A Few Thoughts on Italy
European Straits #106
Dear all,
Italy, like France, seemed well positioned to succeed in the age of mass production. France’s centralized, bureaucratic culture was built by the crown and the ones who served it (Mazarin, Richelieu, Colbert), then reinforced by the Revolution (the continuity between the Ancien Régime and the Revolution was the topic of Alexis de Tocqueville’s other book), and finally consolidated by Napoleon.
As a nation, France entered the 19th century ready to thrive in a techno-economic paradigm that rewarded efficiency at scale. Indeed it performed quite well in both the age of steel and heavy engineering and the age of the automobile and mass production. We French people came out of it all persuaded that we had secured our membership in the club of the most-developed countries on earth forever.
The Italian paradox
As for Italy, well, its heritage of efficiency at scale dates back much further in history. There was the Roman Empire of course, but also the excellence in both trade and production that marked the history of thalassocratic powers such as Genoa and Venice. I already wrote about the latter in a , echoing Chapter 7 of my book Hedge. I would add here that Venice also pioneered mass production with its unrivaled capacity to build galleys, the vector for their mastering of the sea.
The thing, however, is that Italy was never centralized like France. Its efficiency at scale in the 14th-16th centuries was based on networks, competition among regions and cities, and the movement of people and ideas. All that worked well so long as the nodes in those networks maintained a (relatively) equal importance. However, the Industrial Revolution led to a rather swift bifurcation between North and South, and so the unification of Italy in the mid-19th century was unable to rely on (or construct) healthy networked relationships. The failure to effectively address those divisions over the past 150 years has led to where we are today, with vast differences between regions, state and industrial power consistently countered by significant extra-legal forces, and local pride that too often gives way to national rancor.
When it comes to the current Entrepreneurial Age, Italy remains an enigma—or, rather, a paradox. On the one hand, it’s lagging behind in the race to build great European tech companies. The red tape there is infamous. Italy is not even on the map of The Family’s ongoing European tour! One issue is that the startup ecosystem is scattered between many cities (Milan, Naples, Rome, Turin) rather than being concentrated in one capital only, as is the case in the UK or France. And because corporatism is particularly strong in Italy, it makes it hard for innovative entrepreneurs to make their way onto the local market. One article on that topic was written three years ago by my wife, Laetitia Vitaud, on Uber’s many setbacks in Italy: Gig Economy: Italy Has A Few Cards to Play.
On the other hand, Italy does have the heritage of a great entrepreneurial tradition. I mean, Italy invented modern banking. It gave birth to some of the most potent trade and maritime powers of their era. In the 19th century, Naples was one of the five European capital cities that were home to the Rothschild family. And in the 20th century, Italy gave birth to a major European carmaker (Fiat, which now owns Chrysler), prominent entrepreneurial figures such as Giovanni Ferrero, Leonardo Del Vecchio and Giorgio Armani, and a thriving ecosystem of small businesses and suppliers. For a time, Italy even had a leading movie industry and somehow became the center of European disco culture (you REALLY should listen to the extraordinary tribute that Daft Punk paid to Italian composer Giorgio Moroder).
There is also a healthy dose of rebellion, another key ingredient of a thriving startup community. Even if that rebellious spirit often falls into the bad side of things, there are many, many young Italians willing to rebel simply because the system has long failed to provide anything of value for them, today seen in Italy having the 3rd highest youth unemployment in the EU! That spirit is also seen in the fact that so many Italians are prone to emigration. It's one reaction: when things are bad for Italian entrepreneurs, they flee (reluctantly) the country to temporarily make their home in London, the US, or elsewhere. That's led to successful companies such as Moneyfarm, Cubeiq, and, in The Family's portfolio, Oval Money and Emma. But with the right mental models, the proper tools and a changed attitude in the establishment itself, this taste for rebellion could very well turn into entrepreneurial successes in Italy.
And there are many attempts taking place to try and solve that paradox. One is the ongoing effort to turn Italy into a more startup-friendly environment, which includes:
Growing organizations to support early-stage startups. This goes from accelerators and incubators like Digital Magics, LVenture Group and H-Farm, to prominent venture capital firms like United Ventures, Innogest, P101, U-Start and Milano Investment Partners, to trade associations like ItaliaFintech (of which I met the Managing Director Marta Ghiglioni), to new types of players like Valia, a rising organization aimed at providing support to tech entrepreneurs from all over Italy.
Making the government more user-friendly. For two years, that was the work of Diego Piacentini, whom I know as a fellow member of the expert group for the Going Digital project at the OECD, and who, before becoming the Italian government’s CIO, was a senior vice-president at Amazon! Read a recent interview Diego gave to the new pan-European tech media Sifted: On Amazon and Italy’s digital transformation.
Reclaiming the initiative in the South. We all have that image of Southern Italy, a dry, chaotic landscape largely frozen in time. And yet there are tech entrepreneurs in the South as well, including some that my colleague Pietro Invernizzi and I met in Naples thanks to NAStartup’s Antonio Prigiobbo and my dear friend Raffaele Russo.
We also shouldn’t forget the current political situation. A continuous series of terrible leaders has destroyed the Italian public’s trust in institutions, from the destructive Silvio Berlusconi to feeble center-left politicians. On top of that came the current government, which is a weird alliance between the populist Five Star Movement and Matteo Salvini’s anti-immigrant Northern League. The latter is in the news a lot, so you have likely formed an opinion about them already. As for the former, for those of you who read Italian, I’ve been recommended the book L'esperimento, which reveals the origins and story of how Cinque Stelle came to dominate the Italian political landscape. Here’s an article in English in Jacobin: The Experiment: An Interview With Jacopo Iacoboni. Really worth a read!
All in all, Italy’s entrepreneurial heritage hasn’t translated into a thriving startup community (yet?). A key reason, I think, is that there’s not so much in common between the successful 20th-century ecosystem of artisanal small and medium businesses (which remained small or medium because they embraced activities marked by diminishing returns to scale) and 21st-century startups (which, as you know, are differentiated by their sustaining increasing returns to scale). Those two worlds come with different rules of engagement and different cultures, and nothing suggests that because you succeeded at building small businesses, you can then succeed at growing tech startups (see below for further readings on that topic). Of course, we at The Family definitely want to do more for the Italian startup communities and would be happy to talk to more entrepreneurs from there, so don’t hesitate to reach out!
What’s happening these days
🇮🇹 My trip in Italy led to various interviews, mostly around my book Hedge and our work at The Family. If you read Italian (or are willing to use Google Translate), here they are:
An article by my friend Stefano Zorzi and Andrea Garnero, who participated in the Hedge panel in Milan: La protezione sociale non è (solo) una questione statale.
An article (and video) by Rossella Grasso in Naples’s Il Mattino: Startup, missione napoletana dell'imprenditore Nicolas Colin.
An article by Valentina Cefalù in Formiche: Hedge, la grande rete di protezione 2.0 spiegata da Nicolas Colin.
🇪🇺 On another front, the World Economic Forum had its annual gathering at Davos while Pietro and I were in Italy. That’s when the report Innovate Europe: Competing for Global Innovation Leadership was issued. I encourage you to read the whole document. I contributed to the first chapter, about a pan-European approach to entrepreneurship, which you can access here [PDF].
🇸🇬 Finally, I’m starting to plan my trip to Singapore, which will be from March 13 to March 19. If you know of any interesting sources (books, articles, videos, podcasts) related to Singapore, do let me know!
📕 Don’t forget to buy your copy of Hedge by visiting the relevant Amazon website depending on where you are: 🇺🇸US, 🇬🇧UK, 🇫🇷FR, 🇩🇪DE, 🇮🇹IT, 🇪🇸ES.
Further readings on small businesses not being startups
Why Washington Has It Wrong on Small Business (Aaron Shatterji, The Wall Street Journal, November 2012)
For a Booming Economy, Bet on High Growth Firms, Not Small Businesses (Daniel Isenberg and Ross Brown, Harvard Business Review, February 2014)
Startups are a great start, but not the goal (Dan Brezniz, The Economist, April 2014)
The Aging of American Businesses (Ian Hathaway, Harvard Business Review, August 2014)
Startup = Growth (Paul Graham, Essays, September 2012)
More businesses are closing than starting. Can Congress help turn that around? (J.D. Harrison, The Washington Post, September 2014)
Is America Encouraging the Wrong Kind of Entrepreneurship? (Ian Hathaway and Robert E. Litan, Harvard Business Review, June 2017)
If America’s Economy Is Winner-Take-All, Why Are Some Smaller Businesses Thriving? (Karl Smith, Harvard Business Review, September 2017)
The EU Copyright Directive: An SME exemption is not a startup exemption (Allied for Startups, January 2019).
Warm regards (from Paris, France),
Nicolas