ‘thing to do’, ‘way to proceed’.

Ok – but which people?

2. Invest in your PhD students.

America’s famous innovation in Silicon Valley is mostly done by PhD graduates who were explicitly looking for ideas with which they could start-up companies.

I know that in China the educational culture is that up until graduation, PhD students must be learning, acquiring, and absorbing pre-existing knowledge. The tradition of the classics, the methods of repetition, and the culture of Master and the Pupil is extremely strong. I understand that, and I deeply respect that.

But what I am saying is that graduate and post-graduate students are your best sources of innovation in science, technology, and digital media.  The Graduates, the Universities, and the Technology Parks must create a framework that enables the successful creation of start-up enterprises. That means access to finance, expertise, and infrastructure.  For example, the biggest single difference between start-ups that fail and start-ups that succeed are quality teams of people that simply have access to cheap rent, and those that don’t (hence the “garage” metaphor). So I hope that the Technology Parks are giving their graduate and PhD students cheap rent, so that they can start their businesses with their new idea.

May I summarise this way: Build infra-structures where subsidised rent, ideas people, highly-trained graduate students, skilled entrepreneurs, and commercial opportunities are fused into single geographical locations.

3. Bring the Skills Back Home.

I would also suggest, and this is obvious, attract back the overseas Chinese people, and especially from the US.

We will find out dramatically now, especially in the creative industries, but in every other industry too, that the opportunities in America have evaporated.  People, as I heard when I was in Los Angeles recently, in computer games companies, animation companies, are retrenching really outstanding people because they just can’t give them jobs. So China should be selective about attracting back really talented people for skills transfer into Chinese companies.

The other thing I would say is: to engage in continual professional development, and this is a task of the Technology Parks: to continually skill-up, to continually bring to ‘world’s best practice’ the people in the companies in these Technology Parks. 

Internationally, as I mentioned, and especially in the US, there are many, many outstandingly talented people with no future. China should look towards acquiring the best of the brains and bring them to China for knowledge transfer into local Chinese companies. I believe it is a great idea to develop official programs to assist with this attraction and transfer of talent into China.

4. Invest in projects, not companies.

Set up Investment Funds.  We have already said that who has the cash wins. Each of those Technology Parks or provincial governments can set up Investment Funds, because China has the capital and the West does not.

These Investment Funds should fund specific projects (individual IP), not companies. Companies should have many projects on the go, and some of them will fail - good, there is nothing wrong with that - and some of them won’t. So fund the projects and help the companies find success.

5. Find international partners with both funding and talent - and bring them in.

1. Set up an Investment Fund

2. Find International Partners who can bring money and/or talent

3. Appoint an Expert Advisory Board (International and Local) who can do the investment due dilligence and quality assurance for you
     
My two most important observations are:

6. Do *not* invest in foreign funds. 

Do not put the Chinese money overseas.  I was at a conference in Yangpu District in Shanghai a few weeks ago and some people who were Venture Capitalists from Silicon Valley came in and, I swear to you, here’s what they told the conference – they said ‘Give me hundreds of millions of dollars and we’ll take it back to San Francisco and we’ll take all our fees out of it before we do anything else. And you should trust us because we know better than you do.’  And I turned to my Chinese friend and I asked ‘Is this guy crazy?’ He answered me “Yes, he is”.

My advice is do not put your reserves into foreign funds to make decisions about investments: keep it here, and managed here. Invest in local companies and projects and help them get access to the best expertise so that they cam succeed themselves, domestically and internationally.

7. Don’t be afraid to invest in foreign projects to acquire their talent and knowledge.

For example there are many, many great opportunities in Hollywood right now that can’t get funding there. So fund those projects where you can own the intellectual property, get access to the expertise, the management, and the creative talent. That’s good, that’s positive.

The whole point of this, the whole point of X|Media|Lab, is to transfer know-how, skills in intellectual property to China by getting access to expertise. That’s what China should be seeking in digital media - access to expertise and the transfer of skills, knowledge, and international contacts directly into China companies.

8. And also invest in the development of local companies by investing in quality.

My last Li Dao – pointing the way, and taking the lead - is to observe that the development of the digital media industries can be domestically driven. In other words, that China can create a ‘virtuous circle’ by demanding high-quality cultural creations for their media consumption from their media producers.

In the whole world, Chinese are the most sensitive people of all to the relationship between diet and health. Extend the same thought to the creative and cultural industries. You must nourish creativity.

And lastly, if government is the ultimate buyer of cultural content, then they can make the decision to pay more for cultural content, and thereby increase the quality of the product. This is a question of priorities.

And, just as in any other industry, you must invest in the quality of the product. It must not just be cheaper, but but it must also be better.

Creativity and innovation are a constant striving, and are the result of investments in people’s talents in every industry: clean, green, knowledge, and creative

So, finally, I come to another, still yet provisional , attempt to translate this beautiful and deeply meaningful Chengyu: ‘yīn shì lì dǎo’ -

“Genuine understanding of the situation / is the best way forward”.

Thank you.

Comments

[Chris]

Nice article.
Thanks for sharing this post.