US Innovates

It is fairly widely acknowledged that there is a very strong connection between the US’s economic success and the entrepreneurial character of its people which generates innovations. It can be plausibly argued that economic success and entrepreneur-driven innovations are bi-directionally causally linked: each gives a boost to the other in ever widening upward spirals of mutually reinforcing, positive feedback. It is perhaps difficult figure out which came first: the economic success or the entrepreneurial character of the people.

It is also fairly widely acknowledged that India is not a hotbed of innovation and entrepreneurial ventures. Why is it so? My conjecture – and it is only a conjecture – is that the primary reason is that India is a late-comer in the race for economic development.

India is economically backward relative to the US. The US has solved the basic problem of survival for most of its 300 million citizens. Food, housing, education, medical care, etc. Its annual per capita income is around $47,000.

India’s Equivalent Population

India is a subsistence economy. India is still struggling to provide even the most rudimentary necessities of life to a majority of its 1,100 million population. India’s annual per capita income is around $940, or about 2 percent of the US’s. That’s the average in an economy which has high income disparity. There are an estimated 800 million Indians whose income is less than $2 per day, and an estimated 500 million with incomes is less than $1 per day.

People who barely eke out a living cannot be reasonably expected to be innovative and entrepreneurial in the same sense as people who are economically advanced enough to engage in risky, although highly rewarding, activities.

Of the approximately 300 million Indians who have above $2 a day in income, let’s assume 10 percent of them have a per capita income which gives them a life-style comparable to the average American life-style. That means about 30 million Indians have the ability and willingness to engage in activities that are innovative and entrepreneurial like that of the Americans. We are therefore now comparing two economies: the US with 300 million and India with 30 million. That’s an order of magnitude difference.

Ability and Willingness

There are three necessary elements required for any activity: ability, willingness, and opportunity. Let’s focus on the opportunity available to the 30 million Indians who have the ability and the willingness to be innovative and entrepreneurial.

The 30 million Indians exist in an environment which is starkly different from the environment that 300 million Americans live in. The problems the two societies face are qualitatively different.

The Indian environment requires implementation of rather well-known solutions. It is a question of execution and not one of advancing into unknown frontiers. No cutting edge research and development is required to address the concerns that face India. The answers are well understood. Execution of the known solutions is sufficient to engage the skills and talents of the 30 million. There are low-hanging fruits and people are busy picking them whenever they are allowed by the “colonial” government.

(I am not so stupid as to not know that the British colonizers have left the place a while back. I just don’t see the difference between the British colonial administration and the administration of the post-independent governments of India.)

Opportunity

The US faces issues that require innovation because all the low-hanging fruits have been picked long ago. They don’t need more of anything, only better of everything that they already have. They all have phones; now they need better phones. They have to push the frontier because most of their population is at the frontier. They have to be innovative because the next things they want will be delivered by innovation, not just more of what they already have.

Indians lack the opportunity to be innovative in India because India does not need innovations; it only needs execution of known innovations. Indians who wish to innovate, have to migrate to an economy that demands innovation. And they do. The US has more Indian innovators in the US than India has in India because the demand for innovation is greater in the US.

When will Indian entrepreneurs start innovating as their American counterparts? When India has stopped being a subsistence economy. And when will that be? That will be when India has exhausted the available known solutions by implementing them, and therefore become more than just a subsistence economy. Then the opportunity will exist in India for innovations and that’s when the willing and able entrepreneurs of India (whatever their numbers then) will do the thing that the Americans do so well.

This blog post was in response to the question that Sramana Mitra posed on her blog and her post on India’s Innovation Gap.