Make no little plans. They have no magic to stir men’s blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will never die, but long after we are gone will be a living thing, asserting itself with ever-growing insistency. Remember that our sons and grandsons are going to do things that would stagger us. Let your watchword be order and your beacon beauty. Think big.

That quote has appeared before on this blog. Two years ago in April 2007, I wrote in the context of India’s urbanization that India should “Make no little Plans.” Nearly four years ago in July 2005, the same quote appeared in the post where I revisited the “Integrated Rail Transport System (IRTS)” proposal that I promote. India needs a modern — efficient and fast — rail transportation system. I concluded that post with

. . . India always uses outdated ancient technology. For once, India should aim to use the best. And using the best — even if initially imported — will help us learn how to make the best. We need to have the humility to say that we need to import stuff that we can’t make today. We need to have the pride which makes us want to take the imported stuff and improve upon it so that others will look to us when it comes to the technology. We need to have the courage to make big plans.

We need to move beyond the myopia of the politicians and the idiocy of the generals wanting to arm themselves with nuclear subs and missiles and the greed of the peddlers weapons of mass destruction.

We need vision more than we need resources.

What brought this to mind is a recent editorial in the Indian Express titled — surprise, surprise — “Make No Little Plans” (Hat tip: Pranav Vasistha.) It talks about the US plan to spend $13 billion on a set of high-speed rail links. The US was never in the business of making little plans, anyway. But the US has not displayed the most exemplary of visions when it comes to rail transportation. Thankfully, reality is creeping up on them and they will figure it out eventually. Better late than never, I say. Now the high and mighty are quoting Burnham and saying “make no little plans” about rail transportation.

India should wake up and instead of making little plans must think big. Then I will stop having to say, “I told you so.”

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.

Economic growth in a sense, and to a much larger extent economic development, is more akin to a game of golf than a game of chess. In golf, the opponent’s moves matter very little; you may as well play by yourself and later compare scores if needed. In chess, your move depends on how your opponent has moved and how he is likely to respond to your move. In other words, chess is a strategic game while golf is not. All this is very broadly speaking, naturally. I don’t mean to imply that there are no dependencies among economies as they grow; what I mean is that, especially for a large economy like India, how much it produces and how determines how materially prosperous it is and is independent of how other economies are growing. For strictly benchmarking purposes, one can glance over at the neighbors. And if one is smart, one can learn from the experiences of those neighbors. Still, when it comes to economic growth, it is largely the case that you are playing against yourself.

Here I want to glance at India’s large northern neighbor and recently a strategic competitor in the fiercely competitive game for control of scarce resources. China has been moving mountains — quite literally as you will soon note — for quite a few years for growing its economy. From an Indian perspective, it is a chilling reminder that there are no shortcuts to economic growth and that it takes something special in terms of will and perseverance to overcome the ill-effects of flawed economic policies and failed leadership. It is also a story of hope and the indomitable human spirit, a story of almost superhuman striving by mere mortals.

Words, not Numbers

Regular readers of this blog may have noticed that rarely do I have charts, graphs, and tables of statistics in my posts. It is not that I mistrust those devices as they do illuminate the subject. But I leave the numbers to sources that do rely on them for making their points. Honestly speaking, I am fairly suspicious of numbers that have pretenses to a degree of precision that is not even theoretically possible. In one report I had read (from some global consulting firm), I had seen figures which made my head hurt. It said something like, “By July of 2010, the US would have outsourced 10,573,425 jobs to India.” I wondered if they meant July 1st or July 31st; and whether it was by 10 AM of a particular date or was it by 10:30 AM. How did they know that the number in the units’ place was 5 rather than 6 or 4?

I am convinced that you, gentle reader, have seen a lot of numbers projecting what is going to happen to India by such and such a date. One report that I recently glanced at was from KcKinsey which Sramana Mitra has blogged about recently on the growth of India’s middle class. Makes fascinating reading, I am sure, for MBA-types. But I digress. I will get back to that McKinsey report in a different post shortly.

For now, I would like to point you to a National Geographic feature titled “China’s Boomtowns” from June 2007 (Hat tip: Abhishek Sarda.) It is well worth the 10-odd minutes it takes to read it. No charts and graphs there. But it tells a story that makes you admire the spirit of the Chinese. There are lessons in that story that underline some of my obsessions that have to do with the prerequisites of economic growth in the modern world. Without any charts or graphs, the story is replete with lessons that we should have learnt and perhaps we still can if only our benighted leaders were to pay attention.

Similar Pasts

For much of the recent past, China and India were similar in many respects. Very large populations, very deep and widespread poverty, largely agricultural, and saddled with brain-dead economic policies rammed down the throats of the powerless populations by ignorant policymakers. Then the Chinese people got lucky: they got a dictator who was smart. This dictator was different from the other dictator who had propelled China into a “Great Leap Forward” which left tens of millions dead. India matches the first part of China’s story — it got a dictator who wanted to personally control India’s climb into “The Commanding Heights” but succeeded in digging a very deep hole for most of the 350 million living around 1950 that even 60 years later, the number of deep-hole dwellers is variously estimated to be between 500 and 800 million. Thanks awfully, Mr Jawaharlal Nehru.

The new path that the dictator of China took around 1970 propelled economic growth and lifted hundreds of millions out of the hole that had been dug for them by communism. India, by contrast, continued along the path blazed by Nehru, and the path was solidified into an 8-lane superhighway by his daughter. (She was another ignorant autocrat — and appeared to be fairly convinced that ignorance was better than knowledge since she saw no need for the education of the masses. Though she had all the opportunity in the world, she herself never got any formal education and I believe was kicked out of Shantiniketan, a school where you would have to work hard to get kicked out of. The irony that numerous educational institutions are named after her would not be tolerated but for the ignorance of the Indian population.)

India went careening down this superhighway of socialism until it was wrecked through a collision with the barrier of a balance of payment crisis. Headless chickens have been known to display more foresight than the architects of India’s economy.

But I digress once again. Let me get back to what China did: it became the world’s manufacturer. Manufacturing is capital intensive but if you do enough of it, you do require lots of people. Lots of people churning out stuff means that there is more to go around. So labor is attracted into the sector and the laborers get paid wages. Those wages may be low compared to advanced industrialized economy standards but are far superior to the alternative of starving on a farm in the rural interior of China.

Manufacturing

Where did all the wealth that exists in the world today come from? (Wealth is stuff — not money. Stuff that we eat, stuff that shelters us, stuff that transports us, etc.) It is largely manufactured. There is more stuff relative to people today than existed any time in our history because manufacturing stuff requires less labor per unit of output. The fact though is that manufacturing has what economists call “economies of scale”: the cost of production per unit goes down as the volume of production goes up. So large manufacturing units produce stuff more efficiently. And large manufacturing units require lots of people and large amounts of supporting activities which in turn require even more people. In other words, a population living in a bunch of villages is not as productive as the same population living in a city and helping with manufacturing. Cities are the engines of growth because manufacturing has scale economies.

Cities, not Villages

Indian policy makers have an obsession with villages. Villages were Gandhi’s fetish; and Gandhi is an Indian fetish. So I think that the policy maker’s obsession derives from the fetish**2 (the fetish of a fetish) that Indians indulge in. I am not against fetishes, mind you. My own obsession with the primacy of individual freedom compels me to approve of all personal fetishes. Whatever floats your boat, is what I say. But when fetishes intrude into sensible policy making, I draw the line.

So the point that I am attempting to make is this. Build cities. That will require a great deal of manufactured stuff. So you need lots of manufacturing. And forget the crumbling mega-slums we currently pretend are cities, and forget the tiny impoverished settlements we call villages. Build livable cities and build factories that will produce the stuff that the poor currently don’t have because it is not produced. Manufacturing so much stuff will require lots of people. And we have people coming out the wazoo — they are currently stuck in a declining agricultural sector.

Yeah, move a few mountains. They do that in China. India can imitate that bit at least.

People, societies, economies which can successfully adopt innovations tend to do better than those that don’t adopt innovations. The operational word is adopt. Innovations happen all over the place and all the time. Who innovates and how is not what I am concerned about although it is a fascinating subject in itself. What I am concerned about is the adoption of innovation rather than the causes innovations.

This is from one of the earlier It’s the small stuff, stupid posts:

I could go on and on ad nauseum about little innovations that have been around for ages and which we can adopt costlessly. I could fill volumes, honestly. There is a more important point all this is leading up to. That is, we need better technology, not necessarily ICT with its computers and cell phones and internet and world wide web. By technology I mean know-how — how to do stuff. The know-how exists. One just has to observe and learn and adopt. But observing, learning, and adopting takes thinking and effort; it is not as easy as simply buying a bunch of computers and firing off Microsoft Windows.

I am not a Luddite and I am not against hi-tech. Some of my best friends are techies and my education is in computer sciences and engineering and my salary is paid by a technology company. I just happen to believe that hi-tech needs a foundation and that foundation is made of lo-tech. Hi-tech without the lo-tech is about as useful as a car with a fancy engine but no wheels. Hey, that is a good analogy. A car with a fancy engine ain’t going anywhere in a hurry without wheels. And even if you do figure out that wheels are needed, you can’t go far if you don’t get round wheels. Square wheels just won’t do. Then even if you get round wheels, if the tires are not inflated, you get around with a lot of loss of fuel and in discomfort. That is, without air in the tires, your transaction costs are higher.

Perhaps there are people who have amazing powers of recollection and recall, Perhaps there are people who can memorize random sets of 8-digit phone numbers which they can recall in moments of stress and urgency. I am not one of them. I can at most keep one phone number in my head to be used in the rare occassion that I need urgent help. I would not be surprised, if confronted with an urgent need for help, I dial “911″. That is the number you can call from anywhere in the US if you need help. It is standardized, easy to remember, even a five-year old child can be expected to know that number.

Why, oh, why can’t we think? It does not require a rocket-scientist to figure out that there should be one small easily recallable emergency number. You dial that number irrespective of what sort of emergency you have. Then when you get connected, you say “Fire” or “Oxygen” or whatever is your need. The operator then appropriately directs your call.

OK, granted it may require some brains to think of that simple arrangement. But in this case it is not a closely guarded secret. Many parts of the world have that system. Could we not just imitate them? Could someone in Mumbai not realize that perhaps we could copy their system? We do ape them in every crappy thing, don’t we?

They have Hollywood; we must have Bollywood. We are not smart enough to come up with our own name. They have Burger King. We have Jumbo King (sells vada-pao.) They have idiotic synchronized hip-gyrating dancing in their trashy music videos, we have idiotic synchronized hip-gyrating dancing in our movies coming out the wazoo. Aping the US seems to be de rigeur in Mumbai, and the rest of India. They go so far as to watch the same crappy American sitcoms and worst of all, they even watch the insane American wrestling shows.

Aping the Americans, unfortunately, appears to be epitomize the “modern” Indian. Not surprising at all. What is mystefying is that among all this aping, there is not one bit that is aped that is good. I would probably have a heart attack if I ever saw Indians adopt a good idea, however small, from the US. Take for example, the way Indians write phone numbers. Here is a phone number written the Indian way: 7460137498. No spaces, no breaks. Just thenumbersallsquished. Will we ape the Americans (746-137-7498) or the French (74.60.13.74.98)? Not on your life.

The US has “911″ as the number for emergencies and “411″ for directory assistance. We could have a similar standardized system. We didn’t invent the idea of standardization of important numbers, but would it be so terrible if we copied that idea? The first degree of stupidity is not having the brains to come up with a good idea. The second degree of stupidity is not adopting a good idea when it comes up and bites you in the behind.

If you just ape the trashy bits of rich countries and never ever copy the good ideas, you might be a third world country.

As a development economist, I have often asked myself what are the invariants that underlie development. I know for sure that high technology (computers, internet, cell phones) are neither necessary nor sufficent for development. Most of the developed economies of the world developed at a time when all those were not yet invented. I believe that one invariant is the ability to adopt innovations.

People, societies, economies which can successfully adopt innovations tend to do better than those that don’t adopt innovations. The operational word is adopt. Innovations happen all over the place and all the time. Who innovates and how is not what I am concerned about although it is a fascinating subject in itself. What I am concerned about is the adoption of innovation rather than the causes innovations.

Innovations are primarily discovered or invented by what I call ‘micro-agents’. That is, the suppliers of innovations are individuals or very small groups of people. These are the real smart people who have understood some problem very well and figured out a solution to the problem. This is hard work and it requires truckloads of inventiveness, intelligence, luck, and all sorts of fortuitous circumstances for innovations to arise. Therefore, the number of successful innovators is small relative to the overall population and so is the number of real innovations very small. But what is significant is that any real innovation has a multiplier effect in its implementation when the innovation is adopted by society at large. We all don’t have to invent a wheel or a wheel-barrow. Someone somewhere came up with the innovation of a wheel-barrow and for ever not so intelligent people have been using wheel-barrows to cart stuff around with much less effort than would
be required without one.

Ever been to a construction site or a farm where they did not use wheel-barrows? The answer is: depends. I have seen hundreds of constructions sites in India and they don’t use wheel-barrows. The one right outside my window, where three massive buildings are being built, don’t use use wheel-barrows. They pile the stuff up on their heads and carry small loads. The lever and the wheel (two innovations that form the basis for a wheel-barrow) have been known for ages. I have seen the use of wheel-barrows all over in developed nations. But not in India. In India, it is stuff on their heads. Go to a railway station and coolies will be lugging stuff on their heads for the majority of the loads. If you insist they will get a huge luggage cart but then you will have to wait for a while for them to track down one and they will have to charge you extra for that.

So as I was saying, micro-agents invent the stuff and macro-agents adopt them. Micro-agents have to be very smart to invent clever things. The society at large, the macro-agents, don’t have to be particularly smart: only smart enough to be able to use them. You have to be a veritable genius to invent the wheel-barrow but you have to be a certifiable moron to not use a wheel-barrow after it has been invented.

I am going on about adoption of innovation because that is the important bit. It does not matter who came up with the innovation. What matters is whether a society uses or adopts the innovation. What causes one society to adopt innovations and others to neglect them is a fascinating question and I have my theories about them.

For now, I will continue to explore this topic next.