From: Linda (email@example.com)
Date: Mon May 29 2000 - 15:14:36 PDT
[Note to Adam: sell U.S. dot-coms, buy Asian dot-coms... ;)
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
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
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
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
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