Sunday, February 22, 2009

Why India Will Replace Silicon Valley in the 21st Century, Part 2 of 2

In my previous post, I presented some case studies on how the law of unintended consequences have ended up benefiting India and accelerating her ascent to a leading role on the world stage today. In this post, I will describe how the recent catastrophic events in the global economy are inadvertently laying down the foundation for an unprecedented Indian entrepreneurial revolution.

THE LESSONS OF HISTORY: The Once Great German Universities

It is hard to believe today, but a century ago, German universities were considered the greatest in the world. At one time, German universities would churn out one world class scholar after another and would sweep the Nobel prizes, just as Slumdog Millionaire is sweeping every movie award this year. Today, however, if you were to mention once great German universities like Goettingen or Heidelberg to the average Indian, you would just get back a blank stare.

So what happened in the past 100 years in Germany?

Many things, of course. World wars; the partition of Germany; reconstruction, among others. But perhaps the most profound single event that happened in Germany with respect to their universities was the mass exodus of Jewish scholars to America. They left Germany and ultimately ended up at places like Harvard, Princeton, and MIT, where they inadvertently helped create the second revolution in America.

America's (and India's) Second Revolution

We all know about the first American revolution. This happened in 1776 against the British. It is the one we read about in history books, and this is why I like to call it a "loud" revolution.

But in fact, America has had a second, and equally transformative revolution. It was the silent, entrepreneurial revolution that occurred in the second half of the 20th century, when the US took the lead to become the great entrepreneurial machine that has since come to dominate the world.

By the time German and other highly skilled European immigrants arrived to America, the country had already changed completely beyond recognition from its colonial days. Sure, it did not have all the cultural amenities of Berlin or Paris, and parts of America were still stuck in grinding poverty, but by that time, America had developed a solid middle class and a large domestic market with significant latent demand. And it had highly skilled workers who believed in the idea of social mobility through hard work and were therefore willing to learn new skills.


Today, in 2009, we in India find ourselves in exactly the same situation.

Today, in the midst of an unprecedented global economic slowdown, we are starting to see a re-exodus of Indian immigrants back to India. And when they return to India, they discover both a country and a world which in the past ten years has changed beyond belief.

In India, not only do they find a solid middle class and a large domestic market with significant latent demand, but they find a pool of professional workers who are literally the some of the best in the world.

Why is this the case? Because over the past 10 years, due to the massive outsourcing of business process global best practices to India, we have witnessed the greatest legal transfer of knowledge and intellectual capital the world has ever seen. We now have an entire class of Indians who know what global best practices are in almost every single business process, from the mundane like call centres to the unimaginable like product liability litigation, creative brand design and convertible bond valuation. No other country in the world has such an asset.

The Perfect Recipe

All of this is the perfect recipe for an entrepreneurial revolution. India now has all the tantalising ingredients needed to shift up and away from our past role as a facilitator and supporter to that of a creator. And we are seeing the signs of this emerging phenomenon right beneath our feet.

Still skeptical? I can hear the objections already: "Okay so we have helped make search engines for others, but where is our own homegrown Google for India? We know all about CRM best practices, but where is our own homegrown"

My answer? They are coming. And you ain't seen nothing yet.


Case in point. A few days ago, as part of my Real Life Smart Babes series of articles, I had profiled Janeena Basra, the first Indian Miss England finalist, a Ph.D. student in medicine, part time model, and vice president of an Indian search engine company called Yauba.

A few days after I wrote the profile, the company sent me a special preview password for the service which will be launching at the end of this month. And since that time, I have spent at least five hours playing around with it.

My verdict? It completely rocks.

I will be posting a more in depth review of the service after I have explored it some more. But all I will say for now is that I think this is the Next Big Thing. I know they has been a lot of hype and fluff around such vaporware search services like cuil and Powerset. But this is different.

I think this is the only company I have seen in the past 3 years which can take on--and beat--Google head to head. It is that good.

But what is most impressive about Yauba (and most relevant to this post) is that it has been built almost completely in India and by overseas Indians. If services like Yauba or Zoho are any indication, a true golden age of Indian startups is just beginning. And even if services like Yauba and Zoho ultimately end up not succeeding, many more will be coming our way. That is how entrepreneurial revolutions work ... as in Schumpeter's famous phrase, through "creative destruction."

Imagine if just 10% of all the top Indian engineers at Google and Microsoft and Facebook suddenly decided to build something in India, and you can imagine what is likely to happen. And with the slowdown in the US and European economies, such a prospect becomes more and more attractive every day. India will soon have an Internet population greater than all of Europe and US combined. And as US and Europe begin to tighten their regulations on immigration even more, the exodus will continue even more.

And in doing so, the centre of gravity for entrepreneurship will naturally shift to India. Just as America took over the dominant role in entrepreneurship in the 20th century, so too will India in the 21st.

EPILOGUE: What All This Means for Indian Entrepreneurs

All of this is good news for Indian entrepreneurs, but it also means that the entrepreneurial world in India will get much much more challenging due to greater competition.

When the best domestic search engine is a clunky, outdated service like Rediff, it really is not that hard to create something better. But when the best domestic search engine becomes something like Yauba, it will be a whole new ball game.

It will indeed become a brutally competitive, brave new world

But it is this very competition which will finally allow Indian companies and startups to create (and not just faciliate) world class companies and thereby lead the way in India's Silent Entrepreneurial Revolution.