

Believe the Hype About India and China - sunkan
http://www.nytimes.com/2010/11/03/opinion/03friedman.html
" If you thought the rate of change was fast thanks to the garage innovators of Silicon Valley, wait until the garages of Delhi, Mumbai and Bangalore get fully up to speed. I sure hope we’re ready. " -- Quote from the article.<p>I sure hope this turns to reality and the tide rises the rate of innovation that has meaningful social impacts on problems like poverty and disease plaguing the developing nations.
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Hoff
Hype aside, one of the key pieces of American technology development is a very
simple one.

Bankruptcy.

The legal ability for an individual or a business to fail.

Seriously.

If I don't get buried in a mountain of business debt from a (legitimate)
business failure, then I am free to try again with a different business idea
or different business model, and to pivot and to hone my business skills, and
to see what else might work with the customers and with the investors.

Countries and regions with punitive laws around business failures and
particularly around the legal exposures and debt incurred by legitimate
businesses will inherently operate at a competitive disadvantage.

Carefully balancing the societal benefits and costs of non-putative
bankruptcies (and of non-putative layoffs, for that matter) is critical in
encouraging new business ventures.

~~~
jbarham
This is a great point. The difference in bankruptcy law between the US and
e.g. France or Germany creates an incentive for US entrepreneurs to take more
risk since if things don't work out (and they usually don't) they can dust
themselves off and try, try again without crippling long-term debts or too
much of a social stigma.

On the other hand, relaxed bankruptcy laws can be taken too far as in the
housing crisis since homeowners took in huge profits by flipping houses during
the housing bubble but can just walk away from their mortgages if they're
underwater which means the loss is eaten by the banks/taxpayer.

~~~
Hoff
It's certainly a balance.

Think too about the "crippling long-term debt" on the other side of the
contract, too.

Loans are built on standard contract law. There are penalty clauses and
associated costs with exiting the contract, and you (from whichever end of the
deal you're on) have to expect that those exit clauses might be exercised.

When thinking about these "strategic defaults", consider the responsibilities
of and the systemic risks that occur on the origination. If you're originating
or are repackaging what may be questionable loans or derivatives, or are
incurring excessive leverage, isn't that also a systemic risk?

It's a balance.

The folks that are severely upside-down (and staying that way) won't be
consumers, they'll approach indentured status. They'll be paying for the
losses they've taken by not walking away, and (given that these folks are
taxpayers, and if they have any money left) in taxes, and (indirectly,
economically) by not being able to buy the products and services that
businesses are looking to sell (meaning a slower recovery).

If this topic is interesting, here is some "light" reading out of the
University of Arizona: "Underwater and Not Walking Away: Shame, Fear and the
Social Management of the Housing Crisis":

<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1494467>

And playing devil's advocate here, if you're +not+ exercising what you're
entitled to within a contract (and from either end of the deal), then what
does that say about the sustainability and efficiency and equality of the
business system?

And yes, this sort of legal and contractual mire can bury a country and an
economy. As we're seeing.

------
adriand
I think the hype is real, at least the hype about the upcoming wave of major
and disruptive technology companies based in India and China. I think American
startups and established technology firms will compete effectively against
these companies, but the effect on other countries with a less-established
startup and technology investment culture is more worrisome.

I'm particularly referring to Canada (which I'm most familiar with since I'm
Canadian). Canada continues to fall behind the US in terms of productivity and
technology investment. Apart from a few of the major population centres and
Kitchener-Waterloo we have little in the way of a startup culture. We do have
a strong tradition of entrepreneurship but it appears to me that this is
mainly focused on traditional and particularly service-based businesses.

Technology firms here will also tell you that Canadian companies are slower to
adopt new technologies than companies in the US, India and China.

Countries like Canada that have let innovation stagnate because they currently
enjoy a high standard of living may be in for a harsh wakeup call as Indian
and Chinese companies start to really come into their own.

~~~
rasmus4200
As a Canadian developer I agree 100% and this very thought is what keeps me up
at night.

We are soft. Our duvet's are too fluffy. And we can't rely on our natural
resources forever.

~~~
ajaxian
It's not all bad: The California proposition to legalize marijuana was
defeated in yesterday's election, which should help maintain demand for BC
Gold dope.

------
jerf
Uh, exhortations to "believe the hype", phrased in exactly those words, are
usually a sign of late-stage evolution of the hype, shortly before the
collapse of the hype. I remember them from the dot-com bubble, I remember them
from the housing bubble...

(I believe that India and China have a relatively bright future. I do not
believe in the narrative whereby the United States faces problems, because we
live here and can see them, but China and India must inevitably be on a smooth
trajectory upwards with no bumps, because we don't live there to see the bumps
and in China's case we are probably having the bumps deliberately and
systematically hidden from us. Just as Japan's inevitable triumph over the
entire world turned out not to be bump-free either. In fact, doesn't anyone
learn from history...?)

------
sushi
I'm glad to see EKO (<http://eko.co.in/index.php>) making some solid progress
as this post tells. It's nice they have started to make a profit.

I should tell that they have been trying this since last few years and one of
the reason why the idea worked is that this startup reached out to people
personally. The same is the story of Red Bus
([http://techcrunch.com/2010/03/24/yes-you-can-build-a-web-
com...](http://techcrunch.com/2010/03/24/yes-you-can-build-a-web-company-in-
india-here%E2%80%99s-how/)) which reached out to the bus companies.

The trend I am seeing is that IT companies in India have bigger challenge in
making people adopt the technology than marketing or anything else.

~~~
known
<http://www.obopay.in/mobile_obopay.html> and
<http://www.yesbank.in/mobilebankingpayments.htm> have a pretty straight
forward solution.

~~~
sushi
It's not about better solutions. It's about getting customers by reaching out
to them even if the solutions are not perfect.

There are many companies in this niche but they won't succeed until they reach
out to these people who are not literate to begin with.

------
varjag
You see, it's very easy to turn this story around, just alter the caption.

"It takes an American executive to disrupt cumbersome Indian banking", "With
globalization, Americans go on to innovate overseas", "U.S. education is the
driving force of innovation in modern India" and so on.

Note: they could probably do just fine with local education and an Indian COO.
Point is you should be cautious with extrapolations from a single story.

~~~
FraaJad
The COO is italian, not American. They all used to work in America, that's
all.

------
moultano
To me India seems as precarious as it is promising. Against all this
entrepreneurial spirit is the possibility that northern India will drain its
aquifers and its rivers dry, and that climate change will make refugees of the
entire nation of Bangladesh.

------
sagarun
Yes it is an achievement. Even a beggar owns a mobile phone. As an Indian what
really bothers me is, you can get free sim card but to get a decent meal you
have to spend 50-90 Rs (1-2$). Again most of the worker's daily wage is (3-4
$). The food prices are keep on increasing. Are we missing something?

~~~
train_robber
Just wondering, were do you live in India? A 'decent' vegetarian meal (the
kind I have everyday) costs Rs 25 from a restaurant. And possibly Rs 10-15
($0.2) if I cook myself.

~~~
copper
His numbers are a bit on the high side (I'd probably spend that much for a
meal in the food courts at some SEZ), but the basic point is valid: I believe
we still see a >10% inflation rate here. For basic food commodities, the rate
may be even higher.

~~~
thomas11
The Times of India reported food inflation last week to be at 15%. That's
clearly not sustainable as worker's wages rise significantly slower.

~~~
eitally
Not in the IT sector. For the last several years we've seen 20-30% salary
increases annually. I would argue it's more due to market conditions and the
hiring practices of the big consultancies than inflation, but probably a third
to half of that is an inflationary response.

~~~
thomas11
Sure, but the vast majority of Indians are not in the IT sector. These salary
increases in IT are great for engineers, but they also work against India as
an offshoring destination because of the rising costs.

~~~
eitally
Yes, exactly. It will be interesting to see what happens in the next 3-5yrs if
salary inflation doesn't slow down or reverse and external investment is
similarly reduced.

------
itsnotvalid
Besides the line regarding Mt. Everest may relate to China, the rest of the
post is about India.

What is really the truth is that the wealthy nations are unheard of the
situations in poorer countries. What is obvious in our community (banks,
credit cards) is not at all in some areas in the world. It's rare to see the
problems when the problems are not in front of us.

The good thing about cheaper technologies is that, they are more accessible,
could improve the conditions of people faster and have more impact.

~~~
namityadav
Mt. Everest is in Nepal, which is a country between India and China. Although
IMO, it's more like India than China.

~~~
itsnotvalid
It would be a political debate whether how to account for that. To me it is
too hard to say so, as the border is actually cutting the mountain in half.
However technically the peak of the mountain is within the border of China.

------
badmash69
May I suggest reading "Fortune at The Bottom of the Pyramid" by C.K. Prahlad "

This is an excellent guide for innovation for India and much of developing
world. Companies like EKO etc. have taken these lessons and are building upon
those ideas.

------
benzheren
China has its own problem now. The inflation is really which drives the living
cost and labor higher. Lots of companies are trying to seek cheaper labors in
countries like Vietnam. But one thing is true that mobile is really big in
Asia. With great infrastructure, you can have signals anywhere including in
the subways which drives mobile consumption.

~~~
pdelgallego
The company I used to work has closed their "software factory" in ShenZhen,
and expand the other one they have in Manila, because of the higher cost in
China.

------
silverlake
Don't believe the hype. I sincerely hope the BRIC countries do well, but you
can't assume they will grow at the same rate for the next 20 years. There are
Earth shattering events every few years which could derail any of these
countries. Politics, war, natural disaster, tech revolutions, etc. The US can
adjust to change faster than anyone.

------
known
Truth != Hope != Hype

------
known
836 million Indians survive on less than Rs. 20 (less than half-a-dollar) a
day. <http://goo.gl/OUJ5F>

~~~
desigooner
Is there a way to flag users?

This is the umpteenth time that this user (known) has literally copy pasted
the same responses every time any article with India as a focus comes up on HN
.. caste this, less than $1 that, etc etc.

Wish there was a way to ban trolls ..

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known
India has a 5000 years old hidden dark side viz <http://goo.gl/K8Pg>

There are 17,000 cults aka castes in India.

They're destroying India because they literally hate each other.

To strengthen India, it is better to give autonomy to FC/BC/SC/ST/Minority
regions with a single passport and currency across these regions viz
<http://goo.gl/A8F6>

~~~
shabda
> They're destroying India because they literally hate each other.

I am from India, and I assure you I dont hate anyone based on their caste.

~~~
rick_2047
<http://en.wikipedia.org/wiki/Category:Riots_in_India>,

This is a list of communal riots in india. Go figure who hates whom

~~~
known
If Caste == Religion, then there is no Hinduism.

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known
China prospered without India's dummy democracy and casteism.

Indians are brainwashed to believe that (voting in elections == democracy) and
a solution to all problems.

~~~
lobo_tuerto
You wouldn't believe it does only happen in India, would you?

------
known
India is a dummy democracy. Only 84,000 Indians out of 1,173,108,018 have the
courage to vote their conscience. <http://goo.gl/jNi1r>

