When I read yet another report about a farmer who commits suicide, I sit transfixed trying to imagine the depths of despair a man must sink to before he decides to kill himself and abandon his family to the mercy of a world that he himself could not face.

Was it an act of irresponsibility? Was he a wastrel? Or has the crisis in Indian agriculture become so deep that many farmers have reached a dead end? Or, as many newspaper reports seem to imply, are money lenders in rural India snaring innocent farmers to pledge their bullocks and land on such usurious terms that the farmer has no choice but to abandon these, the only assets he has, and take his own life to escape the shame?

            I have been walking around with such questions rattling in my head, till, the other day, browsing at a bookshop in Bangalore, when my eyes lit on the title, "Undeserved Death, A Study on Suicide of Farmers in Andhra Pradesh, 2000-2005", I leapt to get it. It reports the findings of a study done during 2004 and 2005 by the Council of Social Development.

            One case in it, that of Mr Kommalu, a 48 year old farmer from Warangal district, is an illustrative one. In the 90's, Kommalu separates himself from his already small joint family farm and sets out to make a living on his own 3 acres. He grows paddy on 2.5 acres and vegetables on the rest. In normal times, the village tank, filled by rain water, serves him well for two crops a year. In a pinch he buys water at nominal rates from his neighbor's bore well. Kommalu could have continued leading this low risk, if subsistence level life, if he had not turned ambitious.

            Large farmers around Kommulu are raking in money growing cotton. Local dealers tempt him offering seeds, fertilizer and pesticide on easy credit to grow cotton. Kommalu decides, in 1992, to grow cotton on one acre of his three acres. The crop is good and he sells it to the same dealers.  Encouraged,  he next grows cotton on all of his three acres. In five years, he is able to buy a motor bike, a TV  and some jewelry.

Fertilizer and seed prices are steadily rising and he realizes that  he needs to grow ever more cotton to make the same amount of money. He leases a neighbor's five acres and grows cotton on that. That year, despite pest attacks, he squeezes through, paying off half the credit from the fertilizer supplier.  When the time comes to pay the balance, he takes out a loan from a money lender, mortgaging an acre of his land.

1999,to 2001 are drought years in Warangal. Unfortunately, that is also when two of his daughters have to be married off. He is back to the money lender, mortgaging his remaining two acres. By now, he has also fallen behind on lease payments, and his neighbor takes back the leased five acres.

            Kommulu is back to growing cotton on his three acres for ever smaller returns except that these  three acres are truly not his- they are mortgaged to the money lender.

            When his daughters get pregnant he is back to the money lender. Now his two plough bullocks are mortgaged as well.

            While interest payments mount, returns from cotton farming have become  negligible. To make ends meet, he, his son and wife become agricultural labourers.

            One evening, he, walks over to the land that he once owned, stands watching the sun set, swallows pesticide and ends his life.

            In spite of the precise, scholarly tone of the report, I could feel a lump in my throat.

This is not just Kommulu's story. It is a theme across the many  suicide cases in this study: Indian farm sizes get smaller as joint families divide; the farmer attempts to get scale by leasing out land at high rates; a steadily depleting water table, a switch to single crop cash crop from the mixed crop farming of the past; the unpredictable and ever decreasing price of cash crops, ever increasing costs of seeds and fertilizer; increasing expenditure on weddings, education and health

            The American version of Kommulu's story is the basis of John Steinbeck's 1939 novel, The Grapes of Wrath, the story of the Joad family whose farm is foreclosed by bankers in drought ridden Oklahoma. We follow them as they struggle their way in their jalopy piled high with mattresses and pots and pans ,through Texas, New Mexico, Arizona and cross the Mojave Desert to get to the land of their dreams, California. They work as fruit pickers ( or landless labourers, as we call them here in India.)

Steinbeck's villains too are the financiers, the "Bank of the West" (a thinly veiled reference to Bank of America) who helps  land barons gobble up small farms to concentrate them into a few large holdings. Just as we blame the banks  "the village moneylender" for not lending enough to the farmer in trouble. An unpaid loan is often a sign that the borrower's business just isn't making enough money. Making more credit available, while a kind hearted gesture, to do, does not solve that problem.

When the large retail chains get going, it's going to be a boon for farmers, but probably only farmers with hundreds of acres may be able to match the prices, quality and consistency needed.

The Joad family odyssey ends in California in the Santa Clara valley, which in the 1930's was full of fruit farms. Today it is the home of Intel, Apple, Yahoo Google

Is the  moral of the Kommalu and the Joads stories  this: the faster we make the transition from farm to industry the shorter the pain?

END
( first published in the Business Standard, May 11th 2007)

Convocation Speech: IIM Calcutta, 1^st April 2007

Let me start by telling you a modern tale: Five private equity funds get together to buy a large international steel company. The seller states his price: he wants half the money that the first fund has plus all the money the other four have. He gives them other alternatives as well: he will sell his company for a third of the second fund plus all the money of the others, or a fourth of   the third fund plus all that of the others, and so on.

The question is: what is the price the seller wants for the steel company and what size fund does each private equity player have?

Those of you who are mathematically inclined will recognize the problem as one of solving a set of indeterminate equations [1].

Those of you who are students of history will recognize this as one of the many problems from the Bakshali Manuscript [2]. This manuscript, written on pieces of birch bark, was found by a peasant in 1881 [3] in a village called Bakshali near Peshawar. It is written in a language that was a precursor to Sanskrit [4] and has been dated as from between the 2nd century BC and 2nd century AD [5].

In the Bakshali manuscript, it was five merchants who set out to buy a jewel and not five private equity funds to buy a steel company. But otherwise, the formulation of the problem and the method of finding the answer is the same. 

I can see from your faces that  you are all  eager to go on to the real world of business. I want you to remember that the Bakshali manuscript serves as reminder of the great intellectual tradition you come from. 

In 1971, I remember waiting in cap and gown, like you wait today, eager to receive my diploma and set forth to conquer the world. It was on a day much like today, the romantic Calcutta winter had receded into memory but the dog days of May had not yet set in.  But it was different in other ways. There was the sound of guns outside, some from a distance, some from quite close. They served as a humbling reminder that though we were armed with the latest tools of operations research and psychology, there were fellow citizens outside fighting more basic battles. It was the peak of the Naxalite uprising. The government, desperate to find a solution, called an Election. The usual election officers, the state and central government employees were wary of volunteering so they called for students. I was eager to contribute to a solution to the strife and volunteered for election duty.  

Thus I found myself, Sonagatchi, the red light district of Calcutta, soon after graduation assigned the job of marking indelible ink on the fingers of voters while guns went off all around us

This is why I have boasted for years that I have held hands with most of the sex workers of Calcutta.

As I stand here today it is quiet outside. The social battles of the 1970's seem so far away and quaint. 

What is different in today's India compared to when I graduated in 1971? I suppose the e big difference is that the world's macro economic factors have swung India's way.

It started with the Western world's information technology industries developing in the 1990's  an insatiable demand for low cost English speaking manpower to convert billions of lines of computer code that had been patched together in the early days of the computer industry. India luckily had large numbers of such programmers idling because Indian trade unions at that time would not allow computers to be introduced [6]. Smart entrepreneurs seized the opportunity to ship these programmers abroad and moved on from there to build IT services companies that are now the envy of the world [7].

This labour cost arbitrage [8] opportunity has continued. Western financial service, health care and customer service industries have started a transition from a craft mode to an industrial mode. During this transition, they need a large supply of reasonable skilled, low cost, English-knowing workers. Low telecom costs [9] have made it possible to serve this need long-distance from India [10]. When that transition is complete [11] the arbitrage opportunity will disappear but that is still some time away[12].

A second fortuitous wave that is propelling India farther forward- the tremendous liquidity surplus in the world. Capital today is gushing out and finding its way to Indian equity markets, into real estate, into almost anything that you can name.

But big questions stare us in the face and yours is the generation that will have to find the answers to these questions.

What if the rupee that today trades at about Rs 45 to a dollar goes to Rs 20 or even Rs 10 per dollar in the next decade [13]?

What if the current excess liquidity situation in the world tightens and capital becomes risk averse and expensive [14]?

What if millions of our countrymen say we too want to be part of this Shining India [15] that is currently available only to the sons and daughters of people already in the middle class [16].

Remember, one day, one of you will be invited to make a Convocation Speech just as I have been invited today. If it takes the same time it took me to be invited, it will be the year 2040.

By that date, some say [17], India's GDP in US$ terms will exceed not only the European countries and Japan but also perhaps the United States.

But what these reports also say, and this part is often overlooked, is that in 2040, , India's per capita GDP will be just 15% of that of the United States and a third of that of even Russia.

Another way of putting it is that even thirty five years from now, the average Indian will earn just Rs 5000 a month. On this income he will have to feed and educate his children, look after their healthcare needs, afford entertainment and life insurance. This means he must have a place to stay with clean water supply at say Rs 200 per month [18], un-interrupted electric power perhaps at 50 paisa per unit at the consumer level, medical insurance at say Rs 10 per person per month and Life insurance perhaps at Rs 5 per person per month.

If we have to achieve this we need to convert our economy to one that has the lowest transaction and transformation costs [19] in the world.

These seem impossible targets to achieve using the current management methods and present economic institutions. We need to devise new paradigms that achieve these targets without any subsidies, and one that allows businesses that provide these  services excellent returns on their capital.

In finding answers to such challenges, in the past, all of us in Indian management have borrowed paradigms from the west and force-fitted them into the Indian situation.

For example, we often hear calls for reducing "labour rigidity" in India. Every such call should remind us that we are trying to force fit   Henry Ford mass manufacturing system to India. We forget that this paradigm [20] assumes a social system in which business cycle down-turns can be dealt with by lay offs and production cuts. It assumes both a labour shortage economy where people who are laid off quickly find jobs and a social security system that pays you for the time in between jobs.

Similarly, when people cry to "improve quality"  as  a panacea for competitiveness problems ,they forget that the Six Sigma Quality paradigm was developed by Deming [21] in the context of the 1960's Japanese consumer electronics  boom [22]. It works very well in industries like electronics and auto where efficient assembly is the key to success. Transplant it to creative software product development, for example, and it becomes merely a marketing gimmick and makes little difference to results [23].

Finally, a third example, the much admired US National System of Innovation [24] as it applies to the healthcare industry. We forget that it assumes a State [25] that lays out vast amounts of money in research, allows private companies and individuals to own the patents that rise out of this research, employers who bear the cost of the resultant high-priced health care system. US companies in the older industries [26] find themselves in an impossible situation today and American business and political leaders are desperately trying to find a way out of this debilitating system.

In a few years many of you will head large corporations and will be responsible for producing the vast array of products and service that our fellow country men will need. Others among you will hopefully join academics and contribute to theory. Whatever you do, please remember the inheritance you carry within you and the obligation that you owe to your less fortunate countrymen.

Please remember that each management paradigm [27] has its societal context and cannot be that easily borrowed. Original management paradigms [28] to address the Indian challenges have to be developed and it is your generation that will have to do that.

Be inspired by the early examples that demonstrate such a possibility:
The Aravind Eye Care System  that treats over 1.4 million patients each year, two-thirds of them ' or almost a million patients ' for free is often cited as an example. They apparently succeed because they have improved surgical practice and invented low-cost eye implants [29].

If you succeed in doing this [30] you will release a tsunami-like demand  that  will not only create jobs for the millions coming on to the job market but also allow them to live a fulfilled life in which life's necessities are within their reach.

If you succeed, Indian managers and management theory would have made its own unique contribution to the world and you will personally have lived a worthwhile life.
           
Our ancestors have been doing cleverer things and for very long. The Bakshali Manuscript is evidence of this.

If you occasionally wonder whether this immense task is within your talent, remind yourselves that you come from ancestors that created the Bakshali Manuscript. If you ever doubt the power of ideas to transform the world, be inspired by the Bakshali Manuscript- it's written on crude birch bark, the language in which it is written has been long extinct, but the power of its methods is relevant even today.

Thank you very much for inviting me today - I wish you all a very successful management career.

END



[1] The  equations take the following form: x₁/2 + x₂ + x₃ + x₄ + x₅ = p, x₁ + x₂/3 + x₃ + x₄ + x₅ = p and so on
  As  x₁/2 + x₂/3 + x₃/4 + x₄/5 + x₅/6 = q the equations become (³⁷⁷/₆₀ )q = p with a  number of possible answers. If q = 60 then p = 377 and x₁ = 120, x₂ = 90, x₃ = 80, x₄ = 75 and x₅ = 72

[2] The original manuscript is in the Bodleian Library; a reprint of G.R.Kaye's first translation is now available at Aditya Prakashan, Delhi

or lawyer or a software professional or self-employed, you will have a tough time getting a credit card in India. The credit card industry believes that it's just too risky to let you have one.

But this is not a story about bigoted credit card companies. This is about how a laizez faire approach by government regulators can lead to the law of the jungle in which ordinary citizens will suffer.

Lets first start with why credit card companies use these obviously medieval practices in approving credit card applications.

They believe they have heard of enough instances where a lawyer delays payments, the credit card company pursues him too energetically and the lawyer fends them off by filing a frivolous case that takes many years and much expense to resolve that it is more prudent to deny cards to lawyers.

They believe they have heard of enough cases of delinquent journalists who have writing negative articles about his 'harrowing experience' in an attempt to evade the bill collector.

They believe they have heard of enough delinquent software professionals who have taken assignments abroad to keep out of reach.

They believe they have heard of Sikhs or Muslims who live in enclaves like Bombay's Mohammed Ali Road who physically threaten bill collectors who go there to collect delinquent accounts.

They believe self employed people have no predictability to their income and thus find it difficult to meet their fixed monthly payment obligations.

The customer they love the best works in a salaried job in government or in a large, well-known private sector company.

The credit cart companies that use these practices are not, as you may imagine, unprofessional holes-in-the-wall operators. They are among the most prestigious professionally managed corporations in India and are otherwise exemplary in their dealings with their staff as well as their customers.

They are forced to do this kind of profiling because the credit card industry in India is forced to grope in the dark.

Though the small plastic card issued looks the same, a credit card is different from a debit card in that it does not remove money from the user’s account after every transaction. In the case of credit cards, the issuer lends money to the user; a credit card allows the consumer to ‘revolve’ their balance, at the cost of having interest charged

When they issue you a credit card they have no way of knowing what other credit cards you may already have and how much of a balance you may have run up against each. When you pay their monthly bill, for all they know, you could be drawing on another credit card to do this, merely rotating their credit. If you abandon a credit card after running up a large balance and apply to another credit card company, that company has no way of knowing that you owe dues to the first company.

In countries with more evolved financial systems, credit card companies are protected from such risks by a credit information sharing system. Information about users who are delinquent in their payments with one credit card company is made available to all other credit card companies. The consequence of delinquency are so severe (you may not get a card for some years) that by and large consumers meet their payment obligations.

India did set up such a common credit rating bureau under the Reserve Bank of India in, but foot dragging by the incumbent leaders of the credit card industry and lack of focus by the authorities has prevented this institution from performing its duties.

Add to this the perception among our policy makers that credit card usage is something for the well to do; the Finance Ministry issues threats from time to time promising investigation of all credit card high spenders to check if they have filed their income tax returns.

The consequence of all this is that India has just ten million active unique credit card users where this by any account should have been closer to fifty million.

Widespread credit card usage would support the nascent modern retail sector, stimulate ecommerce in the country, and reduce the use of cash in retail transactions. It is an essential part of modernizing the financial system.

The credit card industry performs far below it potential in India because the government regulators haven't done enough to herd all the players in the credit card industry into a common credit rating system.

Perfectly credit worthy Sikhs and Muslims, journalists, software professionals and self-employed businessmen are denied credit cards merely because they are 'profiled' as belong to a category. And bill collection is governed sometimes using the laws of the jungle.

The past excessive role of the government in economic matters has made us all look askance whenever government steps in but it is important that government does what it legitimately must do: function as a strict umpire such that all economic players play by the rules. This is the only way by which ordinary citizens get their due rights.

Too little government can be as dangerous as too much government.

END

In a move that may have marked the start of a new era, the legendary former Disney CEO Michael Eisner unveiled plans to produce 80 episodes of a serial called "Prom Queen." This by itself may not have caused a stir except that each episode will be just 90 seconds. "Prom Queen" is a serialized mystery and will begin on April 2^nd and roll out over 80 days. It has been billed as “a blend of love, gossip and betrayal". The series will run on the studio's own site Vuguru.com, on a show site promqueen.tv, on Youtube the popular video sharing site, on Veoh a file sharing site and arrangements are being made to distribute it on wireless and handheld video devices. Ads will run before and after episodes.  Eisner also announced this week the formation of a studio, Vuguru, that will acquire and develop short videos for the web.

User created One Minute videos have been around ever since the dramatic drop in price of video cameras. But what makes the Eisner move different is that he plans to have his 1-minute videos "professionally produced", using top Hollywood talent.

What this will do to the movie industry that has marching towards ever larger production budgets and ever lengthier durations and ever plusher multiplexes is too complicated to imagine. Are we going to now see the movie industry subjected to siege by the internet folks just as the newspaper and magazine industry has been?

Those with a longer view of history will not be surprised at these developments. Movies as we know it now, a projector projecting things on a screen and a group of people watching it, is the invention, in 1890's, of the French Lumiere brothers. Up until then, movie watching was a different experience:  Thomas Edison that indefatigable American invented his Kinetograph that shot movies but these movies had to view using another of his inventions, the Kinetoscope, through a peep hole one person at a time.

The Lumiere brothers had the brilliant idea of projecting films on a screen so that many people could view at the same time and, in addition the idea of charging for this experience. Their first screening of films to a paying public happened in 1895, at Paris’s Salon Indien du Grand Café, and their first film, hold your breath, was of 45 seconds duration. Titled, "Workers Leaving the Lumi're Factory."

The Lumiere brothers were enthusiastic promoters of this idea and soon undertook a promotional tour of several cities in the world, including Bombay, laying the foundation for Bollywood. The repertoire of films that they unveiled to a wonder struck world included the original "Workers Leaving the Lumiere Factory" and a clutch of sub 1-Minuters with self explanatory titles such as "The Trick Horse Riders" (46 seconds),  "Fishing for Goldfish” (42 seconds),  and "Baby's Meal" ( 41 seconds).  Watch these films (available free at the website www.institut-lumiere.org/francais/films/1seance/accueil.html) and you start wondering whether the current swing to the 1-Minute film is a mere circling back to film's origins.

What then made films bloat from their elegant 45 second origins to the current multi-hour blockbusters? Early American entrepreneurs quickly figured out that extending the early 45 seconders to longer durations immediately lengthened the queues waiting to watch them so much that these queues had to wind around whole Manhattan blocks. The movies industry had found not only its business model but also its phrase for a successful movie- the "blockbuster". An early blockbuster, the longish and extravagantly produced  filming of the stage version of Dante's Inferno, played for two weeks compared to the usual two days for shorter films, setting the stage for extravagant productions which reached their peak during the time Michael Eisner ruled Disney and Hollywood.

There are several insidious trends that are eroding this tried and tested block buster model that Hollywood has operated with ever since. Hollywood core faithful, late- teens-to-early-twenties Americans are flocking in ever larger numbers to the broadband internet. Armed with cheap video cameras, free editing tools and sites where they can publish their work for free, these young people are launching a revolution that has reached such tsunami-like scale.  A recent study shows that two-third of all content viewed by these young Americans is user generated, as opposed to professionally produced.

Even more insidiously, the viewing occasion is also changing. Wired magazine quotes a recent study that lists the many new venues for movie watching:  the 15 seconds that you are in a lift, the minutes you spend at the bus-stop waiting for your bus to arrive, the 30 minutes of the bus ride, even the 5 minutes you are in the loo. The 1 Minute Movie is clearly an invention that is overdue.

The size and duration that we take for granted for art forms: the short story, the novel, or the newspaper column, for instance are grounded in technological developments and human attempts to adjust to them.

Take, the last, the newspaper column. Websites of many famous newspapers in with world are by now free-to-use ' except their columnists. Because, it takes a user about just 5 minutes to read a column of 800-900 words, like this one, they may be signaling that this is about the bite size of time they can invest on a topic and consequently are ready to pay for.

The One Minute Film movement may just be one such signal to the movie establishment.

END

I was idly watched ships gliding into Bombay harbour from my balcony  on a recent Sunday evening when  my phone started to ring insistently.  I felt too tranquil to pick it up , waiting for it to go into the answering machine. did. After a few minutes, the phone  resumed ringing again and once more I let it go to the answering machine.

When it rang the third time,  I reluctantly went to pick up the phone ready to curse whoever was the person calling us as a wrong number.

"I need to speak to you urgently," said a vaguely familiar voice.

"What wrong, Vikram?", I asked. "What's so urgent on a Sunday evening that you should call me after so many years of not being in touch?"

" The bank is auctioning my flat this week, I need money to pay them off immediately and you are the only one I could think of."

Over the next few minutes, he recounted his story. I hadn't met Vikram since the early nineties. When I had last heard from him, he was running a small manufacturing unit in a small town outside Bombay, making plastic  parts for a nationally famous luggage manufacturer. As the luggage manufacturer prospered so did Vikram. Not bad for an engineering graduate from a Tier 3 college, he used to boast. Vikram's bar was always well stocked, he took his wife and daughter occasionally to Singapore and Phuket for shopping and holiday trips. Vikram worked long hours.

And then the economy got reformed. Instead of multiple suppliers of plastic raw material who Vikram could deftly play against each other and get cheap prices, his suppliers merged or were bought over by the dominant one who now dictated his  and demanded cash on deliveries. His main  customer who he had served so faithfully all these years, suddenly found a Chinese vendor whose landed prices  in Bombay were so low that Vikram's proft margin's became wafer thin. He was forced to extend more credit to his customers hoping to keep the business.  Strapped for cash, Vikram pledged his factory real estate and his residential flat to a nationalized bank for desperately needed funds for working capital. The spiral was slow but certain and finally the day dawned when the bank manager could no longer be "persuaded" to wait. His case was declared sick and sent to the Debt Recovery Tribunal who after a few hearings issued an order to recover the bank's dues by auctioning off his assets. The only catch was that, by now, the amount he owed the bank was far in excess of the value of the assets he had pledged.

It was mid morning, the next day when I went to visit Vikram to see all this for myself. I found him with a glass of vodka at the kitchen table in his tiny flat, watching his wife cutting vegetables for lunch. He was only in his early fifties but looked like he was in his seventies.

"Why aren't you at work?" I asked.

"The bank has out a padlock on my unit door, some months ago. They don't let me operate till I pay back the dues."

Later that morning I went around with him to the other units in that industrial estate. Many of them bore that seal of entrepreneurial death,  "This unit is pledged to [bank name]" that allows a bank a risk free recourse to the entrepreneur's assets in case anything goes wrong.

When we meet at conferences on entrepreneurship and venture capital, its not units and entrepreneurs like Vikram who we have in mind. We think of software or biotech companies started by bright young men with glittering degrees from the IITs and IIMs.  Yet, entrepreneurs like Vikram, running low tech businesses, employing a dozen or so workers constitute the vast  majority of Indian businesses.

What financial institutions and laws govern their fate?

While it is hard to argue that such units should be "protected" either through differential excise duties, or indirect or direct tax breaks, we need  to  study  how   other countries deal with  issues of this kind..

In the United States, where we normally assume the free market to behave in the most heartless manner, several states statutorily bar lien on the primary residence of entrepreneurs.

Fortunately, this story may have a happy ending . In the months  that it has taken  the courts to finish its hearings and get down to auction, property prices in Vikram's area  have risen so sharply that what was once a factory asset worth well below the amount due to the bank, now almost covered the dues.  Vikram, may , with luck, and if the property prices keep rising, may pay back his dues and still have his apartment , at least for himself.

Now, a year or so from that first phone call I am back agin on my apartment balcony watching ships glide into Bombay harbour, trying to figure out what the moral of these events in Vikram's life.

Is it that successful economies, like the US one, view business failure as a natural consequence of enterprise and set up institutional processes which encourage people to take risks by protecting them from the consequences of policy change? Is it that prejudice against businessmen, unless they are large or successful or graduate from elite institutions run so deep in our veins, as Indians, that these prejudices subtly are reflected in our institutional processes? Or is that so long as the economy grows at a rapid pace, things will take care of itself as it may in Vikram's case?
 

First Published in the Business Standard

In a world awash with capital everyone is out hunting for the next Big Business Idea.

The variety of available capital is mind boggling: venture capitalists ready to throw their money at unproven concepts, private equity players ready to inject large dollops to grow businesses, buyout funds ready to recast ageing businesses, funds devoted to make private investments in publicly listed companies, mutual funds to support public offerings and hedge funds ready to gamble on any idea of any scale.

All of this capital is chasing the next Big Business Idea.  Where do you go looking for it?

 Where do these big ideas spring from? How do you recognize it when you stumble on it?  

Public imagination and the work of business journalists make big business ideas seem synonymous with big business personalities. In this recounting, Bill Gates is the titan who thought up the software packages that drive personal computing; Jamshed Tata is the one who conjured up a steel plant in the wilderness of Bihar, India's software moguls dreamt up their vast outsourcing empires.

Yet, this recounting of business history may just be another version of what modern historians snigger at as the Great Man Theory of history, the attempt to explain history through    individuals with great   personal charisma and overpowering intellects. Thus the Great Man theory would examine the Second World War by focusing on the big personalities of the conflict: Churchill, Hitler, Mussolini, Franklin Delano Roosevelt and Stalin, and view the events of that war as arising from the actions of these Great Men.

 An alternative view is that great new businesses are born when technological discontinuities occur. In this view, entrepreneurs, those Great Men, are mere midwives for the process. For example, the advent of the personal computer would have created the need for software and if not Gates, someone else would have fulfilled that need.  Similarly, an expanding Indian railway system in the early 1900's created such demand for steel rails that if it was not the Tata's someone else would have fulfilled it. And the move in computing from the mainframe to the PC created such a need for armies of programmers to do the translation of software from the old mode to the new that large IT service companies in some part of the low wage English speaking world would have sprung up anyway.

 The Russian economist Kondratieff, writing in the 1920's, took this kind of thinking to another level. He saw economies as moving in 50-60 year cycles with periods of high growth followed by periods of slower growth with each cycle driven by a bunch of technical innovations.

 Thus, wave theorists see five "Kondratieff waves" as having taken place in the modern era. The Industrial Revolution in the late 18^th century was the first , followed by  the Age of Steam and Railways (1830's), the Age of Steel, Electricity and Heavy Engineering (1870's ),  the Age of Oil, the Automobile and Mass Production (1900's) and finally, the Age of Information and Telecommunications (1970's). According to this theory, we are currently at the turning-point of the fifth Kondratieff wave.

The story of the Indian pharmaceutical industry spells out the processes by which the forces of a long wave are harnessed to achieve industrial leadership through policy interventions by government. In the 1950's, when synthetic drugs were all the rage, a German pharmaceutical product, Thalidomide, caused 10,000 children to be born with birth defects. As a strong reaction to this, the US authorities prescribed time consuming and expensive clinical trials as a consumer protection measure. The pharmaceutical industry reacted to this by demanding and receiving a stringent product patent system that would allow them sufficient time to recover their investments in proving the safety of drugs. In India, a group of local pharmaceutical companies lobbied the Indian government to not subscribe to this product patent system- in their view patents should apply only to the process by which a drug is made and not to the product itself. In the two decades of this regime, several, large, Indian pharmaceutical companies got created by reverse engineering western pharmaceutical products and selling them in India.

 If entrepreneurs are mere midwives, what make some better midwives than others and what make some business ideas more successful than others?

 The auto industry provides some insights into this. The petrol engine-based motor car, a product of the Fourth Kondratieff wave saw, by 1910, several hundred car manufacturers all catering to the wealthy. Using the mass production technique, Henry Ford decreased the price of his cars steadily as they improved in quality. The Ford car in 1904 had a two-cylinder motor, and sold for $1,200. By 1924 it   had a more powerful four-cylinder motor, and included a top and windshield yet it sold for only $290. Not surprisingly, more than half of the cars sold in the United States in that period were Ford. The motor car was no longer a plaything of the wealthy.

This might then be the clue to look for. Hunt down the idea that makes lives of ordinary people better and you will find the Next Big Business Idea.

END

First published in The Business Standard

The slightly built young man sitting across the table from me did not look like the typical entrepreneur that one meets in   India. He wore thick rimmed spectacles, had close cropped hair and a Ph.D.

"So, what do you think of my business idea?" he asked.

I hesitated to reply. In one respect at least his business idea was possibly a great one- it was something I had never imagined as a possible business. After all, when the Wright brothers managed to stay aloft in their contraption for ninety seconds who would have imagined that it was the start of the gigantic airline industry.

The young man had emailed me out of the blue wanting to bounce off his new business idea.

What intrigued me was that this was the third such request for "advice" that I had received this week. And last week there had been another three.

 All were based on a genuine technological innovation. All the ideas served to meet a genuine need or solve a pain point in the lives of millions of people. None of these prospective entrepreneurs were from the traditional business communities. Practically all their fathers were professionals, not businessmen. All were products of elite institutions like the IITs, National Institutes of Technology, Indian Institute of Science or the IIMs.

Yet they all have a common refrain- they are finding it difficult to get venture capitalists interested in their ideas.

In a sense, this is understandable. A venture capitalist fund of $150 -200 million may have a genuine problem in financing a start-up this early and this small. The fund's overhead cost limits are such that they can afford at best two or three experienced people to find and make investments and work with entrepreneurs. This naturally limits the number of deals they can do to ten or fifteen a year. Thus, they tend to concentrate on deals of larger sizes, say, and a minimum of Rs 10 crores as the starting investment. But what the new breed of talented, young entrepreneurs need is just a fraction of that amount. On the other hand they need dollops of time from their investors to guide them through the crucial initial steps of establishing a business.

The business ideas that are emerging this year are very different from the ones of the Bad Old Eighties.

The ideas of that time mostly involved cornering manufacturing or import license for something that was in short supply. Unfortunately, in this regime there was absolutely no incentive to invest time in technical innovation to, for example, reduce manufacturing costs, because you could get far higher results by influencing the Customs or Excise officer to classify your product under a category that attracted a lower rate of duty.

Highly qualified young graduates of our top institutions had no stomach or perhaps no family connections to play these games, which is why so many of them emigrated to the United States during that time.

Today's new crop of young technology entrepreneurs sees a ray of hope. Domestic markets getting to be large enough to support innovation, the technical innovation needed is something the feel they can master. But they are getting stuck at the first step- finding the capital for their start-up ventures.

In the United States, that haven of innovation and entrepreneurship, this financing need is filled by a group called "angel investors". These angel investors tend to be recently retired entrepreneurs and company executives. They  have the   patience and   skills  to complement what the young entrepreneur lacks- tips on where to find a good lawyer, when it is worth applying for a patent and when its not, what to look for when you  hire people, where to find good talent, tips on how to and how much to delegate. In short, all the tacit knowledge that only a life time of operating experience in excellently managed companies can give you.

The capital such angel investors need to put in is in the Rupees one to two million range. This will help the young entrepreneur take the first step, set up shop and make a working prototype of his new product and find the first few customers. This capital will help him focus on the crucial product development stage and not get distracted by having to earn revenue from unrelated activities merely to meet payroll.

In the United States, in 2005, according to the University of New Hampshire's Center for Venture Research, the total amount invested by angels exceed the amount invested by venture capital funds.

There are already a number of such angel investors operating in India but the existing numbers are too little for the scale of innovation needed or possible in India today. The Centre for Venture Research estimates that there are about 200,000 angel investors in the United States. By this count, India needs at least 10,000 angel investors.

What will bring India's seasoned and recently retired company executives into the angel role?  What policy formulations will enable this?

First published in The Business Standard

I looked around at the young, fashionably dressed women and men in at the hip lounge bar at the W Hotel in Manhattan where I was waiting for Ellen. The men were dressed in dark suits with light blue shirts, the signature dress of the New York financial community. The women wore pant suits signaling their professional status.

Light powdery snow covered the streets outside and there was a slight chill in the air but that did not seem to deter the holiday season shoppers thronging the streets gawking at the lavish displays in store windows.

I had first met Ellen a few years ago when we were looking to rent an apartment in Manhattan. We struck up a friendship and after we moved in, she was helpful in many little ways that eased our stay.

It was Ellen who had introduced us to this bar at the "W" Hotel. She had a great knack for finding chic places that were also great value for money.  Ellen had mastered the art of stretching the salary she earned from a middle level information technology job at a Park Avenue publishing company.

           "How's life been?" I asked Ellen as she settled in with her "Cosmo", the vodka plus cranberry juice drink that everyone in Manhattan was drinking that season.

          "I got outsourced", she said quietly, looking into her drink, her blue eyes starting to mist over.

          "How could that happen!" I exclaimed. "You've been in your company for so long, you know your job well and your boss is a good friend of yours. I remember meeting him and his wife at your place."

           "All that did not help much. Our publishing company has not been doing too well. Libraries are cutting back their book purchases. Anyway, the upshot of it all is that six months ago, they decided to outsource the whole information technology department to an Indian company. My boss is the only person they have kept back."

"I am sorry to hear that," I said. It was my turn to stare into my drink and contemplate the irony of my feelings of sorrow at what had befallen Ellen.

Like other Indians, I have marveled at the turn of events by which India had finally found its giant niche in world commerce: white collar job outsourcing. It started first in information technology and in ever widening circles, is spreading to every conceivable white collar activity. This  outpouring of outsourced work to India  is setting off a chain reaction : providing office space to outsourcing companies is  triggering a  construction boom; the construction boom is driving a boom in the  steel, and  cement industries. Then, as the young men and women who work in these outsourcing units take out loans and bought apartments and cars and fridges and microwave ovens a boom in the consumer banking industry is being triggered off.

          Did economic development have to be such a zero sum game where India's moment of triumph has to be a moment of sorrow for western white collar employees like Ellen?

          " Don't worry," said Ellen as she saw the perplexed look on my face. "I  have unemployment payments to tide me over. All I need to do is skimp on things like having expensive Cosmos at places like this"

          "Don't you feel bitter? Don't you feel let-down by your employer after all these years of faithful service? I've seen you work late nights with no overtime. Isn't there somebody you can protest to?"

          Ellen shrugged her shoulders. " This thing happens to everyone here from time to time. By the time my unemployment payments run out, I'll get another job. Anyway, the Indian girl who took over from me from the outsourcing company is really good. She has a computer science degree, she is in her twenties and knows all the latest technologies. You know I don't have a computer science degree. I got this job in the boom ten years ago when they were desperate for anyone ready to work in information technology"

          Ellen was no economist but I could see that inside her was encoded the mantra that had driven western societies ahead of countries like India  from  the time of the Industrial Revolution- the understanding that technological change would cause pain the short run but in the longer run would bring benefits to society as a whole. 

          Several months later I caught up again with Ellen. Her unemployment pay had run out and  she had cut back almost completely from hip places like the one we had met at the last time. She was working at several part-time jobs.

          How is it that Western society is willing to pay the short-term price for technological progress and we, in India find it so tough?

                     Joel Mokyr, the economic historian, has spent a good part of his life looking at what makes some cultures accept technological innovation and what makes others averse to it.  He says in his 1990 book, The Lever of Riches,  that "the stronger the aversion to the disruption of the existing economic order, the less likely it is that an economy would provide a climate favourable to technological progress."

END

I am glad to hear about Shabana Azmi getting the International Gandhi Peace Prize for her social activism. Those of us who live in the Colaba area of Bombay are specially thankful for her role in the 1980’s for supporting the local fisherfolk who were being threatened with eviction from the seafront at Cuffe Parade. As you can see in the picture which I captured last week, the activities of these fisherfolk are the only spot of genuine colour in a landscape filled with dreary skyscrapers.

At that time, government officials made the case that these fisherfolk were illegally squatting on public land;Shabana and other activists said that you cannot deprive fisherfolk of using an area that they have using for centuries in the name of property rights. The activists, lead by Shabana, physically prevented the police from eviciting the fisherfolk. I was in the fringes of the crowd that day watching all this happen not sure what the right stand on this ought to be.

Time has proven Shabana and other activists right- not only have the fisherfolk’s presence made this corner of Colaba picturesque, it turns out ,the very bureaucrats who tried to evict them have gone and allotted themelves public land at very nominal prices to build apartments for themselves! These apartments are to the right and just out of the picture. The buildings in the far corner are offices at Nariman Point, the main office area of downtown Bombay, so you can imagine what these flats are worth now.

Shabana richly deserves the award.