Pigs may not fly, but
they are looking to replace conventional electricity grids.
they are looking to replace conventional electricity grids.
Obituaries in NYT and Fortune).
He was probably the only business thinker who could get away with saying that unions were forces for the good. Here is one of my favourite Peter Drucker exchanges:
"I was at a point where I could have started a consulting firm, Built to Last Consulting, or something. The first thing he asked was, 'Why are you driven to do this [start a consulting firm]?' I said I was driven by curiosity and impact. And he says, 'Ah, now you're getting in the realm of the existential. You must be crassly commercial.'
"For a moment I had this image of going to Yoda for wisdom, and having him say, 'Have a Coke!' But he was either testing me, or it was a joke. I'm not sure which.
"The huge thing he said to me was, 'Do you want to build ideas to last, or do you want to build an organization to last?'
"I said I wanted to build ideas to last.
"He said, 'Then you must not build an organization.'
"His point was, the moment you have an organization, you have a beast to feed—this army of people. If you ever start developing ideas to feed the beast rather than having ideas that the beast feeds, your influence will go down, even if your commercial success goes up. Because there's a huge difference between teaching an idea and selling an idea. In the end, what are you in a battle for? You're battling to influence the thinking of powerful, discerning people. If you ever abuse that trust, you can lose them. So the moment that arrow changes direction, you're dead.
"He said something else important: 'The real discipline comes in saying no to the wrong opportunities.' Growth is easy. Saying no is hard.
"I'll never forget asking, 'How can I ever pay you back?' and his saying, 'You've already paid me back. I've learned so much from our conversation.' That's when I realized where Drucker's greatness lay, that unlike a lot of people, he was not driven to say something. He was driven to learn something.
"I feel proud that I followed the advice. It's a huge debt. I can never pay it back. The only thing I can do is give it to others. Drucker had said, 'Go out and make yourself useful.' That's how you pay Peter Drucker back. To do for other people what Peter Drucker did for me."
Jim Collins writing about the best advise that he ever got.
... I have talked about The Adventures of a Bystander (one of his books) in a previous post.
The result is that firms in India pay far more than rivals in China to produce, distribute, and export their products. Consider the plight of Bharat Forge, India's most successful auto-parts supplier. Bharat has the world's largest single-site forging facility. Over the past five years the company has become a trusted supplier of crankshafts, axle beams, and steering knuckles to top-tier clients such as Toyota, Ford, and DaimlerChrysler. Exports account for 40% of sales. But Bharat is located in Pune, an industrial city 75 miles from Mumbai. CEO Baba Kalyani says that, based solely on distance, his trucks should be able to travel to Mumbai's port and back two times each day. Instead, even with the recent completion of a new highway linking the two cities, a roundtrip typically takes three days. Kalyani figures infrastructure-related delays at the port put him at a 17% cost disadvantage relative to overseas competitors.
From India on the Move, Fortune, Nov 4
In response to this article on CNET, Google instituted a policy of not talking to CNET until July 2006. I must admit that if I were Eric Schmidt, I would not have liked the uncalled for sensationalism at the beginning of that article either. But Google's reaction reminds me of GM's pulling of ads from LA Times a few months back.
Joi Ito's is a liberal Japanese voice on the net (he is better known as an investor in some of the more interesting Internet technology companies - Technorati, flickr, MovableType etc.) His post on the anti-Japanese protests in China and the remarks that it provoked among his readers are interesting reading. (He also linked to this post about the reaction of Chinese bloggers).
Tyler Cowen has a brilliant summary of some of the commentaries on the weblogs on the American threat of using tariffs to force the Chinese to revalue their currency (even shorter summary - A lousy idea).
Elsewhere, he also expressed the belief (albeit a faith-based one) that sooner or later China is likely invade Taiwan and parsed a dense economic paper that concluded that a wealthier China may not necessarily lead to democratization. So much for the Chinese stock markets .....
Longtime readers may be familiar with my interest in China. Lately, it has been hard to keep up and I have mostly given up trying - except for in a few areas.
One of my interest areas is the evolving confluence of interest between Indian IT industry and China - thanks to the Chinese determination to catch up with the IT industry in India and the impact of the falling US dollar and rising wages for the Indian IT companies.
There were two interesting stories on this subject in FT and WSJ last month. The Financial Times story captured the start-up frustrations of the Indian IT companies that have set up development centers in China. There seems to be two main problems - 1. Inability to quickly find and hire a large number of English speaking developers in any Chinese city in order to quickly scale up for new projects 2. Lack of good project managers. It included an interesting interview with an Mphasis manager who said that for the time being they are looking to get experienced managers from from India to lead large projects. There was a story in Wall Street Journal in the same week that profiled a Chinese software company that has hired a few executives to (among other things) rewrite the e-mails from their developers to their US clients. These exectives are also trying to wise up the developers on the 'American way' (e.g. Dont be profusely sorry to an American when you do something slightly wrong. It doesnt go down as well in the English language and the client may think you are faking it). It interviewed some of the people inside this company and they talked about how determined they are to win big business from North America and how they are looking at this cost as an invesment worth making.
I think it will be a few years before we know how successful China's push towards IT services is going to be.
But earlier this month CNET published a short interview with Sudip Banerjee of Wipro. I thought it was very interesting and covered some of the same ground. Check it out.
Surfing through PHPkid's weblog, I ran into this joke about IT project estimation.
It reminded me of this excellent post that I read sometime back on the trade-offs between scope, time and cost in project management (some talk about the same stuff in terms of time, cost and performance) . Obviously, most of us do not have the luxary of 'hiring' the right clients - but we do have the responsibility of setting the expectations rights (wherever possible).
Incidentally, Johm Musser of Columbia University has the most comprehensive online resource on project management that I have seen.
Well, conversations about peak oil are back in currency.
The Oil Drum is a new weblog anchored around the idea that an energy crisis is inevitable - wheather it happens now or 5 years later is beside the point. It is run by two pseudonymous academics who see "Petroleum economy as the fundamental lynchpin of our present democratic society." (via Kevin Drum via Majikthise).
They linked to this very good primer on peak oil.
Doug Henwood's Wall Street is now availble free for download under a Creative Common license (Here are the recent Crooked Timber and Brad Delong posts on the subject)
Henry Hazlitt's Economics in One Lesson is also available free for download.
(links via Mefi)
Carly Fiorina - the HP CEO - has resigned.
Fortune had a devastating story on her last fortnight (it should become available free to all by next fortnight). As I was reading it, I tried to imagine Carly and the HP board reading it. It wasn't pretty.
Today, a Romenesko reader indicated that this story by Carol Loomis had influence beyond people like you and me. This is particularly ironic considering the fact that Fortune bears some responsibility for Carly's reaching iconic status in tech sector.
There has been some talk of Carly joining the Bush administration. That would be apt.
- McKinsey Quarterly recently published a report (unavailable without priced membership) about the comparative advantages in IT industry for India and China. The report concluded that Indian IT industry's economy of scale, established ladership and business practices provides India with powerful advantages. Chinese IT industry - because of its highly fragmented nature - would take a long time to catch up. It seems to have gotten wide coverage in Indian media.
- I recently read news coverage of an interview with Narayan Murthy (Infosys Chairman) in which he talked about the infrastructure burdens of the cities (power, roads, water, transportation) and how these are limiting the growth of IT industry in India (I lost the link).
-International Herald Tribune has a story about how Wipro is trying to widen its talent pool:
"We build our own engineers," says S.K. Bhagavan, who oversees Wipro's in-house "talent transformation" team of 70 faculty members. In a year, Bhagavan's team conducts 150,000 hours of training, and that includes coaching in "soft skills" needed by a work force that interacts with clients globally.
... At an aggregate level too, India needs to convert more of its generalist scientific talent into software professionals to sustain the industry's competitiveness. Of a total population of 7.7 million science and technology professionals in 2000, about half, or 3.8 million, were science graduates. Only 970,000 were graduate engineers, according to an estimate by the Institute of Applied Manpower Research in New Delhi. While India does need more science doctorates to carry out research, it doesn't need more unemployed physics graduates.
Seven out of 10 employees hired in the last three years by Infosys Technologies, Wipro's slightly bigger competitor by market value, were fresh graduates. In order to raise the quality of the talent it hires, the Bangalore-based company has released some of the course material it uses to train employees to universities under a $2 million "Campus Connect" initiative."
- Joel Spolski gave some interesting advise to computer Science graduates in USA a few weeks back (via Kingshuk). They are as applicable for Indian developers:
Have you heard of the latest fad, Extreme Programming? Well, without getting into what I think about XP, the reason you've heard of it is because it is being promoted by people who are very gifted writers and speakers.
Even on the small scale, when you look at any programming organization, the programmers with the most power and influence are the ones who can write and speak in English clearly, convincingly, and comfortably. Also it helps to be tall, but you can't do anything about that.
It does give you a sense of proportion:
And on July 14, 1846, a young U.S. Army captain was posted from Charleston, S.C., to a new base in Buena Yerba in the Alta California territory. How long do you think it took him to arrive in what we now call San Francisco, as fast as the U.S. Army could muster? The trip took six and a half months.
The captain and his wife wrote letters to each other every day. In April 1847, he finally got his first letter from her; she had written it in October 1846. When this soldier, William Tecumseh Sherman, became famous for his March to the Sea in 1865, his two priorities were to destroy the railroads in the Southeast and cut the telegraph lines. He knew exactly what he was doing.
In three breathtaking years from 1866 to 1869, travel time from the East Coast to California dropped from six months to roughly two weeks—and nearly everyone who crossed the continent survived. Suddenly, food and medicine could traverse immense distances in time to save lives. Suddenly, today's New York Times described what happened in Europe yesterday, instead of what had happened two or three weeks earlier. Suddenly, people could learn that it was a matter of life and death for them to get somewhere immediately; and they could actually get there.
Now how could anyone claim, as one venture capitalist did in early 1999, that the Internet is "the greatest invention in the history of the world?" It's simply an incremental improvement in the high speed at which we already share information by phone and fax and FedEx. It's a big deal, but the telegraph and the railroad were at least as big.
From Jason Zweig's speech to Morningstar Investment Conference in June 2001
Last month Tyler Cohen threw down a challenge to those painting a gloom and doom scenario for the US economy:
While not exactly that, Jeremy Grantham has gone on record on a forum this month as having 10% of his portfolio in S&P shorts.
The complete transcript is here. (It is accessible only to subscribers right now.But it should become available to all by the next fortnight. It is certainly worth reading in its entirety)
In the same panell Milunovich also noted that he is 70% cash and commodities (someone should have asked him - cash in what currencies) But then Milunovich doesnt have the sort of brand equity that Grantham has ....
They managed to scare the hell out of me!
Tyler Cowen lists reasons for longer lines in some stores. I think there is another reason too:
8a) Some stores do a better job of dicing and slicing customer behavior data that lets them develop more sophisticated plans for the number of registers that need to remain open in a given store/location/ season/time/day. One company headquartered in Bentonville has a bit of a reputation about that! Not everyone is equally good. (In one famous example i read recently, Bank Of America researchers found that if they provide cable Television on top of their teller counters, the perceived wait time would go down by as much as 30% (I think). The cost of HDTVs per counter in that geography was much less that the cost of implementing an EAI project that would have reduced the actual wait time. Increase in revenue per branch because of the TVs were projected to to be higher than the cost for the TV purchases. The TVs were in. The EAI project was thrown out)
b) The point about impulse purchases is related to this. The success of 'impule buy' merchandising is not only a function of the instinct of the merchandisers / store buyers, but also (I would say more so) of the sophistication of the business analytics applications used by the retailer.
c) Some stores have buggy software or messed up user interface. We go to 'Stop and Shop' and 'Shoprite' for our groceries. Shoprite's software has trouble reading discounts correctly and often brings lines to halt. But Shoprite managment deduced (correctly) that its price sensitive target audience in unlikely to walk away. Stop and Shop is at a slightly higer price point and (probably) made the necessary investment in more state of the art POS software
I think retail is one of the last frontiers. Regular Margin erosions and huge cost of implementations have made the majority of retailers risk averse.
But the debt isn't because of excessive spending in the past. India's government expenditures amount to about 15% of GDP, compared to an average of around 40% of GDP in the OECD. Rather, India's financial difficulties stem from a badly designed and administered tax system. Rates and rules for personal and corporate income taxes appear reasonable by international standards. Nonetheless, India's government collects income taxes amounting to only about 3.7% of GDP, about half that in South Korea and the other Asian tigers.
Agriculture in India accounts for about a quarter of GDP, but even wealthy farmers don't pay taxes. Export-oriented companies in the software and other industries enjoy tax holidays on their profits, although their employees do pay taxes on their personal incomes. Despite reasonable rates, tax evasion is widespread. "
From Amar Bhide's article on tax system in India
Stephen Roach's recent comments seem to have started another round of hand wringing (not that he is saying anything that he hasn’t been saying for some time in a more guarded way). Respected investors like Gross and Buffet had been exhibiting a similar belief either through word or deed for quite some time now. (For a gallows humor perspective read this Daniel Gross story on John Snow)
If the subject interests you, Nouriel Roubini’s web page on US current account deficit seems to be a good place for keeping track of the big picture.
The Wikipedia entry on fiat money is nice reading.
backgrounder in NYT about the impacts of the falling dollar :
"...There are at least three schools of thought on whether a dollar collapse is likely and, if it happens, what it would mean.
One group, which includes the Federal Reserve chairman, Alan Greenspan, contends that ...the dollar may well decline in value,.. but the decline would be gradual and would help reduce American trade imbalances by making exports cheaper and imports more expensive. The Bush administration goes one step further, arguing that America's huge foreign debt simply reflects the eagerness of others to invest here....(Ed: Dr DeLong demolished the treasury department argument in this post).
A second school of thought holds that foreign governments like China and Japan will continue to finance American borrowing and keep the dollar strong because they are determined to sustain their exports and create jobs.
But a third school, which includes officials at the International Monetary Fund, worries about a collapse in the dollar that would send shock waves through the global economy. ..... That group argues that the dollar needs to depreciate another 20 percent against the other major currencies but warns about a run on the dollar that could reduce its value by 40 percent.
A collapse of that size would severely affect Europe and Asia, which ave relied heavily on exports to the United States for their growth. steep drop in the dollar could lead to higher interest rates for the federal government and American private borrowers, as foreign investors demanded higher returns to compensate for higher risk. And it could expose hidden weaknesses among financial institutions and hedge funds caught unprepared.
"There is a school of thought that the U.S. can keep borrowing forever," said Kenneth S. Rogoff, professor of economics at Harvard University and a former chief economist at the I.M.F. "But if you add up all the excess saving being thrown out by the surplus countries, from China to Germany, the United States is soaking up three-quarters of it right now."...
For Mr. Rogoff and several other economists, the question is not whether the dollar declines - but how fast and how far the fall turns out to be."
What does it mean for India?
Bad things obviously. We are sitting on the biggest reserve of US$ in our history. I read a few news stories that suggested that Chadambaram is looking to invest them in infrastructrue projects. (I wish we would use it to pay off part of our debt!)
The IT Industry is probably slightly better prepared for the short term. The big three have long since recognized that future holds a stronger Rupee. They may be able to buy themselves some protection fo the immediate future, . But in long run, it would obviously impact their revenue stream adversely - about half of India's IT revenues come from USA.
Unfortunately, this is happening at a time when the effects of rising staff cost are also being felt. The bigger firms are increasingly looking towards China and elsewhere to bridge the resource gap. (I should note here that right now English speaking Chinese software engineers are more expensive. But Indian salaries should reach parity soon. On the other hand, the churn rate in China is lower. They also have a larger pool of untapped IT personnel). Add to this, increasing commoditization of many sortware support / maintenance activities.
IT sector in India is staring at serious margin erosion. I think we are looking at a shake up in the industry in the next two to three years. Obviously like all such naval gazing, this could be way off base.
This article in Outlook looked at a different set of parameters and reached similar conclusions.
John Heilemann has a nice story about Nandan Nilekani (the CEO of Infosys) in next month's Business 2.0.
Incidentally, the slides of the presentations from Milan 2004 (the Infosys client meet) now seem to be available online.
A few days back, Amardeep Singh, (who writes a lively and erudite weblog primarily about South Asia) linked to an intriguing article on NYT describing an upcoming article by Paul Samuelson (apparently) questioning the economic arguments for free trade in services. Obviously questioning free trade is nothing new, but what is unusual about this is that an economist of Samuelson’s stature is writing it.
In the context of the article, Amardeep wanted an explanation of Comparative Advantage theory of Ricardo. A commentator has already linked to the Wikepedia entry on a comment to his post.
As a non-economist, I found this page to have the most lucid explanation. It also linked to “Principles of Political economy and taxation” in its entirely in both html and PDF. Modern theory of comparative advantage has apparently come a long way since 1817 when Ricardo wrote it, although Ricardo remains something of a patron saint of free trade.
One the reasons people keep taking potshots at comparative advantage theory is because the argument for free trade is built on the mathematical foundations provided by it. You can’t fight the idea for free trade in respectable economic circles without at least euthanizing Ricardo (kind of like you can’t talk about creationism without taking on the elephant in that particular room, Darwin’s theory of evolution).
As early as 1994 Krugman wrote a paper entitled Ricardo’s difficult idea that anticipated and addressed most of the challenges to the comparative advantage theory on the op-ed pages. (It is a little unfortunate that Krugman’s reputation as a political commentator seems to have overshadowed his academic reputation as one of the finest economists of his generation; he is also one of the most lucid writers on political economy for laymen like us). In order to get a context, it is worth reading that particular Krugman paper when reading any critique of Ricardo.
The last prominent op-ed attacking comparative theory that I had noticed was in January 2004; written by Charles Schumer and Paul Craig Roberts. This response by Noam Scheiber in TNR to that article was particularly witty. I think it still remains relevant as a rejoinder.
However, it would be ridiculous to even suggest that Samuelson doesn’t get Ricardo. (Although I do think that Western thinkers often make certain wrong assumptions about outsourcing and Dr Bhagwati in an interview for that article suggested as much). Stanislaw Elam once asked Samuelson to name one theory, which is both true and non-trivial in the social sciences. After several years Samuelson replied that it is the theory of comparative advantage.
I don’t expect to get Samuelson’s scholarly article when it appears (when economists write for other economists, I suspect they take great care to ensure that it is inaccessible to those outside the fold!). Perhaps someone like Edward Hugh or Dr Delong would interpret that article for people like us!
I finished reading Paul Krugman's Return of Depression Economics a few weeks back. It describes the causes behind the currency crisises and the impacts of the resulting meltdowns that effected most of the South East Asian and Latin American economies in the waning years of the nineties.
At that time, I was not terribly interested in international political economy. Outside of a perception culled from cursory readings of BusinessWeek et al that the 'paper tigers' in South East Asia are having a tough time and it is good for them in the long run, I did not really have a clue.
Krugman's book provides a lucid, witty and frightening perspective of the global economy at that juncture and surprisingly for a free-trader, holds IMF responsible for much of what went wrong. All of us in India and China who are currently going ga ga over our own emerging economies should read up on the emerging economy meltdown of the nineties. It is scary how fragile our national prosperity really is and how little it takes for it to go wrong.
Fred Wilson, a New York based VC agrees to Guy Chiarello's (Morgan Stanley CTO) comments:
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):
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.
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.
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 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.
There has been a spate of coverage recently about the Vajpayee's summit meeting in Beijing. Frankly, it is pretty rare for good news from South Asia to get so much coverage here! I suspect part of the underlying cause is the subterranean Western media paranoia about China.
Like most other Indians, I am a tad obsessed with China. And would probably spend the next few days trying to post my thoughts on the subject.
In a excellent report titled 'Two systems, one grand rivalry' Economist (June 21-23, 2003) compared the two economies (it is not available free):
India's figures are understated, they say, because they exclude foreigners reinvested profits, the proceeds of foreign stockmarket listings, intra-company loans, trade deficits, financial leases and so on. China's, on the other hand, are inflated by "round tripping of domestic investment through Hong kong. ...As for FDI, Sadhana Srivastava, in an article in India's Economic and Political Weekly, has recalculated both India's and China's figures for the year 2000 to make a fairer comparison. He found that China's FDI fell by half, while India's more than tripled. This meant that, as a percentage of GDP, there wasn't much differenc; 1.7% for India against 2% for China.
.....However, even on this basis, India was still attracting just 40% of the amount of foreign investment that went to China. Much of the gap is attributable to the activities of overseas Chinese ..they have ploughed back far more of their money into the motherland than have non-resident Indians..."
It goes on to ask
Much that holds India's economy and businesses back has little to do with democracy has such: corruption, fiscal mismanagement, a lack of international ambition and a history of over-protection at home.Where India overcomes these obstacles, and has a clear competitive advantage- as in software and other information-technology services- it can be a huge success...The way India's democracy has evolved has undoubtedly complicated policymaking. Coalition governments give disproportionate power to regional and caste based minority parties. Worse, the electoral time table, with many important states holding polls between the national votes, tends to put governments into cautious, electioneering mode for much of their time in office."
I completely agree that endemic corruption and red tape are huge hindrances against the growth of manufacturing sector in India. It not only acts as a break to existing ventures, it stops young people from starting out on their own.
But one the key reasons behind China's gigantic leaps in the manufacturing sector (and here I am on dangerous ground) is the incredibly cheap Chinese labour. India does not have that sort of cost advantage. In an earlier story Economist had referred to it,
Shoes, semiconductors and televisions are expected to follow. .. Heinrich von Pierer, the boss of Siemens, a big German electronics and electrical conglomerate, has called the country “a global factory” for his company. Comparisons are made with Manchester during the Industrial Revolution. China, it is said, is becoming the “workshop of the world”.
A few weeks back, I read a fascinating conversation on the net. While commenting on James Surowiecki's column on the impact of the spread of SARS on world economy, Paul Krugman took us on a historical analysis of causes behind the rise and fall of slavery in Western civilization.
But now suppose that for some reason land becomes abundant, and labor scarce. Then competition among landowners will tend to push up wages of free workers, and the ruling class will try, if it can, to pin peasants down and prevent them from bargaining for a higher standard of living. In Russia, it was all about gunpowder: suddenly steppe nomads were no longer so formidable, and the rich lands of the Ukraine were open for settlement. Serfdom was an effort to keep peasants from taking advantage of this situation. (And if I've got it right, those who were venturesome enough to run away and set up outside the system became Cossacks.)
Meanwhile, the New World opened in the west. Sure enough, the colonizing powers tried various forms of indentured servitude - making serfs of the Indians in Spanish territories, bringing over indentured servants in Virginia. But eventually they hit on a better solution, from their point of view: importing slaves from Africa."
He ended by asking ....
Dr Brad De long addresssed it in his weblog:
Towards the end of an otherwise excellent article published last year (that I had linked to earlier too), Kenichi Ohmae bared the dark secret of China's cheap labor:
The Western debate over China’s political acceptability should not be cast as a simple matter of right or wrong, but of when and how. Politically, China is comparable to the United States of 1800: an emerging nation with high ideals but widespread poverty and a great many practices that other regions find intolerable. People tend to forget that the U.S. did not establish civil rights legislation until the 1960s. A decade or two of economic growth, under the shrewd and highly motivated leaders of Chung-hua Inc., will provide China’s people with the necessary education in the ways of capitalism,...."
I am not claiming here that labor in India does not operate under slavish conditions. But that sort of activity happens largely away from the glare of governmental inspection processes in semi organized sectors like bangles, carpets etc. In the vast majority of larger manufacturing companies, in spite of the all the corruption, all the thuggery, labor has recourse to unions and access to press and the judiciary.
Neither do I mean to denigrate the superhuman achievements of China in all aspects of business in the last two decades. But I also do believe that the Chinese advantage on cheap labor partly derives from the nature of government that it has at local levels. it is foolish to compare oneself or even try to compete with it on low end cheap labor products. I'll try to take off on this tomorrow.
As I read it on the train on my way to New York, I felt that this editorial was right on the mark. No one expected that the very next day Mr. Purcell will go on to prove how justified those concerns are.
I must also admit that I was pleasantly surprised by the sudden demonstration of SEC's backbone. Of course it could also be because Mr. Donaldson is set to testify before the senate next week. (Donaldson's letter here).
I caught the end of an interesting discussion about Wal-Mart's decision to offer cheap financial services (registration required) on Kudlow and Kramer last night.
The commentators had it right. Competitors have consistently lost out by underestimating Wal-Mart. K-Mart went into bankrupcy trying to compete with Wal-Mart on price. (well, that wasn't the only reason). If Wal-Mart gets into in-store financial services, they would give everyone a run for their money.
Wal-Mart is one of the very few retailers that are opening a number of new stores this year (the linked page probably won't be available until next week unless you are a subscriber to the print edition). It is also one of the few retailers that has consistently been on the vanguard (pdf file) of technology innovations that has revolutionized the retailing landscape in the United States in the last 15 years. And they learn fast. Not so long ago, their e-business initiative was sputtering. An acquaintance of mine consulted for the team that was putting up the Wal-Mart e-commerce site in '99. The business managers were apparently clueless about how e-tailing works. The version they were working on wasn't up by Christmas. Wal-Mart made them work through Christmas. Now BusinessWeek has Fleming saying that the "site will be profitable ahead of plan -- though he won't say by when".
I have a lot of admiration for the discipline, agility and innovative leadership of the company. Yet I hardly find anyone in the industry who actually likes the company. The requirements for doing business and the bare knuckles burgaining turns off the suppliers (yeah, they haul you through coal). The competitors of course don't like them. They seem to inculcate a cult like devotion in their employees that made even 'The Economist' uneasy. And when they set up shop in the subarbs it hurts the small businesses which doesn't exactly make them popular in a lot of quarters. But shoppers like me love their prices and their range. And at the end of the day that's all that counts.
yahoo is migrating its application logic from C++ to PHP. Radwin has an interesting slide deck online which explores the logic and the evaluation criteria that Yahoo used to choose PHP (via algorhythm).
I don't see this as part of a broader trend of larger enterprises adopting open source. Open source does have a great deal more credibility than it did a few years back. But Yahoo has always been an early adopter of open source and in that it is different from other Bay area technology companies.
Large scale adoption of open source in large companies, specially non-IT fortune 500s, is probably a long way away. This is partly because of the conservative nature of large businesses, partly becuase of the ingrained belief of their advisers that 'commercial software is better supported and is more stable' (as an entity). Those mainframes are not going to go away easily.
But I do see this as part of a broader trend by larger companies to cut cost by whatever means possible. As recession continues and the IT budgets stay frozen across the country, layoffs have reached saturation points in most places. Companies are now showing innovation and smart thinking in their IT planning. Many are sending a great deal of work offshore. There was an excellent article in McKinsey Quarterly sometime back on offshore development which I wish I could link to here. Unfortunately, they have now made the online version priced.
Anil Dash has an interesting commentary about software project cost and time overrun in the context of this New Architect story.
My take:
1. A certain amount of responsibility on how to buy software products and how to manage software projects do lie with the buyer. The kind of enterprise software referred to by 'The New Architect' Magazine is usually bought by medium to large enterprises.
For the last 5-6 years, there had been a huge gulf in the the salaries of the developers engaged in Internet and enterprise software development and in the salaries of developers engaged in government, fortune 500 et al. I am not trying to insinuate here that the later type of enterprises did not get bright people. But anecdotal evidence do suggest that the majority of sharp kids working in the OO / current generation of enterprise software / emerging technology areas worked for start ups / product companies. There had been (and probably still are) unequal distribution of talent in these areas. Many a times, enterprises taking software purchase / implementation decisions did not get quality advise from their IT departments.
2. Consulting companies chosen to advise enterprises have more often evaluated products based on self interest rather than on client interest. What I said on January 25 (my links are acting funny, so I have quoted from there) about technology consulting companies while on the subject of corruption in Anderson is still valid:
"Technology consulting companies are ..... badly compromised by their alliance partnerships. There are very few consulting companies that doesnt pitch (subtly or directly) products in which they have a vested interest to their clients. It has now come to a stage where many good product company will not look to ally itself with a technology consulting company if it does not bring in business to the product company. In many case, it would need to commit sizeable revenue to the product company to be accepted as a partner. As a result, most consulting companies today are becoming more hustler than consultants. Most of the clients who went for the big-buck e-business roduct implementations in the last few years simply did not need to go into that kind of expenses to achieve what they needed. They allowed themselves to be steered them towards the big ticket items by the consultants. The chicken is now coming home to roost."
3.Because of the exponential growth in tech sector there simply wasn't enough competent resources available to do all complext project justice. A well known practice among some consulting companies was of pitching for a project with the best team and switching it with a less experienced team later. A less savvy client will not know how to handle practices like these.
4. Sometimes, the technical team would deliberately steer companies in directions in which they want to have exposure rather than directions which are most practical/beneficial for the organization. Many of the development efforts that were undertaken in the last few years even in smaller start ups were simply started because some people wanted to have exposure to sexy technology. I know of at least one CTO in a web based service provider company (doing well I might add) who feels many of the EJBs that were developed adn deployed earlier was unnecessary, badly designed and added significant performance overhead. He is now looking to slowly rearchitect/reengineer his platform.
All these factors also contributed to the current mess in the IT sector
This is a worthwhile cause. It is awesome that some people are actually trying to do something about the Verisign rip-offs. Please help spread the word.
The current issue of Harvard Business Review (unfortunately unavailable online) has a great series of articles on innovation, what fosters innovation and how to harness it. Theodore Levitt went against the tide and said in an article that innovation in the workplace is not necessarily a great thing. It has some good articles. If you have access to it, take a look.
Anil says:
"The Common Language Infrastructure component of Microsoft's .NET framework. (which is what runs .NET code that's been written) has been written for, and already compiles on, FreeBSD for x86. ....What it means is, Mac developers should be able to download the framework and port it in relatively short order, given OS X's BSD underpinnings. "
This kind of segues into what I posted on 7th June about Microsoft thinking about making .Net available on Apple.
My permalinks don't appear to be working. I just found out when I tried to link to my own post!. This is rather ironic since I was sniggering after reading about Andrew Sullivan's permalink troubles in Lakefx. Hopefully, I'll fix it tomorrow.
This, I have to share.
Last month, one of my colleagues and I went to a tech event in a reasonably cool venue in San Francisco. It was followed by a reception. After giving me a sermon on how very important it is to network with the right people, he decided to lead by example. He attached himself to a foursome of rather old and worn looking people and started talking to a lady who looked like the leader of the group. After a while, it was apparent that he was not making much headway. This is the relevant part of the conversation as described by him.
So, What kind of knowledge management initiatives do you guys have?
Ah all kinds...
Anything interesting that you are doing?
I distribute leaflets for the UCSC (University of California, San Francisco)
Silence while my friend tries to recover.
Your friends too?
No, they just came for the food. Where is the food?
Umm...there is no food today. Only booze.
This week, I was to another expo in San Jose (for those who don’t know; its about 50 miles South from San Francisco). And the same lady was there. Gently sipping white wine and nibbling at some cheese. She had different companions this time.
I am glad that someone has finally gotten the better of the PR companies.
MIT Technology Review has profiled 100 top technology innovators under the age of thirtyfive. Its a fairly eclectic list. Made me wonder, what am I doing!
Kenichi Ohmae has written a terrific article on China's economic juggernaut, 'Profits and Perils in China, Inc.' (registration required), in the current issue of strategy + business. I dont like his implied advise to the Western governments to ignore the human rights situation in China. But as reportage, its a great read.
As an Indian, I am sad that India has not been able to achieve what China is poised to. As a strong believer in free market economy and human rights, I am slightly alarmed by the conclusions drawn by Ohmae. But his description of what he calls Chung-hua Inc. (Chung-hua, or Zhong Hua, as it is spelled in Beijing, translates into English as “China,” and actually means “the prosperous center of the universe.”) sounds right.
Russia is finding the going much tougher. Esther Dyson is probably the only person who seems really positive about Russia's economic outlook. In the current issue of Wired (not yet available online) she had forecast that in the next few decades Russia will be ahead of Uniter States in software development. But software development expertise alone, unless it is followed by infrastructural development in other spheres, won't be able to bootstrap the entire country's economy. It would, however, create a large cosmopolitan middle class that would become a catalyst for all sorts of interesting social changes. We know that one in India.
Whoever started the buzz that the IT sector is recovering deserves to be hung. If anything, in the last one week it has gone back into hibernation. I had been to the campuses of two of the Bay area tech behemoths in the la