[Intellectual Capital]The Asian Internet Century

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From: Linda (joelinda1@home.com)
Date: Mon May 29 2000 - 15:14:36 PDT


 [Note to Adam: sell U.S. dot-coms, buy Asian dot-coms... ;)
   --Linda]

                  http://www.IntellectualCapital.com/issues/issue359/item8916.asp

                  The Asian Internet Century
                  by Alex Lightman
                  Thursday, March 30, 2000

                  Last week, Bill Clinton and his merry band of 120 mostly high-tech
                  hangers-on went on a junket in India, the first time in 22 years that a U.S.
                  president has bothered to spend time in the world's largest democracy.
                  The Silicon Valley execs accompanied Clinton because they hoped to
                  gain a friendly introduction to the government, and through the
                  government to a country of over a billion people, hundreds of millions of
                  whom speak English, vote and operate under a British-derived rule of
                  law. Perhaps some of those on the trip are IC readers. If so, here is
                  some advice for you and your fellow travelers: Forget the government;
                  just find the entrepreneurs and fund them.

                  During ABC's wonderful 24-hour New Year's Day broadcast Steve Case
                  opined -- over the telephone rather than the Internet -- that the 21st
                  century would be the Internet Century. The assumption of America
                  Online's chief is, of course, that this will be the American Internet
                  Century. But the open secret is: This will be the Asian Internet Century.
                  While giant American old-economy companies use and abuse their
                  political power to keep newspapers, books, retail stores, PCs, PDAs,
                  laptops, broadcasting stations, power plants and cars competitive,
                  Asia's "teeming hordes" will in the course of this century be transformed
                  into the new youth, labor, programming and high-tech manufacturing
                  markets.

                  Spelling it out

                  The Internet will become Asia's tool to bypass all the
                  blind alleys and compete for the Commanding
                  Heights of hardware, software, communications,
                  storage and tele-services. In the crudest sense, the
                  Internet is like a giant glacier that will crush the big
                  mountains (i.e. transnational corporations with lumpy
                  assets) and make the software business slide over
                  to India and the hardware business over to China,
                  with Japan, Hong Kong and Singapore acting as
                  rich, happy infomediaries.

                  Recently, Morgan Stanley's Mary Meeker, the top Internet industry
                  analyst, shared her presentation slides with me. Slide 10 of 81 jumps
                  out: Home penetration of personal computers (PCs) is 40% in the United
                  States with 99 million households vs. 1% for Asia (not including Japan)
                  with 829 million homes. Business PC penetration is 65% for the United
                  States, with 139 million employees, vs. 5% for Asia, with 1.4 billion
                  employees; the United States accounts for 44% of Internet use, Asia 6%.
                  I have got news for the 1% of dot-com investors who are not day traders:
                  growth of paying PC-based Internet subscribers will be in single digits
                  this year for the United States. Growth for Asia will be in triple digits.

                  Do I have to spell it out? Sell U.S. dot-coms. Buy Asian dot-coms.
                  Kleiner Perkinsí Vinod Khosla, the god of venture-capital firms, says the
                  India software industry alone will increase from about $4 billion annually
                  now to about $80 billion in 2007. That is equivalent to adding three
                  Microsofts, more if you could adjust for Microsoft's proportionately
                  smaller exports vs. the projections for India. That is trillions in market cap.

                  Put another way, in FutureWealth: Investing in the Second Great Wave
                  of Technology: "There are over a billion middle-class consumers in the
                  world today. At the rate countries like China are developing, this number
                  will soon be two billion. India already has a middle class larger than the
                  United States. The first company to dominate direct electronic access to
                  these consumers will become the largest industrial enterprise the world
                  has ever known." (Of course, that's my plan for my own company, but
                  that's another story.)

                  The seeds of Asia's success are already sown, and little acorns that will
                  grow into giant oak trees are already visible. Three Indian software
                  companies have listed in the United States, including Wipro, whose top
                  man is No. 3 on the world's most wealthy list at $30 billion. Prediction:
                  after Microsoft's crash (visit BillParish.com to see what could happen),
                  India may be home for the first time in thousands of years to the world's
                  richest man.

                  I love Microsoft and am using its wonderful products right now. The
                  Justice Department case is pure politics, and I would love to be a partner
                  of Microsoft. In the long run though, it is a big hunk of beef waiting to have
                  its market cap eaten by Asians.

                  As Say's Law has it, "Quantity creates his own quality." Thirty thousand
                  rich antitrust-terrorized, latte-drinking Redmondites are no match for 30
                  million Asians who have access to the crown jewels of capitalism at no
                  cost and no violation of the World Trade Organization agreements on
                  intellectual property, should Asian governments even decide to enforce
                  these rules.

                  The path has been paved

                  What are these crown jewels of capitalism that Asian engineers and
                  entrepreneurs will use to lead the world?

                    1.The Internet: TCP/IP (Transmission Control Protocol/Internet
                       Protocol) was a gift from God and DARPA, with lots of help from
                       my heroes, Vint Cerf and Bob Kahn. Americans paid for it, and we
                       have no patents, copyrights or trademarks to show for it. Now
                       anyone can use it for free, and not even have to log on to get U.S.
                       Information Agency spam.

                    2.Linux: Richard Stallman frets about his contribution, so I'll call it
                       GNU/Linux, the final step toward taking former invincible
                       giant-turned-ordinary-company ATT's proprietary UNIX operating
                       system and turning it into open-source software so that Americans
                       could use it. I have yet to read about how American companies
                       make money once everyone in Asia is using it.

                    3.WAP: The Wireless Application Protocol, the basis for
                       Phone.com's $15-billion market cap, despite the fact that no
                       revenue is generated from WAP browsers and there is plenty of
                       competition in the server market. WAP was Phone.comís gift to the
                       world, to build a standard. Asia says, "Thanks for the Industry."
                       Nokia will start selling WAP phones in India shortly. Do you really
                       think that all those English-speaking programmers will not make
                       wireless server software?

                    4.Apache, Mozilla and PERL: Free Web server, browser and Web
                       CGI programming language so that anything can be put on the
                       Web for free.

                    5.Search engines, e-mail, shopping agents and navigation tools:
                       This list is virtually endless. Hotmail founder Sabeer Bhatia told
                       me, shortly after selling Hotmail for $400 million to Microsoft, that
                       Hotmail had millions of customers in India who had no direct
                       Internet connection. Microsoft is generously subsidizing (via
                       storage) all the students accessing the Internet through public
                       terminals at cyber cafes from Cairo to Columbo to Sapporo.

                    6.UnWestern Business Models: The biggest barrier to entry for
                       Asians outside of Hong Kong was risk capital -- until Americans
                       made it a status symbol to go public with no profits or even no
                       revenues. With all the garbage on Nasdaq, Indian and Chinese
                       companies that have revenues and profits look strong by
                       comparison, even if they do have funky accounting, and even if they
                       have a Red Army partner.

                    7.The Semantic Web: Tim Berners-Lee, the man who invented the
                       World Wide Web, is championing the separation of data or content
                       from its presentation. That is, write once, get the message across
                       in different ways for different devices, using voice, icons, machine
                       translation, etc. For societies that are mostly illiterate, like India, a
                       solar-powered phone with a voice browser will allow for an eBay
                       for human labor, crafts and agricultural products, allowing for 100%
                       growth in rural economic growth.

                    8.Dynamic pricing: This is my favorite. For $12.95, you can purchase
                       Strategy & Business magazine this month and read (pages 82-93)
                       the incredible news flash that dynamic pricing rules. Because Asia
                       has almost never used fixed prices, Asians would respond, "Is
                       there any other kind?" Western companies are stumbling around a
                       concept of which everyone in Asia other than the tourists is aware:
                       Everything is negotiable, all the time.

                  Bumps in the road

                  So what will it take to ensure this vision of an Asian Internet century
                  comes off without a hitch? There are a few "limiting factors" that are
                  needed to overcome to ensure hyper growth.

                    1.Governments privatize or, at least, stay far away from
                       entrepreneurs: I have heard that India's government is offering a
                       10-year tax holiday for companies (like mine) that are going to be
                       100% export from India for software. How does the United States
                       compete when India has better tax terms, and Silicon Valley's
                       awesome Indian engineers and programs go home and set up
                       tax-free companies? I am all ears, IC posters.

                    2.Wireless broadband, via fiber and satellite, across Asia: Asians do
                       not have a continental gas pipeline grid such as Williams and
                       Enron used to become broadband superpowers. Nor do they have
                       maps, or privately owned rights-of-way as the U.S. railroads do.
                       Satellites are part of the answer, but India and China have a bad
                       track record of buying exploding satellite delivery systems.
                       Message to ministers of communications: Lease the time on ones
                       that are up there. I hear there is a great deal on Iridium satellites
                       about to go on sale. Dynamic pricing anyone?

                    3.Stop having riots (India) and threatening Taiwan (China). I was in
                       Bombay seven years ago and saw rampaging mobs turning off the
                       water in modern apartment buildings to make Muslims come down
                       so they could get beaten up, and was there when two dozen bombs
                       were set off a few months later. Beneath the surface of India is the
                       potential for smiling calm to be replaced by rage that makes
                       Iranian protesters look like smirking frat boys by comparison. As
                       for China on Taiwan: Do the math. If you just stop reading the
                       B-grade slasher-flick scripts and start saying, "We welcome
                       hardware manufacturers to enjoy our low costs and large market,"
                       the hardware business could be $1 trillion annually. Gofor the
                       hardware and leave them be.

                    4.Western respect for the individual: This starts with something
                       equivalent to an Asian Declaration of Independence: We hold
                       these truths to be self-evident, that all men are created equal, that
                       they are endowed by their Creator with certain unalienable Rights,
                       that among these are Life, Liberty and the Pursuit of Happiness.
                       Governments and businesses take note.

                  There is more to say about Asia. The fun thing about the word "century"
                  is that there is plenty of time to discuss it. Let's begin the dialogue now.

                  Alex Lightman is CEO of InfoCharms and a contributing editor for Red Herring
                  magazine. He writes regularly on the business of the new economy for
                  IntellectualCapital.com.


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