No appetite for risk-taking, and our education system
This is part of an email conversation I had with a friend, a doctorate in higher mathematics from a top US university (a medal winner to boot) and now working at one of the top information technology companies there. His earlier education in India provides him with the right perspective to answer the question raised here. Here is an extract from his email.
I disagree with you. Success of Jobs and Gates was because of the capital they could raise and the talent they could hire….
The “environment” certainly made Steve Jobs. Indians value stability, gradual progress. Steve Jobs is produced by an environment that encourages massive risks with miserable failures and resounding success. Environment which encourages massive risk-taking is what creates giants in the High Tech sector.
Let us first take a look at risk-taking:
India has no culture of venture capitalists. It is not that we don’t have rich people — we have many many rich people. We dont have people who think that investing large amounts of money on a new business is by itself a legitimate vocation. I don’t know why this is the case.
Are Indians risk-averse? In the silicon valley 9 out of 10 start-ups fail. The investors look for a 1:12 return on their investment. So on the average, they come out ahead. So if you are a VC, you should be prepared to see 9 out of your 10 investments (which are typically in millions of dollars) go belly up. And one of those to hit the ball out of the park. This type of massive risk may not be something that Indians have a cultural appetite for.
Do Indians look upon VC as “moneylending” ? Lending in India has been the mainstay of two kinds of people. Bankers (who don’t lend to everyone) and Moneylenders (who fleece their clients). Because banks dont have an appetite for the kind of risk I mentioned, lending to risky clients have been the solely from “Moneylenders”. Maybe their profession is derided and not looked upon as desirable or lucrative. In the US, a lot of people who become millionaires due to startups, becomes VCs, because the job is looked upon as sexy.
Are enough Indians motivated to start companies? Parents want their kids to become doctors and engineers. In my father’s generation, Parents wanted their kids to join the government (stable job, pension, perks like housing and phone). Nobody encourages their kids to go and start a business. Somehow starting a business is mixed up with inability to study and “business” alludes to a roadside grocery shop. In the US, even though college dropouts who made it big are talked about (Bill G, Steve Jobs), most High Tech companies are started by great programmers, or people with PhDs. This include HP, Facebook, Amazon, almost every chip company (Intel, AMD, TI, Synopsys, Cadence, Tensilica, Qualcomm, Broadcomm, Nvidia). People who are highly educated in India want to join companies rather than start companies. People who start companies and fail are valued highly in the US (for their experience at managing every aspect of the company). People who start companies and fail are looked upon as failures in India and they probably wont get a job afterwards.
Read up on Narayana Murthy’s interview where he talked about his early days. His father in law didn’t want to give his daughter in marriage to a guy “who had no job”. People thought he was crazy to give up his job to start a company. In short, there is no environment of risk taking. People don’t take risks. People who do are not appreciated.
A second aspect is our education system:
What made the silicon valley? I would argue that Universities made the Silicon Valley. Not because they produced good students, but because they encouraged professors to be entrepreneurs. Stanford for example, lets professors take leaves of absence to start companies and then come back. Almost all professors at stanford have started companies or in the boards of companies. Students idolize their professors and want to go the same way. Larry Page (CEO of Google) talked about how he wanted to start a Search Engine Company. Talked to his professor (The Brilliant Rajeev Motwani) who gave him advice on how to go about hiring people, introduced him to VCs, mentored him for the first few years. Google is a 180 Billion $ company now. There are many many such stories.
He has nailed the problem correctly. It is for good reason that India is unlikely to produce path-breaking innovative entrepreneurs.