Hybrid Reality has just spent a week in one of our favorite places: Singapore.

As the city-state celebrates its 45th birthday, it continues to enjoy a unique status as an icon of economic growth and political stability under the leadership of its founder and still “Minister Mentor” Lee Kuan Yew. Its first several decades of export-led growth relied particularly electronics manufacturing and assembly, as well as transport and shipping. But the 2008 financial crisis put a huge dent in that model, forcing a rapid re-think of the country’s economic foundations moving forward. It now wants to be a “living laboratory” of R&D for the world’s multinationals while stimulating its own creative revolution towards the knowledge economy. But can it be done the Singaporean way—technocratically—instead of the organic Silicon Valley way?

Entrepreneurs often celebrate failure as part of the dynamic process of innovation. But in tiny Singapore, failure has never been an option. By and large, Singapore is not pursuing scientific discovery for its own sake, but rather identifying key sectors where it can marry leading-edge technology with the massive market opportunities of Asia: bio-medicine, clean-tech, and digital media. The Economic Development Board—something of a domestic development fund in contrast to the better-known sovereign wealth funds such as Temasek—is providing grants and equity funding to boost growth in these areas. Singaporeans tell us they are just as attuned to this “Tel Aviv model” as to Silicon Valley.

With respect to bio-medicine, it’s well-known that Asian societies have had fewer inhibitions with respect to research in controversial areas such as stem cells. What Singapore has in mind, however, is to capitalize on the convergence of Asia’s (read: China and Japan’s) aging and longer-living population trajectories. That means focusing on nano-medicine to improve the early detection of cancer, computerized medical devices to enhance the recovery of stroke patients, and boosting the sustainable manufacturing of chemically and biologically synthesized drugs. All of this requires a strategic hybrid of the research and development components of R&D, which Singapore has been building by luring some of the world’s top clinical scientists to its new Biopolis facility.

Singapore is also gaining ground in clean technology as well. An early recipient of government funding, the indigenous company Hyflux is capturing a growing share of the market for water desalination with a wide-ranging set of products for customers small and large. It has also forged a partnership with MIT’s Senseable City Lab to deploy electric vehicles, hybrid busses, and other types of efficient urban transport.

Across the street from Biopolis is Pixel, the animation and content production partnership with Lucas Films that symbolizes Singapore’s forays into digital media. Data mining, cryptography, and human-robot communication are also receiving investment from Singapore’s A*Star, showing the government’s interest in the semantic web, artificial intelligence, and augmented reality. Singaporean sixth graders are already going on field trips armed with PDAs that allow them to photograph and instantly learn more about the tiny island’s lush array of flora and fauna. We particularly enjoyed the 3-D virtual reality tennis simulator in which we took on Maria Sharapova using a racket that features vibrating technology for the real feel of ball contact.

Over the past several years, Singapore has risen in the ranks as measured by published papers, patents filed, competitions won, faculty awards, and influence over international standards. So can Asia move from technology consumers to innovators through the same state capitalist model that has helped it navigate the global financial crisis better than the West? Our many in-depth meetings with Singaporean officials and exposure to its leading laboratories reveal a clear conclusion that Asia is coming through an inflection point in its approach to climbing the technology ladder. While they realize they are catching up to Western powers in many domains, and that some investments won’t pan out, Singaporeans are committed to taking some strategic risks in the name of long-term economic reinvention. With a growth rate this quarter reaching nearly 18 percent (the world’s highest), Singapore looks poised to set Asia’s next economic model as it has numerous times before.

Ayesha and Parag Khanna explore human-technology co-evolution and its implications for society, business and politics at The Hybrid Reality Institute.