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Archive for September, 2016

How to build world-dominating businesses

A few days ago I found myself sitting at the longest table I have ever seen in my life listening to a discussion on what are the technologies that will be influential: what jobs will these jobs create, what jobs will they destroy in the coming fifteen years. One side of this long table was filled by people working for NITI Aayog (National Institution for Transforming India)and my side of the table had a dozen or so people like me: entrepreneurs as well as executives from large Indian business groups, people heading think tanks and management consulting companies. Towards the fag end of this multi-hour meeting of give and take, Dr Arvind Panagariya, the Columbia University economics professor and current head of NITI Aayog raised a question: “What does it take India to produce companies like Google and Microsoft? While there was not enough time to debate this question that day, this question has been ringing in my head since then.

I guess what the question really meant was what does it take for India to produce world dominating companies, companies that operate in the Information Age (and not smoke stack, mining or real estate businesses), companies which compete on the basis of the sophisticated technologies they employ to make their products easy to use as opposed to companies that compete on the basis of the cheapness of labour employed by them.

I think the first port of call to start finding an answer to this apparently innocuous but in reality complicated question is to go to the internet (yes, to Google, where else :-)) and locate a scholarly paper using the key words, “Brin”, “Page”, “Page rank”. When you have done downloading it, ignore all the tech stuff and merely look at the two dozen words on the first page where the authors thank people who made the 1998 paper possible: “The research described here was conducted as part of the Stanford Integrated Digital Library Project, supported by the National Science Foundation…Funding for this cooperative agreement is also provided by DARPA and NASA”.

Sergey Brin and Larry Page are of course the founders of Google, the paper you just glanced at is the paper which proposes the technology Brin and Page used to build the Google search engine. Wait, look at a little closer at the acknowledgements: Stanford University already had a project trying to make sense of the newly emerging internet as far back as 1998 when the rest of the world barely had heard of the internet. And finally, look at the source of funding: “DARPA” stands for the Defence Advanced Research Projects Agency- note how American defence interests and university research funding and creation of companies like Google are so intimately inter-twined.

So, one way of rephrasing the NITI Aayog question is why is it that in India universities do not initiate visionary projects that anticipate future technologies like the Stanford Digital Library project. A related question, why doesn’t Indian defence establishment (DRDO?) not pose research questions to our universities and back it with funding like the American Defence Advanced Research Projects Agency? While I will, in a moment, answer the India question, for those who want to decode how such intimacy and confluence of interest has happened between Defence interests and American universities like Stanford, there is no better place to start than Rebecca Lowen’s 1997 book, Creating the Cold War University: The Transformation of Stanford. Professor Lowen’s (she teaches at Stanford) thesis is that university administrators faced with financial pressures and seeing the flush-with-funds American defence sector during the Cold War remade the American University into “cold war universities”, “recipients of Defence Department patronage and close relationships to private industrial concerns, many of which were developing war-related technologies”.

A related line of enquiry reveals the hand of the US Defence Department behind that device which practically all those present that day across the large conference must have had in their pockets: The Apple iPhone. I wish I had distributed copies that day of Professor Mariana Mazzucato’s book about the hidden hand of the American State behind the iPhone: The Entrepreneurial State: Debunking Public vs. Private Sector Myths.  In this book she points out that in the United States, it is a myth the myth that it is the dynamism of the private sector that drives innovation, she shows that the private sector only finds the courage to invest after an entrepreneurial state has made the high-risk investments. She points out that every technology that makes the iPhone so ‘smart’ was government funded: its touch-screen display, the voice-activated Siri, the Geographic Positioning System and related map data which detects your location and gives you helpful directions, not to mention the internet itself, the microprocessor that drives it, as well the cellular technology which makes all mobile phones possible.

The secret to transforming what could have been a heavy hand of government that stifles all initiatives lies in the processes that DARPA follows, says Professor Mazzucato. “It facilitates workshops for researchers to gather and share ideas while also learning of the paths identified as ‘dead ends’ by others. DARPA officers engage in business and technological brokering—linking university researchers to entrepreneurs interested in starting a new firm; connecting start-up firms with venture capitalists; finding a larger company to commercialise the technology; or assisting in procuring a government contract to support the commercialisation process. DARPA funding is provided to a mix of university-based researchers, start-up firms, established firms and industry consortia”. So, the answer to the question, how to create world- conquering companies may be this: how to make the Indian State become more entrepreneurial.

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