The Indian Economy Blog

December 8, 2006

Desperately Seeking India’s Google

Filed under: Business — Atanu Dey @ 8:44 am

The San Jose Mercury News has a recent report about how mobile phones are going to be for India what the PC was for the US. Naturally, they quote the most passionate evangelist for the mobile web, my colleague and MD of Netcore, Mr Rajesh Jain. The matter that the article focuses on is of paramount interest in the context of India’s development: the mobile phone revolution in India.

Mobile phones are enabling technology. Precisely speaking, they enable markets by reducing transaction costs, as we economists are quick to point out. When you reduce transaction costs, you reduce friction and markets become more efficient. Efficient markets imply greater productivity and therefore more wealth creation. It warms the cockles of an economist’s heart to see people across the income spectrum use the cell phone. The guy making the kitchen cabinets in my apartment called up three hardware stores this morning and checked prices and availability of plywood without moving out of the apartment. The uses of the mobile phone is virtually limitless—from a jet-setting executive receiving an SMS update of his flight status from the airline, to the corner vegetable seller getting a request to deliver onions to apartment 205.

At its most general, cell phones are a subset of information communications technology tools. Of course, ICT tools have a hoary history and a very large family. They include carrier pigeons, smoke signals, tom-tom drums, marathon runners, the telegraph, landline phones, radio, TV, satellites, the internet, and so on. As time goes on, the IT tools become more efficient. Compared to smoke signals, cell phones are more handy, can be used on dark and stormy nights, and are considerably less polluting.

Cell phone technology—more generally information technology—is definitely a gift of the gods when it comes to India’s economy. Certainly, IT enables the employment of thousands of Indians in BPO and call centers. But that accounts for a very small part of the Indian economy. The greater gains are when IT use is tightly integrated into the economy as cell phones have become in India. Yet, in some sense, what we have seen is only the first act of a three-act play. There is much more to come and if the people at Netcore Solutions are correct, the mobile web will have an effect on the Indian economy similar to the one the internet had on the US economy. You ain’t seen nothing yet.

Time to get back to the point that I was making. I was telling you about the Murky News (as we like to call Mercury News) report. What caught my eye was a quote by Rajesh: “The next Microsoft, Cisco or Google of the world is going to come out of countries like India …” If I had a dollar for every time that I have heard Rajesh say that, I would be pretty well off. OK, maybe not well off, but I could certainly buy myself a neat gizmo. Anyway, the question is, how likely is it that the next MS or Google will come out of India?

One way to address that question is to ask what factors lead to the creation of a Google or a Microsoft and whether those factors are present in India today. The Silicon Valley in California is an incubator for world class innovative technology companies. Why is that? Perhaps it has something to do with the presence of world class universities. The August 21/28th issue of Newsweek has an article titled “World of Knowledge” which focuses on education and global universities. Newsweek’s ranking which shows “that the world’s top 10 includes eight American universities plus Oxford and Cambridge.” It goes on to note that “of the next 40, 22 are American, five are British, five are Swiss, three are Canadian, two are Japanese, two are Australian, and one is Singaporean.”

Curiously, the combined populations of the countries that account for the top 50 global universities in the Newsweek ranking approximate the population of India. Not one of the 272 universities in India figures in that list, however. Four of the top 10 universities are in California. Stanford (established 1885) ranks 2nd, California Institute of Technology (est. 1891) is 4th, UC Berkeley (est. 1868) is 5th, and UC San Francisco (est. 1873) is 9th. Of the top 50 universities, 30 are American. Is it any wonder that the US leads the world in innovation and technology? And of the top 10, four are in California. Is it any wonder that within the US, California is the home of the Silicon Valley? Not just that, Yahoo!, Google, SUN, and a whole host of lesser known global firms have been born at Stanford University. Something in the water in northern California? Or does it have something to do with the universities?

[Just as an aside, I should add that UC Berkeley, my beloved alma mater, is a much better school than Stanford, which one must remember is after all a “junior” university. “Leland Stanford Jr University” if you must know the full name of that school. Mind you, I don’t have anything against Stanford. I slummed there for a year as a Reuters Fellow, as it happens. Stanford can’t be all bad compared to UC Berkeley, is what I say. :) Go Bears! ]

My proposition is that world class innovative firms are built upon world class universities. And world class universities don’t spring forth fully formed like Athena out of Zeus’s head over night. It takes time to build them. I deliberately noted above the dates of establishment of the various top universities. Universities are institutions that have a very long lead time. Time is an important factor. Admittedly they are built on real estate but the most important ingredient in the recipe for an university is ideas and ideals. Ideas and ideals come from very smart inspired people with acute vision.

To me the sequence appears to be this: people with vision create universities in a conducive environment created by wise government; over time, the universities become centers of excellence; finally the universities give birth to Googles. Miss any of the elements in the sequence, and you will not find a Google, no matter how hard you search nor how devoutly you wish.

It is clearly possible that the next Google will come from India. It is not the possibility that is doubted. The question is how probable is it? It is always good to distinguish very clearly between “possible” and “probable.” It is possible but very highly improbable that the next Google will be out of India. Why? Because none of the links that form the mechanism for creating a Google is available in India.

Still, it is not too late. If we want India to produce excellence, we can get started on it now. It will take a 100 years or so, but then we have to make a start sometime. I am sure that we have visionaries in India. Next we need wise governance. Given the current political leaders, this one is a very difficult order. But let us hope and pray that one day we will become collectively wise enough that our government (which is a reflection of our collective will and wisdom) will be good. And then it will become not only possible but probable for India to give rise to a Google. I look forward to that day.

1 Comment »

  1. You are right about the necessity of great learning centers for companies like Google to come up. That is true beyond any doubt.

    Comment by Abhishek — December 8, 2006 @ 10:57 am

  2. I don’t agree with you fully.
    Good Universities spawn good ideas – Perfectly accepted.
    But, is it only good universities and government policies that are required. Doesn’t it require a society that accepts failures while doing new things and not term them as an outcast. How many of the great inventions have come from UK or the other places that has been mentioned? In India we live more with the fear of failure than anything else. That is one of the reasons for mediocrity and lack of hunger to create new things. And I am no exception to this, but I am trying to do something about it. :)
    You are correct when you say that it takes time to build these systems and the top universities have been around for nearly 100 years. But, how many of the inventions came out in the first 60-70 years after the birth of these universities? I feel it takes more than Universities and Policies to create great companies. It takes a Society which supports innovation that is more important than anything else. So, I would add Society/Culture to your list of things.
    And you have listed only the tech companies. What about other companies which have pioneered innovation in other sectors like 3M, Toyota, FedEx, Canon (in cameras) etc.

    Comment by Ramki — December 8, 2006 @ 11:21 am

  3. Great post. To add another angle:

    Good universities produce good science. Successful entrepreneurs use that science to meet unmet needs in the market. For that good science is necessary but not sufficient. They must understand their market intimately which comes from being part of it. Being part of a bigger market like the US is an almost unfair advantage.

    India will see world beaters in industries where competitiveness is derived from lower costs. Outside of that, you correctly point to the mobile industry as an opportunity. The west, particularly, the US is so PC centric that it leaves wide open opportunities for the rest of the world.

    Comment by Basab — December 8, 2006 @ 11:27 am

  4. I think it’s a little late to start a company that dominates the mobile phone industry.

    Companies like Microsoft and Google were there for the start of the industries that they dominate now…

    Comment by alphie — December 8, 2006 @ 11:41 am

  5. I think what we are talking about is an entrepreneurial ecosystem where centers of excellences like university research centers are one part of the overall chain. If you compare the Indian entrepreneurial ecosystem with any other country’s, lets say the USofA, there are big chunks that are missing.

    There is ONE band of angels which has made maybe 2 investments in about one year. Its a start nevertheless. There is TiE which is more like a networking group rather than an angel investment group. There is no pre-seed or early stage risk capital in India. Forget early stage, there is hardly any venture capital investment in India. Most funds are geared towards late stage.

    Even if you have centers of excellence that produce great commercializable IPR, the lovely judicial system ensures that IPR doesnt mean too much. But this doesnt mean that the IITs are producing great IPRs. I am not sure but if one compares the patents filed by R&D centers of MNC firms located in India with the patents filed by the IITs, the MNC firms might win hands down.

    India talks about a large and highly educated workforce working on the cutting edge. I think one of the best metrics to figure how acute the shortage will be in the future is to judge the pupil/educator ratio in maybe the top 100 higher education institutes in India. The stats will prove that not only is the quality of students being churned out sub-optimal but the kicker one needs in the higher education sector would result into nothing because there are no teachers to power that growth.

    Comment by Akhil — December 8, 2006 @ 11:45 am

  6. What does Google’s(Ad-ware advovate) innovation in India’s economy or technology have to do with the relevance of the existence of God, or Gods? YES, you’re bright…but not quite “connected.”

    Comment by Donna LaFleur — December 8, 2006 @ 12:55 pm

  7. Best post here, ever.

    Also, as a fellow Golden Bear, go Bears! Hopefully our football team will be as good as the academics of the university –> #1.

    Education is the key – always has been and always will be. And it doesn’t start with just the top, the purpose of all institutions of education, whether top rated engineering colleges or apprenticeship schools, is to maximize the output and talent of all individuals to the best of their capacity.

    Comment by AJ — December 8, 2006 @ 2:28 pm

  8. That seems like a stretch, AJ.

    Bill Gates, Ted Turner and Steve Jobs are all college dropouts.

    Getting a degree at a university almost seems like an admission that you are not an entrepreneur.

    I’m not saying that a supply of educated workers doesn’t come in handy when an entrepreneur wants to expand their company, but that an entrpreneur is the crucial ingredient needed for the next Google, and you can’t make one at a university.

    Comment by alphie — December 8, 2006 @ 3:04 pm

  9. [...] Atanu Dey examines the factors which result in successful businesses and dwells on the possibility of the next major Information Technology company being of an Indian origin. [...]

    Pingback by DesiPundit » Archives » Desperately Seeking An Indian Google — December 8, 2006 @ 8:50 pm

  10. I think most of the folks here are over emphazising education and need for ph.ds to create a billion dollar company and cite google as an example.( maybe because most of the contributors here are ph.ds). But most succesful companies were not created by ph.ds or based on ground breaking technologies.
    Risk taking culture is the most important criteria needed. I think India and other asian countries lack that. Forget business risk, how many indians do u see in adventure sports. Compare that with US. Lots of ordinary US folks go for river rafting, rock clibing, bungy jumping etc. The argument then will be that they can afford these “luxuries”. But majority of them are not rich.

    Comment by Rekha — December 8, 2006 @ 11:29 pm

  11. Atanu,

    The basic thread of what you are saying is correct. However, how do you account for the rise of Japan in a couple of decades with only two-three universities?

    I think the connection is the other way around at this point of time, which is that exceptional growth powers the rise of academia. California could have 4 of the world’s top 10 universities, but then it also needs to be borne in mind that California is the world’s eighth biggest economy.

    And lastly, education today is one of the few commodities that is easily transferrable across borders (if not in terms of price, at least in terms of availability).

    Comment by Arjun Swarup — December 9, 2006 @ 12:11 am

  12. Alphie and Rekha – your point that PhD’s are not required for starting great companies is well taken. However, google and microsoft would not have been what they are right now, without the hundreds of PhDs who work in R&D in these firms. Your judgment is based on survival bias, as you cite firms that only made it big and not the thousands that might hav failed.

    The contributions of advanced technical professional talent to entrepreneurial talent is a must. Great universities are not a necessity to foster entrepreneurism but are definitely a must to create the advanced technical talent that elevates “ideas” to “reality”.

    I guess that was the core of Atanu’s logic.

    Comment by Girish Mallapragada — December 9, 2006 @ 2:49 am

  13. Just a hypothetical question for Atanu and the commenters: if you HAD to choose, would you rather that India had one google or thousands of moderately successful businesses with 10-14% topline growth?

    Sounds like a silly question, I know. But the kinds of entrepreneurship required for a google/ms/etc. vs. oh, say a well-run (and profitable) kirana shop are very different – and, in my view, a society can’t get to the former without first mastering the latter. Companies like Google are amazing because they change the world and drive human knowledge, but like it or not, they generate money/value/jobs for mostly the educated and/or financially well-off. India has about 700 million people who live in rural areas. Isn’t it more important to first focus on the more basic aspects of entrepreneurship that can help our people in a relatively simple and quick manner, before trying to move on the advanced aspects of business?

    Of course, there is an obvious counterargument: that we should do both. That’s why I asked, “If you HAD to choose…”!

    Comment by Nanubhai — December 9, 2006 @ 3:04 am

  14. The founders of google could have been successful as high school dropouts – they are just special. The 99% of the rest of us, however, are dependant on a sound educational system.

    Comment by AJ — December 9, 2006 @ 5:54 am

  15. Donna Lafleur:

    What does Google’s(Ad-ware advovate) innovation in India’s economy or technology have to do with the relevance of the existence of God, or Gods? YES, you’re bright…but not quite “connected.”

    Figure of speech, manner of speaking, which may be misunderstood by those who are not quite familiar with the idiomatic forms of the language. Basically, I did not imply that the gods (billions though they are) have anything to do with Google.

    Ramki:

    I did not even attempt to exhaustively list the conditions for a great economy. I was merely stating one necessary condition for great technology firms such as Google and Yahoo. I did not claim that that condition is sufficient. It is good to distinguish between the necessary and sufficient conditions.

    Rekha:

    No claim was made about the need for a PhD for starting a world class company. Universities incubate. We should ponder the meaning of the word “incubate”.

    Risk taking has something to do with how much wealth one has. Poor people are risk averse. The causality runs from wealth to risk taking rather than the other way around.

    Now about college dropouts and successful companies: they are dropouts, not uneducated. I know many PhDs who have not finished their education and many non-PhDs whose education was complete before they were awarded any degrees. The universities have to be there before you can have university dropouts.

    Universities provide a wide range of services to the economy, not just PhDs.

    Arjun, the universities came before California was a large economy. In 1800s, California was perhaps as rich as some states of India are today. But the people of California gave themselves the Univ of California system, which the states of India don’t appear to be doing. More about this later.

    Nanubhai, agreed that you need thousands of kirana stores as much as one needs a handful of Googles. It is not one or the other.

    http://www.economist.com/business/displaystory.cfm?story_id=8381987

    Comment by Atanu Dey — December 9, 2006 @ 8:00 am

  16. Nokia is the world’s largest mobile phone company.

    Shall we conclude that snow is a necessary condition for successful cell phone manufacturers?

    Microsoft was founded in Albuquerque, New Mexico, btw.

    Comment by alphie — December 9, 2006 @ 9:29 am

  17. Alphie, you would be surprised how geography and climate dictate what happens in places. Heard of ethernet? Heard of Hawaii? See the connection?

    Finland is sparcely populated, rough terrain. Landlines are costly in such places compared to cell phones. Not surprising that Nokia is Finnish — their domestic requirements gave them the platform to become a global player in mobile technology.

    So in a sense, yes, snow is an indirect factor that led to Nokia’s success.

    Comment by Atanu Dey — December 9, 2006 @ 11:53 am

  18. Good point, Atanu.

    The unique population distributions of 1920 Australia led to Qantas, one of the world’s first airlines…

    So what’s unique about India these days?

    Comment by alphie — December 9, 2006 @ 1:13 pm

  19. Another ranking, by The Times.
    http://world-university-ranking.com/?gclid=CMKc6qqJhYkCFR0dYAodfxxEQA

    Comment by Dwight Ken — December 9, 2006 @ 2:33 pm

  20. Did someone say an “India’s Google”?

    http://ia.rediff.com/money/2006/dec/09infy.htm

    Comment by Nanubhai — December 10, 2006 @ 4:50 am

  21. It need not take 100 years to build an Indian Stanford or Berkeley. Even without much resources and comparatively poorer educational structure, we fill many of the top US graduate programns in Technology & Sciences by as much as 50%. MIT has over 10 Indian professors in EECS dept alone, and this looks to increase substantially over the next decade as more an more American students stop doing PhD and Indian PhDs are increasing. Thus, we have a huge knowledge pool to bank on – thousands of Indian profs and PhD students who come from India every year.

    It just requires some guts and policy change from Indian govt – most importantly with respect to reservation. If it comes to the point where brain is what one requires to enter big institution and not community certificates and backdoor entrances, we could create MIT and Stanford’s within a decade in India.

    Comment by Balaji Viswanathan — December 10, 2006 @ 7:39 am

  22. Interesting post. I’ve just returned from San Jose and read that article in the paper. There is certainly a mobile revolution taking place in India and I hope it can contribute to the creation of an Indian technological giant.

    It seems as though your post is suggesting that the lack of world-class institutions of higher learning is the only, or predominant reason, why it is improbable that the next Google will come from India. I’d appreciate it if you could clarify that point. Thanks.

    On the whole, this is a great blog. Keep up the good work!

    Comment by Hari Ramanathan — December 12, 2006 @ 3:45 am

  23. More than universities what we need is good primary school education. It is now an accepted fact that intelligence and creativity is honed in our early years. Our school system tries very hard to squash these qualities.
    I personally do not believe that academic intelligence is what gives rise to great inventions or great companies.

    Comment by Nita Jatar Kulkarni — December 12, 2006 @ 9:02 pm

  24. >>do not believe academic intelligence is what gives rise to great inventions or great companies.

    You should definitely search for the origins of SUN, Yahoo, Google, HP… If somebody says that Silicon Valley has no relationship with Stanford/Berkeley, they should be extradited to the nearby Nevada desert or the middle of Oregon :)

    It’s only Indian academic mentality that says that universities and entrepreneurship has no relationship. MIT, Stanford, Princeton, Caltech and Berkeley are part of parcel of American innovation and research. HBS, Sloan, Stanford, Kellog and Wharton are the core parts of the mega Fortune 500 companies. And Yale, Princeton and Harvard are core of American politics – Congress & Oval Office.

    One thing that India failed is the lack of imagination to associate our educational system with the rest of the society.

    Comment by Balaji Viswanathan — December 13, 2006 @ 4:42 am

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