A child pushing an elderly man in a wheelchair in afghanistan

The $2 trillion start-up that failed

management risk strategy Feb 01, 2022

Afghanistan is dominating the news headlines, following the start of the US military withdrawal and the rapid collapse of the national government. Thousands of families are still besieging Kabul airport in a desperate bid to escape the medieval brutality of the Taliban regime. The geopolitical clock has been reset to 2001. Despite twenty years of effort, countless deaths and over $2 trillion invested in military support, aid and civilian infrastructure, the experiment of democracy in Afghanistan has come to naught.

The western values transplanted into an Islamic country have been rejected. The pervading feeling is one of shock. But that shock relates to timing, not the outcome. The collapse took only 6 days when 6 weeks were forecast. No one believed the national government would survive beyond a month and half. That is a poor return. We can understand more about the problem if we treat Afghanistan for what it was, a massive start-up. 

The first test of any start-up is to develop a stable product. If you can’t offer a reliable solution, then even the most loyal customers will quickly desert you. The national government never came close to offering this. Partly because the security situation never solidified, the radical Islamic insurgency was never defeated. Without peace the rule of law, any progress in civilian society is doomed to fail.

But also because the democratic government was the wrong solution to Afghanistan’s problems. Afghanistan was and remains one of the world’s poorest countries. The country needed a new economic strategy rather than a political one. The historic tribal culture is as much a brake on economic progress as the poor security situation. But it can evolve, as Middle Eastern countries have shown. The real problem was a lack of wealth and specifically wealth creation. Start-ups can’t succeed without accurate diagnostic skills.  

This also means that Afghanistan failed the business model and commercial tests: it had no path to profitability or way of making money beyond Western aid. 

Funding was plentiful, although $2+ trillion wasn’t enough. After the 2001 invasion there was no easy exit for any of the Western powers. What is the point of deposing a regime without leaving something robust enough to stop it returning when you leave? Western money poured in, but like water in the desert, it was quickly soaked up. The failure to establish security meant much of the money was invested in military assets. Civilian infrastructure and the quality of life in Kabul both improved. Outside the capital, the gains were marginal. There simply wasn’t enough money available for investment, and when the investors pulled the plug, the enterprise collapsed immediately.

Start-ups need demand for their solutions. Without it, there is no market. The demand for Western values and democracy was too small. There were promising signs as women rushed to take up professional positions, students took up sharing pictures of Big Macs on social media and everyone – including rural tribesmen - bought mobile phones. None of these things were conceivable under the previous Taliban regime. But popular engagement in democracy and the values that underpin it remained stunningly low. Only 5% of the population voted in the 2019 presidential election. In 2017 99% Afghans still favoured sharia law and 85% supported stoning for adultery.

Finally, start-ups need to be able to compete and win against determined rivals. Other organisations who have alternate visions and solutions for the same market space. Once again the national government failed. It was unable to compete with the Taliban militarily or ideologically. Twenty years should have been enough to subdue both, but internal political divisions, the spectre of foreign influence and a lack of charismatic, authentical local leadership prevented progress from being made.

There are lots of lessons from the Afghan debacle. Firstly, sound democracies cannot be fast-tracked into existence. The same is true of any seismic shift in society or industry. Big changes take time and require fertile soil to take root. If the conditions are not there, then alternate models need to be considered. Secondly, there are interesting parallels between Afghanistan and the start-up experience. They show that its collapse should not be a surprise to anyone, because the enterprise broke nearly every law that determines the success of new enterprises. Thirdly, eye watering amounts of funding do not guarantee success. If anything, they can leave an organisation weaker, more dependent and more vulnerable to collapse than if they had received less. Remember this the next time you are considering a funding round: only ever take the minimum you need.

All we can do now is hope that the people of Afghanistan, already impoverished by decades of fighting since the 1970s, don’t pay a further price for the failure of perhaps the last great democratic start-up experiment.


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