In a talk titled Inside Israel this month, I shared my company’s story and my insights on the tech scene in Israel. The next thing everybody wanted to know was what HK can learn from “the tech miracle” of Israel, a country only slightly bigger than HK in population.

It’s a good question, because the scene in HK is still hardly impressive compared to that of Tel Aviv, or London or Singapore (yes, Singapore). The government and local entrepreneurs have plenty of pride and good will. Some people say that HK will eventually explode. I understand where the argument comes from. After all, startup scenes are magic. The success factors (risk tolerance, talent, capital, ideas and heroes) get built up slowly and reinforce each other. Once they reach a tipping point, the scene catches fire and sustains itself in a big party. But I have a feeling that HK lacks some big things if it wants to catch up with the fully burning ecosystem in Tel Aviv or the catching-fire scene in Singapore. Let me present the most obvious one, in my opinion. Let’s look at some facts:

1. HK’s Innovative Technology Commission (ITC) receives about 515m HKD in annual budget. That’s an insulting 8.5% of the annual budget of the SGD, its Singaporean counterpart [source]
2. HK has nearly full employment, but R&D employees account for 0.88% of the working population as of 2009. Compare that to Japan (1.74%), Singapore (1.53%) or South Korea (1.95%) [source]
3. HK’s R&D spending as % of the GDP has been hovering around 0.73%. Singapore is at around 2.05%, with an absolute investment also at 3x of HK. Israel’s figure is a staggering ~4% [source]
4. Shenzhen (which used to be looked down upon as “the back yard of Hong Kong”) is also investing ~4% of its GDP in R&D, and is home to countless meetups, restless hackers, R&D centers of multinational companies [source]
5. There is a clear pattern of tech companies and engineers leaving HK for Shenzhen or Singapore. Reasons range from costs to taxes to politics to plain lack of talent & opportunities. Notable stories are Google canceling a plan for a big datacenter in HK due to costs or the getaway story of DJI– perhaps HK’s greatest tech miss

The better I got to know HK and its startup scene, the better I realized: the country suffers from a serious “maker crunch”. HK has a ridiculously low number of engineers. This is not a theoretical problem. Recent ‘real life stories’ from the scene show the implications of that maker crunch:

1. High number of startups outsource R&D work, which decreases your speed and risk taking by about 80% (in Tel Aviv, outsourcing R&D would be usually dismissed as suicide)
2. Business founders get tired of looking for the “tech brain”, and eventually compromise on someone they don’t know, who might not deliver
3. Talented entrepreneurs who lost their CTO’s often look for replacement for months. Months!

With very few makers in town, it’s also hard to find subversive, smart, action-driven meetups in Hong Kong. At the end of 2013 I attended Bitcoin meetups in Tel Aviv which were filled with hackers and people who were ready to challenge the world and take this groundbreaking innovation seriously. Before Marc Andreessen said so. When I attended a fintech meetup in HK in mid 2015, Bitcoin was a sidenote that the suites (90% of the attendees) looked down on. [ Fantastically enough, at the end of the meetup I was introduced by a local friend to a Telegram group of local Bitcoin maniacs, which does include some brilliant makers 🙂 ]

If you don’t understand why the lack of engineers is a serious problem, chances are you’ve never felt the magic of a strong engineering-driven culture (such as Tel Aviv or Silicon Valley). Engineers are the heart and soul of a healthy tech ecosystem:

• They spread a no-bullshit approach and stir up discussion
• They make weird dreams come to life as products… overnight
• They take bold risks because it’s cheaper for them than for the businessman who doesn’t know shit about coding. Many people who start tech companies in Tel Aviv (including me) saw themselves as “engineers before businessmen”
• They storm from one job to the next, leaving behind complete systems and creations that would serve companies for years
• They spread their passion for problem solving- which inspires others more effectively than the “get rich quick” approach
• They tinker with mindblowing ideas from Arduino to 3d popcorn printer, which might bring about the next revolution

People like to talk about the HK vs. Singapore rivalry. Today, it seems to HK that it’s a tough competitor in terms of attractiveness and brand (maybe just a projection of their close competition as financial hubs).

But HK can’t shine (read: will get its ass kicked by Singapore) if it doesn’t deal with its “maker crunch”. How do you deal with it? Through a revolution in education, government spending and long term vision. That means brewing local talents as well as staying attractive for foreign makers (not just foreign bankers). As one of the world’s most beautiful+livable cities, and with a hefty budget surplus year after year, HK doesn’t have any excuses not to act.