Chronicles of a Wandering Mind

I’m writing this post from Findikli, Turkey, a small town on the Blacksea coast of Turkey, near Georgian border.  Sitting in the terrace of my grandfather’s house, connected to the Internet via broadband. I keep repeating this fact to myself (and others) likely due to some level of disbelief. It is indeed remarkable how things changed.

25 years ago, this town was not connected to the phone network. It was possible to call someone by “registering a call” with the operator.  One would have had towait in front of the phone for hours for the operator to connect the two parties. It all changed with Ozal, starting 1983, opening up the country and the economy to the world. And now, I’m sitting here with a broadband connection, integrated with the rest of the world, as I would be back home in Switzerland or anywhere else in the developed world.

I sit in the terrace and looked around to the sea, to mountains, yet people insight often capture my attention. A remarkable transformation is happening and one does not have to look very hard to see it.  Couple of women are carrying down tea leaves down the hillside with huge baskets on their back. Tea farming is hard work.  Three harvests a year and the terrain here is mountainous. One of the women has a mobile phone in her hand, clearly texting (and quite fast), mobile penetration is very high. Houses here have all the amenities, from dishwasher to satellite TV. Tea factories still the biggest employers.

The coast is much better connected to the rest of the world. 40 years ago, taking the ferry was the best option  to travel to far away cities.  Once could have arrived to Istanbul in about a week!, IF there were no weather problems. Now there are numerous flights, and coastal highway connect the towns to each other.

There has been significant migration from these towns on the coast to large cities as my parent have done a long time ago. Migrating to larger cities has been the only viable option for many to move out of the agricultural lifestyle and join the industrial era. Now, people here are not only better connected physically but also technologically.

I’m curious to see how the information wave will alter this society once again. One thing is sure, people here are accustomed to change and adapt to new things with ease, and this is their strongest suit.

It’s been 4 years since my last visit here. This year, I’m able to stay over three weeks, because I can continue working here!

I’m about to head out to the train station to go to Basel to watch the Turkey - Germany semi final match. Having had the fortune to watch the Czech game in Geneva, I’m excited that I’ll be in the match regardless of the outcome.  I’ll also be meeting with two friends from University which adds to the fun!

Football is dominating the agenda in Turkey these days, which would be fine, if only really important issues were not overshadowed. Never mind judicial coup attempt that threatens the country’s future, never mind military abandoning its principle to meddle into politics and risk damaging its credibility irreversibly.

I hope we win tonight, but there are other areas where we should compete.

(refers to the deaths in Tuzla dockyards)

Continuing the story of two groups of entreprenuers who are starting up a software company in Turkey and US. In the previous post, The American entrepreneurs have completed their legal requirements and have started developing their product, yet their Turkish counterparts are still struggling and face with the unexpected regulations and associated cost at every step of the way. Will they finally be able to actually start developing their product anytime soon?

The Turkish entrepreneurs now have a certified accountant to help them with the accounting. However, just when they thought that they were free to focus on software development, their accountant informs them that since they are working for themselves, they have to become member of a semi-governmental association that provides benefits (health care, etc.). Apparently, for self-employed people and this is mandatory! They are “touched” by the thoughtfullness of their government in ensuring that they have benefits. The fact that they have not made any money and will not make any for the next year or so is a minor detail. If they knew, their American counter parts would be saddened that unlike Turkish government, their government does not care enough about them to force them to pay benefits to secure their future! How inconsiderate of them.

Read more »

In the last entry, we’ve started to compare the experiences of fictitious entrepreneurs in Turkey and US, and found out, setting up the legal entity is much more expensive and difficult in Turkey than it is in US. Our American entrepreneurs have already dove into their work, yet our Turkish entrepreneurs are still struggling to figure out all the things they have to do. Unfortunately for them, the hassle of setting up the legal entity is not an exception but an ongoing struggle.
Our entrepreneurs will first have to develop their product, hence for the first year, they will have very limited commercial activity. They don’t plan on hiring any employees, they plan to use one of their appartments as their office, and they will not buy/sell much, may be some computer equipment.

The American entrepreneurs use one of their appartments as the business address, buy a domain name for their company and subscribe to a hosting provider. They now have a website (their virtual office), business email, and broadband internet. Their monthly cost is less than $100,an insignificant amount. They only need enough money to be able to live, nothing more (other than $100/month) is needed. The only paperwork they will have to do is to file for taxes (which they will not have any) at the end of the year. It will be a simple process if they don’t have any activity, and even if they did, they can do it easily using the resources over the web. They will not have to spend more than 2 days over the year for the paperwork.
The Turkish entrepreneurs however, just found out that by law they have to have a certified accountant, further more the “fee” for the certified accountants is regulated by some semi-governmental organization. They have to pay about $250/month to an accountant for bookkeeping. This is a big blow to them, since it is a lot of money for our budding entrepreneurs. They hear that it may be possible to find an accountant that provides the service for less (against the regulations), but doing illegal things (or working with an accountant that does) makes them nervous so they decide to do the things by the book and look for a proper accountant.

Read more »

I don’t have any concrete data based on research but I think it is safe to assume that the US has the most “friendly” business environment for high-tech/software startups. The overhead of setting up a company is very low. Many developing countries on the other hand have very complicated regulations and procedures, and it is quite expensive to setup a company. This is quite frankly insane! The reverse correlation between the economic development of a country and how long it takes to setup a company is well researched, and high quality data is available, thanks to WorldBank.

I’ll use US and Turkey as examples, as I also had the first hand experience to start companies in both countries, hence have personal experience in addition to the available research data. In our case study, we have three computer science graduates who are high on talent and ideas that can change the world, but low in cash, trying to start up a software company. We’ll go through the motions of starting up a company for these young entrepreneurs both in Turkey and in US.
First, let’s look at the research data. According to doingbusiness.org, it takes $210 and 5 days to setup a legal entity in US vs $1,040 and 9 days in Turkey. So the cost of setting up a company is 5 times the cost of setting it up in US. Our entreprenuers in Turkey are in a disadvantage. This is bad for Turkey, in fact, it is much worse than it looks.

Read more »

Turkey is a “big” country. 70 million people (compare to the EU population of 456 million). It takes a massive effort to transition a country that size from agricultural era to the information era. As stated by Deniz Gökçe (in Turkish), there are 7 million people working in the agriculture sector in in Turkey (compare to the 10 million in EU). 32% of the population lives off of the Agriculture. Productive is very low. There is massive under/hidden unemployment that goes well beyond the official statistics.
Hence, it is no surprise that there is massive exodus from agriculture. 1.3 million people per year exit the agricultural sector. Turkey also has a very young population, unlike most of the EU. This means signifcant number of people come off age and ready to join the work force every year.

In short, Turkey needs a strategy that will create massive numbers of new jobs every year. Where (in which sectors) will these jobs be created? What are the necessary infrastructural changes to faciliate such growth? What are the obstacles now? These are some of the questions that can help us to begin the analysis.

Lack of foreing direct investment has been identified by many as one of the major issues. It is clear that the level of foreign investment is very low, compared to the similar countries. The legal infrastructure and the somewhat negative sentiment in the society are the primary obstacles. Unfortunately, Turkish public do not yet understand the concept of foreign investment. They are skeptical and do not percieve foreign investment as a “good” thing, despite the fact that “finding a job” is probably the biggest problem in their lives. The connection between “jobs” and investment (foreign or otherwise) has not been made. It does not help of course that the Media is clueless. The level of “ignorance” in Turkish Media is stunning. Some stuck with ideological baggage, still repeating dogma from previous decades, others spewing populist garbage with no care to “think” about what they are saying. There is a great anecdote about the terrible quality of drugs in the beginning of 1900’s saying that if all the drugs of the time were tossed in the sea, it would be better for mankind and worse for the fish! I kind a feel the same way about the Media in Turkey. Too harsh? May be.

The other problem is that the commercial regulations are practically HOSTILE to new businesses. Try to start a new business in Turkey, and you’re hit with so many regulations, “fees”, etc. it is a remarkable feat for any company just to exist! The regulations choke new businesses in their infancy with regulations and taxesm denying many the change to even begin a life and provide much more to both the society and the country later on.

I’ll attempt to demonstrate this point with subsequent posts comparing the first year of a startup in Turkey and in US. I’ve come to realize that many people in Turkey did not realize the extend of this problem. When we live with something for a long time, we consider it “normal”. I believe a comparative look at the process will make it easier to grasp the extend of the problem and how it is one of the major obstacles of growth in Turkey. Stay tuned …