Monthly Archives: October 2003

Posted on by
4

I am alive and kicking, just managing my time very badly. I hope to start posting again from this evening.
On my way back from New York last evening, it occured to me that surprisingly good number of commuters from Stamford or Greenwich to New York read The Economist on the way. I guess it could just be the location (many Wall Streeters in Greenwich). It is not that ubiquitous in California.

The regional economies

Posted on by
Reply

Amy Wildman has a very positive story on Indian economy in today?s NYT. I have always enjoyed her coverage of South Asia. In this article, she captured the dichotomy of economic development in India very well:

?Much of India is still mired in poverty, but just over a decade after the Indian economy began shaking off its statist shackles and opening to the outside world, it is booming. The surge is based on strong industry and agriculture, rising Indian and foreign investment and American-style consumer spending by a growing middle class, including the people under age 25 who now make up half the country’s population. After growing just 4.3 percent last year, India’s economy, the second fastest growing in the world, after China, is widely expected to grow close to 7 percent this year.
?..India is now the world’s fastest growing telecom market … Banks are now making $15 billion a year in home loans … The Bombay Stock Exchange’s benchmark Sensitive Index has risen by more than 50 percent since April, hitting a three-year high. Foreign exchange reserves are at a record $90 billion? India is slowly making a name not just for software exports and service outsourcing, but also as an exporter of autos, auto parts and motorcycles. …The seasonal monsoon that ended recently was the best this agriculture-dependent economy has seen in at least five years ..That, in turn, is putting income and credit in rural pockets, spurring a run on consumer goods that will only strengthen when the harvest comes in later this year.

Then she also measures the cons:

??..Of course, truisms about what holds India back have not disappeared. The shortfalls in infrastructure, particularly power and education, are staggering. Twenty-six percent of Indians still live in poverty, and data suggest inequality is widening even as the poverty rate falls. Overall employment is essentially stagnating.The heavy dependence on agriculture, which still accounts for 25 percent of gross domestic product and 70 percent of employment, means that a bad monsoon, like the one last year, can hobble the economy. The country remains politically dependent on subsidies that have helped swell fiscal deficits that limit growth and investment in education and health. ?

In spite of all the negatives, a story like this, on the NYT homepage, is a big deal. And frankly, this worries me a little. I too think believe that India has an opportunity here that a country rarely gets. But I also think that Vivek Uberoi (who recently joined us in IndiaEconomyWatch) hit the bull’s eye when he said on an e-mail to the group:

?There is so much breathless commentry on the Indian economy in the western press these days–which is quite nice. However, India remains a desperately poor country and life for a lot of Indians is still nasty brutish and short. We should not loose sight of these people at IEW.?

I worry that if we are not careful, the growth may accelerate the endemic corruption of Indian institutions and the increasing fragmentation of our politics that is eating away our society. I wonder about the effects that the essentially regional nature of the current IT and BPO boom may have on Indian politics and society.
Obviously, I was reading Kenichi Ohmae. Ohmae is the prophet of the rise of Regional economies. In his last book published quite some time back, He talked about, how in Japan, some regions have been bearing a disproportionate part of national developmental burden in and how this has created huge social dischord.

“?.Of the country?s (Japan’s) 47 prefectures, 44 are net recipients of government subsidies. The other three ? Tokyo, Osaka and Aichi (Nagoya) ? pay the rest. ?.More than 85% of the nation?s wealth is created in the regions of Tokyo, Osaka and Fukuoka, Sapporo, and Nagoya. All the others receive more from the central government than they pay in.
.. This arrangement is both reflected in and sustained by the country?s voting patterns. The heart of the LDP?s traditional support came from the rural areas, to which is returned a disproportionate share of the centrally provided subsidies, in the form either of direct grants of money or services or for indirect protection like trade barriers against the import of foreign rice or beef.
? If I live in one of Japan?s three major cities, this arrangement quickly begins to lose its appeal. I may be as reasonable as the next man, but it is hard to see why I should keep footing this kind of bill.?

Yesterday, in his rejoinder in Slate (which is worth reading in its entirety) to David Brook’s new column in NYT, Daniel Gross nailed one of the core economic issue underlying the current tumult in USA:

Essentially, the Northeast (for my definition here, I use New England plus New Jersey and New York) subsidizes the federal government to a massive degree. Incomes are far higher in the Northeast?and the equally Democratic West Coast?than they are in other regions. Meanwhile, many other regions?say, the South and the Great Plains?subsist on federal largesse. On a per capita basis, those in the Northeast pay far more taxes and receive far fewer benefits than people in other regions.
On a percentage basis, those with the largest disconnect between the amount they ship to Washington and they amount they receive back are in the Northeast. New Jersey receives only 62 cents back on every dollar shipped to Washington, while Connecticut and New Hampshire receive 65 cents and 66 cents, respectively.
The data flies in the face of received notions about wealth, partisan affiliation, and dependence on the federal government. The five largest recipients of federal largesse in 2002 were all non-Northeast states: New Mexico, North Dakota, Alaska, Mississippi, and West Virginia (four of which went Republican in 2000). The states shortchanged the most were New Jersey, Connecticut, New Hampshire, Nevada, and Massachusetts?four of five of which are in the Northeast, and four of which voted Democratic in 2000. In fact, when you look at the voting behavior of states?based on 2000 per capita income?11 of the 13 wealthiest states voted for Gore while 15 of the poorest 17 states voted for Bush.

So, two of the biggest economies of the world are still wrestling with the social impact of skewed development. However, the relative homogeneity of people in countries like Japan or USA have so far held the ensuing social dischord in check. India has a lot of things. But one thing we don’t have is homogeneity.
I don’t think anyone would dispute that right now we are looking at the development of three powerful regional economies in India. In the South, there is what I would call the golden triangle of Bangalore, Madras and Hyderabad. New Delhi and the satellite towns of Gurgaon, Noida and Faridabad in the North and the Bombay-Pune corridor in the West are the two other key hubs that together with the Southern cities form the center of gravity of the IT / BPO / biotech boom in India.
But unlike Japan, India also has the problem of an increasingly fragmented and violent political system. All the Southern states are run by regional parties. The center of gravity of political power resides in the Gangetic valley of Northern India which is largely being bypassed by the technology led economic rejuvination in India. If you consider the fact that the large food and fertilizer subsidies are mostly going to big farmers in Northern India, that the bedrock of caste and religion based politics is in UP, Bihar and Madhya Pradesh, that the basic distrust between the Hindi speaking North and the Dravidian states never really went away, you would probably agree that we are looking at a potentially much bigger social upheaval in India unless we can figure out how to bootstrap the rest of the country.

Jhumpa Lahiri

Posted on by
Reply

Both Om Malik and Prashant Kothari noted serious media and popular interest in Jhumpa Lahiri and her new book. It is getting great reviews everywhere.
Incidentally, SAJA has a Jhumpa Lahiri reading in New York on Oct 23.
Om also noted Moorish girl’s observation that the media seems be going on and on about her wardrobe.
We should not be surprised. The publishing industry has been getting closely ‘integrated’ with the retail and entertainment sectors for quite some time now. The publishing distribution channels are adopting those tactics too. Books are launched in almost the same way movies are. The agencies try to place their writers in as many available forums from as many angles as they can. It boils down to getting their writers ‘top of mind awareness’ in the target audience. If the writer is polished and good looking, that is icing on the cake. Branding becomes much easier. The writer becomes the celebrity. In Lahiri’s case, it started happening from the time ‘The Interpreter of Maladies’ came up. I am not being critical. I am actually quite glad that someone writing about South Asian experience is getting the ‘It girl’ treatment. It is just that the whole set up is slightly depressing. I guess I am a little more sensitive than I usually am because I just finished William Gibson’s Pattern Recognition (great book) and I am feeling that the universe is going to the dogs.
Jhumpa Lahiri reviews and profiles:
NYT reviews: here, here and here
Washington Post: here
Older SawNet profile and links: here
Now all I need to do is read the book!

Sunny California

Posted on by
Reply

What can I say? I lived there for quite some time; I love the place. I have some very happy memories there. And now they have elected a serial sexual predator with some very disturbing personality traits to run the state.
A few years back I had attended an e-commerce presentation by a dour banker from Minnesota. He was wearing a pinstriped suit during summer in San Jose. He started off with the announcement, ?Yes, Jesse Ventura is the governor of Minnesota. Yes, I know that he was a WWF wrestler. And no, unlike what you may think, not all of us voted for him. And I would not like to discuss this during the Q&A session?. I wonder what would my Californian friends who now do ?.
Gray Davis was no one’s idea of a brilliant statesman. He was an uninspiring, run off the mill politician who had hidden the gigantic budget deficit from the electorate; Kind of what Gov. Pataki did in New York. But The Terminator is not an improvement. Schwarzenegger had spent the last two months studiously avoiding answering any policy questions. I suspect that he would be like Bush, hostage to a trusted coterie of advisers.
John Scalzi has a wonderful diatribe on his weblog.
NYT?s skeptical editorial was also good.

National Novel writing Month

Posted on by
Reply
National Novel Writing Month is a fun, seat-of-your-pants approach to novel writing. Participants begin writing November 1. The goal is to write a 175-page (50,000-word) novel by midnight, November 30.
Valuing enthusiasm and perseverance over talent and craft, NaNoWriMo is a novel-writing program for everyone who has thought fleetingly about writing a novel but has been scared away by the time and effort involved.

NanoWrimo is a wonderful site with terrific forums, great ideas and cool functionalities. If you have been thinking of writing fiction for the last so many years and it is just that you have been waiting for the right time, mood, leisure etc., I think you should check this out. Many of us need some sort of artifical external pressure to get us kick started. The Nano community does it very well for writers.

IEW posts

Posted on by
Reply

My new posts are up at IndiaEconomyWatch.
I am thinking through how best to cross link to posts on IndiaEconomyWatch. One way to do this is to display the links to my new posts on IEW on the nav bar. The other (easier) is to post all my IEW posts here too (which is what Edward does).
I dont want to mix up the two blogs. So the former is probably better. But I also do want to follow my train of thoughts as I chase stories/ideas on Indian Economy. I am thinking of creating something like economy.kaush.com and post my IEW entries there too after a few days of posting them on IndiaEconomyWatch.

The next big thing

Posted on by
Reply

Fred Wilson, a New York based VC agrees to Guy Chiarello’s (Morgan Stanley CTO) comments:

(Chiarello say) “I have stopped worrying about the next big thing, I just worry about my big problems, which are security, open source, business continuity, systems management tools, etc”.
This is so true. The reason why the Internet was so big was that it changed the whole paradigm of the technology business. Now we are in an evolutionary paradigm, not a revolutionary paradigm. We’ve built an open, connected, computing platform that scales and evolves bit by bit, piece by piece. And as such, there won’t be a next big thing in tech for a long time.
But we’ve still got big problems, some of them created by the architecture of the net, some of them created by the the hyper competitve global economy we are in, and some of them created by the increasingly tense world we live in.
So get used to it. Stop looking for the next big thing and start solving problems. That’s the new way to make money in tech.”

This is bang on target. All this enterprise scale naval gazing on the future of tech is ridiculous. There is otherwise intelligent magazines like ‘The Economist’ which published an entire survey on IT industry to convince us that IT is now a matured, cyclical industry where the gold will come out of efforts to make existent technologies more useful rather than from emergent technologies (The survey is well written and worth reading, even though its conclusions are wrong headed). Then there are people like David Carr who is now writing a whole book explaining how IT does not matter.
What people often forget is to differentiate between emerging technologies and matured information technolgies. Most people tend to put both maturing IT and emerging IT in the same bucket when talking about growth. This is wrong. This is doubly wrong when you try to track the growth of maturing/matured tech companies like Amazon or Cisco as a yardstick for measuring the growth of emerging technologies (a point I started to make in a comment in Barry Ritholtz’s amazing weblog on capital market). The tech companies get this. Cisco has been buying emerging technology companies in order to sustain its growth (among other things), but considering its size and the rate in which it needs to grow such acquisitions have less and less impact. . Oracle and PeopleSoft are market leaders in an ERP space which is now shaping up to be an oligopoly. They are trying to consolidate in order to sustain grown and to lock out new entrant.
Meanwhile, innovation has been happening underground away from the glare of media. Widescale adoption of those technologies may be years away. John Scully (ex CEO of Apple) made this observation in a News.com interview (Via Rajesh Jain):

We’re going through a systemic, secular change in high technology. We saw, in the 1990s, the commoditization of hardware. Now, we’re going to be seeing the commoditization of almost everything, including software and services. This makes a lot of sense because, as the technology world moves from being computer-intensive to communications-intensive, you have to have open standards, which means innovation is going to have to take place in different parts of the value chain. The things that we used to think of as the areas for “wow” technology, like computers, have become commoditized and even transparent, as they are embedded into systems. The innovation now is taking place with things that are largely being driven by market opportunities and customers.
I think where the amazement is going to be is in the ability to do things with information and content that was never possible before. There are huge opportunities for search technologies to deal with information, and they are increasing in orders of magnitude over the next decade. If you take something as simple as sensor devices, like RFIDs (radio frequency identification), and, if Wal-Mart put RFIDs on every item on their store, it would generate something like 7.5 million terabytes of new data every day. So as we move to real-time systems and sensors and robots, and all of these things that have been kind of like experiments over the last decade are turned into things that can be productized over the next 10 to 15 years, the world of real-time information, and how it becomes incorporated into more parts of their lives, is going to be where the amazement is going to take place.

If I may go out on a tangent here; widespread adoption of RFIDs (an existent technology) is at least 3-5 years away. Wal Mart is backing away from aggressive persusal of RFID and asking their suppliers only for adoption RFIDs at carton level (even that is a big deal) by 2005. Until prices come down from the current 30 cents / chip to something like a few cents it is not very viable for the retail sector. But the footprint of sensor based systems has the potential to be much, much bigger than RFIDs. A few weeks back stardusts / sensors made the cover of ‘MIT Technology review’, ‘New Scientist’ and ‘BusinessWeek; simultaneously; which at the very least means that a lot of reasonably powerful, well connected people think that this technology is now ready to ’emerge’ and hyped up.
This is kind of beside the point, But Fred Wilson also has a very interesting post about General Clark here . Incidentally, Cameron Barett (he is part of Clark’s blogging team) says that the Clark is planning to start writing on his weblog soon.

Azim Premji, BusinessWeek & Wal Mart

Posted on by
2

There is a largely flattering story on Azim Premji (the chairman of Wipro) on the current issue of BusinessWeek (Asian edition).
In last week’s BW (US edition), there was a story savaging Wal-Mart (registration needed). It is interesting for a number of reasons.
Firstly, it confirmed to my mind BusinessWeek’s tendency to go for alarmist headlines. A few months back, it went after IT outsourcing to India and China with blazing headlines on the cover “Is your job next?”. Obviously, the Asian edition has a different slant where they interview people like Premji! But having said that, the article does present some thought provoking statistics about how the outsized influence of Wal Mart in America effects almost all aspects of life. I did not like what I read about the wages.

On average, Wal-Mart sales clerks — “associates” in company parlance — pulled in $8.23 an hour, or $13,861 a year, in 2001, according to documents filed in a lawsuit pending against the company. At the time, the federal poverty line for a family of three was $14,630. Wal-Mart insists that it pays competitively, citing a privately commissioned survey that found that it “meets or exceeds” the total remuneration paid by rival retailers in 50 U.S. markets. “This is a good place to work,” says Coleman H. Peterson, executive vice-president for personnel, citing an employee turnover rate that has fallen below 45% from 70% in 1999.
Critics counter that this is evidence not of improving morale but of a lack of employment alternatives in a slow-growth economy. “It’s a ticking time bomb,” says an executive at one big Wal-Mart supplier. “At some point, do the people stand up and revolt?” Indeed, the company now faces a revolt of sorts in the form of nearly 40 lawsuits charging it with forcing employees to work overtime without pay and a sex-discrimination case that could rank as the largest civil rights class action ever. On Sept. 24, a federal judge in California began considering a plaintiff’s petition to include all women who have worked at Wal-Mart since late 1998 — 1.6 million all told — in a suit alleging that Wal-Mart systematically denies women equal pay and opportunities for promotion. Wal-Mart is vigorously contesting all of these suits.

I also thought that their cultural gatekeeping is foolish:

Wal-Mart cites customer preferences as the reason it does not stock CDs or DVDs with parental warning stickers and why it occasionally yanks items from its shelves. In May, it removed the racy “lad” magazines Maxim, Stuff, and FHM. A month later, it began obscuring the covers of Glamour, Redbook, Marie Claire, and Cosmopolitan with binders. Why did Wal-Mart censor these publications and not Rolling Stone, which has featured a nearly naked Britney Spears and Christina Aguilera on two of its recent covers? “…
Wal-Mart was the only one of the top 10 drug chains to refuse to stock Preven when Gynetics Inc. introduced the morning-after contraceptive in 1999. Roderick L. Mackenzie, Gynetics’ founder and nonexecutive chairman, says senior Wal-Mart executives told his employees that they did not want their pharmacists grappling with the “moral dilemma” of abortion. Mackenzie was incensed but tried to hide it. “When you speak to God in Bentonville, you speak in hushed tones,” says Mackenzie, who explained, to no avail, that Preven did not induce abortion but rather prevented pregnancy. Wal-Mart spokesman Jay Allen says “a number of factors were considered” in making the Preven decision, but he denies that opposition to abortion was one of them. “If anybody of any belief reads any moral decision [into] that, that’s not right,” he says.
….By most accounts, though, Wal-Mart’s cultural gatekeeping has served to narrow the mainstream for entertainment offerings while imparting to it a rightward tilt. The big music companies have stopped grousing about Wal-Mart and are eagerly supplying the chain with the same sanitized versions of explicit CDs that they provide to radio stations. “You can’t have 100% impact when you are taking an artist to a mainstream audience if you don’t have the biggest player, Wal-Mart,” says EMI Music North America Executive Vice-President Phil Quartararo.

But I am not specially concerned about their moral obsessions. In today’s Internet enabled age, most people in North America can buy what they want, though may be not on Wal Mart prices.
As I have noted earlier, I admire what they have managed to achieve. (And I love the price!). But I queasy about their labor policy.
NYT has an interesting story about how Netflix is trying to use speed of delivery to fight off Wal Mart on the online DVD rental space. (Very cool analysis of their DVD rental allocation system here). I used Netflix for some time when I was in California. I was very happy with their service. I hope they make it without having to sell out to someone like Blockbuster.