The beauty of Amsterdam (and ecosystems)

Today is a beautiful late summer day, and when I look out the window of my home office, I am gripped by the elegant simplicity of the city. In the early 17th century, each house was uniquely designed for the family’s needs, but at the same time, it was part of a cohesive whole, a community. It symbolized ‘e pluribus unum’: one in diversity. This was the golden age for the Netherlands that brought forth famous painters like Rembrandt and Vermeer, reclaimed the sea, shaped the canals, and had ships venture out to trade with the world. At that time, Amsterdam was the only city run by the merchant class instead of royalty or the church. In a joint effort to keep the constantly encroaching sea at bay, the city was founded on collaboration by its inhabitants. It welcomed people who were prosecuted because of their religion: the Huguenots from France, Protestants from Antwerp, and the Jews from Iberia. Spinoza and Descartes became "Amsterdammers" and contributed to trade, science, and philosophy.?Innovation was sparked by these newcomers and embraced by the city’s regents.

The Dutch became world-leading in cartography. They developed smaller, faster ships and optimized trade routes. Property rights and the rule of law were firmly established. The first share-holding company, the VOC, was set up to explore and exploit the world. Amsterdam invented the stock exchange and started trading increasingly sophisticated instruments, allowing a large part of the population to participate in markets. The regents recognized the need to deal with the risks and vagaries of trade and innovated insurance that brought financial stability in a highly unpredictable world. The combination of participative governance, openness, and support of science and the arts led to this fantastic period of wealth generated by a population of barely 100,000 people living in a swamp on the edge of the North Sea—a true ecosystem. Riches were made, and fortunes were lost in this period. The environment was highly conducive for entrepreneurs, full of creative energy with a risk-taking attitude. There were positive feedback loops between institutions, businesses, the sciences, and the arts. While legal, social, and economic frameworks set the rules for businesses to operate, those businesses, in turn, influenced the evolution of those frameworks.

Yet, every innovation has its unintended consequences. Every success has its dark side. Tulip mania led to one of the first documented boom and bust cycles caused by heavy speculation and the use of financial instruments, like derivatives. Enslaved people were among the goods traded. Unfortunately, by the late seventeenth century, the country succumbed to the economic pressure of wars with the much larger French and Spanish armies.?When back under autocratic rule, the golden era ended. The openness and multi-disciplinary approach fuelled the city’s success. It was narrow interests and dictatorship that turned the country’s fortunes around. However, the beauty and culture of the town have remained.

Taking it to the 21st century: Digital disruption

The city is reinventing itself with many start-ups and a large ex-pat community. That same context of creative, purposeful, and participative entrepreneurship also applies to Silicon Valley and other digital hotspots like Seattle, Boston, Shenzhen, Tel Aviv, or Eindhoven, as epicenters of digital disruption and the birthplace of some of the most valued companies in the world. They have a set of core ecosystem characteristics: solid academic institutions, attractive to global talent, an infectious entrepreneurial spirit, easy access to venture capital, and business-friendly governance. Stanford, MIT, the University of Toronto, and the Weitzman Institute are hotbeds for tech innovation and talent. Over half of the US’s unicorns have a founder born outside the country.

The diversity of thought and skills fuels innovation. For example, the Eindhoven area in The Netherlands has become one of the unlikely tech hubs in Europe. The region has given birth to world-class companies like ASML and NXP. All advanced semiconductor manufacturers in the world use ASML machines. This all started when Philips decided in 2003 to take down the walls of its campus and invite all kinds of tech companies in. A local government keen on enabling the tech community made it easy for ventures to get off the ground and allowed foreign talent to work and live here. The tech university seeded the place with research and expertise. The larger Brainport region that grew around it is now home to 5,000 companies and bills itself as Europe’s smartest region.

Platform-based Ecosystems

Most leading digital platform companies were founded in those hotspots. They have given rise to new ecosystems and business models. They have triggered the digital ecosystems that unite users (customers/ consumers) and producers (product/ service providers) in a seamless, automated experience. Those platform players aim to accrue value for all participants, but the lion's share will go to the ecosystem orchestrator. McKinsey projects that ecosystem-based companies will reach a quarter, if not a third, of the worldwide economy. By 2025, $60 trillion of global revenue will be concentrated in just twelve digital ecosystems.

In the aftermath of a pandemic that stopped the world in its tracks, in the middle of a war in Europe, with significant turmoil in the capital markets, energy shortage, run-away inflation, and record heatwaves and floods, we find ourselves again in an era of significant change. Despite the supply chain hiccups and energy crunch, there is an abundance of accessible tech, content, and data. The ecosystems that bring forth the companies that harness this abundance to create value for their stakeholders at scale continuously will be thriving, as we have seen before in history. ?