Clusters, not champions

Recently, Nokia decided to shut its factory in Sriperumbudur, following a tax dispute with the Indian government and the loss of orders from Microsoft, who took over most of Nokia’s cellphone business (in fact, all of it apart from the Sriperumbudur factory). Consequently, it has had to let go of most of its workers in its plant. The results, as Mint has reported here, are not pretty at all. People who worked for years at Nokia assembling phones have suddenly found that in the absence of Nokia, there is no comparable employer in the Sriperumbudur area. There is little else in terms of mobile phone manufacturing in India – most Indian companies get their phones manufactured abroad. Only this April did MicroMax start manufacturing phones in India – in Rudraprayag, far far away from Sriperumbudur.

Around the same time that Nokia was shutting down its factory in Sriperumbudur, Yahoo! decided to shut down its software engineering operations in Bangalore. About 600 employees got sacked (with severance payouts), while a few top performers were given the option of either relocating to its California headquarters or exiting the company with an even better severance payout. In the days that have followed, there has been a massive scramble for the now ex Yahoos among software companies in India. Apart from those that are yet to make up their mind, most ex Yahoos are gainfully employed, most of them in Bangalore.

The reason for the differential outcomes in the above two cases has to do with geography. Nokia’s plant in Sriperumbudur operated in an island – in a place where there was little else in the way of mobile manufacturing units. Thus, employees of the plant (who were well paid, as per the report), came to depend wholly on Nokia for their livelihoods. It something happened to Nokia, as it did, or if for some reason their relationship with their employer or boss soured, they had nowhere to go. Even when the plant was fully functional and successful, employees of the plant were effectively “locked in” to their employers and thus had little choice in terms of their careers.

Yahoo!, on the other hand, had (and has; operations have not ceased yet) its office in Bangalore, which has emerged as an excellent hub for software engineering services in India. From the time Texas Instruments first set up its office in the city over thirty years back (apart from the weather, a guiding factor for that decision was the availability of engineering talent in Bangalore, thanks to the presence of defence PSUs in the city), Bangalore has only grown as a market for techies. Thus, there is a large number of IT companies that has made Bangalore its home, and there is now a significant market for techies of all levels and skills in the city. Thus, when Yahoo! decided to shut its factory, there was little problem in absorbing the now surplus employees.

The difference between Sriperumbudur and Bangalore was that Bangalore grew organically as an IT hub – companies invested in the city because it made economic sense for them to invest there, in terms of the ecosystem, and upward and downward linkages available in the city. Nokia, on the other hand, was “parachuted” into Sriperumbudur. The Mint story mentions that the Nokia factory was situated there after some kind of a bidding war between various states, and was essentially a political decision and not a business decision made by Nokia. Nokia was followed there by its suppliers (who are also facing an uncertain future now) but that was the end of it – there was no further growth in the mobile manufacturing ecosystem in the Sriperumbudur area. Thus when the one company that the tiny ecosystem there got dependent on decided to shut shop, the consequences were disastrous.

There are several policy lessons that can be drawn out of the above contrast. The first, and most important, lesson is that companies should not be “parachuted” into areas chosen by the government (Jane Jacobs has an excellent treatment of this in her book Cities and the Wealth of Nations). Instead, investment should happen “organically”, by means of decisions that make business sense to the investor without relying on artificial sweeteners such as tax breaks (this might mean that no investment might happen in certain areas, but that only means that such areas are overpopulated and people from there should move to areas where investment happens).

As a corollary of the above lessons, we need land acquisition laws that are friendly to both investors and landowners – the current law passed last year is friendly to neither, but simply enhances the power of the government. The key to the building of large industrial clusters (especially in heavy manufacturing industries that the current government plans to promote) is that companies will want to be situated close to other similar companies, or companies that form an upward or downward linkage. This means the company should have the ability to set up shop close to the existing cluster, and that means being able to purchase the land at a “reasonable” (both to the company and the land owner) price. A land acquisition law which empowers the government at the cost of the transacting parties prevents such organic expansion from taking place.

Thirdly, governments should stop promoting “champions”. The assumption is that once you have a “champion” of a particular sector set up shop in a particular area, it will automatically lead to an ecosystem for that sector in the area. As the Nokia story demonstrates, this is not necessarily the case. What the government should do is instead simply be an enabler for clusters, and stop looking for “champions” to establish such clusters. In fact, it is not necessary for a big investment by an existing company for a cluster to develop, and this needs to be recognised.

Conventional wisdom regarding the success of the software engineering industry in India is that it succeeded “in spite of” rather than “because of” the government – being a new sector it was lightly regulated that resulted in its rapid growth and success. While the contribution of the government in the overall success of the industry might be debated, what is clear is that lack of government intervention has helped the industry to build around a few “clusters”, and that has only made the industry stronger.

Government data requests for Yahoo!

Yahoo! Inc. has put up online the data of the number of data requests it received from various sovereign governments. As expected, the maximum requests came from the United States. Interestingly, Germany is in second place, followed by Italy, Taiwan and France. India also has a prominent presence, with about 1500 data requests. Full report here.


So how did Yahoo! deal with the 1500 requests from India? You can find the details here. The following pie chart summarizes the responses:

How Yahoo! dealt with data requests from India


Note that the data given is restricted to those countries where Yahoo! operates a legal entity and is hence bound by local laws to disclose data.


Bol Bol Why did you ditch me …

of late i’m having frequent bouts of extreme depression…

After careful analysis you see that the only chance for you to win is if the Queen of Hearts is with West.

I’m trying to figure out whether i have a crush on her or not.

…I’ve started enjoying it – talking to her frequently, guessing what goes behind each thread of conversation, trying to understand her while she tries to understand me…

You think of a wonderful scenario. You start day-dreaming about it. You day-dream about it so much that you start believing it’s true.

Of course, this screw-up has been hitting me for the last 12 hours. And that reminds me of the fact that she hasn’t responded to my mails or messages for a long time. Pushes me further down. Feel like totally giving up in life.

Suddenly “inspired” by an arbit conversation with a friend, I happened to rummage my almost defunct yahoo mailbox and look through some old mails. a series of exchanges with her, circa early 2004.

I input a girl into my algorithm and ask it if there is a possibility of a relationship with her. If it says no, I can completely believe it and get on with life. A ‘yes’, however, means trouble. It means there is a possibility of a relationship, but there is no guarantee.

That little bit of indiscretion. The little bit of getting carried away. And then, that little bit of my foot in my mouth – I could’ve probably wriggled out of the situation, but i chose not to. Yet another relationship in limbo.

Think I have hit a local optimum. And jumping the gun being my habit, I tell my mom about it before I confirm it with the woman in question.

I’m still trying to figure out the nature of this relationship. It’s much stronger than simple good platonic friendship, but doesn’t seem to be anywhere near a romantic relationship

I made the measurement today. don’t ask me how. we are good friends.

Ranga sends this: Any kind of symbiotic relationship ends up being remunerative.

i believe people enter your life exactly at a point when u need them to grow together and exit/fade away from your life at the right time, enabling you to move ahead. its sad but true”

at several points of time in life, you end up in the unpleasant situation where your relationship with someone has hit the pits. there is a cold war on, and you haven’t spoken to him/her for a while. and you want to try and re-build the relationships.

She took my hand in hers and started gently stroking my fingers. One by one.

For most of the first half of last year, I used to turn to her whenever I was depressed.

When we met for the first time, my order of a mousse was met with a “oh, I didn’t know you are such a high calorie person. I?m very calorie conscious you know. I’ll have tea -without milk or sugar”. I had quickly changed my order to a cup of cold coffee.

And that relationship. Something had snapped right at the end. She had suddenly wanted to puke and wanted to hang up.

Having been in a budding long distance relationship (which ultimately didn’t wrok out; in fact, it failed before it became “official”), I couldn’t agree more with this article.

She is still an out-of-money option – quite ordinary for most of the time, offering nothing, or mildly negative returns; but once in a very long time you get great value, making the long periods of mediocrity worth their while.

Tauba Tera Jalwa, Tauba tera pyar,
Tera Emosanal Attyachaar!

Arranged Scissors 10 – Modern Channels Protocol

So nowadays the process for arranged scissors has slightly changed, mainly due to the introduction of “modern” communication channels such as the internet and the phone. In earlier days, it was simple – the only way you could check out the counterparty was by way of meeting, and there was a protocol for that. There was a protocol about the kind of questions that one could ask, the standard templated answers to give, the answers you weren’t supposed to give, questions you weren’t supposed to ask, etc. And based on canned questions and canned answers, people would make the most important decisions in life.

Now you have the phone. And the internet. So you have people saying “my son wants to talk to your daughter on chat (sic) before meeting up. Hopefully you are liberal enough to allow that”. The typical answer to this is “what to do? youngsters nowadays are like this, so we have to allow this”. And the boy and girl talk “on chat”. And hope to be better informed than their counterparts 10 years back regarding the most important decision of their lives.

Now, from my very limited personal experience, it seems like some sort of protocol is being established in this “modern channel” also. Neha Vish had a nice article about this a while back on her blog, but I’m not able to find it – about a Sastri who sits behind a girl while she chats up a prospective NRI boy on Yahoo! Messenger, and gives her expert instructions. It seems like the generalized Sastri’s advise has now become part of common knowledge, and has become part of the “protocol” for “modern channels”.

The chat protocol is heavily derived from the single-meeting protocol that I had mentioned earlier. There are canned questions, and canned answers. It is in fact easier to give canned answers here since you don’t need to look into the counterparty’s eyes (though I don’t know how many “couples” actually put eye contact before making the most important decision of their lives). Heck – you can copy paste – or even have a friend chatting for you.

The essence of this protocol, as I see it, is what I call as the “direct approach”. You know that you are checking out the counterparty only for purposes of possible long-term relationship, and not to be friends, so you get straight to the point. One popular quesion seems to be “what kind of girl are you looking for?”. And then they ask about habbits and hobbits and rabbits and rapids, and about hobbies and jobs and career plans and settlement plans and so on.

By becoming part of the standard arranged marriage protocol, what has happened is that “modern channels” have also gotten demodernized, with standard templates coming into the picture. It seems like more innovation is needed if standard good old courting is to be brought back into the arranged scissors scene.

For the record, I’ve partially withdrawn from the market. I have delisted myself from the one exchange where I’d been listed. OTC search is still on but not in full josh. I like things this way, with the only downside being that I’m not getting enough material to fund this series


Here is the link to Neha’s article on Boothalingam Sastrigal – the one that I had mentioned in the blog but was too lazy to dig up the link for.