Wednesday, December 31, 2003


Folks, here's wishing all of you a fantastic New Years. 2003 has been the best year of my life by far and I am hoping my luck will hold out in 2004 too, or perhaps even get better :) 2003 has also been a fantastic year for India and the icing on the cake were the GDP numbers announced today which suggested that the Indian economy grew at 8.4% in the last quarter. The optimist in me has to wonder what these numbers would look like if we succeed in operationalising the RISC model. Well, that's something to look forward to in 2004 as is the expected completion of my Ph.D. at some point in 2004.

Enough rambling. Once again, happy new years to all of you. Thanks for reading.

The world's youngest nation 

This post is dedicated to Edward Hugh, who worries about the economic effects of changing demographics more than most. Outlook, the Indian newsmagazine, is carrying a special issue on the world's youngest nation -- India (54% of the country's 1 billion plus population is under 25).

The demographic bulge that has created these staggering numbers can cause a "revolution of expectations". It could transform us as a nation if we tap the implicit potential. It could trip us if we don’t! What do the numbers mean?

This is an angle that a lot of commentators overlook in making comparisons between India and China -- that India is younger and will also overtake China's population in about 15 years. In any case, it's a good cover story to end what's been a fantastic year for India (the feel-good spirit in the country has to be seen to be believed) with. Contributors include Azim Premji, Anil Ambani and President Kalam.

The unbearable lightness of being.....Paul Krugman 

Just when you thought complete and utter pessimism was unique to Stephen Roach, along comes an op-ed by Paul Krugman called Our So-Called Boom. Krugman looks through the economic numbers and predicts that they might not be quite as rosy as Team Bush would have us believe.

In the third quarter of 2003, as everyone knows, real G.D.P. rose at an annual rate of 8.2 percent. But wage and salary income, adjusted for inflation, rose at an annual rate of only 0.8 percent. More recent data don't change the picture: in the six months that ended in November, income from wages rose only 0.65 percent after inflation.

Why aren't workers sharing in the so-called boom? Start with jobs.

Payroll employment began rising in August, but the pace of job growth remains modest, averaging less than 90,000 per month. That's well short of the 225,000 jobs added per month during the Clinton years; it's even below the roughly 150,000 jobs needed to keep up with a growing working-age population.

An aside: how weak is the labor market? The measured unemployment rate of 5.9 percent isn't that high by historical standards, but there's something funny about that number. An unusually large number of people have given up looking for work, so they are no longer counted as unemployed, and many of those who say they have jobs seem to be only marginally employed. Such measures as the length of time it takes laid-off workers to get new jobs continue to indicate the worst job market in 20 years.

So if jobs are scarce and wages are flat, who's benefiting from the economy's expansion? The direct gains are going largely to corporate profits, which rose at an annual rate of more than 40 percent in the third quarter. Indirectly, that means that gains are going to stockholders, who are the ultimate owners of corporate profits.

So is the *booming* economy yet another reality TV show? Krugman seems to think so.

Tuesday, December 30, 2003

Replicating Silicon Valley 

Bangalore has often been compared to Silicon Valley. I thought the comparison was a bit optimistic, bordering almost on the ridiculous. Silicon Valley has been the fount of innovation for a while now. Bangalore doesn't have much to show in that department, though the prospects are pretty good. Business Standard shares some of my skepticism about Bangalore's silicon crown.

Well, I tried to post the story on here, but there's just too much relevant stuff to post on here and would make the post unwieldingly long. But, I would strongly recommend reading the piece if you have an interest in figuring out what it would take to replicate Silicon Valley's extraordinary success.

RIAA legal action bears fruit 

The RIAA has been playing ostrich in the sand for over a year now, successfully suing 70-year old grandmothers and 12-year old children for file-sharing. Finally, here's news that all of their efforts to curb music piracy has succeeded.

More people looked for information about the file-swapping program Kazaa than anything else on the net in 2003, according to search site Yahoo. It beat Harry Potter, Britney Spears and Eminem to top the list of the year's most popular searched-for terms.

It shows that despite legal moves by the recording industry to clamp down on illegal music swapping, surfers are still interested in such software.

So, Kazaa has managed to beat both Harry Potter and Paris Hilton. Will RIAA take a hint now?

Helping out in Bam 

If any of you was wondering whether there was any way of helping out with those affected in the Bam quake (latest reports suggest the death toll could cross 40,000), here are a bunch of aid agencies that have requested help.

The backoffice moves 

Okay, so articles on offshoring are the flavour of the year and the Economist joins in with a long-ish article. The Economist remains gung-ho about the positive effects of offshoring, quoting from McKinsey study that predicts a benefit of $1.12-$1.14 per USD spent going offshore. Stephen Roach of course, manages to remain pessimistic :)

The offshoring business remains predominantly English-speaking. It is dominated by American and British companies outsourcing their internal operations to third parties in places such as Ireland, Canada and South Africa, but most of all in India. The fact that America and Britain have relatively liberal employment laws has also been influential in the shift of business overseas. If offshoring is, as McKinsey claims, a “win-win� formula for both sides, the process is set to give English-speaking countries a significant competitive advantage.

India looks likely to remain the most attractive offshoring destination for some time. It sees its main competitors as China and Malaysia. But Sanjukta Pal, a consultant with PricewaterhouseCoopers, says that the cost of operations in India is currently 37% lower than in China and 17% lower than in Malaysia.

For the future, offshoring promises to diminish the effects of the demographic crunch in countries where the ratio of the working population to the total is set to fall. HSBC reckons that America would require an extra 8.6m workers to maintain the ratio at its 2000 level for 20 years. Countries that are reluctant to allow in immigrant workers to do their unfilled jobs now have the option of sending some of those jobs out to the workers, before they even think of emigrating.

Despite all the advantages of offshoring, there are also disadvantages. With voice services—such as directory enquiries, for example—local knowledge is often important. So too are accents and culture.

Whatever the truth of the matter, there is no doubt that customers with complex queries requiring local understanding do not respond well to far-off operators repeating parrot-fashion a series of learned responses. Convergys, one of the world's biggest providers of “contact-centre services�, advises companies to shift simple queries offshore while retaining the more complex ones on the same shore as the caller. It calls this process “rightshoring�, and estimates that about 80% of the companies that it is working with in Britain are planning to split their call-centre operations in this way.

Still the tip of the iceberg?

Many companies have not yet taken anything like full advantage of offshoring. Harris Miller, president of the Information Technology Association of America (ITAA), a lobby group, says that offshore locations have so far captured just 3-4% of all American companies' outsourcing. The bulk remains onshore in the hands of big firms such as Accenture, CSC, EDS and IBM. A report by Forrester released at the beginning of this week says that 60% of Fortune 1,000 companies are doing nothing, or are only just beginning to investigate the potential of offshoring (see chart 2). Mr Harris says some big companies have told him that up to 40% of their outsourcing business could end up offshore. That suggests the industry still has a long way to grow.

The threat to India's dominance of the business faces a threat, according to the article.

firms such as AT&T are working on speech-recognition software that might, says Hossein Eslambolchi, AT&T's chief technology officer, soon be good enough to replace a lot of the routine inquiries currently handled in call centres. Indian call-centre employees, in other words, might soon find themselves competing with “offshore� computers in New Jersey, and Indian doctors currently providing remote diagnosis of patients in other countries might find themselves undercut by a supercomputer's analysis of, say, digital mammograms and dental records.

The Future of Flight 

Okay, so I am really running late with reading the Economist. So, the next couple of posts are probably old hat. Nevertheless, I thought they made excellent reading. First, a special that ponders the future of flight, especially that of UAV's. Obviously, the special was written on the occasion of the 100th anniversary of the Wright flight. Flight certainly has come a long way since the Flyer and has a long way to go from now.

As UAVs have proved themselves in various theatres of war, military interest has blossomed. In the past two years, American spending on them has gone from $300m-400m a year to over $1 billion, according to Laurence Newcome, who runs the website “UAV Forum”. America's Department of Defence expects to spend $16 billion on UAVs between 2002 and 2010. According to a UAV road map from America's Department of Defence, by 2012 UAVs the size of F-16 fighter aircraft are likely to exist. These will be capable of many combat and support missions, including the suppression of enemy air defences and electronic attacks on enemy sensors. The ultimate goal is to enable America to project its power on to the far side of the globe with no need for nearby air bases, or risk to the lives of pilots.

By 2020, the Pentagon estimates that one-third of America's combat planes will be robotic. UAVs certainly look as though they will be commanding a large share of future military spending (see chart). And the Joint Strike Fighter being built by Lockheed Martin looks as though it will be the last new manned American fighter for decades. By 2100, human military pilots will be a quaint oddity. Why? Even if pilots could be beefed up with an exoskeleton that would allow their bodies to turn under a force 20 times that of the Earth's gravity, they think and react more slowly than computers.

The world's smallest UAV is currently the 15cm-long, electrically powered, Black Widow. It can fly for 30 minutes and download live colour video to the ground via its onboard camera. Many such craft are being developed for “over the hill” work, when soldiers need scouts in dangerous areas. Future ground forces are likely to carry insect-sized craft routinely, launching them by hand into the air. Soon enough, these craft may also have “perch and stare” capabilities—to allow surveillance periods lasting weeks. Tiny UAVs may be used as sensors, to mark points for precision air strikes, and for detecting radiological, chemical or biological contamination. By 2100, they will probably be smaller than houseflies and available in supermarkets in packs of ten.

Further ahead, the HyperSoar is a concept for a craft flying at ten times the speed of sound and able to reach any point on the globe within two hours. Hydrogen powered, it would use air-breathing, rocket-based engines to ascend to the outer limits of the Earth's atmosphere where it would skitter in and out of the atmosphere like a stone being skimmed across the surface of a pond. If it works, the craft would also make access to space a great deal cheaper.

A complex ecology of planes is emerging for different routes and functions. At one extreme are massive aircraft such as the Airbus A380 serving the most popular routes—whose successors will perhaps double its capacity to 1,000 people. At the other end, there will be insect-sized spy craft. Humanity will finally master the skies in the coming century and in doing so will largely eliminate the pilot. With a future this bright for aircraft, what humanity really needs is a cure for jet lag.

Sunday, December 28, 2003

Profile: Howard Dean 

I have linked to more than one profile of Gen. Wesley Clark. So, it's only fair that I also link to one on Howard Dean as well. Dean is certainly a good candidate and is someone I probably agree with on most issues, except on free trade (or at least what he claims at public fora). The primary reason for my being a bigger fn of Clark is because I think the General has a much better chance of beating Bush in an election in which national security will play a huge role. Anyway, here is a New York Times profile of Dean that also outlines the similarities in background between Dean and Bush, something I have blogged about in the past.

George Walker Bush and Howard Brush Dean III are from opposite sides of the nation's political fault line. Yet besides energizing the left wing of his party, Dr. Dean has some Republicans worried that the characteristics he shares with President Bush could appeal to swing voters, especially when Dr. Dean's current image as a Vermont liberal is leavened with details of the fiscally conservative way he governed Vermont for 11 years.

The two are sons of established blueblood families dominated by powerful fathers. They attended top prep schools and Yale. And they settled far from traditional power enclaves, reinventing themselves as archetypes of their chosen new homes, President Bush in swaggering Texas and Dr. Dean in outdoorsy Vermont.

They were known for hard-partying, hard-drinking in their youths, but those days ended when they simply gave up alcohol as adults. Each man's character was shaped by the loss of a sibling: for the president, a sister who died of leukemia at age 3; for Dr. Dean, a younger brother who disappeared in 1974 in Laos while on an around-the-world trip.And although each has a distinct political style, as governors they developed reputations for carefully bridging the political divide between liberals and conservatives, a skill that has thus far eluded them on the national stage.

Other, deeper similarities are apparent only to those who have spent significant time with each man: temperaments prone to irritation; political skills that play better in small groups than on television; rock-solid confidence in their own decisions.In addition, each man is seen as being his own worst enemy on the campaign trail, President Bush for mangling his English and fumbling answers, Dr. Dean for creating unnecessary crises by speaking his mind too swiftly.

Saturday, December 27, 2003

The General in his Labyrinth 

I have been fascinated by the western media's coverage of Gen.Musharraf. He started of being described as a vile sort, but post 9/11, he became some sort of media darling. Witness how the media suggested that there was no credible alternative to the General. True, but what the media missed was that the lack of an alternative to Musharraf was partly because the two most popular politicians in Pakistan (Nawaz Sharif and Benazir Bhutto) were in exile in Saudi Arabia and London. Needless to say, the media also has a habit of skimming over Musharraf's personal culpability in the Kargil disaster.

Of late though, he seems to be returning to semi-pariah status given that Bin Laden has not been captured yet and more than one person in the west doubts Musharaf's sincerity in breaking down the complex links between Al Qaeda and the ISI. Besides, Musharaf seems to be living a charmed life given the number of attempts that have been made on his life in the past two weeks. Typical of this change in opinion reflected in the media is this op-ed in the Washington Post which was written in the wake of the latest attempt on the General's life.

More than ever, Mr. Musharraf's ability to deliver on his promises to stand with the United States against terrorism and Islamic extremism is in doubt. His sudden death would trigger a crisis both for Pakistan and for U.S. security. Yet if the Bush administration has a fallback plan, it shows no sign of it.

The world already has good reason to wonder whether, despite Mr. Musharraf's promises, Pakistan's nuclear technology is being spread to rogue states or terrorists. If he were to fall victim to assassination, Pakistan's own nuclear arsenal might be up for grabs, as extremist Muslim and pro-Western elements inside and outside the military scrambled for power. Mr. Musharraf's manipulation of the political system leaves no clear road map for continuity. Bush administration officials appear to bank on the assumption of power in a crisis by another friendly general -- which, even under Mr. Musharraf's constitution, probably would require a coup d'etat. Other forces, including the secular democratic parties and civil society movements, might be allies of the United States, but the Bush administration's strategy doesn't encompass them. All its chips are on a man whose evasion of two suicide truck bombs was, for the second time this month, a lucky chance.

Friday, December 26, 2003

Al Gore did not invent the Internet 

Paul Krugman touches on an issue that I felt wasn't adequately covered in the media or elsewhere -- the free ride that GWB got from the so-called liberal media during the 2000 elections. He suggests a few rules for political reporting including this line.

If a reporter must use anecdotes, they'd better be true. After the Dean endorsement, innumerable reporters cracked jokes about Al Gore's inventing the Internet. Guys, he never said that: it's a malicious distortion of a true statement, and no self-respecting journalist would repeat it.

Bingo. This is something I used to be very pissed off about during the 2000 elections, especially since this line is taken to be the gospel truth by just about everyone. The truth behind the oft-repeated statement is slightly different. What really happened was that Gore was asked why he was different from Bill Bradley in the 2000 primaries by Wolf Blitzer on an episode of Late Edition. This was his response.

During my service in the United States Congress, I took the initiative in creating the Internet. I took the initiative in moving forward a whole range of initiatives that have proven to be important to our country's economic growth and environmental protection, improvements in our educational system.

Yes, Gore's phrasing is rather clumsy. Clearly, he meant that he helped create an environment (especially from a policy and regulatory standpoint) from 1977 on that helped the Internet flourish. It came out sounding a little different, but even so, he hasn't claimed that he *invented* the Internet. So, how did that meme get so much currency? In this context, it's useful to remember Vinton Cerf's comments about this whole Al Gore episode.

I think it is very fair to say that the Internet would not be where it is in the United States without the strong support given to it and related research areas by the vice president

It seems a little mind-boggling to me that this misrepresentation has so much currency even today and no news outlet, including CNN (the home of Wolf Blitzer) has tried to set the story straight. So much for the liberal media.

Sending Party Pays 

Who hasn't been pained by spam, especially if one happens to own a web-based e-mail account? Researchers have been trying to figure ways to fight spam for some time now. These have included several attempts to make spammers pay an economic cost for the e-mails they send out. The BBC is carrying a story about Microsoft's attempt to make sending parties pay for e-mail.

The development has been called the Penny Black project, because it works on the idea that revolutionised the British postage system in the 1830s - that senders of mail should have to pay for it, not whoever is on the receiving end.

"The basic idea is that we are trying to shift the equation to make it possible and necessary for a sender to 'pay' for e-mail," explained Ted Wobber of the Microsoft Research group (MSR). The payment is not made in the currency of money, but in the memory and the computer power required to work out cryptographic puzzles. "For any piece of e-mail I send, it will take a small amount computing power of about 10 to 20 seconds." "If I don't know you, I have to prove to you that I have spent a little bit of time in resources to send you that e-mail. "When you see that proof, you treat that message with more priority."

Mr Wobber and his group calculated that if there are 80,000 seconds in a day, a computational "price" of a 10-second levy would mean spammers would only be able to send about 8,000 messages a day, at most. "Spammers are sending tens of millions of e-mails, so if they had to do that with all the messages, they would have to invest heavily in machines." As a result of this extra investment, spamming would become less profitable because costs would skyrocket in order to send as many e-mails.

The idea was originally formulated to use CPU memory cycles by team member Cynthia Dwork in 1992. But they soon realised it was better to use memory latency - the time it takes for the computer's processor to get information from its memory chip - than CPU power. That way, it does not matter how old or new a computer is because the system does not rely on processor chip speeds, which can improve at rapid rates. A cryptographic puzzle that is simple enough not to bog down the processor too much, but that requires information to be accessed from memory, levels the difference between older and newer computers.

Seems like a clever idea, if it only weren't Microsoft promoting the idea. Anyone who has used Hotmail knows how much the volume of spam increased since the time Sabeer Bhatia sold to MS. Besides, what to do about the open standards that might be required to make even the Penny Black project work efficiently?

Paul Wolfowitz, velociraptor extraordinaire 

Even at the worse of times, one had to admit that Paul Wolfowitz is an intriguing man. No matter how much I disagree with him, I'd actually go to some trouble to listen to him speak, if for no other reason to find out how the other side thinks and the stream of logic they're using. Clearly brilliant and extraordinarily intellectual, he comes across as being the exact opposite of his boss, GWB. Given his brains, one has to wonder how he managed to misread the Iraq situation so badly. So, I read with great interest the Washington Post feature on him yesterday.

Some observers of Wolfowitz speculate that one lesson he took from the Holocaust is that the American people need to be pushed to do the right thing, because by the time they entered World War II, it was too late for millions of Jews and other victims of the Nazis.

Asked about this, Wolfowitz agrees but expands on the thought -- and connects it to Iraq. "I think the world in general has a tendency to say, if somebody evil like Saddam is killing his own people, 'That's too bad, but that's really not my business.' " That's dangerous, he continued, because Hussein was "in a class with very few others -- Stalin, Hitler, Kim Jong Il. . . . People of that order of evil . . . tend not to keep evil at home, they tend to export it in various ways and eventually it bites us."

Agreed, but where were you when Mobutu, Pinochet, Saddam, Bin Laden etc were being nurtured by your fellow travellers in the name of national security?

To Wolfowitz, there is no contradiction between calculated policies and idealistic goals. Rather, he contends, they can reinforce each other. Indeed, Wolfowitz is most confrontational when he is most idealistic. Nowhere is that more evident than in his advocacy of transforming the politics of the Middle East, a policy that frequently is attacked as unrealistically idealistic.

Pentagon insiders say this vision of a democratic transformation of the troubled region is probably the biggest single area of discrepancy in policy views between Wolfowitz and Rumsfeld, who is said to doubt that such a sweeping change is possible.

Some see Wolfowitz's views on the Middle East as dangerously naive. "Wolfowitz doesn't know much about the business he's in," says retired Marine Gen. Joseph Hoar, a former chief of the Central Command, the U.S. military headquarters for the region. "He knows very little about war fighting. And he knows very little about the Middle East, aside from maybe Israel."

Likewise, the latest issue of Parameters, the official journal of the U.S. Army War College, carried some tart commentary aimed at Wolfowitz and his colleagues. Jeffrey Record, a former staffer for the Senate Armed Services Committee, wrote that "the Bush Administration, and more specifically the civilian leadership of the Pentagon, made faulty assumptions about postwar Iraq and failed to plan properly for Iraq's reconstruction." He particularly faulted "the 'liberation' scenario peddled by the Defense Department's neoconservative naifs."

An intriguing man indeed. If only his idealistic adventure didnt cost these many lives. Of course, if the war had been sold on the "Saddam as tyrant" spiel (Wolfowitz's take) rather than on WMD's, it might not have become the marketing disaster it has now become. But then try selling Wolfowitz-style liberal interventionism to the American public.

Thursday, December 25, 2003

1 Giant Leap for world music 

I have listened to the 1 Giant Leap CD off and on. Today I managed to catch the documentary on the making of the 1 Giant Leap DVD and later the DVD itself on National Geographic India. Fantastic stuff. From the introduction by Bono down to impromptu jams by everyone from Baaba Maal to Asha Bhonsle to Maori musicians in New Zealand, its a *very* watchable documentary on the commonalities among people/cultures in a very diverse world. For more information on the project visit the website.


Merry Christmas everyone. Hope you're all having a great Christmas. For my part, I am glad I am in India celebrating Christmas, minus the political correctness. Yes, you can wish anyone you want (irrespective of religion) for Christmas without worrying about offending Hindus, Buddhists, Jews etc. And that's exactly how it should be, where everyone can participate in everyone else's festivals without fear of offending anyone. The sooner the PC folks get it, the better off the world will be. That's my Christmas thought du jour.

Wednesday, December 24, 2003

Linus defends Linux 

I kept wondering throughout the SCO allegations (accusing Linux of violating its UNIX copyright and license) against Linux why Linus Torvalds was maintaining an uncharacteristic silence. Well, the New York Times reports that Torvalds has decided to finally speak out and defend his baby.

SCO has for months made the broad claim that Linux included large chunks of copied Unix code. But the letters being sent out - urging companies to stop using Linux or to pay SCO license fees - listed for the first time more than 65 software files that "have been copied verbatim from our copyrighted Unix code and contributed to Linux."

"Some of these files were written by me directly," Mr. Torvalds said in an e-mail exchange, and so were not contributed to the Linux project by third parties, including I.B.M., which is being sued by SCO. The files listed in SCO's letter are written in the C programming language. Citing two files, "include/linux/ctype.h" and "lib/ctype.h," Mr. Torvalds said "some trivial digging shows that those files are actually there in the original 0.01 distribution of Linux" in September 1991.

"In short," Mr. Torvalds said, "for the files where I personally checked the history, I can definitely say that those files were trivially written by me personally, with no copying from any Unix code, ever. "I can show, and SCO should have been able to see, that the list they show clearly shows original work, not copied."

Tuesday, December 23, 2003

Ipod on the cheap 

I have harped in the past about the way Apple overprices its products, the Ipod being a case in point. I bought my Creative Nomad Zen Xtra 30 GB player for about $200 less than what an Ipod with similar capabilities would have cost. Yes, the Ipod has a better user interface, but thats about it. I havent noticed much of a difference with any other feature. So, is a marginally UI worth an extra $200? More importantly, would Apple be willing to give up on the lower end of the market, as the big players like Sony and Dell enter the market?

The answer seems to be no, if this report can be believed. Steve Jobs is planning to unveil new Ipods which cost about $100 each.

The lower-end iPods, which are expected to carry a price tag of about $100 and will hold 400 to 800 songs, are a necessary answer to the bevy of MP3 digital music players now on the market that cost $100 or less, analysts said. "Odds are it's a flash-memory-based player, something to position Apple against the low-cost offerings from Creative and Rio," said Rob Enderle, principal of market search firm the Enderle Group.

Flash memory? Jobs seems to have the idea right -- that he needs to lower the cost of Ipods, but flash memory and 400-800 songs when my Nomad can hold 8,000 songs???? And of course, Sony has plans to enter the market in 2004 with a sub $100 player. Yes, there's a market at the very low end, but I believe what Jobs needs to do is to lower the prices on the original Ipods if he hopes to compete against Samsung, Creative etc as awareness of their products grow (the name recognition of Ipod has thus far been its biggest selling point -- the security guy at Heathrow looked at my Nomad and asked if it was an Ipod).

Bollywood's gonna Kazaa you! 

It was last month that Kazaa announced its plan to sell the Hindi film, Supari to its users for $2.99 a pop, becoming the first movie to be legally available on the file-sharing network. I did wonder at the time how on earth a Bollywood crew could understand the direction technology and the Internet are leading the entertainment industry to earlier than any studio in Hollywood.

But now comes this report which suggests that Bollywood may have this figured out even better than I assumed.

India's film makers are offering Internet movie downloads on web site Kazaa in a move that could lower costs and boost revenues in Bollywood, the world's most prolific film production center.Some 35 producers will be able to sell movies using Kazaa, a file-sharing program owned by Australia's Sharman Networks, according to company statement.

"In a distribution deal struck between Sharman's partner Altnet, Inc...and IndiaFM.com, one of the most popular Bollywood entertainment sites, Kazaa's estimated 60 million global users will gain access to previously unavailable content," the statement said.

Since fast broadband connections aren't yet available to consumers in India, these movies are clearly aimed at the non-resident population in the west and are also a very long-term bet in terms of profitability. Nevertheless, it remains interesting that Bollywood has figured out a distribution mechanism far earlier than their western counterparts.

Random thoughts on globalisation 

I've been spending some time the past couple of days roaming around the Fort Cochin area. Walking around an ancient port with fishing nets from the court of the Kublai Khan, jewish settlements that were established soon after the sack of Jerusalem by Nebuchadnezzar (and site of the oldest synagogue outside the middle east), remains of Roman trading ports, one has to really wonder why there is so much song and dance about globalisation today (yes, the stakes are much are higher today than they were 100 years ago).

2000 years ago, free trade between nations was a matter of fact (in fact the Phoenicians were trading with south-west India far earlier than that). A cursory look at the similarity in the racial features, language, customs, traditions and food of people along the various trade routes provide more than ample evidence of this movement of ideas, capital, goods and people. In fact, one could safely make the argument that the global trading system finally collapsed in the wake of the first world war.

So, why then the fear that globalization is some kind of imperialist plot cooked up by the Americans to take over the world (i am paraphrasing of an opinion expressed by a trade unionist in an Indian newspaper today)? What's truly ridiculous is that is this opinion was proferred by someone from Cochin, someone who clearly has no clue about the history of his own hometown.

Yes, the Americans are the main drivers of globalisation today, but that's because they are the biggest economy in the world. Yes, globalisation at it's practised today (trade is good, imports are bad) is bound to piss people off, but even so, if the critics thought about it for a bit, the benefits of a free and fair trading system must surely be evident to them?

Globalisation and Homogenisation 

One of the more popular myths surrounding globalisation is that it will somehow lead to a homogenous society. I have often wondered whether folks who make these allegations have ever visited to the melting pots (the most obvious symbol of globalisation) of today -- London, New York etc, or even read about the melting pots of old -- Alexandria, Cochin, Constantinople etc. The one accusation you cannot make against these melting pots is that they are/were somehow homogenous. They are/were anything but. Stephen Evans agrees in this story about varieties of local cheese.

At the click of a mouse, North Americans can order Beer Kaesa cheese from Monroe, Wisconsin (it doesn't actually contain any beer but took its name because it was devised in 1933 to mark the end of prohibition) or Humboldt Fog from California or Vermont Shepherd from New England.

The University of California has just published a history of Camembert, and it does show a relentless move towards uniformity over the last century. Where once individual farms would have produced their own unique strain of the French cheese, invariably using milk from a particular herd, the trend has been to agglomerate production in factories, where the product was standardised, homogenised and pasteurised. Camembert lost its distinctive look and taste and became uniformly pasty white, with scarcely a hint of robustness.

But the good news for cheese-lovers is that distinctive, local Camembert is making a comeback because of the internet. It's expensive, of course, but at least it's there.

The signs are that the internet is doing what its proponents promised it would: creating a truly global market for a huge range of products made all over the world. This, plus the postal service, promises small producers of obscure cheeses - and meats and olives and anchovies and herbs and wines - a return from the brink of oblivion.

Religion and AIDS 

First it was the pope and his cronies who talked down the threat of AIDS, claimed that usage of condoms didn't make a difference and that abstinence was the best way to prevent AIDS from spreading. Then came some of the defenders of Indian virtue and culture in the national government. Now, it's the turn of some crazy mullah in Somalia, who has decided to outlaw the use of condoms by invoking sharia law. The punishment for selling condoms will include flogging, according to this report.

Sheikh Nur Barud, the chairman of the Ulema Council, told a public meeting that the use of condoms will increase adultery and those promoting its use deserve punishment. The council is responding to a United Nations-funded campaign to raise awareness about Aids being aired by a local radio station.

It's one thing for religious institutions and personalities to not understand the divide between church and state. It's another thing altogether to butt their noses into a public health disaster, the complexity of which they are completely ignorant of. And if they insist on intervening, I believe they should be held as accessories to genocide because that's truly what the AIDS epidemic is turning out to be.

Monday, December 22, 2003


Time was when Margaret Thatcher's Conservative party retained power helped hugely by the TINA factor. Now, in a neat reversal of roles the Labour party and Tony Blair seem unbeatable for at least another election cycle, Michael Howard be damned. It doesn't help that the vast majority of the Tory party are senior citizens and toffs (not mutually exclusive). The New York Times reports on the curious plight of the once-powerful Tories.

The Conservatives were the dominant force in British politics through much of the 20th century, producing political giants like Mrs. Thatcher, Stanley Baldwin and Winston Churchill, and setting the tone for Britain's view of itself and its place in the world. But after a long period marked by damaging struggles for power, internal policy disputes on issues like Europe, an inability to capitalize on missteps by Mr. Blair's government and the steady usurpation of traditional Conservative positions by the newly centrist, even rightist Labor Party, the Conservatives are struggling to find their way.

Much of its problem has been in identifying a leader with the stature to take on Mr. Blair, who has a gravitas that is at times distinctly presidential. None of the post-Thatcher Tory leaders — John Major, lampooned as a colorless nonentity who tucked his shirt into his underpants; William Hague, who never overcame the handicap of looking like an infant Alfred E. Neuman; and Mr. Duncan Smith, who sounded as if he had a chicken bone permanently lodged in his throat — could effectively compete with Mr. Blair.

Meanwhile, the party has blundered itself into irrelevance in much of the country. It holds just 163 seats of the 659 in Parliament. It has no parliamentary presence in most of England's northern cities, including Liverpool, Newcastle, Leeds and Bradford. There is only one Tory member of Parliament from Scotland and none from Wales.

Perhaps Gordon Brown is, in fact, the only true alternative to Tony Blair?

Sunday, December 21, 2003

Bhutan goes Mobile 

Four years after the introduction of TV and the Internet, the Himalayan kingdom has now decided to introduce its first mobile phone service (with an ancient buddhist ritual, no less). Looks like the king has finally decided to adopt the course of modernity and integrate Bhutan with the rest of the world, t least technologically. Having the world's two fastest growing telecom markets for neighbours probably helped spur the decision.

At retail outlets, potential customers eye up phones which would happily stand up to scrutiny in far more developed markets. They are far from cheap and call prices are out of reach of most Bhutanese. But being mobile is the latest status symbol for the aspiring classes, and so business is booming for vendors of the new equipment.

Invariably there have been a few teething problems. There was such an initial rush to top up pre-paid accounts with credit that it crashed the automated computer system. There is a learning process that has to take place as well, because Bhutanese are expecting too much from their phones - the phones can deliver but the networks cannot. For the 2,000 subscribers, there is a real danger of creating an expectations gap, which even officials acknowledge has to be closed quickly.

India's forex reserves cross $100 billion 

The inevitable has finally happened. India's forex reserves have crossed the $100 billion mark. Not bad at all for a country that was on the verge of default some 12 years back and had pledged its gold reserves. The recent surge in forex reserves are probably due to the depreciation of the dollar against other currencies rather tremendously increased inflows.

By my rough calculations, the top 10 Asian economies now hold about $1.5 trillion in forex reserves. Japan has about $600 million, while China has about $350 billion. Throw in India, Taiwan and South Korea and you get close to that figure. Obviously having huge reserves gives politicians something to crow about. But is it time for these Asian economies to rethink whether it wants to continue lending money to the U.S. -- at about 4% -- so American consumers can continue to indulge their profligate ways? Perhaps.

Churchill in Bangalore 

Ram Guha has written an interesting article on one of the lesser known of Winston Churchill's life -- the time he spent in Bangalore. Back in 1896, Bangalore was a sleepy little cantonment (not that it was very different in 1990. 2003 is a VERY different story) and Churchill was pretty bored most of the time he spent in Bangalore.

Life in Bangalore was pleasant, but also very boring. A young army officer yearned for "action"; but the only wars in India were then being fought at the other end of the subcontinent, on the Afghan border. So Churchill began, a butterfly collection; this got to as many as 65 varieties, before it was attacked by rats.

After eight months in Bangalore, the young Subaltern wrote to his mother summing up his life there. "Poked away in a garrison town which resembles a 3rd rate watering place, out of season and without the sea, with lots of routine work and... without society or good sport — half my friends on leave and the other half ill — my life here would be intolerable were it not for the consolations of literature ... ."

Interestingly, Guha points out that Chruchill first fell in love while in Hyderabad.

In My Early Life there is a vivid description of a polo tournament in Hyderabad won by Churchill's regiment. Discreetly omitted from the memoir is what happened on that visit, outside the playing field. For it was in Hyderabad that Churchill fell in love for the first time. The lady's name was Pamela Flowden, and her father was a high official of the Indian Civil Service. "She was," Winston wrote to his mother, "The most beautiful girl I have ever seen — Bar none," and also "very clever". He hoped to take a tour of the city with her on elephant back.

Of course, no mention of Churchill's time in Bangalore can escape a reference to the Bangalore Club.

In Bangalore, Churchill was bored, he was bookish, and he was butterfly-obsessed. And he was also (not that he reveals it in his memoirs) broke. Evidence of his financial penury is contained in the lounge of the Bangalore Club. There, under a display window, is a minute book open at a page where we can read, under the list of members who have outstanding dues, the name of "Lieutenant W.S. Churchill." The sum he owed (indeed still owes) the Bangalore Club was 13 rupees.

Friday, December 19, 2003

A Reliance on nepotism? 

The Reliance conglomerate in India has made a very successful foray into the booming Indian telecom sector, becoming one of the largest players in the market only 9 months after entering. While it would seem like a remarkable achievement to overtake well-established comptetitors in that short a time, there are questions being raised as to whether Reliance's success is due in part to its legendary ability to influence government policy in its favour.

The dispute stems from the way that Reliance has built a national mobile network on the cheap by using wireless local-loop (WLL) technology licensed for city-sized areas. Normally a user of such a service would not be able to “roam” from one city to another. But Reliance has given its subscribers multiple telephone numbers and a call-forwarding facility to enable them to use their telephones as they travel across the country.

This has been challenged by the cellular firms, whose licences cost them at least four times as much as Reliance paid for its WLL licences. In October, Arun Shourie, India's telecoms minister, said that the government's technical-evaluation committee had found that Reliance was “violating” its licences and that it would be told to restrict its activities. But at the same time Mr Shourie and the Telecom Regulatory Authority of India were preparing a new unified telecom licence, covering all services. Reliance has now bought one of the new licences for $340m (including a $100m “penalty” for its earlier violations).

Though the consumer is the clear beneficiary (lower costs, better plans etc) of this food fight between Reliance and the other telcos, one needs to ask whether it is time, for the long-term health of the economy, to save capitalism from the capitalists (tip of the hat to Raghu Rajan)?

Indian Railways -- the mother of all free lunches? 

I have always been a fan of the Indian Railway system. For the better part of 10 years before I left for New York, I travelled the length and breadth of India in those dilapidated trains. It was so much fun, it never occured to me to complain about the dilapidation, lack of punctuality etc. But in many ways, the Indian Railways is representative of all the problems that confront the booming economy. The Economist picks up on the idea in this wonderful special on the Indian Railways.

Most importantly, it does not make enough money to meet its investment needs. Its “operating ratio”—operating costs as a proportion of revenues—which had climbed close to 100% by the beginning of this century, has fallen to 92.5%. But that is still not enough to cover depreciation, maintenance and expansion. Nor can the railways rely on indefinite government bail-outs at a time when India's overall fiscal deficit (at more than 10% of GDP) risks becoming unsustainable. Yet the railway system has been losing customers to an improving road network, making it hard to see how its finances will ever improve.

Some history -- Earlier this year, India celebrated the 150th anniversary of its first train journey. On April 16th 1853, a locomotive pulling 14 carriages and 400 people left what was then Bombay to a 21-gun salute and trundled to Thane, 34km (21 miles) away. The journey took about 75 minutes.

From there, the network grew fast. Some of it was built by the British Raj, some by the princely states, such as Bikaner and Jodhpur, which retained their notional independence. Many of the network's main trunk routes were laid by private companies under schemes that would now be described as “build-operate-transfer”. Passenger numbers increased from 24m in 1901 to 42m in 1917. By 1922, almost 60,000km of track had been laid. In a controversy that would find echoes in contemporary India, the rail operators, which enjoyed a government-guaranteed minimum return, were suspected of exorbitant profit-gouging. In 1924, the entire system—its construction, operation and financing—was brought under the control of the British Indian government.

Today, Indian Railways is the largest organisation in the country, both in number of employees—more than 1.5m—and in capital invested, some $10 billion. It has 63,000km of routes, 7,700 locomotives and nearly 7,000 stations. It carries 1.4m tonnes of freight and 14m passengers every day—equivalent to moving all of India more than four times a year.

In fact, the Indian Railways is the largest employer in the world and that is definitely a sobriquet it should gladly hand over to Wal-Mart (1.1 million).

The story also quotes the recommendations of the Rakesh Mohan committee on what could be done to change things.

It means that Indian Railways should start divesting itself of “non-core” activities, such as catering and manufacturing; that it should cut staff numbers drastically; that its top management, a seven-member Railway Board, should shed its conflicting responsibilities as regulator, policymaker and boss; and that it should start producing intelligible accounts. Similarly, it should establish standard commercial criteria for its investments. But above all, it should stop using its freight customers to subsidise passenger fares.

The crux of the biscuit is the apostrophe too 

Here's a hilarious piece on the joys of punctuation. It's such a good read I am tempted to post the entire story (basically a review of Eats, Shoots & Leaves: The Zero Tolerance Approach to Punctuation ) here, but I shall give in to the fear of copyright law (not that I know either way) and just stick with a couple of extracts.

A panda walks into a café. He orders a sandwich, eats it, draws a gun and fires. As he is on his way out, the waiter asks him why. The panda hands him a badly punctuated wildlife manual. The waiter reads, “Panda: Large black-and-white bear-like mammal, native to China. Eats, shoots and leaves.” Punctuation, says Lynne Truss, is the track along which language runs. When it breaks down, so does meaning. She illustrates her point with countless cheerful examples. Where, for instance, would extra-marital sex be without its hyphen? In a completely different moral sphere.

Why, when other punctuation manuals are on the market (The Economist's style book is available at a very reasonable £16.99), is this one a bestseller? Timing. As people worry about the white rhino only when it is nearly extinct, so they defend punctuation only when it is endangered. The threat is not so much the greengrocer's apostrophe—his tomato's have been on sale for decades—as e-mails and text messages. In the first, speed undermines precision; in the second, brevity destroys form. Worse, both use sacred marks for their profane little emoticons :-) It's enough to drive one to an exclamation mark!

The false promise of biometrics 

Ever since I first heard whathisname at the Homeland Security Dept stand up and praise as biometrics as a technology that would have prevented two of the 9/11 hijackers from the United States, I have been a thorough opponent of the planned system, and not just because I will have spend extra time in line waiting to clear the immigration lines at JFK (an extra minute per passenger according to sources). Not because of privacy issues either.

Let's see, those two guys would have been prevented from entering the U.S. because the biometric scan would have shown them up as suspects. My question is if the U.S. did in fact have evidence against them, what were they doing issuing visas to these gents? Worse still, such a biometric system would have done nothing (besides providing data on irises and fingerprints of dead terrorists) to stop the other 17 because they came in on their own names and passports. My fear is that valuable resources are being used in invested in technology that has a dodgy record when other tactics may work better (just plain spook work, for example).

The Economist's Technology Quarterly is carrying a long-ish report on biometrics and pretty much makes the case for why it might not live up to its promise. But first a brief introduction.

Biometrics can be used in two ways. The first is identification (“who is this person?”), in which a subject's identity is determined by comparing a measured biometric against a database of stored records—a one-to-many comparison. The second is verification (“is this person who he claims to be?”), which involves a one-to-one comparison between a measured biometric and one known to come from a particular person. All biometrics can be used for verification, but different kinds of biometric vary in the extent to which they can be used for identification.

There are two key measures of how good a biometric system is: the false match rate, and the false non-match rate. These two can be balanced against each other. Tune the system to be tolerant, so that everything matches, and you have a false non-match rate of zero, but a very high false match rate; conversely, in a system that is so strict that it allows no matches, the false match rate is zero, but the false non-match rate is 100%.

In an identification system, particularly one that has to search a large database of millions of templates, the task is much harder. Even a false match rate of one in 10,000 would produce thousands of false matches. And if you are trying to spot members of a small group of known terrorists, even the best of today's biometric systems produce hundreds of false matches for every correct match with a terrorist. The result is that the system is flooded with false alarms, which are routinely ignored, providing almost no additional security. As a result, the new border-control systems now being implemented at American border posts are merely verification systems.

Spending the billions of dollars that the GAO estimates will be necessary to implement biometric systems at border-crossing points—$1.4 billion to $2.9 billion initially, and $700m to $1.5 billion annually thereafter—may mean there is less to spend on other areas of security. America has long land-borders with Canada and Mexico, and tens of thousands of miles of coastline. Using biometrics at airports does little to reduce the level of illegal immigration, since most such entries do not occur at airports, but over the far more porous land and sea borders. The new system will, however, be ideally suited for spotting tourists or students who overstay on their visas, but that is a trivial issue.

Wednesday, December 17, 2003

Migration, reversed 

The Wall Street Journal is carrying a story on the return of Indian programmers to the mother country. There is nothing new about this phenomenon or this story, but nevertheless publication in the WSJ will probably create a greater public awareness of something that could in fact create a real problem in the U.S. long term.

When a very large part of the technical force in the U.S. is foreign-born, the assumption is that they will behave like normal immigrants and stay on and add to the technological capacity and economic activity of/in the U.S. What if they don't? What if Indian and Chinese scientists decide to return to the homeland (voluntarily or otherwise)? What will happen to the U.S. lead in innovation? Needless to say, the return of the skilled migrant also takes away the multiplier he/she had created in the past.

As companies like Lumenare increasingly move software and other service-sector jobs to India, Mr. Maheshwari effectively wound up competing against himself in the global labor market. Tens of thousands of U.S. programmers are unemployed, and pay is declining for those still working. In returning to India, Mr. Maheshwari may be in the vanguard of a growing reverse migration. Over the past decade, hundreds of thousands of Indian engineers moved to the U.S. for jobs, adventure and Silicon Valley wealth. Now, the U.S. job market is lousy and the government is tightening the rules on immigrants.

Seeems like bad news for the U.S. and if anything, the new visa caps and the nonsense being initiated in the name of the war on terror are going to simply make it worse.

Tuesday, December 16, 2003

PowerPoint Crash? 

According the New York Times magazine, the board investigating the Columbia shuttle crash has found a rather bizarre accessory to the disaster -- Microsoft's Power Point software.

NASA, the board argued, had become too reliant on presenting complex information via PowerPoint, instead of by means of traditional ink-and-paper technical reports. When NASA engineers assessed possible wing damage during the mission, they presented the findings in a confusing PowerPoint slide -- so crammed with nested bullet points and irregular short forms that it was nearly impossible to untangle. ''It is easy to understand how a senior manager might read this PowerPoint slide and not realize that it addresses a life-threatening situation,'' the board sternly noted.

This year, Edward Tufte -- the famous theorist of information presentation -- made precisely that argument in a blistering screed called The Cognitive Style of PowerPoint. In his slim 28-page pamphlet, Tufte claimed that Microsoft's ubiquitous software forces people to mutilate data beyond comprehension. For example, the low resolution of a PowerPoint slide means that it usually contains only about 40 words, or barely eight seconds of reading. PowerPoint also encourages users to rely on bulleted lists, a ''faux analytical'' technique, Tufte wrote, that dodges the speaker's responsibility to tie his information together. And perhaps worst of all is how PowerPoint renders charts. Charts in newspapers like The Wall Street Journal contain up to 120 elements on average, allowing readers to compare large groupings of data. But, as Tufte found, PowerPoint users typically produce charts with only 12 elements.

Microsoft officials, of course, beg to differ. Simon Marks, the product manager for PowerPoint, counters that Tufte is a fan of ''information density,'' shoving tons of data at an audience. You could do that with PowerPoint, he says, but it's a matter of choice. ''If people were told they were going to have to sit through an incredibly dense presentation,'' he adds, ''they wouldn't want it.'' And PowerPoint still has fans in the highest corridors of power: Colin Powell used a slideware presentation in February when he made his case to the United Nations that Iraq possessed weapons of mass destruction.

Of course, given that the weapons still haven't been found, maybe Tufte is onto something. Perhaps PowerPoint is uniquely suited to our modern age of obfuscation -- where manipulating facts is as important as presenting them clearly. If you have nothing to say, maybe you need just the right tool to help you not say it.

Ouch, ouch. That must have stung at Redmond. I have reported. You decide.

Another helping of curried Kangaroo please! 

One good thing about being back in Asia is that I get to watch the cricket matches again. And watching a series of American games where the ball is incidental to the violence on the field, it does come as a welcome breather. So, I watched the India-Australia test both in Dubai and in Bombay.

And what a fantastic game it was. India rarely wins against Australia, but when they do, boy do they do it in style. The Calcutta test in 2001 I'd rank as the best test I have ever watched. This one was pretty incredible too. Who would have thought a team that gave away 556 runs in the first innings and were at 81 for 4 would actually turn the game around to beat the world champions, and that too at home. And the perfect answer to the critics who dismissed India's chances in the series somewhere between bad and terrible.

The common factor between the Calcutta and Adelaide tests? Rahul Dravid and V.V.S.Laxman. Rahul Dravid is one of the 4 best batsmen India has produced, in my opinion. However, he gets a raw deal since he always plays in the shadow of far more flamboyant players (Tendulkar, Ganguly, Laxman etc). In some ways, he has been treated in the same vein as Ravi Shastri was in the latter part of his career. But what a way to answer his critics. Two double centuries in some 4 tests.

Well, lets hope that the Indians can increase or at least hold on to the lead in this series. For the moment though, the first two tests have been moral victory enough. I am just glad I got to watch a great game, and in Bombay at that.

Sunday, December 14, 2003

Greetings from Dubai 

I am sleepy. I am jetlagged. There is a fabulous duty-free shop outside where I am expected to spend my millions of paisas. So, what do I do? I turn on blogger.

The interesting news I have to report is how the middle east (well, Dubai) is reacting to the capture of Saddam Hussein. Most of the reaction I have noticed tends to be stunned disbelief -- mind you, not disbelief in the American claim of capturing Saddam per se, but in the ease with which he was *arrested.* Here was a man who said he, like Saladdin, would fend off the disbelievers and fight their fire with fire. Instead, all that I can see on TV is some doctor examining the innards of Saddam's mouth. Not exactly a Saladdin-like last stand, I must say.

I don't know what this will do to the Arab street. My guess is that it will increase their sense of shame and inferiority. Here was a guy who dared the great satan, and the great satan arrests him without a shot being fired. That's pretty embarassing.

The contrast with London was pretty striking. I had a couple of conversations on the tube and at a pub regarding the arrest. Most Londoners seemed to be concerned with whether this arrest would drastically boost Bush's re-election possibilities. My guess is that it will. Unless something drastic happens between now and November (the economy tanking or Iraq getting worse), I think we are going to have a two-term Bush presidency to deal with. God help us all :)

Saturday, December 13, 2003

Beautiful women cause stupidity... 

...in men, if this research can be believed. According to psychology professors Margo Wilson and Martin Daly, men simply cannot think straight after looking at a beautiful woman, or even a photograph of them.

The researchers showed male students pictures of both attractive and non-attractive women. Then they had the men roll dice. When they threw double digits, the men would get a choice: take between $15 and $35 the next day, or take $50 to $75 after a wait of one week to eight months. The men who had just viewed pictures of "hot" women were far more likely to take the lesser sum right away, says the study, printed recently in Biology Letters, a Royal Society journal.

The same test was done with female students. There was no difference in the response of the women who had just seen pictures of "hot" men and the response of those who had seen pictures of average or non-attractive men. The pictures were taken from a popular website which invites visitors to rate the attractiveness of people who have submitted pictures of themselves. The psychologists' finding is that men stop thinking about consequences when testosterone takes over.

Okay, that's a comforting thought alright. I wonder if the same reaction can be elicited by showing men live sports and women the shopping aisles at Macy's :) But let's leave that to the next batch of evolutionary psychologists, shall we.

Friday, December 12, 2003

Vajpayee thinks the unthinkable? 

With his eyes firmly on history, Prime Minister Vajpayee has called for a common currency and open borders right across South Asia.

Delivering the keynote address at the first Hindustan Times Leadership Initiative on The Peace Dividend: Progress for India and South Asia, Vajpayee said: "If we can put aside mistrust and dispel unwarranted suspicions" and develop "mutual sensitivity to each others' concerns," these two initiatives were realistically achievable. "Our people, businesses and organizations are waiting to interact more closely with each other. This includes producers and consumers, investors and markets, doctors and patients, artists and audiences, students and universities. They are all part of the supply and demand dynamics of a vast sub-continent," Vajpayee further said.

"They see the unexploited potential in their own neighborhood. They have waited for over a half-century for its fulfillment and are now impatient to move ahead. We can sense this impatience in the outpouring of popular sentiment after our initiatives. We have to respond to this desire by seeking every possible way to banish hostility and promote peace," he added. "If we provide legitimate avenues of free commercial interaction, we can eradicate the black market and underground trade. We could jointly tackle smuggling, drug trafficking, money laundering and other trans-national crimes, which today flourish in our region because of mutual rivalries and inadequate coordination," he said.

"Once we reach that stage, we would not be far from mutual security cooperation and open borders and even a single currency. If this seems unrealistic and utopian, perhaps we are being unnecessarily cynical. Let us remember that the world did not anticipate the sudden end to the Cold War or the collapse of the Berlin Wall. No one thought apartheid South Africa could be transformed bloodlessly into Mandela's rainbow country," he added. Stating that "our most important common war today is against poverty, disease, hunger and underdevelopment," Vajpayee said: "If we in South Asia look back objectively at the experiences of our freedom struggles and of our nation-building, the one stark lesson that stands out is the imperative of forging unity based on our commonalities."

This is a very brave thing for an Indian PM to suggest, leave alone the PM of an ultra-nationalist party. Given the difficulties faced by the EU in far less problematic circumstances, the chances of any such initiatives coming to fruition in South Asia (especially between India and Pakistan) are close to zero. Then again, as Vajpayee suggests, who saw the Berlin Wall collapsing as quickly as it did?

Tuesday, December 09, 2003

Price, not speed. 

Close on the heels of my earlier post about Time-Warner's VoIP plans comes the news of the Forrester Report that seems to suggest that broadband customers care more about price than speed.

As high-speed Internet service becomes more mainstream, the latest customers are more price-sensitive than the techno-geeks who were the first to abandon dial-up modems for faster, always-on links to the Web, according to the study released on Tuesday.

"Mainstream consumers of broadband are more price-sensitive, lower-income, and less technology-optimistic than early adopters," wrote Forrester analyst Jed Kolko, who expects the importance of price to become more pronounced over the next several years. High-speed DSL services offered by telephone companies cost roughly $30 a month, compared with cable modem services that cost $40 to $50 a month, the firm said.

Game, set and match to the Baby Bells? I certainly don't think so. First of all, cable dominates the broadband market today -- 65% -- and it'll be difficult to break the stranglehold. But more importantly, I do remember the pundits out there who suggested that it would be difficult to migrate folks from dial-up to broadband because they were price-sensitive. Someday, these guys will learn that it's about the content and if customers find *useful* content online, content that you could better access at higher speeds, they will move towards whatever technology offers them speed at reasonable prices.

For the stuff you get online today, there might be no difference between DSL and cable, though there may be a difference between dial-up and broadband. But that needn't be the case tomorrow when customers might be willing to pay a higher price for 3 MBps on the downlink than they do for 768 KBps down. And for all you know, legit MP3 might be the tipping point.

Oscar for Gollum. Now! 

No less an authority than Time has now called for an Oscar for Gollum. This is something I spent a great deal of time harping about ever since I first watched the second installment. In fact, I did part-expect that Gollum would get a nomination for best supporting actor in 2003. Anyway, here's Time's demand.

So poignant are Gollum's turbid emotions, and so persuasively is this computer critter integrated with the live performers, that he deserves a special acting Oscar for Best ... Thing.

Thing? Though I would prefer supporting actor, thing would work just as well, I guess. I cannot wait to see Shelob, who if rumours are to be believed, is about as good as Smeagol itself.

Time Warner goes VoIP 

The Associated Press is reporting that Time Warner is planning to provide VoIP services to its cable customers in a partnership with Sprint and MCI. About time the Baby Bells faced some competition from the *other* owners of the last mile.

The technology will let Time Warner customers make calls with their regular phones, but the calls will travel as packets of data over the cable line that feeds into the house, rather than going through traditional, circuit-based phone wires. At a switching station, the calls will be transferred to either the MCI or Sprint phone networks and into the traditional format that reaches most phone users.

That gives cable companies an efficient way to break into the phone business. Meanwhile, telephone providers are increasingly going after the cable companies by cutting prices on digital subscriber line (DSL) high-speed Internet service and by bundling satellite TV service with local phone bills.

There you have it. Instead of competing with ever-lowering DSL prices by lowering their own prices (which at a ridiculous $45 is the only technological service I use for which prices have gone up and not down over time and no, it has nothing to do with inflation), the cable guys are going to offer an increasing bundle of services, ramp up their broadband speeds and so on.

Good for the consumer and hopefully, this will lead to lower prices in both phone services and broadband services, which in turn will lead to greater broadband penetration.

Monday, December 08, 2003

The Simputer changes its tune 

I was introduced to the Simputer story back in 1998. So, I was dissapointed when I realised that it had got its price point all wrong and that as a result it was going to bomb badly. Now, the company seems to be spinning a very different yarn (to save face?), if this CNET report can be believed. Apparently, the Simputer will now target high-end users rather than the *digitally deprived* it was supposed to serve, according to all the initial publicity.

"It the beginning, it was portrayed as a computer for the common man. They had pictures of farmers in India holding it, but it was for publicity," said Desiraju, CEO of Encore Technologies, the Singapore-based company designing, making and selling the handheld. The idea for the Simputer was first proposed in India. Encore's own Web site holds press clippings with headlines such as "Computers for the Third World", "India's simple computer for the poor" and "New handheld aims to bridge digital divide".

After two years of such pre-publicity, Encore launched the device in October 2002. Since then, the firm has tried to shake off the Simputer's rustic image and move it upmarket, selling the handheld as a do-anything platform that can be transformed into any kind of portable computer. But in the last two years, handhelds from major makers such as Palm and HP have gained in features and dropped in price, factors which some have said undermined the reason for the Simputer's existence.

Desiraju, however, pointed out that the Simputer is very different from a PDA. Such handhelds are just accessories to the PC, whereas a fully-configured Simputer can replace a desktop, he said. "For the cost of one PC, you can buy five Simputers," he said. It is also far cheaper than other handhelds designed for vertical markets, thanks to the use of royalty-free hardware, the open-source Linux operating system and low capital costs of the founding companies, he said.

Desiraju had on hand a paperback-sized Simputer Web server. The device's mainboard, memory, processor and Linux operating system is so customizable, he explained, that it can be configured as a tiny server that converts a stand-alone industrial machine into one that can be managed and configured remotely, over the Internet or by dial-up. In another mode, the Simputer can become a thin client by adding a keyboard and external monitor. The Simputer cannot be purchased in stores, but is sold as part of a business solution.

I don't know what the current price of the Simputer is, but the last time I checked it was between $250 and $300 and I am assuming it hasn't come down a great deal since (else they would still be trying to tap the rural market). In today's market, you could buy a basic Palm Zire for under $100 and you can buy a barebones PC for about $400. And of course, there are serious attempts to reduce the cost of PC's further, including by my RISC colleague, Rajesh. In such a situation, I simply don't see what market the Simputer is trying to capture. After all, it would be difficult to convince someone to buy a simputer as a desktop replacement when it costs about as much as a cheap desktop itself and offers far fewer features.

Moore's Law for Wetware? 

Edward Hugh, of Bonobo Land and Marcelo Rinesi have written an interesting article in the Straits Times in which they wonder whether a version of Moore's Law applies to brain power, especially as cheap communications technologies reduces transaction costs across the board. The conclusions they draw have real implications in understanding the trade debate.

But the 'new new economy' way - one that recognises that well-educated human minds are as much of a commodity as any standards-compatible central processing unit - involves software written by bright maverick programmers (maybe tucked away in an East European 'transitional economy'), the incredibly cheap communication infrastructure of the Internet, and literal warehouses of Indian mechanical-mental workers typing away for what to us may appear as bargain basement wages (but which are still more than they could otherwise earn).

This is how individual ingenuity, cheap technology and cheap intellectual labour defeat corporate R&D and expensive technology. Any American company that insists on playing by the old new rules, using a top cadre of shut-in experts, geographically centralised operations and sub-planetary mindsets, will find itself outflanked, outsmarted and eventually outstripped by a few guys with the right network.

Politicians and losing businessmen call it 'unfair competition', while the businessmen that are making money out of it prefer the expression 'emerging outsourcing platforms'. We see it simply as an extension of Moore's Law to human beings, which can be put simply like this: The knowledge, expertise and ingenuity that you can rent for US$10,000 (S$17,300), or US$1,000, a year is rising exponentially.

OF COURSE, this is somewhat of a misuse of words, as human insight can't be quantified. But let's put it this way: The cost of hiring a certified public accountant, MBA or PhD holder, programmer or technical support technician is falling faster with each passing year. If your human resource department isn't taking this into account, if your management is planning to compete five years from now with a 'corporate IQ' of the same order of magnitude as the one it currently boasts, then they aren't simply failing to prepare for the future, they are grotesquely blind to the realities of the lived present. It's a reality that won't go away any time soon, or just because you file a couple of anti-dumping claims.

In the end, everything here boils down to the laws of supply and demand. The current, ongoing impact of the Internet seems to reside in the fact that it has spawned a global mental labour force of hundreds of millions, with high and rapidly rising educational standards (in everything from English language skills to advanced research) and lower wages than in the developed countries.

Sunday, December 07, 2003

Website Watch -- Indus Scitech 

I had come across this interesting website a couple of years or so ago. I stumbled onto it again today while I was clearing my favourites folder. It is an interesting site that attempts to open Indian science and technology to the outside world. The site is run by Prof M.A.Pai, who teaches computer science and electrical engineering at Urbana-Champaign. Worth a bookmark if you're interested in the subject.

The investments made in Science and Technology infrastructure since 1947 are now making an impact on the Indian scene. Consequently the transition to a market economy has been very smooth. The emergence of India as an IT global hub, quick adaptation to the emerging area of Biotechnology, use of IT in the Banking and Communication sectors, advances in Space technology are just a few examples.

The web site contains 14 Channels which are updated frequently. Current News & Agriculture news are updated on a daily basis. A new channel devoted to Information and Communication technologies for development (ICT4D) will be included.

Birds of a feather? 

I have often had arguments with my American friends about their being blind to the elitism prevalent in their country, an elitism that is far less tangible than in the rest of the world, but elitism nevertheless. Of course, the American version of elitism also allows for great upward mobility. So, yes, Bill Clinton can be born dirt poor, but can become president of the United States. What people miss while making that argument is that even Bill Clinton went through the Ivy League system (one that networks yyou into the corridors of power) before he got to be president. Fact is that in the past 100 years, only 4 presidents have emerged from outside of the elite school system (ed: I include West Point and Annapolis in here). Lexington makes a couple of similar points while examining the similairity (yes, similarity) between Bush and Howard Dean.

The most obvious likenesses are draft-dodging and drink. Both men avoided the Vietnam war: Dr Dean failed his army medical with a bad back, but then spent ten months skiing. Both were drinkers: Mr Bush woke up with such a hangover on his 40th birthday that he decided to give up alcohol forever. It turns out that the same is true of Dr Dean.

The deeper similarity has to do with social background. Both Howard Brush Dean III and George Walker Bush hail from the same White Anglo-Saxon Protestant (Wasp) establishment: a world of blue blood and old money, of private schools and deb balls, of family connections and inherited first names. Their fathers and grandfathers were educated at the same Ivy League university, Yale. One of Mr Bush's grandmothers was a bridesmaid for one of Dr Dean's (they had been at finishing school together). Dr Dean's father worked as a stockbroker at Dean Witter Reynolds, and the young Howard grew up on Hook Pond in East Hampton and on Park Avenue. He was educated at St George's in Newport, a posh boarding school, and then at Yale, where he overlapped for a year with Mr Bush, who had been to Andover.

So why do people with such similar backgrounds have such different political views? Fifty years ago America's Wasps saw eye-to-eye on politics just as much as they did on trust funds and Ivy League universities. Most of them were relatively relaxed Republicans: high-minded and fiscally responsible at home, Atlanticist and Anglophile abroad. The Bushes and Deans were both rooted in this tradition. Mr Bush's grandfather, Prescott (who, incidentally, also went to St George's), was a senator for Connecticut who believed in progressive taxation, internationalism and birth control. Dr Dean's father, “Big Howard”, managed the campaigns of a Republican congressman, Stuyvesant Wainwright II. His mother wore a dress emblazoned with the word “Ike” during Eisenhower's re-election bid in 1956.

These moderate Republicans began to lose their grip on the party in the mid-1960s. Dr Dean's first political experience was at the 1964 Republican convention which chose the upstart Barry Goldwater as its candidate. Big Howard had a soft spot for the Arizonan, but the convention in San Francisco, where hundreds of decidedly unWaspish delegates from the South and the west booed Nelson Rockefeller off the stage, was a turning-point.

The amazing thing about the survival of America's Wasps is why their prominence arouses so little comment. Britain would be on the point of revolution if its election could be caricatured as Eton v Harrow. The 2000 contest between Al Gore and Mr Bush was also a struggle between St Alban's and Andover. Next year, it looks like being Andover v St George's. There is nothing wrong with America's old elite. Whether there is anything wrong with America's commitment to upward mobility is a much more open question.

Saturday, December 06, 2003

Mexico surrenders to Wal-Mart 

After conquering every conceivable American suburb, Wal-Mart has its sights set on Mexico and it seems like Mexicans don't mind. Tim Weiner has the story.

Wal-Mart, the biggest corporation in the United States, is already the biggest private employer in Mexico, with 100,164 workers on its payroll here as of last week. Last year, when it gained its No. 1 status in employment, it created about 8,000 new positions — nearly half the permanent new jobs in this struggling country. Wal-Mart's power is changing Mexico in the same way it changed the economic landscape of the United States, and with the same formula: cut prices relentlessly, pump up productivity, pay low wages, ban unions, give suppliers the tightest possible profit margins and sell everything under the sun for less than the guy next door.

Though it came to this country only 12 years ago, Wal-Mart is doing more business — closing in on $11 billion a year — than the entire tourism industry. Wal-Mart sells $6 billion worth of food a year, more than anyone else in Mexico. In fact, it sells more of almost everything than almost anyone. Economists say its price cuts actually drive down the country's rate of inflation.

Last year, 585 million people — nearly six times the population of Mexico — passed through its check-out lanes. With 633 outlets, Wal-Mart's Mexican operations are by far the biggest outside the United States. Its sales represent about 2 percent of Mexico's gross domestic product — almost the same as in the United States. Analysts say it now controls something approaching 30 percent of all supermarket food sales in Mexico, and about 6 percent of all retail sales — also about the same as in the United States.

PS: Have a look at the graphic that details Wal-Mart's presence around the world.

Kyoto Tax? 

I came across this interesting idea floated by the British think-tank, New Economics Foundation -- countries refusing to cut their emissions of greenhouse gases should face trade sanctions.

The New Economics Foundation wants the EU to tax imports from these countries because they enjoy a competitive disadvantage as energy costs increase. Signed-up countries are currently meeting in Italy to discuss the treaty. New Economics Foundation spokesman Andrew Simms told BBC Radio 4's Today programme EU countries would be within their rights to "work out the cost of the free ride America is getting" and raise that amount. "There are very few signals the United States understands - they do understand economic signals," Mr Simms added.

Interesting idea, though I have to wonder whether the EU (or the 55 signatories) can apply these sanctions on the U.S., China, India, Russia etc -- the giant non-compliers -- and hope to get away without getting slammed by retaliatory sanctions.

Friday, December 05, 2003

Death on Nov 22, 1963 

I came across an interesting bit of information the other day, of special interest to quizzers and trivia fans. It was well known in Indian quizzing circles that Aldous Huxley died on Nov 22nd, 1963 and that his death barely got a mention because the news of his death was completely overshadowed by the Kennedy assasination. Turns out C.S. Lewis died on Nov 22, 1963 as well. J.F.K, Aldous Huxley and C.S. Lewis. Some day.

Wonder if there are any other days of this nature historically or better still, if anyone else kicked the bucket on the same day as the three.

Mobile Public Call Offices 

Elizabeth Biddlecombe writes an interesting article on how Shyam Telecom, a GSM provider in Rajasthan is using rickshaws to provide mobile public telephone services.

The company has equipped a fleet of rickshaws with a mobile phone. Drivers pedal these mobile payphones throughout the state capital, Jaipur, and the surrounding countryside. The rickshaw drivers, numbering around 200, are largely drawn from those at the margins of society - the disabled and women.

The company came up with the idea of its mobile public calling office, dubbed Chalta Flirta PCO, as a solution. The hand-pedalled rickshaws are equipped with a battery, a billing machine and a printer.

The drivers take a 20% on every call, earning between 6,000 (US$131) to 9,000 ($197) rupees per month. The telecoms company charges nothing for the initial set-up costs despite the 75,000 rupee ($1,641) price of the tricycle and equipment.

The company is apparently planning to provide Internet access in a similar as well. Clearly, this experiment is very similar to the Grameen Telecom project in Bangladesh, though Shyam Telecom haven't figured out how to make money of the service just yet. I don't see why using mobile phones in PCO's should be such a wow idea. Sometime in the near future (one hopes, with tariff rebalancing), mobile calling rates will begin to drop to and below landline rates in India. At that point, why on earth should anyone use a landline at a PCO, especially since cellcos offer instant connectivity and better service. For that matter, why would anyone even bother with owning a more expensive landline, especially if Internet connectivity can also be moved to the always on/non dial-up model?

Indian salaries for U.S. programmers 

Everytime I hear about disgruntled U.S. programmers complaining about job flight to India, I have wondered why noone ever raised that possibility that these programmers had perhaps priced themselves out of the market. Maybe people got so comfortable with their $100,000+ salaries that they forgot to ask themselves whether they were worth that much or even whether the market would correct itself at some point and if it did, what the consequences would be. So, I read David Gumpert's column in Businessweek with a great deal of interest. What would happen if U.S. programmers were paid Indian salaries (very high end Indian salaries, ie)? Apparently, Jon Carson of cMarket decided to find out.

Jon had a brainstorm. What if he offered Americans the jobs at the same rate he would be paying for Indian programmers? It seemed like a long shot. But it also seemed worth the gamble. So Jon placed some ads in The Boston Globe, offering full-time contract programming work for $45,000 annually. (He had decided that it was worth adding a $5,000 premium to what he'd pay the Indian workers in exchange for having the programmers on site.)

The result? "We got flooded" with resumes, about 90 in total, many from highly qualified programmers having trouble finding work in the down economy, Jon says. His decision: "For $5,000 it was no contest." Jon went American. And the outcome? "I think I got the best of both worlds. I got local people who came in for 10% more (than Indians). And I found really good ones."

Even given that $40,000 is the salary level of a very highly qualified Indian programmer (meaning you could get Indian programmers for a *lot* less) and the addition of a premium, there are clearly some advantages to getting the job done close to home. And the anecdotal evidence from this case seems to suggest that a market does exist even at these reduced salary levels. Perhaps Lou Dobbs and his ilk should talk about this possibility as well when he starts off on his anti-free trade tirades?

Covering up Racial Prejudice 

The Economist was, a couple of issues back, carrying an excellent story on research that seems to indicate that covering up racial prejudice is tiring. The research question being addressed is one that I have wondered about in the past, especially in light of the extraordinary PC-ness I have witnessed since moving to the U.S.

In most places these days it is impossible to know what someone is actually thinking when he meets or works with someone of another race. Politeness makes it unacceptable to express prejudice, even if those attitudes are actually there. How hard do people work to overcome a prejudice that they feel but are not allowed to express?

The methodology?

The idea behind the theory of resource depletion is that the effort expended on suppressing prejudice depletes the ability to use cognitive control in subsequent tasks. The researchers recruited 30 white students as volunteers, and attempted to identify their racial attitudes using the Implicit Association Test (IAT). During an IAT, volunteers match positive and negative words such as “health”, “beauty”, and “ugly”, with names traditionally associated, at least in the United States, with black (such as Latisha and Tyrone) or white (Nancy and Greg) Americans. The IAT measures response times to these uncomfortable questions, and assigns higher levels of racial bias to white participants who are slower and less accurate in matching black names to positive attributes, and vice versa. The results of the IAT were used as a baseline from which to assess each volunteer's underlying prejudice.

Two weeks later, the same participants were recruited for a seemingly unrelated experiment, and were shown photographs of black and white faces while undergoing a brain scan. The scans revealed what Dr Richeson's team had suspected. Areas of the brain associated with cognitive control flared into activity proportionate to each volunteer's level of racial bias as measured by the IAT.

The bottom line, it seems, is that it is tiring to suppress racial prejudice. Furthermore, this has impact on a person's subsequent attention and performance. It is rather similar to the depletion of a muscle after intensive exercise.

Interesting indeed. You'd much rather have people be honest and so on, but what if the truth is rather unpalatable?

Richards can't get no satisfaction 

Just when you thought the Rolling Stones had patched up their differences for good, the BBC reports Keith Richards's reaction to Jaggers acceptance of a knighthood from the Queen. It's fair to say Richards is not very impressed and he's not very polite about it either. For me though, it's always been amusing to watch these guys (who are great friends) scrap.

Richards said he did not want to go on stage with someone wearing a "coronet and sporting the old ermine" and told the singer it was a "paltry honour". "It sent out the wrong message. It's not what the Stones is about, is it?" Richards told Uncut magazine.

"I thought it was ludicrous to take one of those gongs from the establishment when they did their very best to throw us in jail," Richards said.

Jagger attempts a feeble defense by suggesting that Tony Blair forced him to accept the knighthood. Richards' response?

"Like that's an excuse. Like you can't turn down anything. Like it doesn't depend how you feel about it." Richards said he doubted he would be offered an honour "because they know what I would've said... they knew I'd tell them where they could put it."

Fun, fun, fun. Talking about rock star rivalry, I watched Simon and Garfunkel at the Garden last night. Having listened to a lot of S&G growing up, I never thought I would ever actually get to see them live. They certainly did not dissapoint, though Art doesn't quite have his voice of old anymore. The highlight of the evening was the Everly Brothers joining them on stage for 4 songs and the first live performance of Leaves That Are Green since 1967. Garfunkel explained, tongue firmly in cheek, the source of their rivalry over the past 50 years. He wanted them to be called Garfunkel and Simon.

Thursday, December 04, 2003

George Soros defends himself 

George Soros explains his contributions to the movement to unseat Bush in this op-ed in the Washington Post. As a recap, Soros had committed $10 million to America Coming Together and $2.5 million to MoveOn.org. Clearly he felt the need to defend his giving in the face of attacks from the right.

Rather than a debate on the issues, there's been a lot of name-calling by such groups as the Republican National Committee and the National Rifle Association. In an attempt to taint the groups I support and intimidate other donors, they imply that my contributions are illegitimate or that I have somehow broken the law. In fact, I have scrupulously abided by both the letter and the spirit of the law. Both America Coming Together and the MoveOn.org Voter Fund are "527" organizations -- referring to Section 527 of the tax code -- which are entitled to receive unlimited contributions from individuals. Both groups are fully transparent about their motives and activities. Both file detailed and frequent reports with government regulators.

President Bush has a huge fundraising advantage because he has figured out a clever way to raise money. He relies on donors he calls "Pioneers," who collect $100,000 apiece in campaign contributions in increments that fall within the legal limit of $2,000 a person, and on those he calls "Rangers," who collect at least $200,000. Many of these Pioneers and Rangers are corporate officials who are well situated to raise funds from their business associates, bundle them together and pass them along with tracking numbers to ensure proper "credit."

Soros also supports amending the campaign reform act so as to level the playing field a bit, in the light of Bush's tremendous fundrasing advantages in the 2004 eletion.

Among other measures, it calls for an increase in the federal match for small contributions and would raise the spending limit for candidates who accept public funding to $75 million -- changes that would reduce the bias toward big-money donors. Free airtime for candidates is also important. This would reduce the cost of campaigns and the distorting effect of commercials.

Wednesday, December 03, 2003

China an economic threat? 

Knowledge@Wharton has an excellent article that pours water on the notion that China is somehow an economic threat to the United States, which is very fashionable in the media these days. Thankfully, the article also sheds light on who will ultimately be hit hard if this trade war goes from rhetoric to action -- consumers.

According to Linda Lim, professor of corporate strategy and international business at the University of Michigan, “the risk is that the Bush administration is getting on the warpath withChina. Who will be the losers?U.S.consumers. Cheap imports fromChinahold down inflation and interest rates [in theUnited States.] Low interest rates keep the economy humming. It’s not clear you want consumers to suffer higher prices and higher interest rates.”

The article also reiterates some basics which seem to have been forgotten in the brouhaha of painting China as public enemy no:1. It's good to return (especially for various shades of policy makers) to these basics often so as to not get carried away with the rhetoric.

“The essence of trade is to allow countries to specialize,” states Erica L. Groshen, an economist at the Federal Reserve Bank of New York. “Just as trade between people allows people to specialize, trade between countries allows countries to specialize in the production of things in which they have comparative advantage. That’s where the gains in trade come from. We can’t all become heart surgeons. It’s better for a few people to do heart surgery rather than each of us to do heart surgery. It’s the same with making products.” Groshen says the products and services in which the United States specializes change over time, depending on what she calls the “three Ts” – technology, taste and trade.

“We specialize in innovation,” Groshen explains. “We start new industries. We [create] new products. We have well-trained workers relative to the rest of the world. When an industry moves from being a new, innovative one to one that’s more mature, we lose our comparative advantage because we don’t need such innovative, skilled workers to make that product anymore. That’s when the rest of the world, which tends to have less-skilled, less-innovative workers, increases its comparative advantage and those jobs gradually move overseas. The more trade we have, the faster that happens. The more transaction costs go down and information costs go down, the more rapidly that can happen. That, in a funny way, is a sign of our success – that we’re continually exporting jobs. This has gone on through thick and thin, in good times and bad, for a century or more.”

The United States has a global current account deficit – that is, an aggregate deficit with all countries in the world combined. It just happens that the biggest deficit of the various bilateral deficits is with China. America has a global current account for two reasons: the U.S. government’s large budget deficit and a paltry savings rate on the part of U.S. households. To finance its growth, America relies on large capital inflows from the rest of the world. Since the United States has a global current account deficit, it is importing more than it is exporting and, as a result, is earning less foreign exchange. The difference has to be made up by borrowing from abroad or selling assets to foreigners. The most recent statistics, for October, show that foreign investment into the United States has fallen dramatically. Because investors throughout the world have a low appetite for U.S. assets, it will be harder for the United States to borrow from abroad.

Is the impact of China on the U.S. economy mildly exaggerated? Lim provides some perspective.

“It is not China’s fault that the U.S. has a global current account deficit,” Lim states. “The current account deficit in the U.S. is now 5% of U.S. GDP. This is an historic high. If this were the case in Brazil, capital markets would be panicked. The deficit with China happens to be the largest of all the bilateral deficits that the U.S. has. But, even so, imports from China account for just 1.5% percent of the total U.S. GDP. It’s very small.”

“The U.S. economy is so huge that whenever you have something like high unemployment it has to be because of domestic factors, not trade,” she says. “Total imports from all countries in the world are only 15% of U.S. GDP. So, on a political level, there’s an attempt by the Bush administration to blame someone else for what is a failure of the U.S. domestic economy. This is not necessarily the administration’s fault; it could be the business cycle. The weak point in the Bush record is the large loss of employment, so it’s temping to blame foreigners rather than yourself. And it’s easy to point to China because of the trade deficit.”