venturing.in

  • Reinventing The Wheel For India

    AFP/Getty Images
    India currently has just one automotive company, Tata Motors, in the global top 20, while China has three in the top 20.

    The transportation sector in India is witnessing rapid growth as India urbanizes and the economy continues to expand. Car sales for July recorded a jump of 38% from a year earlier, rising to an all-time high. Delhi, Bangalore, Mumbai and Kolkata are all building up mass-transit systems. The national capital has just opened a swanky new airport terminal and the civil aviation industry has never been more competitive.

    Consumers today have lots of choices in how they choose to get around. This is a far cry from the earlier times when government carriers dominated the skies and entry into the automotive industry was heavily regulated and just a handful of players allowed to manufacture cars. With the exception of railways, which continue to be a government monopoly, every sector of transportation is witnessing a vibrancy never seen before in India.

    The upward shift in the standard and quality of transportation in India is one of the most visible and tangible benefits bestowed by economic growth. The problem – and investment opportunity – is that we have only scratched the surface.

    India currently has just one automotive company, Tata Motors, in the global top 20, while China has three in the top 20 and ten in the top 30. Interestingly, many of China’s large automotive firms are home-grown, while international auto companies like Suzuki, Honda and Hyundai dominate the Indian market.

    Vast regions of the country are yet to be connected by roads and airports. Conventional approaches and legacy technology cannot meet all the new demand. The 300 millionth car to be sold in India may not even run on petrol or diesel. There is a need for innovation to ensure that transportation capacity scales in step with mushrooming demand in every sector, be it aviation, passenger cars, commercial vehicles or mass transit.

    Relying only on technologies and ideas from the West is not feasible, since there has never been a transportation need of this scale in the developed economies. Indian policy-makers and entrepreneurs must think for themselves.

    Investing in auto startups and building companies in the transportation sector is certainly not for the fainthearted. Building an auto company from scratch is extremely difficult. Most investors would balk at the idea of funding a car company, given the capital investment required to manufacture cars. But it is all but impossible for an entrepreneur to start up without financing.

    Tesla Motors, the electric car company funded by leading Silicon Valley VC firms and built by PayPal co-founder Elon Musk went public recently in the first IPO by a US-based automotive company since Ford Motor Co. in 1956. Mr. Musk staked his considerable personal wealth behind the venture, using his own money when institutional funding was difficult to obtain. Without Musk’s calculated gamble, Tesla wouldn’t have survived.

    There are other ways of entering the industry. I met Dilip Chhabria, the founder of automotive design firm DC Design, at an event organized by IIM Calcutta last week and he said the time was right for investors to form a consortium to acquire the rights to rebuild and redesign the Ambassador, an iconic car produced by Hindustan Motors, the one-time market leader that is now struggling financially.

    One should remember that while the precedents which are the basis of the negativity about automotive startups are from abroad, the Indian context and market represent a new dynamic – and that can make all the difference. The structural factors driving the growth of India’s automotive market are not going away anytime soon. Rather than facing a headwind, there will be a tailwind assisting those venturing into the Indian automotive industry.

    While this doesn’t imply that any automotive startup will do well, high capital requirements should not be a deterrent to investing in the opportunity presented by the Indian auto sector at this stage of India’s growth cycle.

    Originally Published: http://navam.in/TcuDmV

  • Billionaires Should Fund Startup Countries

    Every Independence Day, one’s thoughts inevitably veer around to the abject poverty and destitution that consumes most of India. After more than 60 years of Independence, why do we continue to have widespread poverty? Watching “Peepli Live” — a fantastic satire on the state of politics, the mainstream media and the urban-rural divide in India — crystallized those thoughts even more, giving a vivid visual representation to what most urban citizens of India only see in passing on news channels.

    As the film shows, much of the poverty is caused by the poor incentives and choices enforced by India’s socialist economic system. Year after year, decade after decade, the government creates more and more schemes, and they all fail to uplift the poor. In fact, the schemes keep poor people poor.

    Clearly, there is need for a new approach. We all know what that approach is, but the execution is lacking because there is no political will to follow up on it — India has seen no substantial reforms since 2004. There has never been a more pressing need for economic liberalization.

    Recently, Bill Gates and Warren Buffett have been personally reaching out to the world’s wealthiest individuals, requesting and cajoling them to join the Giving Pledge. The Giving Pledge, initiated by the two, has been attracting a lot of media attention thanks to its high-profile backers. The Pledge requires billionaires to publicly commit to “give away” half of their wealth during their lifetimes.

    Both billionaires plan to visit Asian nations over the next year to convince billionaires in the region to take the Pledge. Gates and Buffett are redefining the standard for philanthropy by their example, and they have been compared to Andrew Carnegie and John D Rockefeller for the sheer scale of their charity.

    But there is a small difference — Carnegie and Rockefeller built institutions of lasting significance, like the University of Chicago, Carnegie Mellon University, Rockefeller University, the Council on Foreign Relations and the Carnegie Endowment for International Peace. Andrew Carnegie is still remembered for building countless libraries. Rockefeller built institutions that continue to push the boundaries of research in medicine, natural sciences and social sciences, and define the public discourse in matters of government policy. The impact of their philanthropy has been outsize, transformational and incalculable.

    In India, the Tatas have played a seminal role in giving to the nation institutions such as the Indian Institute of Science, Tata Institute of Social Sciences, Bhabha Atomic Research Centre, Tata Memorial Hospital, Tata Institute of Fundamental Research and National Centre for Performing Arts. For over 100 years, Tata scholarships have helped meritorious students fulfil their academic potential. Without the Tatas, India wouldn’t be the India we know.

    The best way to support charity in India is to always buy Tata products, for the primary holding company of the group has been majority-owned for several decades by the philanthropic Tata trusts.

    While Gates and Buffett have noble intentions, their strategy can be made more effective. In many cases, the Gates Foundation and other foundations will be allocating billions of dollars to solve political problems with charity. Charity cannot fix what are essentially failures of governance. Billions of dollars of aid cannot get rid of AIDS, malaria and other infectious diseases in African countries, just as government support for farmers has failed to uplift them in our country.

    What is the solution — how can a rich person be charitable, support market economics and yet help the poorest of the poor?

    Stanford economist Paul Romer has been the most vocal proponent of an idea known as charter cities, also called startup countries by some. In a nutshell, a charter city is governed by its own rules, laws, regulations and institutions — its own “charter”, rather than those of the parent nation. A charter city would be much like a new business development unit within a large company. Leased by China to the United Kingdom for 99 years, Hong Kong may be taken as an example of the first-ever startup country. While China suffered under Chairman Mao, Hong Kong prospered because of the different rules adopted by its government.

    We have made massive strides in wealth creation, and now we are at a stage where individuals are wealthy enough to lease land from nations and build them with new rules and institutions as a strategy for economic development. Creating charter cities and startup nations maybe be among the most effective ways to improve the standard of living of vast swaths of humanity who are trapped in nations governed by inept and corrupt leaders.

    The model allows for a way to circumvent politics and regime change via war while promising economic development — and it may be the 21st Century equivalent of the kind of philanthropy that Carnegie, Rockefeller and Tata have pursued.

    Originally Published: http://navam.in/1tHjOnQ

  • Build Your Dreams

    That’s not the cheesy title of this blog’s first post — it’s a leading electric car company in China that is blazing a trail in the automotive industry.

    Founded in 1995, BYD Company started as a manufacturer of batteries, competing against established Japanese firms to become the world’s leading manufacturer of rechargeable batteries by 2000.

    It entered the automobile industry via an acquisition in 2002, with zero experience in the car business. In 2008, Warren Buffett invested $230 million for a 10% stake in the company and BYD launched the world’s first plug-in hybrid electric vehicle, successfully integrating forward from just manufacturing batteries to producing battery-powered cars.

     BYD has been consistently rated among the most innovative companies in the world, beating entrenched automobile industry heavyweights such as Ford and Volkswagen.

     BYD’s story doesn’t just represent the rise of a new innovator — it is symbolic of a surge in technology-driven, product companies from Asia. BYD has broken the stereotype of the Chinese mass manufacturer, one capable only of churning out commoditized products at low cost.

    From focusing on only outsourcing and mass manufacturing of commodity products, nations like India and China will now produce more innovation-driven companies driven by the three-way confluence of the availability of high-quality technical talent, a large domestic market and broader shift in the economic center of gravity from West to East. This is a strong, secular and structural trend whose momentum will be a key driver of the next wave of economic growth.

    There has never been a better time to be an entrepreneur — and as BYD has shown, build one’s dream.

    Originally Published: http://navam.in/1p66B7T

  • Riding The Indian Education Boom

    India’s education sector is seeing hectic entrepreneurial activity and private equity investors are deploying significant capital in this sunrise sector. Funds focusing exclusively on education have emerged. Recently, education company Kaplan announced the formation of Kaplan Ventures, which will invest in the education sector in India and other countries.

    There are a few structural drivers to the boom in India’s education sector.

    First and unusually, the Indian government has made a commitment to restructuring the policy framework, including the setting up of foreign universities in India. Human Resource Development Minister Kapil Sibal has taken a few steps forward, and some backward, but for now even the mere promise of reform and more openness in the sector is sufficient to generate hope and excitement that spurs investment and business plans.

    But some caution would be apt. There is a strong case for regulating the sector and putting in place standards and guidelines for what it takes for an educational institution to be recognized as a university or school. Without sound regulatory norms in the early stages, the education boom may fizzle out to the detriment of investors, entrepreneurs and India’s economy. Regulation, however, should be left to individual school examination boards and professional accreditation bodies as far as possible, distributing rather than concentrating authority.

    For instance, there has been a profusion of institutions offering the International Baccalaureate program for high school students. The IB is governed by the IB Organization based in Switzerland, which sets its own standards for what it takes to be an IB school. The government should empower Indian boards to set standards in the same way, for this would allow for competition between boards. Schools, private and government-aided, should be free to choose the board they want to offer, to design the admissions mechanism and to charge the fees they wish.

    Second, India is entering a phase of demographic change that has far-reaching consequences for society and the economy. According to research from Deutsche Bank, India will be adding almost a million people to its labor force every single month for the next 20 years till 2030. That’s a staggering number of people, equivalent to the current populations of U.K., Germany, Spain and France combined. The only comparable demographic shift from recent history is the post-World War II baby boom in the United States. Skill development, training and education will be among the first areas where all those consumers will want to put their money.

    These trends will only accelerate, making the education sector very attractive for both entrepreneurs and investors. Moreover, without private capital and the participation of entrepreneurs, India simply cannot train and educate a workforce of this size.

    While projects such as building full-fledged schools and universities would be beyond the reach of most first-time entrepreneurs and are typically not “fundable” from a venture capital perspective, ancillaries like infrastructure, technology and services are attracting investments.

    In 2009, TutorVista, Career Point and FIITJEE were some of the companies offering training for competitive university admission examinations that saw substantial investor interest. The most successful companies in the sector so far have been those that are providing information technology and software solutions to brick-and-mortar institutions. Companies like Educomp Solutions and EdServe Softsystems have combined the high margins of the software business with the scale and opportunity in the education space.

    Education is a very large canvas. The challenge is to identify the areas within it that will be the most profitable. As the sector evolves and grows, opportunities which cannot be anticipated today will soon emerge.

    Originally Published: WSJ

  • The Jugaad Myth

    In 2001, Fevicol ran an advertising campaign showing a truck overloaded with people making its way across a rough and barren landscape. Even though the terrain is rocky and the truck overflowing, none of the passengers fall off, bonded together, viewers are to think, with the same strength and reliability as India’s leading adhesive brand.

    The campaign was a hit, winning the prestigious Cannes Lion for the advertising firm which conceptualised it. It deserves full marks for creativity and for capturing poignantly how Indians get by and get on with life despite seemingly insurmountable hardships, a classic example of art imitating life.

    This phenomenon, where people in India seem to always find a way to muddle along somehow or the other, has slowly entered management-speak as jugaad, a curiously Indian way of getting things done. Venture capitalists and management gurus have praised this approach of doing more with less, but jugaad is more an outcome of limited access to capital, resources and infrastructure, than it is innovation.

    Peter Drucker, doyen of management studies, defined innovation as “the specific instrument of entrepreneurship that endows resources with a new capacity to create wealth.” Take the case of the humble earthen pot, which has been used since time immemorial to keep drinking water cool in some of the hottest regions of the Indian hinterland. Is the earthen pot an innovation in the modern sense, or does it reflect the brazen poverty and under-developed economies of its end-users?

    The pot is certainly an innovation insofar as it allows water to be cooled even in very high temperatures, but it is also used by those who cannot afford or access modern technology such as refrigerators. Higher-income homes do not rely on earthen pots.

    Innovating for bottom of the pyramid should not degenerate into a paternalistic condescension of creating low-quality products that have poor usability. Many innovations which claim to be for the bottom of the pyramid would want their purveyors to be stuck at the bottom, for if they managed to increase their income levels, they’d choose more technologically-advanced solutions which actually boost productivity and create wealth.

    An inexpensive refrigerator that delivers effective cooling at a low operating cost would be more of an innovation, allowing more people to use refrigeration the way the Nano automobile from Tata Motors has made cars accessible to a broader section of society. Tata Motors’ Nano plant at Sanand, Gujarat uses automated manufacturing, cutting-edge supply-chain management and robotics to produce the world’s cheapest four-wheeler.

    Tata has re-invented several aspects of automobile engineering when designing the Nano, and the company has broken the stereotype of India being only a competent outsourcer. Even though the Nano is a product targeted at the aspirational bottom of the pyramid, it is built to meet global standards of safety and performance at a world-class factory.

    A nation’s innovation ability is tied closely to its research capacity in science and engineering, which is a function of the higher-education system. The government has a role to play in investing in fundamental science research areas where it would take very long for private capital to get a return on investment.

    According to India’s Department of Science and Technology, total investment in research and development has languished between 0.85-0.90 percent of GDP since 2000. In contrast, the US invests around 2.6 percent of GDP and China, 1.4 percent, about twice as much as it did in 1995.

    Moreover, Indian private sector investment in R&D has grown substantially since 1998 to contribute over 25 percent of the pie, while government investment has declined. This means that while tax receipts have increased in the period alongside the boom in the economy, the government’s research funding has declined in relative terms and the gap has been bridged by the private sector.

    The substantial growth of the economy has not seen a commensurate increase in the establishment of more science and engineering universities and government R&D investment. Instead, we have seen a rationing of existing supply, with increased reservation of seats at the IITs and other centrally-funded universities—policies that can compromise quality. India should be focusing on increasing capacity to such an extent that everyone has opportunity and nobody is left behind.

    However, increasing capacity does not mean building a campus and naming it Indian Institute of Technology. Institutions are not just mere buildings and infrastructure, they are nurtured by people, and it takes decades of relentless focus on excellence for an institution to achieve a reputation. Political opportunism and promises of an IIT for every state are destroying a brand built over five decades. Dr C N R Rao, chairman of the Prime Minister’s Science Advisory Council, has severely criticised the government’s policy. In a nation the size of India, should there be just one world-class university brand?

    Earthen pots and other types of jugaad may make good documentary film subjects, but we should remember that these are typically low productivity solutions with a below-par user experience. They should not be romanticised. India cannot become a world-beating economic force by under-investing in fundamental scientific research and celebrating the stop-gap survival mechanisms as path-breaking innovation. Such celebration and characterisation should be left to advertising agencies and other creative types looking for a story to tell. The state should commit itself to turning India into a magnet for top scientific talent from around the world, increasing investment in fundamental science and engineering and creating infrastructure which will give Indian scientists the choice of working in their home country instead of moving to more hospitable climes abroad.

    When such an environment is created, storytellers will find inspiration from life to imagine and create more on the lines of the recent Hollywood blockbuster series on high-technology superhero Iron Man, showcasing cutting-edge technology that can inspire real innovators.

    Originally Published: http://navam.in/2qdx2Pw

  • Venture Investors In India Must Rethink Bets

    According to Venture Capital deal data released late April, investment in India doubled to $259 million compared to the first quarter of 2009. While more than $210 million was invested in business services and financial servicescompanies, very few companies from cleantech or health care made the cut.

    In contrast, U.S. cleantech venture investment for the first quarter more than doubled compared to last year, proving to be more resilient that other investment sectors, with 72 deals attracting over $730 million in capital.

    The other revealing aspect of the India data was the median deal size, which more than tripled to $10.4 million. This is rather curious, that Indian services companies are absorbing as much capital as U.S. cleantech companies even though dollar for dollar, salaries, overheads and other startup costs in India are much lower.

    The data also suggests that the surge in venture funding was for growth-stage investments (investments targeted at companies that already have products and substantial revenue) in services companies, while there is ample room for allocating capital to early-stage companies building products.

    There are three reasons why investing in early-stage startups would be optimal for maximizing long-term returns.

    First, in many cases, promising companies are not able to reach the stage where they can justifiably raise the minimum level of a few million dollars that most VC firms in India like to deploy in each investment. More early-stage funding will increase that deal pipeline for growth equity investors, expanding opportunities for the entire ecosystem.

    Second, as Sanjay has pointed out, VCs have been playing it a little safe, shying away from home-run bets and settling for lower but more predictable returns. And as Internet entrepreneur Rajesh Jain wrote in a blog post recently, VCs in India act like private equity investors, and private equity investors act like banks – and as fellow panelist Sanjiv Bikhchandani has noted, India’s nationalized banks are not known to lend easily to new ventures and to small and medium enterprises. Venture capitalists must not abdicate their role of providing risk capital to ideas and sectors which more conventional investors would not touch.

    And finally, funding directed at technology-driven, product companies offers the prospect of outsized returns for investors, though this demands patience. A casual survey of the best exits for venture investors suggests that some of the biggest hits have been product companies with a strong technology differentiation – Google and Genentech come to mind. In a developing country like India where tens of thousands of people enter the workforce month after month, new ventures and small businesses have an important role to play in creating jobs.

    While the increased venture investments in India is encouraging, it also highlights an investment deficiency in sectors like cleantech and life sciences. Venture investors should introspect on where they are placing their bets. Adjusting strategies towards early-stage funding for product companies is in everyone’s interest and would grow the entrepreneurial ecosystem manifold.

     

    Originally Published: WSJ

  • What Sachin Pilot Can Learn From Margaret Thatcher

    I think we have gone through a period when too many children and people have been given to understand, “I have a problem, it is the Government’s job to cope with it!” or “I have a problem, I will go and get a grant to cope with it!” “I am homeless, the Government must house me!” and so they are casting their problems on society and who is society? There is no such thing!

    File Photo of U.S. President Jimmy Carter and British Prime Minister Margaret Thatcher (AP Photo)

    These words were spoken by British Prime Minister Margaret Thatcher in 1987. My fellow panelist Harshal Shah has called for government support to realize India’s economic potential.

    I’d like to make the case that the apt thing for the government to do is to get out of the way. India’s entrepreneurial ecosystem can grow best by evolution, not the design efforts of bureaucrats and ministers.

    The role of government is widely misunderstood. Government exists for providing strong national defense and internal security, investing in essential physical infrastructure, setting policies to allow markets to flourish and designing effective regulatory mechanisms to ensure that markets remain free, fair and competitive.

    This does not translate to the government dedicating itself to ensuring jobs for everyone or world-class education for all. There is a compelling case for providing a social safety net for the lowest income-groups, but this should be executed in ways that empower those groups to increase their income and economic ability over time, instead of making them dependent on government handouts.

    There is rampant and deep-set confusion about the cause, effect and remedy for India’s economic problems, most of which are self-inflicted. Driven by political calculations, India’s government has landed it in a morass where a nation which claims to be a global superpower in the making has the closest rendition on Earth to the Biblical vision of hell.

    Economist Niranjan Rajadhyaksha crunched the numbers recently about the meaning of that staggering figure, calculating that over six decades, government spending has outpaced GDP growth by 3% annually on average. While the Indian economy had grown 578 times since 1950, the government’s expenditure has grown by 3020 times.

    It is no coincidence that the sectors which have the most entrepreneurial activity and dynamism, mobile value-added services and Internet, also have the least government interference. In other sectors, entrepreneurs run into India’s infamous red tape sooner or later, even today. Valuable time and resources are wasted in managing the environment. Moreover, sectors such as agriculture and mining which are heavily regulated are also highly inefficient and unproductive.

    The level of mergers and acquisitions activity in India is disproportionately low relative to the size of the economy. Only recently have founders and promoters sold their companies to larger corporations or investor groups. Low M&A is also a reason we have dynastic succession in businesses – when owners can’t exit the business, they have no choice but to bequeath it to their children, forcing them to manage those companies even if they don’t want to and breeding massive industrial inefficiencies due to fragmentation.

    Those who have earned money lawfully through business have every right to bequeath their property to whosoever they deem fit – that is the very essence of the concept of private property. Some of them, such as the Tatas, have voluntarily made sustained contributions over the last century to nation building perhaps of even greater impact than Rockefeller or Gates. Nearly 70% of Tata Sons Limited, the main holding company of Tata Group, is owned by charitable trusts which have helped established institutions such as the Tata Memorial Hospital, Indian Institute of Science, National Center for Performing Arts and several scholarship schemes which have continued to help Indians study abroad.

    It is true that the government investment has successfully facilitated a dynamic entrepreneurial culture in countries like Israel and Singapore, but India has a vast population among other factors, making it almost impossible to emulate those models.

    Recently, Minister of State for Communications Sachin Pilot said that the government was focused on maximizing revenue via the 3G auction, claiming that the spectrum belonged to the people of India. This is typical of the government’s socialist mindset, and that it comes from a Wharton-educated Minister who is often projected as a visionary young leader is certainly alarming.

    The spectrum is best used to provide the lowest-cost 3G service to Indians, not to maximize the government’s revenue as a custodian of the spectrum which would only result in investors in the sector re-pricing their product offerings higher to make up for the payout to the government. Mr. Pilot’s ministry is effectively taking money from the people of India and helping price a potentially transformational technology out of the reach of many Indians. His government intends to take that money and redistribute it through questionable social sector programs.

    Mr. Pilot needs to be reminded that there is no such thing as society – there are only individuals, as Ms. Thatcher had eloquently said:

    There is a living tapestry of men and women, and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves. And each of us, by our own efforts, is prepared to turn round and help those who are less fortunate.

    The day the majority of Indians realize the wisdom of this philosophy, is when India will break the shackles and emerge as an economic power to reckon with.

    Originally Published: http://navam.in/S7HWnm

  • The Genesis Of Jobs

    Speculating whether India can spawn innovative companies like Apple and Google is a favourite parlor game among venture capitalists and entrepreneurs.

    It’s clear that there is staggering talent and creativity in the country, and it seems more a question of when and not if, provided the proper environment is created. Young entrepreneurs and engineers are bubbling with enthusiasm and energy and spending time with them fills one with optimism about the country’s future.On the other hand, a casual scanning of the daily news can be rather depressing. Riots, murders, suicides, mass protests, corruption, political scandals have become so commonplace that they are no longer a surprise. Human tragedies have been turned into mere statistics. While India is touted as a growth engine for the world economy, it also has the largest number of children suffering from malnutrition and among the highest incidences of crimes against women.

    Businesspeople and entrepreneurs are said to make up “India” while farmers, laborers and other low-income groups form the other India, known as Bharat.

    The government tries to put the interests of Bharat before India, calling for inclusive growth and championing job creation programs.

    How can India and Bharat be bridged?

    In a few days, Cupertino, California-based Apple’s hotly-anticipated iPad will hit the market. Led by the legendary Steve Jobs, Apple has upended many industries in the last decade, including personal computing, entertainment, wireless telecommunications and retail. His vision continues to guide strategy and product development at what is arguably the world’s most innovative company. His personal story is just as illuminating for how economic and individual freedom catalyze innovation.

    Steve Jobs was born in 1955 to a Syrian immigrant father at the height of the post-War Baby Boom. Before co-founding Apple in 1976, Jobs dabbled in calligraphy, electronics and psychedelic drugs, even travelling to India in search of spiritual enlightenment in 1974 after dropping out from college. Back then, electronics and computers had no serious hope of becoming as mainstream as they are today, and were the exclusive preserve of hobbyists.

    The vanguard of this group was a motley set of people who styled themselves as the Homebrew Computer Club, which would probably qualify as the first industry association for the computer and electronics business. Steve Jobs was among the early members. From unlikely beginnings, Jobs co-founded the company that became the vanguard of the computer revolution. He did not go to an Ivy League college, nor did he come from an affluent family. In fact, Jobs recounted recently how he’d travel to the local Hare Krishna temple every weekend while in college because he didn’t have enough money to eat.

    It’s not for nothing that America is known as the land of the free. Steve Jobs is one of the best-known examples of how a culture of freedom and openness in America has allowed individuals to prosper based on ability and effort. That culture cannot be replicated quickly or easily. The first step is to boost economic freedom. Much to the disappointment of venture capitalists and others in India Inc., job creation and not economic liberalization has been high on the agenda of the government.

    The distinction between job creation and income growth is not as well understood as it should be. Nobel laureate economist Milton Friedman once visited China at the height of Communism, and was taken to a construction site. He asked why the contractors were not using machinery and modern equipment, and was told that the project was part of a government job creation program. Friedman replied that the spades used by the labor force should be replaced with spoons, and that would increase employment even more! The lesson is that it is easy to “create” jobs, but harder to grow incomes because incomes rise only when productivity increases. Productivity increases when companies compete and innovate.If we are serious about creating jobs, we should focus on creating an environment where people like Jobs prosper. Bharat will become more like India.

    In the current regime, India is being turned into Bharat. Well-intentioned policies that claim to employ the poor are distorting the labor market by incentivizing people to migrate back to villages from cities. The country must urbanize if it has to develop economically, it cannot continue to live in villages.

    Much has been made of India’s demographic dividend. An average of nearly 1 million people will be entering the work force every single month for the next 20 years, a scale unprecedented in human history. The only comparable event is the post-World War II Baby Boom in the US. This is an opportunity, and can be a huge challenge, because all those people will want to be well-fed, educated and productively employed. It would be futile for the government to even try employing so many people. If harnessed properly, this talent pool can transform the Indian economy. If the creativity of this human pool is allowed to flourish, it can change the world. India can produce many Apples and Googles.

    Otherwise, the country will remain impoverished and torn by social strife in coming decades, and will naively celebrate the success of its diaspora, for the best and brightest will simply migrate in search of a better life.

    Dhirubhai Ambani, founder of the Reliance group, famously said once that it was imperative to manage the environment when doing business in India. The environment should be changed so that entrepreneurs like Steve Jobs can create jobs and businesses can focus on managing innovation instead of the environment.

    Originally Published: http://navam.in/1nNU8sm

  • Not Just Luck By Chance

    This is Part 2 in a two-part series on Bollywood and Entrepreneurship. Read the first part here. 

    Conviction: In recent times, one of the best films about the film business was Zoya Akhtar’s Luck By Chance, released in 2009. It tells the story of Vikram Jaisingh, an aspiring actor, and his efforts to make it in Bollywood amidst cut-throat competition. Vikram believes that success and failure are simply choices people make. In a dramatic scene, his girlfriend breaks down when she learns that she has been overlooked for a lead role in a movie she had spent years chasing. Vikram tells her that so far you’ve believed in and relied on others, now believe in yourself.

    He tells her that opportunities are not found, they are created. Apne raaste par chalte raho, chalte raho…dheere dheere saari duniya tumhare raaste par aa jaayegi (Keep traveling your chosen path, gradually the whole world will start following you on that path), says Vikram Jaisingh. Played expertly by Farhan Akhtar, Jaisingh goes on to become a superstar. The movie keeps the viewer guessing whether he was just lucky or “created luck” by sheer hard work, drive and conviction.

    Conviction is indispensable for entrepreneurs, particularly the truly innovative ones. Success is elusive and hard to come by. When starting out, family, friends and everyone around you wish you well but they also harbour doubts. Personal conviction is paramount, but it is also very important for entrepreneurs to have a mentor and guide who has unfailing conviction, someone who can advise and course-correct when required while believing in the dream. While it’s difficult justifying a stressful lifestyle and long work hours indefinitely without showing some accomplishment; as an old saying goes, the distance between madness and genius is only bridged by success.

    Contentment: Clarity, confidence and conviction mutually reinforce each other, eventually leading to breakthroughs. A hint of success and achievement can alter public perceptions. The idea of the personal computer was considered outlandish, but the entrepreneurs who pushed its development are part of business legend today – history is replete with many such examples.

    Success and recognition are accompanied by pitfalls, and they can breed a sense of contentment. Contentment breeds a stasis that can destroy an organization. Again, the role of a mentor who helps maintain the entrepreneur’s focus and passion is critical. Contentment can quickly undo the positive effects of the other three Cs. The biggest risk is not taking enough risks.

    The hunger and drive never really dies in effective entrepreneurs. In the movie Guru, Gurubhai asks his shareholders whether they want to become the largest company in the world, now that the company is the largest in India. Vikram Jaisingh describes a friend working in theater as “content” – after working in theater for several months, he had achieved some success and was unwilling to rock the boat.

    When entrepreneurs combine the first three Cs and ward against the fourth, stars are born.

    Originally Published: http://navam.in/1hyzk5J