Flattened World: America, China, and India…a Travelogue

I just returned from a brief vacation to India where I visited Bangalore, where I was born; New Delhi, India's capital; and Agra, home of the Taj Mahal. The long flights gave me a chance to catch up on my reading. I finished reading three books: The New Age of Innovation: Driving Cocreated Value Through Global Networks by C. K. Prahalad and M. S. Krishnan; Rivals: How the Power Struggle Between China, India and Japan Will Shape Our Next Decade by Bill Emmott; and The Post-American World by Fareed Zakaria. Reading all three books with overlapping themes —globalization, the rise of Asian giants, and America’s need to live with the new economic powers— was a nice preface to my visit to India. Here are my thoughts.

The last time I visited in India was in 2001. I flew this time, as I did then, by Singapore Airlines (SQ) — unquestionably the best airline in the world. U. S. airlines should either emulate SQ or go bankrupt, and no one will shed a tear for their demise! Most of all, the flights from San Francisco to Singapore and then on to Bangalore (BLR) [1] were memorable, thanks to the exceptional and wonderful service by SQ.
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[1] Now called Bengaluru by fanatics, thanks to the idiotic Indian bureaucrats and politicians who waste their time ‘Indian’izing English names, e. g., Bombay --> Mumbai, Madras --> Chennai, and Calcutta --> Kolkata, instead of spending money on improving the decrepit infrastructure in India; wait till the morons rename India’s capital as Dilli (Delhi) or Navi Dilli (New Delhi), just as they did New Bombay --> Navi Mumbai! As for me, I’ll stick with our English names: I still like to wear my Bleeding Madras, sip my Bombay Sapphire Gin in the veranda of my bungalow, and muse about the Black Hole of Calcutta and the Bangalore Torpedo!
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BTW, SQ appears not to hire any female flight attendants if they are over 25 years old or weigh over 120 lbs! Singapore’s Changi Airport is a remarkable city in itself. Where else can you watch movies, play Nintendo Wii, Xbox360, or Sony PlayStation, or work out in a fitness center — all for free?

Arriving in the brand-new BLR airport, which is open 24 hours, was a pleasant surprise vis-à-vis the junkie airport of yesteryears, with an illy coffee shop, Pizza Hut, McDonalds, Subway, and Baskin-Robins welcoming you at the airport! Is this junk-food heaven, globalization or a flattened world? Do you care?

Driving to my lodging in Bangalore, Cross Roads Inn, was an experience — 90 minutes to travel 40 kilometers or 24 miles. You think traffic in LA, New York, or Silicon Valley is bad? You ain’t seen nothin’ until you’ve been to India! On the way, you see ultra-modern, multi-story apartment complexes — even a scaled-down version of the Petronas Towers of Kuala Lumpur — and buildings housing offices of the likes of HP, IBM, Infosys, Microsoft, Motorola, Oracle, Tata Consulting Services, Wipro…right next to run-down buildings and abominable slums. I am convinced zoning laws don't exist in India.

IBM has over 70,000 employees in India and HP has over 28,000. And, in the tradition of many Indian employers, especially state-owned enterprises, most companies provide free transportation to and from work to their employees in the form of buses or vans. So you see scores of buses/vans hauling HP, IBM, or Oracle employees. At the airports in Bangalore or Delhi one can’t help noticing that about 50% of the passengers are professionals or businesswomen/men with laptops in HP-, IBM- or Dell-logoed carrying cases, using cell phones, and doing their work. I did not see this on my last trip.

Years ago, it would take you five to ten years to get a landline phone in India, unless you bribed a bureaucrat. Now that the telecom industry has been privatized (although there are still some state-run carriers), all you need today is a local address to get a mobile phone. I went with my cousin to a publicly held national carrier’s office and got a mobile phone in less than 20 minutes with a pre-paid plan! By the way, India today has almost 273 million mobile phones deployed and offers one of the cheapest rates in the world, at about 2 cents per minute! Internet access in cafes and coffee shops, e. g., Café Coffee Day, the Indian equivalent of Starbucks, is widespread and mostly free; you pay about 50 cents per hour of connectivity in cybercafes.

After a while, you get tired of Indian food and yearn for something American. So, I took my family for lunch at the Hard Rock Cafe in Bangalore. The place is nice, with a decent bar and friendly staff. However, the veggie burger I ordered was the worst one I have ever tasted. It was schizophrenic and couldn't decide whether it wanted to be a veggie burger or a simple peas-and-potato patty! I can buy better veggie burgers at Trader Joe's in San Jose, California! My wife, though, enjoyed her hamburger made with imported beef from the U. S.!

Talking to many of my second cousins/nephews/nieces and young professionals at local bars…er, English-style pubs, I noted that about 80% of them, unfortunately, have no intention of going to America for higher studies: They would rather pursue a career with BT, Goldman Sachs, Morgan Stanley, Reuters, or any of the multinationals cited above in India than come to the Land of Opportunity, especially now that it has become so hard to enter the U. S., following 9/11. By the way, ALL of them have read Thomas Friedman’s The World is Flat.

So, is America losing out? Yes and no. Many Indians are going to Europe and Australia for higher studies, although the U. S. still remains the #1 destination. BTW, last year Australia attracted 37,000 Chinese and 28,000 Indian students, according to an Australian gentleman I flew with from Delhi to Bangalore.

As Zakaria notes in his book, America has to learn living with other rising powers and no longer act as a policeman to the world. The Chinese are dominating the African development scene, providing aid, building highways and oil refineries…without preaching human rights. Sure, China and India’s economies are showing robust growths, but will they displace America? Not quite, yet. The infrastructure in India is a disaster. For instance, Bangalore’s population has almost quadrupled to almost 7.2 million in 40 years; yet, none of the services — water supply, electric power, housing, and roads — have kept up to meet the growth. Hour-long commutes to cover barely five miles, the wasted gasoline (or petrol, as they call it there), and the accompanying pollution…we are sure are adding stress to peoples’ lives in Bangalore. Delhi is much better where all its transit buses and the three-wheeler auto-rickshaws run entirely on compressed natural gas (CNG). It is also trying to clean up its act to host the 2010 Commonwealth Games.

How about China? China is decades ahead of India in infrastructure — roads, highways, and electric power — but is choking with air pollution and drowning in polluted water, although it is temporarily closing many factories and drastically curtailing traffic in and around Beijing in preparation for the 2008 Summer Olympics. India has a shaky surface (roads, power grids, water supply, housing…) with a solid foundation (legal system, transparency, IP issues), whereas China has a solid surface (infrastructure), but a shaky foundation (questionable legal system, lack of transparency, lax IP issues, widespread piracy…).

Bottom Line
It was good to visit India after seven years, but it is GREAT to be back in America, my home!

Enjoy some pictures below:

My alma mater, the Indian Institute of Science, Bangalore

Vidhana Soudha, Legislature Building, Bangalore

The Taj Mahal, Agra

Akshardham Temple, Delhi, world’s largest Hindu-temple complex

Bahá'í Lotus Temple, Delhi

India Gate, New Delhi, built in memory of the 90,000+ Indian soldiers who lost their lives in World War I

Everything old is new again!

I just attended a Computerworld-sponsored conference SaaScon 2008 on software as a service, held in Santa Clara, CA.

The information technology ( IT) industry loves hypes — be they thin-clients, client-server computing, object-oriented databases, ASP, ISP, MSP, xSP, virtualization, Web x.0 (where x = 1, 2, or 3), mashups, cloud computing, social computing — which drive the industry, clients get excited, and the analysts and vendors work each other. The problem with us Americans is that we do not have an emphasis or focus on history, recent or otherwise.

Specific to this conference that focused on software-as-a-service (SaaS), it was amazing to see how many attendees were excited about the concept of SaaS. SaaS is nothing new: Thirty years ago they were called Service Bureaus (remember CDC’s Cybernet?) You submitted a job with punched cards to a computer that was housed who-knows-where, got the results back, fixed any errors, resubmitted your job, and got the final results after a few runs. This was real cloud computing: You had a dumb terminal (a.k.a. green screen), usually a 3270; a computer, usually a mainframe, and a network that you didn’t know what it consisted of. You probably had a TI Silent 700 terminal with thermal paper to input and print out the results, and not a desktop/laptop with lots of memory, disk space, GUI, and a wide-screen monitor. But, you got your work done, although it probably took you longer than it would today.

So, is SaaS going to take over the world? No, but it will play an increasingly significant role. Many defense contractors, banks, and financial-services companies are not big fans of SaaS because of security and privacy issues. Nicolas Carr, of the IT Doesn’t Matter fame, has a new book The Big Switch, where he essentially expounds the concept of utility computing (aka SaaS) that Larry Ellison of Oracle and Scott McNealy of Sun Microsystems talked about over ten years ago. However, Mark Benioff of salesfocre.com actually delivered the solution. Scott even predicted circa 1996 that pretty soon all appliances in your home would be networked and that your light bulbs or fluorescent lights would beg to be replaced before they die. Today, 12 years later, none of the appliances —toaster, microwave oven, refrigerator, freezer, washer or dryer — in my home have an IP address! As the late, great Arthur C. Clarke said decades ago, and I am paraphrasing it, we tend to overestimate the short-term implications and underestimate the long-term implications of a new technology.

New technologies, for the most part, supplement existing ones, and not totally supplant them. We believe SaaS will steal some thunder from the traditional perpetual-licensing model, but will not totally replace it.

What can do the Democrats in?

While Barack and Hillary are debating as to who is going to answer that phone at 3 AM, McCain flies to the Middle East to visit ‘friendly’ (read ‘oil-rich’) countries there. So, could in-fighting among the Democrats will bury them?

I suggested to a friend of mine a month ago that Barack should agree to be Hillary’s VP candidate; he laughed at me. Barack better settle for it; otherwise, as my friend speculated, the ever-shrewd Republicans are going to dig up tons of dirt about Chicago southside-raised, liberal-Princeton-student-in-the-1970s Michelle Obama, and use that dirt to bury Barack. And, with our country in such an economic mess —the dollar at an all-time low against most major currencies, oil flirting at $110 a barrel, gold over $930 an ounce, housing and sub-prime mortgage meltdowns — the last thing we can afford is another four or eight years of Republican idiocy and ideology.

How dumb can a state be?

In a recent article, The New York Times reported that the lawmakers in the State of West Virginia, where I obtained my Ph. D., gave final approval to a bill that allows hunting education classes in all schools where at least 20 students express interest. My question is: How more stupid can you be? Whereas states such as California, where I live now and call my home, and ‘developing’ countries such as BRICS (Brazil, Russia, India, China, and South Africa) are investing in biotech, software, nanotechnology and other technologies that are shaping the 21st century, here is a stupid state investing in hunting education! This is akin to the Middle Eastern countries investing in education where almost 55% of the PhDs awarded are in Islamic studies! The modern world is being run by neither the 26 English alphabets nor the hundreds of Arabic or Chinese characters, but by ‘0’s and ‘1’s — it’s a cyber world.

West Virginia ranks among the bottom five of the 50 states in the U. S. in almost all categories — per-capita-education spending, healthcare, infrastructure spending, corporate tax incentives…And, here is a state that, for the first time in its history, voted for a Republican presidential candidate — George Dubya — in 2000. Why? Because Dubya in the last minute flew in NRA President Charleston Heston who convinced the dumb mountain dwellers that, if they voted for Al Gore, they would lose their rights to own guns and couldn’t hunt anymore! The result: West, by Gawd, Virginia is still stuck in the 20th century and, with its corrupt politicians, is emulating third-world countries. West Virginia is a beautiful state, but its politicians are making it ugly.

Is Detroit Dead as a Dodo? Part 2

We wrote in the Is Detroit Dead as a Dodo? blog below that over 70% of the cars sold in Silicon Valley have foreign labels. The San Jose Mercury News reported in its Friday, July 20, 2007 edition the top 20 vehicle brands sold in Santa Clara County from January through May, 2007.

Here is the list:

Toyota Prius 1,627
Toyota Camry 1,611
Honda Civic 1,504
Honda Accord 1,211
Toyota Corolla 1,168
Honda Odyssey 823
Toyota Sienna 765
BMW 3-Series 721
Ford F-Series 591
Toyota Tacoma 589
Lexus RX 497
Honda Pilot 489
Chevrolet Silverado 483
Toyota RAV4 468
Mazda 3 413
Lexus IS 394
Lexus ES 390
Nissan Altima 374
Acura MDX 351
Infiniti G35 31
Total 14780

Note there are only two ‘American’ cars in this list and foreign labels make up for over 92% of the total! By the way, The Merc also reported that 30,463 new cars and trucks were registered in the Santa Clara County between January and May 2007, but did not provide a breakdown by make and model.

So, Detroit is still a dodo in the Valley!

Whither America?

There have been countless news reports and articles in broadcast and print media during the past year on how China and India’s explosive economies will marginalize the U. S. over the next 20 to 40 years. We say, “Not so fast.”

To back what Jack (yes, Neutron Jack, the former head of GE) and Suzy Welch wrote in a recent issue of BusinessWeek­­, the news of the death of American leadership is highly exaggerated. America has a solid political system and one of the most, if not the most, corrupt-free economies in the world. Our system, despite its flaws, works. Following the resounding defeat of Republicans in the mid-term elections last years, there was a smooth transition, everything kept working, and there were no riots, no killings of either the contestants or the electorate — quite common in developing countries. Of course, elections in China are a farce. Corruption is rampant and a way of life in China and India.

The U. S. has had a solid democratic system for over 230 years with no military coup d’état or other political turmoil. India has an almost-60-year-long stable government, despite a short period when Mrs. Gandhi almost became a dictator and eventually paid a heavy price for it. But will the left-leaning, phony-patriots turn back the economic reforms instituted in the 1990s? China is an unknown. It is credited with inventing gun powder, paper…yet, xenophobic leaders built a giant wall to keep foreigners out! In each of these countries, just between 200 million to 300 million (depending on which source you believe) make a decent living; the rest barely live on $1-a-day wages. How long can this imbalance last? How long will it be before another Mao Zedong (Mao Tse-tung) rise and start a Peasant Revolution and massacre another 20 million Chinese?

Sure, we have inequity in the U. S. too. We may have the world’s best healthcare available, but it is not accessible to everyone, with almost 45 million uninsured Americans. Every President for the past 30 years has promised reforms, but healthcare costs continue to climb at three to four times the annual inflation rate. We spend almost $1.5 trillion annually on healthcare — 15% of our GDP, and it is expected to grow to 25% by 2010.

Despite our current pathetic leadership in Washington and stricter scrutiny of incoming students, America still attracts the world’s elite that come here to pursue higher education and dream and build a better future. What attracts them is freedom and innovation. We still lead in innovative manufacturing, computer hardware, software, biotech, and are making headways in new energy sources.

So, don’t kiss America ‘Good-Bye’ yet. We will prevail for a long time, unless we let our ignorant leadership in Washington, political arrogance, and technological complacency take over.

Is Detroit Dead as a Dodo? Part 1

Anyone who has watched the U. S. auto industry for the past 50 years has to wonder, “When will Detroit ever wake up?”

Toyota entered the U. S. market in 1957 with its ToyoPet Crown (shown above), which was an ugly but a cute car. "Japanese Quality" was an oxymoron in the U. S. in the 50s and early 60s. Through the 1960s, Japanese car manufacturers kept exporting cheap, gas-efficient, low-end cars. Detroit laughed at the Japanese and said, “They can have the low-end market, we build luxurious, high-end cars.” Then, the energy crisis hit in 1973.

Detroit was caught with its pants down and the Japanese took advantage of it. Having pretty much conquered the low end, Japan slowly started attacking Detroit from the side—mid-sized cars—and eventually from the top—the luxury brands. And, started building cars in the U. S., beating Detroit in its own backyard and, often, front yard. Today, Lexus rules the high end, Toyota Camry and Honda Accord dominate the sedan market, and Japanese manufacturers lead in fuel efficiency and J. D. Power Associates' quality survey and customer satisfaction. (Forget the ‘initial customer survey’ that covers the first 90 days of owning your car, which Ford touts; we think it is a joke. If a car has problems in the first 90 days of its existence, it shouldn't have been manufactured and shipped in the first place!)

Amidst all this turmoil Detroit made even bigger blunders: GM acquiring Saab, Ford buying Land Rover, Volvo, and Jaguar, and Chrysler agreed to be bought by Daimler. In all these cases, instead of the European brand-name qualities trickling down the poorly built American cars, the horrible qualities of Detroit percolated up their respective brands. The result: Daimler got rid of Chrysler in a fire sale; Ford is selling off Land Rover and Jaguar, and wait for it to unload Volvo and GM to follow the suit. The Big Three haven't realized that they can not only NOT make quality cars, but their diversification strategies throughout history have been disastrous. Remember Chrysler/Kelvinator/Ground Systems Division, Ford/Philco/Ford Aerospace, and GM/EDS/Electro-Motive Division/Frigidaire/Hughes/Terex?

By the way, here is a breakdown of profit or loss per car manufactured in North America:

Nissan $1,575
Honda $1,368
Toyota $1,266
Daimler -$1,072
GM -$1,436
Ford -$5,234

Source: Harbour Consulting, as quoted in The Wall Street Journal, June 14, 2007.

Of course, Detroit blames the UAW and retiree-benefits burdens. We believe this is just an excuse. Poor leadership and incompetent management always beat up on demanding workers! Yet, you see these days on TV commercials the Big Three (or 2½) touting their gas-guzzling monsters, or flag-waving, patriotic American Revolution ads—hardly ever about quality (or lack thereof).

All that Detroit executives have to do is stop meeting in their ex-smoke-filled, currently mahogany-furnished boardrooms in Detroit; instead, fly to Silicon Valley and drive through the parking lots of high-tech companies and educational institutions, where they will find over 70% of the cars are imported or have foreign labels! These folks are tomorrow’s leaders in the making. By the way, Toyota's market share—including the Lexus and Scion brands—in Santa Clara County is larger than those of Chrysler, Ford and GM combined.

Detroit is a loser city—The Big 2½, Lions, Tigers, Red Wings, Pistons—having lost more than one-half of its population since 1950, to less than a million now. San Jose has beaten Detroit and is now the tenth largest city in the U. S. with a population of almost 950,000!

Going Private?

In the past few months we have seen many publicly held companies in the U. S. going private, often being acquired by leading private equity firms, such as the Blackstone Group, Kohlberg, Kravis, & Roberts, Silver Lake Partners, and the Texas Pacific Group.

Alltel, the wireless service provider, last month agreed to a $27.5 billion buyout by Texas Pacific and a unit of Goldman Sachs. KKR, notorious for taking companies private, invested $700 million in Sun Microsystems. Avaya is rumored to be selling itself to Silver Lake Partners and the Texas Pacific Group for more than $8 billion. Other notable buyouts include Chrysler, Bausch & Lomb, student-loan company Sallie Mae, Harrah’s, and TXU (Texas Utilities). Even Vitria, a small software vendor based in Silicon Valley, went private last year.

The reason most often given for these humongous buyouts is that these companies no longer have to be accountable for stockholders or waste resources on complying with the Sarbanes-Oxley Act. In fact, some companies have even bypassed NYSE and NASDAQ and chosen to get listed on the stock exchanges in Hong Kong, London, or Singapore.

We believe this is a copout. If a company’s leadership and its board are honest and ethical, they have nothing to hide and should open their kimonos for everyone to see. Now, with them going private, who knows what goes on behind the curtains?

Globalization Discussion at TiEcon 2007

We recently attended TiEcon 2007, held May 18-19, 2007 in Santa Clara, CA. At the pre-conference Charter Members-only event, Dr. Laura Tyson, University of California—Berkeley, talked about globalization of the economy.

Globalization is a great moderator; the GDP per capita is growing globally. There is more equal growth across the world. This also has a great decoupling effect—the United States will not lose its leadership anytime soon, but its influence on the rest of the world will diminish in this century, despite what leaders in Washington believe. Global interdependence is healthy.

Globalization in the 19th and 20th centuries was driven by the railroad, steamship, and underwater cables, which led to massive trade on a global scale. Globalization can be related to creative destruction. Yet, 90% of Americans fear their jobs will be outsourced/offshored and only 30% feel globalization is good, and moves are afoot in Washington to limit imports and impose levies on them—all in the name of keeping jobs in-shore and reducing trade deficits.

Globalization creates losers and winners and there is a role reversal between the developed (G7) countries and emerging economies. Emerging markets comprise 80% of the world’s population, control 40% of the world’s exports, and 96% of all new workforce in 2005-2010 will be created in emerging markets! Threats to globalization are not the economy, but politics.

Footnote: Chindia or Indina

It is noteworthy that in 1800 China and India accounted for almost 40% of the world’s GDP. Today, despite their robust growth and exploding economies, their combined GDP is less than 7% of the global GDP. However, by the year 2050, the leading world economies are expected to be China, the U. S., and India—in that order.

Ellison, The (Ex)Terminator

Oracle's CEO Larry Ellison said a few years ago there are too many software companies, especially, in Silicon Valley and most of them don't deserve to exist, implying they should either go out of business or be acquired. In the past four years, Oracle has spent over $24 billion acquiring companies of the likes of Agile, Hyperion, Peoplesoft, Portal Player, Octet String, Siebel, Stellent, Sunopsis, TimesTen, Thor Technologies, and others.

Oracle's CEO Larry Ellison has been called many names, but we call him a Take-No-Prisoners Winner. Larry fought the U. S. Department of Justice and won.

We are sure the buying binge isn't over yet.

What Shortage?

There are hot debates everywhere about the shortage of engineers in the U. S. and employers are constantly pressuring the US Congress for more H-1 visas. Is there really a shortage?

We believe the answer is an emphatic NO. All one has to do is look around Silicon Valley, for starters. Following the dot-com bust, thousands of engineers were unemployed for long durations. After drawing unemployment benefits for six months, they no longer appear in the unemployed category. Hundreds of engineers changed their careers -- became school teachers, worked in Starbucks, Home Depot, or Macy's, or opened franchises such as UPS or coffee shops. So, while the US Department of Labor reports unemployment rate in the Valley is ~4.3%, it is more like 15% to 20%, if one includes the underemployed.

Is there a shortage of engineers in the US? No, there is a shortage of cheap engineers! That is one of the reasons why:

1. Every major hardware and software company in the Valley has laid off employees and hired in Asia or done intra-company employee transfers on L-1 visas from overseas, paying them far less than what they did the employees they replaced.
   
   
2. IBM, inter alia, is reportedly laying off thousands of its employees in the US and aggressively hiring in India and China; see Robert Cringely's pulpit at:

http://www.pbs.org/cringely/pulpit/2007/pulpit_20070511_002058.html

Dogs, Math, and Science

I recently had lunch with the Marketing Manager for a Silicon Valley two-year community college. We were discussing the quality of education in the Valley and she mentioned over 90% of the students in Science and Math (S&M) in her college are Asian-Americans. Asked why, she said most American kids are raised by their parents with fear of S&M, so they don't love S&M.

This reminds of my childhood in India where most kids are raised with fear of dogs, because so many of them (dogs, not kids!) are stray and carry diseases. I remember walking my (late) Springer Spaniel in my San Jose neighborhood. Whenever I ran into Indo-American kids, they always asked me, "Does she bite?" American kids always asked, "Can I pet her?"

Of course, thing are changing: Many second generation Indo-Americans love and have pets -- cats and dogs.

Blah, Blah 2.0

After the dot.com boom and burst in 2000-2001, Silicon Valley startups added a twist to their business plans and came up with new semantics—Web 2.0, Semantic Web, Social Web, etc. The last time I checked, there were over 400 US-based companies that were developing Web 2.0 software infrastructure; yet very few could define what in the world is Web 2.0. Is it semantic? Social? Collaborative? User-generated? What is its impact on the enterprise? Non-profit? Non-loss? Regardless, what is your business model? How are you going to make money? Are you dot-bomb a la 21st Century?