Samsung's Supply of Geeks Are Looking for a New Boss: Themselvesby and
South Korean leader spends $18 billion to seek growth engine
New generation of entrepreneurs looking for alternative career
Passengers stepping off the high-speed train in Pohang station in South Korea are greeted enthusiastically by a dog. It’s a robot.
In the station concourse, five little automatons dance to a song by K-Pop girl band Exid.
This is South Korea’s steel city, the birthplace of Posco which fed the country’s industrial rise to become the world’s biggest producer of crude steel by the end of the last century. Yet, nowhere better illustrates the efforts to wean the country off its dependence on the giant companies that transformed the economy.
Posco was part of the industrial plan championed by former dictator Park Chung Hee, which gave rise to the family-run conglomerates, called chaebol, that still dominate the economy, groups like Samsung and Hyundai. Now his daughter, President Park Geun Hye, is trying to roll back their influence and encourage high-tech entrepreneurs to create a “second miracle on the Han river.”
“What is of paramount importance if Korea is to better compete with the rest of the world is to enable young Koreans with creative ideas to freely take on the challenge of starting a business,” Park said on Sept. 25 in written answers to Bloomberg News. “Groundbreaking changes are sweeping across our startup and venture communities.”
She said that the number of newly established business entities exceeded 80,000 for the first time last year, when venture investments reached the highest level.
The visions of Park and her father merge in Pohang. Here are steel mills, chemical plants and shipyards. Here also are Posco’s Pohang University of Science and Technology, a light accelerator, one of the country’s biggest clusters of scientific research centers, and a robot museum.
A block away from the museum is a “creative economy” center, one of 17 startup incubators that are part of Park’s $18-billion program to boost entrepreneurship.
South Korea isn’t the only developed country trying to replicate Silicon Valley’s cauldron of innovation, but the efforts of successive presidents to boost science and technology give it an unusual edge. The country has raised spending on research and development every year since 1991, lifting it 20-fold in the time to $15 billion, and putting it first in R&D in the Bloomberg Innovation Index.
It is also one of the most-wired nations on Earth. It has the sixth-highest number of fixed broadband subscribers per 100 people among OECD nations and the fastest Internet download speed.
Yet much of that success is due to the very entities that have been criticized for stifling creativity and innovation. Companies like Samsung Electronics Co., the world’s biggest maker of smartphones and memory chips, have traditionally creamed off the best graduates from the top colleges every year.
“Big corporations were safe throughout most of the 20th century, but they have been challenged by global competition, the drive for low wages, international mergers and acquisitions and the growth of multi-dimensional data analytics,” says John Howkins, a British consultant who coined the term “creative economy” in his 2001 book. “It is now safer for someone to take charge of their own destiny, develop their personal portfolio of skills and move between a cluster of employers and clients.”
With South Korea’s big corporations increasingly being squeezed by competitors in China, some of the nation’s brightest minds are heeding that call.
Across the street from the crucible-shaped university library are the offices of StradVision, a company started by former Samsung SDS and Intel Korea engineer Jun Bong Jin, who is trying to crack one of computing’s hardest goals: how to get robots to recognize things by sight.
Jun, who inhaled carbon monoxide till he passed out as an experiment as a small boy, has assembled a group of coders to build software that won the most prizes in a competition in France this year, sponsored by the International Association for Pattern Recognition.
“I quit Intel because I wanted to work freely,” Jun said, wearing a T-shirt, as one of his employees showed up for work at noon. “As long as you love what you do, what you wear, when you show up and how you work don’t matter.”
Those around him typify the growing appeal for many young Koreans of this approach. In a massage chair in the center of the room, algorithm engineer Sung Myung Chul is laughing at a joke on his mobile phone, while former computer-game developer and professional rapper Cho Kuk Hyun types nearby on two keyboards at once.
Others are busy hunched over laptops or testing the software with Google Glass: hardware architect Lee Su Hyun, who was shocked with electricity as a boy while experimenting with a wall socket and a pair of metal chopsticks; coder Lee Myung Jin, who ran a fried-chicken restaurant at college; and Jun’s five-year-old son, who’s at a desk watching the Disney Channel.
They share the space with a hamster, two stag beetles and a tank of small fish (a pet chicken was exiled for being too smelly.)
One of Jun’s biggest challenges is the one that bedevils entrepreneurs everywhere -- funding. Unlike the startups in the government-backed center next door, he’s relying on his savings because it gives him more control.
Rejected by Investors
Finding investors in South Korea isn’t easy. Mergers and acquisitions account for only 2 percent of how investors make a profit on backing start-ups, deterring them from looking for the next YouTube or WhatsApp. And it takes an average 12 years for a South Korean venture to list on the stock exchange.
Kim Hyoung Ki, chief executive officer of biotech company Celltrion, which now leads the tech-centered Kosdaq index, recalls being rejected by every South Korean investor he visited when his company decided to quit contract manufacturing in 2009.
“We were taking a chance by trying to build our own product, but it scared investors away,” Kim said in his office in Songdo, west of Seoul. He then produced the fountain pen used to sign a deal in 2010 with Singapore’s Temasek Holdings. “We were wading through a valley of death, and we found relief overseas.”
Park pointed to investment from companies like Cisco, Intel and SoftBank as a sign her policy is working. Her “creative economy” centers operate in collaboration with major companies, including the chaebol.
Competitive small-to-medium sized companies and invigorated local economies are essential to address the economic challenges facing the country, Samsung Electronics said in an e-mailed replied to questions. Samsung welcomes entrepreneurship and already operates an internal “Creative Lab” for staff to challenge themselves, it said.
Seoul-based Woowa Brothers is one beneficiary, drawing $36 million from a Goldman Sachs consortium last year for a smartphone app that delivers everything from pork hocks to sashimi. Founded in 2010, the company plays pop music in its office and has a stool between every pair of desks so the boss comes to employees instead of summoning them.
As he sweeps floors and wipes desks with his staff in a weekly company ritual, 40 year-old jeans-clad executive Choi Jung Yi sums up why Korea’s young talents are increasingly abandoning the traditional path.
“When my parents were young, Korea’s economy was booming like a rocket,” said Choi. “It no longer is. Just working hard doesn’t give you financial stability, let alone affluence. Which do you think has better odds -- becoming a Samsung Electronics executive or succeeding with your own startup?”