Small States Asset Class

All the issues that we care about now are cross-border and global. Climate, pandemics, information, finance, immigration, instability, and, of course, Artificial Intelligence. The creation of a Small States Asset Class is intended to recognize the global nature of our challenges, and leverage the advantages that today’s small states, including small islands, offer in the face of cataclysmic events.

In a world of globalization, no island is an island. To believe otherwise, is quaint but not realistic.

The advantage of small states, including islands, is that they can be nimble, fast, flexible, and adaptive. Why? Because they are small. Those that leverage the advantage of size, and evolve with the times, will thrive. The rest will live on handouts.

The dream of being 'left alone’ is over. Coming to terms with this reality is now key to development, especially for small states. These communities are ‘canaries-in-the-mine’ on many issues. They are at the frontier of many havocs, especially those created by climate change but also pandemics, migration, crypto, etc. For them to be relevant, the role they can play is to be communities of innovation. In this, there is value for them and for the rest of humanity. It also gives them some hope of agency over their destiny.

Local only development is over. The charm of the innocent ‘native’ unmolested by 'scrooge' of modernity is gone. The quaintness of unspoiled lands is for tourist brochures only. This is exemplified by the island local who leaves their flat screen TV, microwave and air-conditioned home and drives over in their Ford Explorer 150 Limited Edition to entertain incoming tourist hordes. Before arriving at their destination, the local possibly stopped at a KFC or McDonald, got some fast food, and shed their T-shirt and jeans, in exchange for ‘native’ costume pulled out of a closet, and a straw hat that is used for no other occasion than these. Prior to returning home to the comforts of modernity, they stood in the blaring sun, performing on steel drums for visiting tourists, who were only looking for fun-in-the-sun, in search for a post-card selfie from a period long lost. It is not authentic.?

Cultural innocence is over. This end started 500 years ago, when Dutch, English, Spanish, Portuguese, French and other explorers set out during the Age of Discovery for distant shores. The process brought a melding of cultures between Western Europe, indigenous populations, and enslaved Africans. This journey started when European explorers showed up on the islands of the Caribbean, and they initiated a clash of civilizations, that eventually spread globally. The advent of telecommunications, especially the Internet, fast forwarded the process. Over the next 5-10 years, the Artificial Intelligence Revolution will send us all into hyper-speed, blending all of humanity into one integrated and connected specie. Any remnants of isolation will be over.

Development institutions that don’t innovate are over. Those tasked with architecting a future for the ‘developing world’ are at best behind the curve. They are not driving the process of globalization. Since the ‘80s, private markets and investment capital has far dwarfed official development assistance. With that relative decline has been a retrenchment of the influence of development institutions on the global system. If multilateral development banks (MDBs) don’t reform, they will be mostly irrelevant. For MDBs too, the clear task is to be islands of innovation. They should be at the frontier of risk taking and not just documenters of history. Like Google X, HP Labs, Bell Labs, Xerox Park, CERN, or many other corporate innovation labs, they must be fast and supportive of risk taking. Reform is not an easy process. Like the governments they represent, change will require a top-to-bottom creative destruction and recreation of culture and decision-making processes.

Size can be a liability. Being big and non-adaptive means your existence is likely going to be over. 65 million years ago, when the meteor hit the Yucatan, the dinosaur had been dominant for 165 million years. It roamed unmolested over the planet. However, when this cataclysmic event happened, it was not the dinosaur that made it to the other side of existence. It went extinct. Who made it? It was the small marsupials, the toothless birds, and even the cockroach, that survived. There are lessons in this historical evolutionary reality.

The creation of a Small States Asset Class is intended to tap into the energy of those who are nimble, fast, flexible, and adaptive. This is the key to evolutionary success in the face of cataclysmic changes. It is also the source of investment return. The only way to agency is to lead the process.