theglobaljournal.net: Latest articles of Anuj Kapoor

Diving Deeper into the Bit Coin mine

2013-12-26T12:07:53Z

Developments around Bit Coins have been rapid, much like the price changes. All of these things and more should be expected. My last piece “Freedom Take it! Its Yours. Why you should Invest in Bit Coins” for The Global Journal http://theglobaljournal.net/article/view/1156/ talked about the basic economics of the Bit Coin universe. In response I received quite a few questions about what investment value or trasactional efficiency do Bit Coins or digital currencies bring. This short essay looks at those questions.

As the eco system evolves and more people get involved, trying to explore the intrinsic value of Bit Coins becomes relevant. It is time to take a closer look at the inner workings of Bit Coins and also of some of the traditional financial instruments that they could potentially displace or reinvent. As is now widely discussed, Bit Coins are considered to be instruments for two broad purposes: A. Units of transaction and B. Store of value. What do these two mean?

Post barter, for transacting products and services, accepted units of currency, what we know as ‘money’ evolved as the means of exchange. While transacting, the value you wish to charge for the good or service you sell is up to you and is a function of demand and supply for your product. The role of money is ‘merely’ to allow you to exchange that value with someone interested in buying your product. Once you receive the said currency, you can yourself use it to buy from a seller of some other product or service that you might need. This much is simple enough. As a unit of exchange of value what you needed traditionally, was that the currency should be accepted by as many buyers and sellers and should not get devalued while you are holding it. This devaluation as we know is mostly on account of inflation which is driven by economic factors and Government decisions beyond an individuals immediate control. Nowadays added to this is the complication of international supply chains and a high degree of cross currency financial transactions which add FX risk to the value of your local currency or your buying power. So the 'time risk' to holding currency is further complicated and enhanced. In short therefore, the quicker the transaction, the better it is.

Development of payment systems such as VISA and Master or American Express on whose back most money transactions are done using plastic or credit and debit cards was a giant leap in payment and transaction processing. It removed the need to go to a Bank to withdraw cash and then spend it, resulting in significant efficiencies. However the actual transaction process became more complicated and in some significant regards, slower. When you pay for your coffee at Starbucks with cash, you have immediately transferred the value with the currency note or coin to Starbucks and reduced your net money holding in a way that you cannot reverse. When you pay by card however, the transaction takes approximately 2 days to be completed between your bank and Starbucks’ bank account (The complete cycle of this process is explained in the paragraphs following. *) therefore the actual transaction takes longer with Plastic (Cards) than it did with cash. So for the efficiency and safety of not having to withdraw and carry cash we have become accustomed to using a different albeit slower transaction process.

Then came the Internet and people could buy and sell from many sources in remote locations across borders while sitting at home. This has made trade more efficient, quicker and convenient. The banking system involved with settling online transactions between buyer and seller has still however remained similar to what was used for card transactions. Online payment gateways allow transactions online by entering details in a secure and encrypted format through account numbers and passwords. This has not replaced the banking transaction settlement systems but only removed the need for paying at a till. Banks verify the details of the payee and receiver and make the transaction flow online. This too hasn’t crunched the time of the actual transfer of value from payee (buyer) to receiver (seller). This is certainly going to change in the wake of Satoshi Nakamoto’s paper and the consequent development of Bit Coins. That a central ledger where transactions are logged and value transferred from one individual or business to another within an hour and can all be managed by a crowd sourced network without layers of intermediaries is without question the most sensible way to make such transactions happen. Satoshi’s paper brings back the immediate nature of cash transactions by almost immediately transferring ownership of the money from one person to the other in a secure manner also preventing any reversal of transactions and without the need for a bank to intermediate. It is in this space that I imagine J P Morgan is trying to get a Patent. Whether a company or a bank can do so or will be allowed to do so is one of those volatility-inducing games that are now afoot. So watch this space for one of the sources of volatility on Bit Coin Price. In sum, the transactional efficiency role of the single ledger to monitor payments is vastly attractive.

[*To quickly explain this point a bit more, lets take a quick look at what currently happens when you pay for a coffee with your credit card at a Starbucks. Your card may be issued by say Citibank on a VISA platform. So you pay with your Citi Visa card at Starbucks, who may have an HSBC terminal installed to accept card payments. So when you swipe your Citibank card on the HSBC till, HSBC sends the transaction to VISA (in this example) or Master Card as the case may be. VISA then reads the number on your card and realizes it’s a Citibank Card and directs the debit instruction to Citibank, who then read your card number and debit your account. On the other hand a similar process also takes place in order to credit Starbucks the money they are owed for your coffee. Only that not all if any of these links happens immediately. So there are at least three parties involved and they all do their accounting at different times and in batches. All of which takes time. Consider that in contrast, with Bit Coin or other Peer to Peer transaction mechanisms, the transaction is a mere change in a ledger that just needs to be ratified by computers and its done within the hour. Also in addition to it being a ledger entry, it is also in itself a currency (BTC) therefore the need for banks' involvement is completely removed as long as you are willing to hold the value in BTCs. This is a significant departure from other online payment systems that need the traditional currencies and bank account involvement before a transaction can be completed. The current volatility in Bit Coin price makes it currently harder to transact in it, but that doesn’t mean that it is any the less efficient as a means of exchange in the long term or as a technology. ]

Going back to the two aspects of currency, transaction and store of value, I believe that on the former Bit Coin performs extra ordinarily well. That it has transactional value is almost never disputed. This in itself is a mighty innovation in financial transactions. All this however is not unique to Bit Coins whose architecture is open sourced, so many other versions of the platform have come up, Lite Coin, Peer Coin and Name Coin to mention a few. Therefore we could see several attempts at creating this payment or transaction architecture outside of Bit Coin. Maybe, even without the crowd sourced element, but that remains to be seen and is not in my view a desirable development.

The second, the store of value aspect is slightly more involved. The volatility in BTC (Bit Coin) price is in fact a result of the varying expectations in this second aspect of Bit Coin. The fact that Bit Coins are finite in number (21 million to be ever in circulation) and that their production is incorruptible is significant. These two factors give it the financial feel of Gold or precious metals. However the reason why you and I may choose to put some of our GBP or USD into Bit Coins is because unlike the ultra high net-worth individuals (categorized as such by Banks) the average saver does not get access to international capital markets. The average saver doesn’t get the opportunity to think whether they want to put their savings in GBP or USD or CNY or in a basket of currencies if they are bearish on their local currency. This is especially true at times of recession, when most high net investors are able to move their money more freely than average savers. Also, average savers cannot easily escape inflation and low interest rates, which lower their spending power. For these situations, middle class savers have no means or options. Bit Coins serve as a vital means of solving this problem. Through a few clicks of a button from your living room, you could transfer your money into Bit coins and then into any currency you choose or keep it as Bit Coin, without having to go to any bank. People in many countries where capital controls are particularly stringent, have used Bit Coins for this purpose, thus adding to its credibility as a store of value. In addition to the finite number and in corruptibility of Bit Coins, which is like Gold and other precious metals, it has the enhanced feature of being easier to transact being a digital currency. This is where savers in Latin America, Cyprus and Greece as well as China have used Bit Coin in a manner that seems to bolster Bit Coins claim to being a store of value. The fact that many savers were confident in converting their local currency into Bit Coin to get money out of their country or even to hold it for the medium term at this early stage of its adoption are significant facts.

Therefore tracking news around its use as store of value will help in understanding its volatility. Also while reacting to statements by central banks and governments one has to look at them in the light of their own vested interests. I wouldn’t be too worried by the statements from the Chinese central bank, even though they cause volatility or bearishness at times. The core architecture of crypto currencies is here to stay. The news from central banks and governments are along expected lines and are worth tracking for understanding developments around obvious regulatory hurdles but mostly for price movements in the short term.

I would be more inclined to reacting to any competing currencies or deficiencies in the mining architecture or in the economics of mining if they were to crop up. As of now these latter concerns have no real substance, and therefore Bit Coins specifically and crowd sourced crypto currencies in general are a buy and hold. The single ledger transaction system should be raising concerns at Master Card and VISA and other payment systems and bringing a smile to people optimistic about Bit Coins and other crypto currencies. May be more than version of crypto currency emerges and might even be needed to fulfil the transaction and store of value aspects of this family of currencies. The change however is irreversible and therefore it is a technology to get accustomed to.

Freedom! Take it, It’s yours! Why ‘you’ should buy Bitcoins?

2013-12-09T17:52:16Z

Discussions around Bit coins can be as simple or as complicated as you desire. You could for instance, try and understand the hashing, the cryptography, the nuance of the nonce and the mechanics of the technology, which would be like trying to understand the manufacturing process of printing dollar bills. Or you could take a few moments to understand the currency conceptually. This article facilitates the latter.

Bit coin or all crypto-currencies can be seen as a dis intermediation process that can save hundreds of millions if not billions annually in transaction costs for consumers. A currency that has successfully created a system of transacting money that requires no intermediary between the person paying and the person receiving, yet there is complete transparency and record of all transactions on what can be described as a ledger that is visible to everyone and stored with everyone. Transactions can all be seen minus the identity of the people transacting if secrecy is needed.

The other significant advantage beyond the instant transactions and absence of intermediary costs is the fact that there will always only be a predetermined finite number of coins (21 Million) and this is ensured by a robust architecture that prevents anyone producing fake coins or fake transactions. What this means is that like Gold which no alchemy can produce and is therefore considered a store of value and a standard, Bit Coins if they were to be taken on by vast numbers of people, would be very valuable.

Now, where does that leave you. Yes specifically ‘You’? What should you do? Well you are a critical and active part of finance beginning today just like you have been important in communications for some years now. In Media, the days of one or two government backed broadsheets and broadcast channels controlling information or news or entertainment are a distant memory. Communication has been truly liberated and transformed by the Internet. Everyone can tweet, report, upload videos, interact on social media etc. From Tunisia and the Arab spring to Wikileaks and cute cat videos, individuals and social media have toppled governments, unleashed a wave of creativity and taken charge of communication. This is not a hypothesis but fact.

When it comes to money however, the vast public is still used to seeing finance and economics as the domain of government and big business. They see themselves as spectators, the helpless mass that works within the policies of left or right. Who operate within economic policy framed by interest groups and vote banks. Astonishingly most people see themselves as passive components of the socio-economic mix. Criticizing economic policies in the public sphere notwithstanding, there has been limited means for the average individual to free themselves from bad policy or inflation or vote bank economics or big bank monopoly.

All that is set to change. Like you could buy Gold earlier and not have to keep your money tied to a currency, you can now buy a crypto currency like Bit Coin. While Gold, Oil and other commodities are monopolized by people who’s land these commodities are buried under in their raw form, Bit coins or crypto currencies are not buried under someone’s land, they are ‘mined’ or produced by computers across the world wherever. Yes the machine’s required to mine now have become expensive and powerful as opposed to its early days when you could mine Bit coins on your computer at home. Despite that, there is no physical constraint on who mines the coins, in fact the more diverse the pool of people mining coins, the more robust the architecture. So you have in Bit Coins a means of putting your money in a format that no inflation can touch. Unlike your bank account in your local currency, low interest rates and high inflation cannot rob you of your spending power at the whim of a political party in government. This new currency can be transacted instantly anywhere in the world and converted to any other currency online on an exchange. It removes so many transactional hassles that it ends up producing significant competition for your money and efficiency in the use of it which make it better for the person whose money it is, namely you.

Yes, regulation is needed on money laundering and such activities, but beyond that, the genie is out of the bottle and cannot be stopped. There are plenty of Nay Sayers, who are either still tied to the old textbooks and theories on the nature of money or have vested interest in keeping this transformative innovation in finance out of the public’s imagination. But sure enough, the overwhelming strength of the concept of this technology is apparent in the statements of lawmakers in America, Germany, China and increasingly elsewhere in the world.

So, you need to get used to your new-found freedom. And like with any newly liberated population, the hesitation is understandable. But you have to remember that you have to act not because you want to speculate on the rising price of Bit Coins, but because you want to remove the hegemony and monopoly of deep pockets and not be found snoozing when the biggest revolution in finance of recent history is taking shape. More valuable than anti banker slogans, or protest marches is being part of this revolutionary change that will go a long way in transforming economics and making it more efficient and democratic. Whether you accept payments in Bit Coins for your business, buy it on an exchange or mine it on a powerful machine, you need to be part of it, because your participation will free economics from existing monopolies and be the path to financial freedom in the new age.

But even still, if taking part in the potential increase in Bit coin price is your incentive for joining this new economy then here are a few key things to understand. As per the talk given by Tuur Demeester (Editor MacroTrends) on 17th October 2013 in San Jose at the Bit Coin Conference, we are at the early stages of Bit Coin as a technology being adopted around the world. Projecting valuation of the currency, Mr Demeester presented the following figures:

The above presents a very bullish environment for Bit Coins. This still doesn’t represent the full potential of the Bit Coin economy as it doesn’t include a vast majority of Credit card transactions, many potential new uses or the latent geographic dispersion linked demand for the currency. Anecdotally, Sir Richard Branson announced that Virgin Galactic will accept Bit Coins as payment, Financial Times reported on 29th November 2013 that Alderney a small island in the English channel which is a British Crown Dependency, is considering minting physical Bit Coins to launch itself as the first international center for the new currency. The United States Senate has been holding hearings on digital currencies and have gradually decreased the regulatory risk on the currency. Germany has recognized Bit Coins as Private Money.

The currency has been used as a safe haven or as a means to getting money out of countries and economies where free capital movement is restricted by the State. China which till recently had become a large part of the Bit Coin world is a prominent example. Recent volatility, both the sharp rise and then the fall in the value of Bit Coin has resulted from first a rapid demand from the Chinese population and then statements from the People’s Bank of China, which announced that citizens trading in the digital currency were doing so at their own risk and that Banks were not allowed to deal in it like they are in other currencies. This raised the regulatory risk on Bit Coin and led to a fall in its value. The high volatility and evolving opinions of government, people and institutions is likely to keep the currency volatile in these early stages, however the strength of its core architecture, its transactional efficiency and its means as a democratizing force in money and store of value will see it rise as the backbone of payments, transfers and finance. One would therefore be advised to invest and transact in Bit Coins rather than speculate for a quick return.

As time passes and more people join the Bit Coin economy, it becomes increasingly robust and more and more valuable. The remarkable crowd sourced mining process makes Bit Coins a powerful financial innovation to surpass all in recent history. Welcome to the new economy.

When is Prime Time?

2013-11-06T07:57:00Z

When open source started, techies revolutionized not just the info tech space but also some of the rules of doing business and providing services and products to customers. In other words, they transformed economics.

In the last decade, technology in general and information technology more specifically has not only given jaw dropping sci-fi style gadgets and Daily Prophet like interfaces but has also broken some long standing rules about how much businesses can charge for what and how. Dis intermediation is one outcome of this open source culture, but for some industries its more than dis intermediation, it is changing the production process, delivery mechanism and consumption patterns.

Some prominent examples of this in a snapshot are:

Music sharing for free that challenged the Music industry’s business model ending up with Apple’s I-tunes as the model of choice.

Hollywood’s traditional distribution methods are being challenged, with the likes of Netflix rapidly becoming the new way of delivering programming and film content.

Tailored and on demand news and information sharing by platforms like Zite and Slate etc. which send push through multimedia articles and domain specific content to readers from a wide variety of sources.

Kick-starter and Bit coins and a whole range of financial alternatives and financing models being currently tested and tried successfully that are seriously challenging an already brow-beaten financial services industry.

These technologies are powerful, seriously powerful things. Open source culture and now crowd sourcing have become ubiquitous. As open source allows many people to use available technologies to create and sell their products at low prices, there is considerable competition in things like gaming and entertainment and information, which means that the mechanics of charging customers have changed. Crowd sourcing in finance not only allows people to raise funds for an invention or a project without having to borrow or go to a major financial institution or a rich uncle but also allows producers to understand what products have a market. The customer is involved right from the start. The click is certainly mightier than the brick. The most significant revolutions and ‘regime changes’ that have happened in recent years started on social media, the famous social media led uprising in Tunisia followed by the Arab Spring being a case in point.

There’s been talk for a long time of how social media will change advertising, but most social media companies had so far failed to really tap into this. This too is now however set to change with social media companies’ especially Facebook’s Advertising and boosting options offering very powerful advertising options to businesses. This is a big threat to traditional broadcast media advertising. With targeted, referral based and cheaper alternatives available, small businesses, start-ups and individuals can reach the right psychographic and demographic across the globe without spending too much. Competition for advertising revenues coupled with cheap and free information and news that is delivered through multiple sources into our inboxes, hand-held or palm tops and soon into our sunglasses (think Google Glass), its about time broadcast and broadsheet media really considered their options and business approach going forward.

Alongside these seismic changes in access and distribution, there are dramatic developments in data visualization, information presentation, graphics and analytics. All these mean that not merely the messenger but the message is changing. While good journalism, creative writing, talented music composition and content creation is valuable and will perhaps always remain so, the tools of producing content, the mechanism of expressing an opinion and the very means of production and laws of economics and sociology are changing. While it will take academics years to perhaps piece together all the elements of this puzzle if at all they ever completely understand its implications, there is some very insightful work that has already been done by some academics viz Chris Anderson, Ethan Zuckerman, Robert Fisk etc. to name a few.

While we wait to get a grasp of what really is the true and lasting impact of these developments, there are things that media professionals can already do to better reflect and adapt to these changes. To start with, creating more interactive, creative content and deploying newer design elements and graphics and incorporating crowd-sourced content into mainstream reporting is essential. Too often one sees publications take a puritanical and conservative attitude to these inevitable changes. These are incredible opportunities for serious journalism to deliver hard-hitting and meaningful content. Up-skilling journalists to deploying these technologies while expressing themselves is another aspect of journalism that needs far greater attention. Rather than hire techies to work separately and journalists to continue in the traditional way, the two need to work together to develop stories and present them. Matrix structures for reporting as opposed to the classic approach of journalists chasing stories and analysts working separately to bolster the views and news with statistics may not be the most efficient way of telling a story anymore. How can a journalist for instance report on a news story accurately only through interviews and on ground observation, when multiple developments and aggregate actions of people influencing the story are being tracked through algorithms and when the key actors themselves are acting online and impacting developments on ground. A 3 dimensional news experience presented in simple formats while conveying all the complexity that goes into a situation is a tractable challenge with the aid of these technologies. One sees television studios transformed into many a different type of data visualization sets during elections for instance. While that is a start, it needs to be incorporated in everyday media interactions. While software is becoming increasingly available and simpler for everyone to use and design their presentation and analysis, media companies need to embrace this head on and explore the possibilities to the fullest degree as they happen. Like gaming and other industries, engaging customers now comes before asking them to pay. The model therefore needs a rethink. This needs to be a media revolution as much as it is a technological one.

Opinions voiced by Global Minds do not necessarily reflect the opinions of The Global Journal.

Clicks and Bricks: Preparing for Continuous Change

2012-11-15T19:27:27Z

What is the new game in town? Out of competing theories and views, there tends to emerge a certain winner, a dominant argument that shapes the entire new paradigm. In a world of diversity and disparate values and social systems, its not always easy to know what this emerging paradigm is. A lot of the times our views on who the winner might be are shaped by our own context and where we live.

What world do you live in? The world has probably always been as varied and multifarious as we find it now. Its population always separated by distance, context and perspective. There always were, and perhaps always will be, technologically advanced and not so advanced societies that co-exist. The crisis of our time though is somewhat different. It almost seems as if post-modernity has only just arrived in its truest sense. Choices about careers, investments, politics and social systems are all a lot more difficult.

As the world transitions towards multi-polarity, the shortcomings of all systems come sharply into focus. As the speed of technological innovation accelerates, skills, careers and products of today will become very rapidly obsolete tomorrow. As capital is attracted to a large spread of commercial centers across the world, and as start-ups and innovations drive economic growth, the world is growing much more competitive. This is probably an era of a million renaissances. As the worldwide web forged a global market, increasing numbers of people began selling their arts, skills, crafts, cultures and products to individuals all over the world, breathing life into many otherwise marginalized or unknown communities.

Despite the incredible variety in the lifestyles of the 7 billion people living on earth, there are at times some seminal events or discoveries that seem to reach across these vast differences and affect the lives of nearly all of us. It isn’t, however, always easy to spot such events in their early stages or to predict what their subsequent effects may be. As an increasing number of people gains access to information and research across the world, several different interpretations are brought to bear on these events. Post-modernity, perhaps by definition, implies a certain ambiguity and plurality of perspective embedded in context specific interpretations of the world, rather than a single monolithic understanding of it.

There are still, however, writers, thinkers and theorists whose views seem to envelop a large swathe of human understanding. Clay Shirky’s views, for instance, on collective human action through enabling technologies better known as ‘crowd sourcing’ is one area that is now seeing incredible growth and activity. Kick Starter – the start-up platform that ‘crowd funds’ creative projects and innovations of aspiring entrepreneurs and originated in the US in 2009 – has already funded US $350 Million in projects as of October 2012, and just launched in the UK last month. ‘Unbound’, a UK-based publishing house, aims to crowd source book publishing by taking away the middleman. Several such projects and start-ups are beginning to render the intermediary actors in entire sectors redundant.

The words and actions of such leading thinkers point to a very significant and rapid change in the way society functions. Yet in the midst of revolutionary ideas and innovations from people such as Paul Graham and Steven Pinker, you still, however, observe the old world views centered in geographic identities and ‘war of civilizations’ type mentalities fighting for survival in the writings of the likes of Niall Ferguson. Nonetheless, the inevitability of change is bound to creep into all our lives and it behooves us to listen and adapt to these changes as individuals, communities and as a society at large.

Happily enough, the developments we are observing are for the better, pointing to a more exciting and promising time ahead. With the corruption and inefficiencies in banking and other leading industries of the 20th century spilling out, the new breed of open-source and crowd sourced businesses is taking over, increasing transparency and leveling the playing field. The online shift of the world economy has opened avenues for growth to those who adapted fastest. However, the next generation of change is already upon us, and a new set of technologies are again on the anvil. We have already transitioned web-based business to mobile platforms resulting in incredible innovations in telephony. But there is a different class of innovations now taking shape.

The inventor Marcin Jacobowski built a tractor in just six days, and made the designs available to everyone. He is now creating a ‘starter kit for civilization,’ which includes simple designs for 50 machines he considers important for modern life. All of these are being made available open-source to unleash the potential for others. He is not alone, however, with this open source philosophy and idea sharing spreading far and wide. Marcin is also not alone in focusing on manufacturing. Time magazine’s best inventions list for 2012 featured, alongside his tractor, a motion-activated screwdriver, solar water distiller, a ‘liquislide’ compound material for aiding fluid flow that can be used in anything ranging from ketchup bottles to airplane wings, self inflating tires, a new space suit design, and James Cameron’s Deepsea Challenger Submarine. In sum, the list includes a host of objects that represent innovations in design of physical space. There is an unmistakable trend towards manufacturing and hardware after a burst of software and web-enabled innovations. These developments are transformative and will realign industries and economic power.

According to Chris Anderson, Editor in Chief at Wired and best-selling author, the next significant development will be linked to the democratization of the tools of creation and distribution. At his talk in London for Intelligence Squared, Anderson singled out 3D printing as the next major revolutionary step, which will impact and drive manufacturing over the coming decades. According to Anderson, ten years ago businessmen from developed western countries had to travel half way across the globe to China, network with local officials and obtain permits to have their products manufactured in cheap local factories. Now the same transaction takes a couple of clicks on the Internet through online payment and data sharing services.

The methods of production and the mechanics of doing business internationally have changed dramatically. The global supply chain or ‘factory in the cloud,’ has not only made it easier for Chinese factories to secure overseas contracts, but has also empowered inventors in the West to become entrepreneurs by helping them convert their designs into products, reducing barriers to entry. But that too is now fast becoming par for the course. According to Anderson the game is already set to change once again with the advent of 3D printing, which essentially enables users to print ‘things’ instead of documents at home from their computer. That is, providing the means for individuals to design their own product and ‘manufacture’ it in on their own 3D printer.

While still nascent, the potential impact of this technology on how we consume products, design our physical space and personalize our world is significant. For instance, 3D printing could be a challenge to Chinese dominance of production processes. If spread widely enough, people might design and tailor their products to their own taste and build them at home rather than buying mass-produced goods off a factory floor. In this vein, Anderson wrote in his earlier books Long Tail and Free about the revival of barter and exchange of value over the net, resulting in new rules for finance and economics in the information age. All these developments rupture existing structures, creating space for new ideas and systems.

How far economies go in internalizing these concepts and developments into their social fabric and their culture is pivotal in marking out the main beneficiaries of such developments. While this notion of adapting to the latest technology is not new, the extraordinary rate of progress now is itself a major game changer. Slow moving, entrenched and rigid structures, large corporations and monopolies will find themselves less and less competitive in a world of crowd-sourced solutions, networked start-ups and rapid technological advances. The shifts in global politics, the shifting of economic power, rapid and irresistible technological changes and evolving social and cultural paradigms mean that nimble-footed and adaptive institutions and individuals will lead the way and benefit most from coming changes.

Smaller start-ups and flexible networks rather than large companies, and adaptive individuals rather than commoditized, unresponsive workers are destined to survive better. Flexibility, the ability to start afresh and continuously innovate is the new normal. Given this new set of rules, creating industries that are adaptive and systems that are responsive is the order of the day. It is perhaps not a war of civilizations anymore, but a competition between networks: the wider, broader and nimbler the network, the better the chances of surviving to the next hurdle. Societies that are able to look beyond political and religious identities towards more collaborative and result-oriented associations across the globe will lead the way. That, really, is the new game in town.

India: The Singing, Dancing, Entrepreneurial Revolution

2012-03-14T16:07:08Z

Socrates believed that the first step towards gaining true knowledge was eliminating misinformation and realizing how much you don’t know, a state he called ‘Aporia’. The Chinese have a similar saying which suggests that one needs to empty one’s cup before anything else can be poured into it. A look at the headlines across newspapers and magazines over the past decade shows how much airtime and public discourse has been taken up by the growth stories of China, India and other fast emerging countries. Despite all the news bites, headlines and newly coined terms like ‘BRIC’ and ‘Chindia’, the truth about the realities of people living in these societies remains somewhat elusive. Beyond mere statistics, getting some answers to questions about the challenges and opportunities for people living in these societies is important. What are the aspirations and values that guide the next generation of leadership in these countries? What does that mean for the geopolitical climate in the years and decades ahead? These questions are significant because they hold some of the important clues to the puzzle of what future governance systems and economic & social models might look like. It is important therefore to look beyond the headlines, to understand the statistics and get a flavor of the reality on the ground.

On 17th June, 2011 in Toronto, Canada, the Aurea Foundation organized a Munk Debate involving Henry Kissinger, Farid Zakaria, Niall Fergusson and David Daokui Li on the topic: ‘Be it resolved that the 21st Century will belong to China’. In a charged and passionate debate Mr Li made the point that “China’s emergence gives us an alternative model of social and economic institutions different from the west.” One, he claimed, that focuses more on social good than on individual freedom. The argument is an old, but significant, one. It is clear that any country of significant size will share more than its resources and markets with the world - it will also share its own model of growth, geo-politics and social evolution. It’s not merely the economic size of an economy but its ability to present the most progressive and relevant social and cultural ideas that mark out the leaders. This includes the ability to innovate, produce new technologies, solve problems and create a society in which the educated and hardworking middle classes will want to live. Irrespective of whether you like that model or not, China’s emergence implies an alternate to Western models.

The question is equally interesting when applied to India. What are the social, cultural and political structures that a more significant if not more assertive India presents? How do they differ from the political system of democracy India inherited from the British, or the capitalistic and open markets system that America and the major global economic institutions have been championing? Is it merely an amalgamation of those two with a dash of its own version of right-wing politics thrown in? All these are ingredients in the mix, but what comes out of it is something quite unique and specific to India. Something that people outside the country don’t necessarily hear about enough and those within the country aren’t always able to adequately communicate. Aside from call centers, technology companies and the usual political cacophony, there is something far more critical and valuable happening inside India. Developments rooted in entrepreneurship and the advancing aspirations of a young society, powered by social & technological innovation, have a significant impact on the resulting social structures emerging in the country.

The economic crisis, which tested the governance system even in America and forced a closer scrutiny of the political and economic systems in the EU, turns our attention to other models. Consequently, an evaluation of the democratic principles and governance of other diverse populations (sometimes with very divergent views) becomes relevant, and India is a valuable case study. Before addressing the sociological aspects, a quick look at some numbers helps get a sense of the scale and context of any discussion on India. As per the 2011 census, India’s population is 1.21 billion (or 1,210 million). According to 2010 data from the United Nations Development Program, an estimated 37.2% of Indians, approximately 450 million people, live below the country's national poverty line. The poverty line in India is defined as Rs. 32 (0.50 euros) per capita per day in urban areas, Rs. 26 (0.40 euros) in rural areas, and is itself a subject of controversy; the definition is considered by many to be too low to represent actual living costs, even on PPP (Purchasing Power Parity) terms, implying that, based on more realistic living standards, the actual number of poor people in India could be even higher.

Further, according to numbers published after the 2001 Census of India, 29 languages were each spoken by more than a million people, while 57 languages were each spoken by more than 100,000 people. These figures reveal a diverse and complicated society, resembling more the characteristics of a continent than a nation state. India is, therefore, a very large country with an exceedingly diverse population, in terms of language and of race and religion. So the challenge is to dovetail the aspirations of a very varied population into a coherent strategy that delivers growth to the different stakeholders.

India moved away from a socialistic model towards liberalization at the start of the 1990s under the then Finance Minister Manmohan Singh, who is now the country’s Prime Minister. The accelerated rate of economic growth since liberalization has led to a rapidly growing middle class. According to a report by the National Council for Applied Economic Research's (NCAER) Centre for Macro Consumer Research by 2015-16, India will be a country of 53.3 million middle class households, translating into 267 million people. Currently India has 31.4 million middle class households (160 million individuals).

The expanding middle class and the resulting rise in literacy have created a generation of educated young people with the desire and the qualifications to effect real change. While the population proportions still remain skewed towards a very high percentage of poor households and low literacy levels, the rate of positive change has accelerated considerably. Another major development comes from the leaps made in information and communication technologies. These advances have created entire industries in emerging markets, based in little towns and small IT companies, capable of delivering services to the developed economies from halfway across the globe. The growth in technology education in India is representative of the role IT is seen as playing in the country’s progress. India’s most renowned technology institutes, the IITs (Indian Institute of Technology) more than doubled their branches in the last decade - from 7 in 2001 to 16 in 2011. The liberalization and expansion of communication and technological innovation is at the heart of India’s recent growth. Although the country has achieved an average annual growth rate in excess of 7% for over 10 years, there are severe challenges to sustaining this growth, not least because of the relative lack of manufacturing in the country where growth has largely been driven by technology-enabled services.

What do these statistics and developments mean for the everyday lives of people? At a party in south Delhi a few weeks ago, I got a flavor of it. In an upper middle class neighborhood, a group of professionals, students, academics and young businessmen and women had gathered for a weekend party. The song and dance that accompanies almost every aspect of Indian society across its vast land was in full display, but in the middle of the singing and dancing, I caught a glimpse of the preoccupations of the youth, and a sense of what drives them, their outlook for the future. Among this dynamic and forward-looking group was a young woman, who had set up women’s empowerment organizations in two cities in north India (Urban Mahila Association and the Maids Company) aiming to provide social security for underprivileged women, often outside the organized economy and therefore outside the reach of government initiatives; there was a social entrepreneur from the organization Swechha who was organizing a festival on the banks of the Yamuna to clean the river and raise awareness of environmental issues among the Delhi slums; there was the owner of an IT and web development firm that also does work with the visually challenged in South India (Society for the Rehabilitation of the Visually Challenged); a fashion designer working on textiles with tribal communities in the northern Himalayas helping to create a market for their garments.

These are not isolated examples. According to a report in the Indian Express quoting a Government of India study of 2009, India has close to 3.3 million NGOs working in the country. This element of social responsibility in a nascent and newly liberalized capitalistic economy is surprising - corporate social responsibility is still lacking and large organizations face criticism for their low involvement with social issues. However, this element of Indian society is not always correctly and adequately represented in discussions about the country’s economic and social evolution. For example, at the 32nd Jawahar Lal Nehru memorial lecture in London in November 2011, Lord Bhikhu Parekh brought to light some of the issues facing democracy in India. A detailed, thoughtful and critical lecture titled ‘The Crisis of Indian democracy’ spelled out the challenges of governing through democracy, but failed to mention this most central of developments in India – the rise of the young (social) entrepreneur with a changing definition of enterprise. Knowledge sharing, open sourcing and crowd sourcing which are commonplace among software and IT professionals are spreading to other areas of the economy as well. Apart from social media and its role in increasing transparency and mobilizing people, collective problem solving is yet another area in which web-enabled communication systems are increasingly deployed. Such platforms are being built and used in the social sector as never before. This form of entrepreneurship and involvement with social issues is seen increasingly among the upper middle classes as well - people who have traditionally shunned such ventures, seeking instead to look for positions in the public sector or working in family businesses. These social entrepreneurs form a crucial link between India’s capitalistic present and its socialist past. The statistics suggest that the beneficiaries of India’s recent growth have been predominantly the affluent classes, but there are significant improvements for the wider population as well. According to a recent statement from Andrew Mitchell, UK Secretary of State for International Development, India has got 60 million children into school in recent years. By some estimates, India lifted over 200 million people out of poverty between 2005 and 2010. NGOs (although sometimes coming under criticism for lack of transparency or corruption) and the services sector are partly responsible for this positive change.

However, problems remain, especially in corporate social responsibility, graft and corruption in deploying funds for the improvement of public goods and services. Perhaps this widespread corruption is one of the reasons why large organizations still do not come forward enough to participate in socially relevant issues, preferring instead to get cosy with politicians through graft to facilitate their business ends. Smaller organizations and newly established ventures are less able and increasingly less willing to follow this process. Societal recognition through being involved in social issues compensates to an extent what large organizations achieve through graft. Like the people at the party in south Delhi, the aspiration of starting up one’s own business and following an entrepreneurial path, as opposed to working in large corporate organizations, is an increasing trend. The acceptability and pride associated with working in large multi-national organizations is substantially diminished in the middle classes. More and more diverse, smaller and entrepreneurial ventures with increasing dependence on technology seem to be taking hold and guiding growth. There is a greater degree of dependence on vast networks rather than large organizations in meeting business and social ends. Smaller organizations tied through networks are far more able and willing to adapt to and work with local communities to deliver value. Where large organizations have failed to adapt and monolithic structures have failed to evolve, these smaller organizations created by entrepreneurs, enabled by technology and joined by networks spreading over vast geographies and industries, seem to be better equipped to produce the next generation of growth. This to me is the critical development where the challenges and opportunities of the future will increasingly be met. More ideas will be shared and strategies developed in chat rooms, social gatherings and parties rather than in board room meetings behind closed doors. The singing dancing generation of entrepreneurs dealing with the grime and dust of the challenges posed by outdated structures and inefficient practices is deciding the course of the country’s future more than ever before.

These nimble, technically savvy and energetic groups of people working in smaller organizations and coming together across a range of sectors and industries, possibly hold the key to what the future socio-economic structures might look like. In the middle of the song and dance, one can sense a little revolution developing that promises some excitement and perhaps some opportunities for real change in the years ahead.

Read the article of Prof. Amartya Sen on Quality of Life: India vs China.