There is a front page article on the Wall Street Journal with the title “In European Crisis, Iceland Emerges as an Island of Recovery“. Let me be very clear, I have nothing against Fishing or Fisherman or the seafood industry. I know and understand the industry quite well, worked a lot in it when we were expanding the Seafood Banking activities of my former employer. I actually think that industry is very ripe for disruption. However, I really don’t believe the future of Iceland is going to be based on Fishing or Aluminum or manipulating the Icelandic Krona. I know this because I have seen the future, I have been working with Entrepreneurs and Startups in Iceland for the past 3 years and none of them are looking into doing anything with Fishing or Aluminum. Even the article above and the video shows that most of the people employed in the fish processing plants are workers migrating to Iceland. They are low skilled labor workers. The same will be true for Aluminum based development, putting up another smelter is going to require low skilled labor that is going to leave once the smelter is setup. I categorically reject the notion that these sectors are going to save Iceland and the recovery that is being witnessed has nothing to do with Fishing because there has no real value creation because it has been artificially manufactured due to the Currency Controls on the Icelandic Krona. Iceland has fantastic infrastructure for Software based companies, excellent uninterruptedrenewable green energy, entire country connected with Broadband and Mobile 3G network, young population that embraces new technology, relatively affluent, well educated… now the last mile in Icelandic households are being fitted with Fiber optic cables. I know a bunch of companies just rented a big house and are building code in the living room and bunkering the bed rooms. There is a grass root movement on this that is not obvious to the mainstream media, I met a couple of Linux hackers who have moved from New York City to live in Iceland because they think that the living standards are much better here and real estate is affordable. Check out the 3G access provided by the largest telecom provider in Iceland, practically every livable area is covered. I could actually hook a 3G sim card to my laptap and drive around Iceland and code… where in the world can you do that? The infrastructure that has been invested in Iceland is fabulously under utilized.
So where is the real value being created? I have written about how Software is eating Fish and Aluminum. I continue to bet on that fact that high value software related companies are going to disproportionately create more value than Fishing or Aluminum ever did. This has been proved many times, the factor input cost of Software based companies is mainly variable cost, there is no big capital expenditure this allows for better bootstrapping and selective investment that creates better margins and better value. With the advent of Internet and Mobile phones as distribution mechanisms the scale to distribute and sell software is extremely beneficial. The same is true for Design, however given the merchandising the retail attached to the Design it is hard to scale the sales, once again not the case in Software based companies. Especially those that are leveraging the new infrastructure of Google, Facebook, Apple, Twitter, Pinterest, Amazon, iOS and Android. I really don’t believe Iceland has a competitive advantage when it comes to manufacturing physical goods, it has to be goods that can be transported over a wire… so Movies, Music and Software. Did I not write that Sound and Mobile is going to be next disruptive platform?