OPINION

The Auntie-Factor and the Myth of Indian Entrepreneurship

April 16, 2007
mbjesq

Automatons

Everyone sees that India's economy is doing well - if we measure success by international competitiveness rather than, say, the successful distribution of wealth within the country - and the prognosis for the immediate future is good. This buoyancy, coupled with the gaudy success of the Indian technology sector, leads many people to hail Indian entreprenuerism.

I see creative enterprise in India very differently.

Entrepreneurship in India is a very rare and courageous thing - at least for the middle class and upward. (Those lower in the economic pecking order display an astonishing — if not always creative — economic self-reliance and initiative, if only as a matter of survival.) This is not to say that there are no entrepreneurs - in a country of one billion people and an enormous economy, the only thing of which there is nothing is nothing.

But the shocking thing in India, particularly given the enormous success of tech, is how few entrepreneurs there are, not how many. This is true in every sector of the economy. For every Infosys or Airtel, there are a score of multinationals and a small handful of domestic corporate conglomerates driving the marketplace. Indian start-ups, where they exist, generally address proven solutions for proven markets, translating an international model within the Indian context. This is a much more cautious side of entrepreneurship than our stereotype: guys working at 2:00 am in a garage to give birth to an outside-the-box, revolutionary technology.

In the US, many of our best and most creative minds are willing to dedicate themselves to new and compelling ideas, and our finance systems have developed to back their enthusiasm with capital. The assessment of risk-and-reward is skewed by two social factors. First, there is adventure in starting a new venture. In American culture, entrepreneurship is high-spirited, optimistic, and fun-despite-the-hard-work. Second, failure (should it occur), is not the end of one's professional road, much less the end of one's life. It is simply the point at which one dusts themselves off, considers the lessons of the experience, and tries something else.

In India, these interrelated psychological factors are markedly absent. There is little joy in striking out on one's own because the personal risks are so high. Failure in India is, as they say, not an option. Our good friend, Madhu Metha, designed a fascinating, brilliant program for young entrepreneurs at Nirma Labs, in Ahmedabad. Here's how they describe the program:

At NirmaLabs, you are groomed to identify an idea, understand hi-tech markets and emerging technologies, gain insights of high-growth businesses, form a team and create a business plan, develop value proposition during incubation, interact with mentors and venture capitalists and spin-off to start your venture.

Each incubated project gets seed funding up to Rs.20 lakhs and each team member gets sustenance of Rs. 8000/- per month.

It is part MBA program and part hot-house for innovative new businesses. In the U.S., a program like this would need riot police to stave off the waves of applicants; but Nirma Labs simply cannot attract the top students it seeks.

How can Indian start-ups garner the talent they need when the entire society conspires to thwart the fearlessness required for entrepreneurship? Very few of India's best minds are able to resist the immense pressure of family and friends to play-it-safe with their careers; and they wind up taking stultifying jobs in established corporations. To apply one's talents to a new venture always carries the possibility of failure, despite the brilliance of the idea and the excellence of the execution. Entrepreneurs the world over understand that this substantial risk carries with it the potential of great reward, both personal and financial. But in India, the personal doesn't really matter, and the financial is too speculative. There is nothing that will doom one's prospects in life faster here than being branded a "failure". Indian "aunties" love nothing better to wag their tongues about this kind of thing; and Indian families invariably feel profound shame, rather than the appropriate dismissiveness, when the gossip machine kicks in.

It is pathetic that the inability to successfully launch a new business is seen as failure, while the joining the ranks of corporate automatons working for a paycheck is seen as success. The initiative and resources required to address the challenge of innovation and entrepreneurship are impressive; the ability to land a job at Infosys, Wipro, or Cisco Systems just is not. Until Indian kids are able to bring their parents and aunties around to the same point-of-view, entrepreneurship in India will remain elusive.

Mark Jacobs is a freelance volunteer, working on service projects in various places around the world. He lives half of each year in India and writes at www.memestream.org.
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#1
sridhar
April 18, 2007
02:04 AM

Dear Mark,
A very intersting viewpoint about Indian entreprenuerism.Maybe one reason is that the middle class is risk averse and would go for the low hanging fruit, namely, a secure job.In other words get a IIT degree coupled with IIM degree and work for MNC's.There is a cradle to grave indoctrination that one should not fritter away ones life in start ups. Another reason is the fact that there are practically no Venture capitalists who are willing to take risks in start ups. Most of them prefer to invest in mature businesses.We seem to be entralled by the service boom industry.

I understand that after the Internet bust in US, capital for start ups is not that easy.Maybe even US is reverting to big is beautiful baby.

#2
lomi
URL
April 29, 2007
01:18 PM

a good one. Indians gotta change

#3
Corporate Serf
May 9, 2007
10:51 AM

Two words: "Bankruptcy Protection"

#4
Not a soofi
URL
October 20, 2007
06:50 AM

Could have agreed more with the article. Am in one of those elite Indian B-schools, and rather than acquire entrepreneurial skills, most students are focussed on acquiring skills that make then good employees for foreign companies. Enthusiasm for entrepreneurship is limited to a handful, who are looked down upon by the rest of the campus as "almost unemployable", especially by the reputed i-banks.

What is even more interesting is that most of us mentioned the words entrepreneur at least a couple of times in their interviews for the institute. At that point of time, it seemed the sexy thing to do.

Another bias that I find about entrepreneurship is a regional one in India, people expect gujaratis and marwaris to be entrepreneurial and if one of these speaks abt entrepreneurism, it is said to be "in his blood".

#5
Sanjay Garg
October 20, 2007
10:53 AM

Too many issues in this article but just looking at the obvious ones.

First, entrepreneurship cannot be taught in school, B-school or any school for that matter. The overwhelming majority of entrepreneurs never went to school or dropped out if they did. If entrepreneurship could indeed be packaged and taught in classrooms, then the nations with sophisticated educational systems would have been churning them out by the thousands. Which of course is quite untrue. In the US, for example, the vast majority of new businesses are started by immigrants.

Second and perhaps even more obvious, India as a country is actually overrun with entrepreneurs. When you have 90% percent of the working population making their living out of the unregulated market, you necessarily have to be entrepreneurial in order to compete & survive.

It is laughable that in countries where 90% or better of the workforce is engaged in 9-5 type jobs and with the added safety net of corporate & government benefits, people are being framed as more entrepreneurial than Indians!

#6
Anu
URL
October 20, 2007
11:29 AM

I think India is changing, I see a lot of youngsters taking risks without worrying about what the Auntie says...

#7
mbjesq
URL
October 21, 2007
06:39 PM

Sanjay:

You never read what I write; but I'm sure your criticisms are dead-on with respect to some other essay, somewhere.

Yes, entrepreneurship is astounding in the non-elite levels of the economy, where the risk taking calculus is vastly different than among upper- and middle-class kids from families who have quaffed the kool-aid of materialism. (Third paragraph, second sentence.)

I also do not deny that new Indian companies have not driven the economic boom. I am arguing that (a) they are relatively few compared to the business initiatives of the entrenched conglomerates, and the overall size of the economy, and (b) they involve emulation -- albeit in a highly skilled, very successful way -- of existing, and therefore less risky, technologies and business models. Thus, one can laud India's role in the technology sector without ever pausing to so-much-as-wonder whether the next stunning, technology-shifting, industry-launching innovation might come from India. It won't.

My thesis is that Indian business has successfully marshaled a diligent, highly educated, extremely skilled work-force. And it is lucky that the tremendous creativity of its best and brightest is being channeled into the work of the existing large enterprises, rather than finding outlets in innovative entrepreneurism.

MBJ

#8
mbjesq
URL
October 21, 2007
06:43 PM

Anu:

I can certainly come up with a number of names of more intrepid young people, although these are still largely exceptions that prove the rule. One of the most encouraging aspects of this new attitude is the very recent quasi-acceptability for smart, energetic, highly-motivated kids to go into social services and the nonprofit sector.

MBJ

#9
paul7anderson
August 31, 2008
10:57 PM

5 Sanjay

I assume you are taking about America. While many businesses have been started by immigrants, it is really only a small fraction. Perhaps if you look at some groups, they have been quite successful.

You talk about an overwhelming majority of entrerepneurs never went to school or they dropped out if thy did. This is not true.

You speak of 90% of the population in 9-5 jobs. Over 50% of the US work force is in small businesses.

There has been a change in America. Now days, most workers will be changing jobs within 5-7 years.

I personally started a mail order business while I was in high school. It helped me get into college. I was not one of those who dropped out of school, I got my PhD. I accepted an offer that I could not turn down. I went to work doing research for a very big company. However, they gave me a release on a patent and I soon had a side line business. When the facility where I was working was closed, I chose not to move. I might add that less than half of the staff chose to move. Many, like my self, started technical businesses. I have since been involved with four start up companies.

The United States has a history of people starting new businesses. We have the infrastructure that helps. We can easily get advice, physical help and in many cases, financial help. These do make it easier.

#10
Ledzius
September 1, 2008
02:29 AM

There is a lot of IT entrepreneurship in India in some selected spaces. Like BPO, KPO, IT consultancy, soft skills, etc. Not exactly cutting edge, if that's what you mean by entrepreneurship, but nevertheless, involving quite a bit of risk-taking.

But is entrepreneurship mandatory for innovation? If you take S Korea, the entire economic workforce depends on the major conglomerates (chaebol) one way or the other. And major companies like Samsung and LG are state of the art in terms of consumer technology.

Even in India, a major revolution in automobiles came from Tata, not some start-up. A big company provides financial security as well as capital resources for many young minds to be creative without the pitfalls of starting something of their own. Most of the patents in the US come from big corporations like IBM, Intel, or GE. So to say that the absence of entrepreneurship is bad is not entirely credible.

#11
paul7anderson
September 1, 2008
04:59 AM

Ledzius

You state that most patents in the Unites States go to big corporations like IBM,Intel, and GE. If we count patents since 1976, IBM has 51,010,Intel has 15,904 and GE has 28,614 US patents.This is out of a total of about five million. Looking at a random group of 200 patents, over half were to individuals and an other group were to companies that I did not recognize.

I found 2096 oatents listing Indian residence, There were 687,713 for Japan.

#12
kerty
September 1, 2008
12:14 PM

When one is discussing enterprenureship, emphasis on innovation and patents as benchmark of enterprenureship misses the point.

Innovations in society can come from many sources - government, defense establishment, educational institutions - they all play vital role in generating new ideas and innovations. Patenting knowledge is a typical capitalist idea, and not all political/economic systems would pursue it with same zeal.

Enterprenureship is more about serving the needs of economy and society. Its about producing goods and services, nit just ideas and innovations. We do not need everybody to be einsten and newtons - as long as we have few who are, rest of society can do other stuff, like taking existing body of knowledge and ideas to serve society, and in turn help themselves.

Enterprenureship is about ownership society - about taking ownership of the economy, about having ownership skate in the economy. Somebody has to own the economy and it better be the people whom economy is meant to serve - we would be reduced to a labor colony and surfs if we do not own means of productions and must toil for somebody for our well-being and all we gain exchange is livelihood but no ownership stake in the economy - the nation and its education machine has to be geared to turn its citizens to be owners of economy rather than employees - that should be the focus of its educational and economic policies.

One can argue that we do not need everybody to become enterprenures, just as long as we have few(homegrown or imported), and rest are willing and able to follow them, we can have vibrant economy - and that has been the thinking of our policy makers - where innovation in thinking is needed.

I would rather have majority of indians turn into small enterprenures rather than have few giant enterprenures - the progress measured by how many small entrepreneurs we have rather than how big/few they are. We measure disparity of income, but we should be measuring disparity in size of entrepreneurship and distribution of entrepreneurship among people.

I would rather have majority of population to turn into entrepreneurs and only small segment that can not be entrepreneurs to become employees - let entrepreneurs compete fiercely to attract human resources from the small pool of job-seekers that would raise their employee bargaining conditions in the end - and the innovations in automation will follow automatically as there are too few people willing to work for others. The entrepreneur competing for survival of the fittest would create robust engine for innovation and growth. Currently, we have just the opposite model - Majority of entrepreneures come mainly from the ranks of those who did not do well in education, careers, job opportunities, most picked up trades of their parents by default. Majority of finished product of many years of educational indoctrination turning to employment market en masse and chasing few remaining entrepreneurs for the employment prospects - eagerly awaiting arrival of some messiah from abroad to fuel job market for them, or waiting in line to go abroad to be a coolie for hire - have tools, will travel.

Unless paradigm shift happens in India, everything else will remain a patch work and stop-gap measures.

#13
anand
September 3, 2008
01:38 PM

i have a lot of respect for entrepreneurs. these are the people that risk their capital. and when they get big they deserve to enjoy all the material luxuries of the world and the other people have no right to critisize them for that.

#14
paul7anderson
September 3, 2008
05:19 PM

Kerty

My only reason for mentioning patents was to reply to Ledzuis.

However, the statement that"patenting knowledge is a typical capitalist idea and not all political-economic systemd would pursue it with the same zeal." while true, does deserve comment. A patent is knowledge, it is a solution to a problem. Getting this knowledge, often requires a lot of work. Patents have been the justification for the effort. China in the pasthas not accepted the idea of patents. They have roughly forty times as many scientists and engineers as the United States. So far they have produced nothing in the way of major innovation.There have been nothing like transistors, nothing. They don't admit it publicly, but they are concerned. As of today, there are 17,691 US patent application from Chinese inventors.The eraser on the end of your pencil and your computer are the result of the patent system.

You might be interested in InnoCentive.com. This is an organization that offers a reward up front, instead of a patent to solve problems. They have problems ranging from business to science,.. They offer prizes of $5,000 up to a $1,000,000. You might be interested in the experience of an Indian. http://blog.innocentive.com/2008/07/17/dr-ammanamanchi-radhakrishna/trackback/ . He has solved three of their problems. I have solved two so they can't be too hard.



Your next to last paragraph is a little confusing. You seem to be proposing a society where everyone makes a living by taking in each other's laundry.




#15
kerty
September 3, 2008
06:59 PM

#14

"You seem to be proposing a society where everyone makes a living by taking in each other's laundry"

I am still scratching my head how did you come to such conclusion.

Economy is built around serving the needs of each other. And that would include laundry too, among all other things. People participate in the economy to serve the needs of the economy which in turn aims to meet the needs of people - whoever serves better or more receives more rewards in return. That is basic economics 101.

Our choices are - how best to participate in the economy - as wage earners or as entrepreneurs, as servants or as owners. And who should own the economy and means of production, and how their ownership should be seen distributed among people - such benchmarks allow us to judge the effectiveness of educational and economic policies. Another benchmark I would add is where economic activity would be taking place.

We hear slogans that Aaam Adami does not benefit from development. That is because we continue to ration development and force Aam Adami to compete for scarcely produced development - and that goes to the root of our policies that are designed to make entreprenuership a scarce commodity, a function of luck and chance and avenue of last resort. As a result, Aam Adami is made to migrate wherever that scarce development may be taking place. In fact development should be taken to where Aam Adami lives, to every nook and cranny of country where Aam Adami lives - mere presence of Aam Adami should act as a magnet for attracting development - but that can not happen if Aam Adami has to wait for somebody else to hire him - he has to become an entrepreneur himself, and become an engine of development wherever he chooses to live to go - that is how growth of entrepreneurship would take development to places where ever Aam Adami lives and goes. That would happen when Aam Adamis are transformed into entrepreneurs.
In stead, we have a reverse policy that chases Aam Adami wherever he happens to live, no doubt - but not to offer development where he lives, but to sell him stuff (most which he can live without or can not afford), thru marketing and distribution outreach. One can see clear bias in our policies towards treating our Aam Junta as consumer colony, coolie colony and rootless migrant gypsies.

In summary, growth of entrepreneurship is key to India's development. Everything else will fall in place in due course. But it requires a major shift in education, media, taxation, government policies.

#16
paul7anderson
September 4, 2008
03:25 AM

Kerty

You state"I would rather have majority of population to turn into entrepreneurs and only small segment that can not be entrepreneurs to become employees - let entrepreneurs compete fiercely to attract human resources from the small pool of job-seekers that would raise their employee bargaining conditions in the end - and the innovations in automation will follow automatically as there are too few people willing to work for others. The entrepreneur competing for survival of the fittest would create robust engine for innovation and growth" For a majority to be entrepreneurs, we are looking at mainly single person operations. In classical economics this primitive society is compared to a situation where each is taking in the others laundry. I am sorry this was not clear.

Speaking of economics, i have been very impressed by Dr. Bhaskar Dasgupts essays

#17
kerty
September 4, 2008
04:39 AM

#16

It resembles Gandhian economics of self-reliance and self-sufficiency, village industries that make individual, family/home, village to be major economic centers and focal point of economic engine. While it is true Gandhian economics can not create mass production or complex products or infrastructure - but they can mature over a time to undertake any challenge. It would generate ample scope for innovation and automation to bridge the gap. When there are unmet needs, and there are entrepreneurs waiting to pounce on opportunities, innovations and technologies are bound to follow.

#18
paul7anderson
September 5, 2008
02:36 AM

Kerty

It would seem that you delight in making outrageous statements and when they are rebutted, you ignore the response and make more outrageous remarks. I went to the list of 2700 comments you have submitted. I would love to quote some of the answers that have been posted. They are there for everyone to read. I did not know your history. When you made your statement about patenting knowledge, i responded. When you made your statement about a society with a majority of entrepreneurs and only a small fraction of workers, I responded. You now bring up Gandhi. I am going to restrain myself.

#19
kerty
September 5, 2008
04:05 AM

Paul

Please do not restrain yourself, if you can rebut or offer critique of what I have said in this thread, by all means, do so.

I have tried to offer ideas about alternative economic paradigm that is inspired from Gandhian economics - at present, they are purely abstract and theoretical in nature as they do not exist in India or elsewhere, and if you think they are outrageous, I would not blame you, as Gandhian economics was summarily dismissed as visionary but impracticable by his own staunch followers.

I am sorry if my expose on entrepreneur-centric economics offended you. It was not meant as anything personal.

#20
Desh
URL
September 5, 2008
01:10 PM

Marc:

Again, a very generalist kind of sweeping article at best!

Here are few points:

1. The two critical pillars of entrepreneurship are finance and IP. For these two to work best, one basic requirement should be met - that of the ability to assign ownership of tangible and intangible assets to their rightful owners and the ability of the judiciary to implement that ownership should a dispute arise. These basic thing is missing in the Indian infrastructure - the ownership question is HUGE!

2. Now, given these handicaps - have the people on the ground shown risk taking that makes one an entrepreneur? I would say a resounding YES! One of the comparisons I can readily make is that of Forbes Billionaires. India has the highest in Asia - more than Japan and China. Which, to me, is striking! Decidedly, number of billionaires are not the best measure of affluence in a society or the breadth of its entrepreneurship quotient - BUT if majority of those billionaires are first time billionaires - then it does say one thing.. that the path from nothing to billions has been opened.. and many are on that way! And when this happens more often than those in the established and faster growing economies... then it becomes a credible evidence.

3. So, if you argued that India's entreprenuerial infrastructure is bad, I will agree whole-heartedly.. but if you say that Indian entrepreneurship is weak then I would say that that's a blatant nonsense!

One more important thing that most miss out on... the diversity in the entrepreneurship that has occured in the last 2 decades. The most common business communities came from North - Punjab, Marwaris/Banias; West - Gujaratis and South from Andhra basically. The occurrence has spread! The new businesses are being started in areas and in communities that were never groomed in that atmosphere. It is VERY significant! It will mean more democratization of entrepreneurship and growth. You wouldn't see the result in next 5 years, but the significance of this spread will be tellingly visible in a 15 years time span.. . when the new generation comes of age.

#21
kerty
September 5, 2008
01:19 PM

Paul

"For a majority to be entrepreneurs, we are looking at mainly single person operations. In classical economics this primitive society is compared to a situation where each is taking in the others laundry."

I would have to disagree with such assessment. So many sectors of India's economy are already serviced by one-person and one-family setups and one wouldn't call them primitive unless one considers corporate engine, malls culture and mass production as the only benchmark for sophistication and modernity. They do not have to remain primitive at all. They too can evolve. And they have come a long way and they are poised to embrace information and technological revolution. Professional services, consulting, services, retail, restaurant, hotel, transportation, farming etc represent sizable segment of India's economy where single person operations and family-based operations are norms rather than exceptions - if you can't see beyond corporate engine, mall culture and mass production, than everything else would indeed appear primitive.

When majority of population lives in rural areas, it makes sense to take development where they live and tailor it that suits their local framework - as it is, urban centers are already stressed out and can't accommodate endless stream of migrations. So India has little choice but to decentralize engine of development and take it to places where people live.

India's strength lies in cohesiveness of family and community and economics that taps into it is more likely to succeed in meeting the challenges of meeting the needs of Billion strong population base. India's entrepreneur spirit has always manifested as family-based operation. Most of the big and small economic players in India operate not as one-man operations, but as family-based operations - even when they form publicly capitalized corporations, most of them remain family controlled. Most partnerships are relatives and immediate families coming together, most cooperatives are localities coming togather. None of them are novelty for India.

What I have said on this thread is hardly ground-breaking. Gandhi was a big proponent of economics on similar lines but his ideas could not compete with more sexy ideas emanating from socialist and communist economic paradigm. And now in the era of globalization, going global seems sexier than going local, going Gandhian.

It is easy to get caught up in symantics of expressing ideas and words used, and make them the central point of rebuttals, but if it misses the point, than such frivolous exchanges are not for me.

#22
kerty
September 5, 2008
01:55 PM

Paul

Kerty: "I would rather have majority of population to turn into entrepreneurs and only small segment that can not be entrepreneurs to become employees"

One can say that is an outrageous statement. It is indeed a rhetorical flourish. It takes the present scenario and constructs an opposite one. It is meant to direct attention to different set of ideas, different direction for the economy. I prefaced it by "I would rather have" - which means there is a choice involved, and not some kind of prescription, mandate or fiat. When society implements the choices available to it, equilibrium usually ends up somewhere in the middle, not towards the extremes on either directions.

#23
paul7anderson
September 5, 2008
06:33 PM

Desh



I especially agree with your distinction between Indian entrepreneurial infrastructure and Indian entreprenuership. Your looking at Indian billionaires was interesting. I know the data would be hard to get but I would like to look at the in-between steps, how many new millionaires, etc.

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