Global Themes

On Globalization & Venture Capital

China, India and the “3D Advantage”

Thomas L Friedman writing in yesterday’s IHT (“Tough Choices” or “Learning to Keep Learning” Pg 7, 13th/14th Dec ’06) about the many changes that China will need to make to get into the “rank of innovation-oriented countries by 2020” had a very interesting comment to make:

“…I still believe it is very hard to produce a culture of innovation in a country that censors Google – which for me is a proxy for curtailing people’s ability to imagine and try anything they want,”

As Friedman goes on to say, “You can command K-12 education. But you can’t command innovation. Rigor and competence, without freedom, will only take China so far…”

And this is where India may have an edge with its vibrant democracy, a culture of “questioning” and its tradition of free thinking…all of which gets turbo-charged when coupled with our enormous diversity…

In the long-running discussion of India vs. China, India’s “3D Advantage” (Democracy, Demographics and Diversity) may well prove to be decisive.

December 17th, 2006 Posted by | China, Entrepreneurship, India | 15 comments


  1. Shantanu, thought-provoking post for a Sunday morning.

    It is true one can command K-12 but not innovation, but without the basic K-12 education, I am afraid the 3 Ds are likely to dive:
    – Democracy is a dream appropriated by the urban educated few;
    – Diversity is where differences – and sometimes riots, although I know it destroys my alliterative streak in this argumen – seethe and simmer (see recent headlines about AIIMS strike going on against ‘backward quotas’ or ‘upper-caste’ Hindus rebelling when Dalits enter a temple);
    – Demographics may attract but not necessarily mean more demand (which from Marketing 101 is need backed by purchasing power – without education, no skills, no jobs, no money, no buying power); esp more educated women famously have fewer children so buying power remains concentrated in small-sized family units living way above subsistence;

    Rising tide and all boats rising come to mind. Don’t get me wrong – I want India to succeed and grow with all my heart. However my mind raises these questions constantly.

    Individual enterprise is a key strength of India, but great nations of over 1Bn need more than that. Unless people like you and me stop focusing only on these messages of hope – and start focusing on the realities we have seen for years and still see – things may take much longer to change.

    America is a great country too – but vast tracts of the country remain in the grip of poverty, lack of education and poor health. They had a clean slate and fewer people when they began and they still managed to create this situation while the American dreams continue to thrive for new migrants and for some Americans; India has what we used to call in the IT lingo a ‘legacy problem’. We need to deal with it. Differently.


    Comment by Shefaly Yogendra | December 17, 2006

  2. This article will be of interest to you. It is talking on similar lines though the emphasis is more on questions rather than on answers. The author there is looking at what it takes to build these world class institutions.

    Comment by Ramki | December 21, 2006

  3. Interesting perspective Shefaly and echoing some of my own thoughts…I agree we cannot blind ourselves to what we see around us (the reality) but hope is essential to make sure that we dont get into the rut of eternal despair, loss of self-confidence and lack of pride.

    But I agree that the problems we face need a different kind of approach…perhaps radically different and therefore perhaps unlikely to come from the establishment.

    Comment by Shantanu | December 21, 2006

  4. Some very interesting discussion concerning recent economic developments in China and india. Comparative and analytical, in-depth with lots of interesting facts and figures

    Comment by Carlini` | February 20, 2007

  5. Thanks for the link Carlini.
    Had a quick read just now..Nice article (although some stats need updating e.g. the number of mobile users in China is now closer to 400m and in India, closer to 100m).

    Comment by Shantanu | February 21, 2007

  6. […] by Shantanu Bhagwat (from his blog, global-themes), December 17, […]

    Pingback by Why India will Overtake China - Part I - | April 17, 2007

  7. […] by Shantanu Bhagwat (from his blog, global-themes), December 17, […]

    Pingback by The Editors’ Blog » Blog Archive » Why India will overtake China - Part I | April 17, 2007

  8. I appreciate this discussion. Refer to your response to Shefaly’s comment. You say, “the problems we face need a different kind of approach…perhaps radically different and therefore perhaps unlikely to come from the establishment.” I agree that we need a radically different approach. But I do strongly believe that if improvement has to happen, it can happen best with the involvement of the governing agencies (in your words, establishment). Have a look at one of my articles, where I’ve tried to address the problem of faculties/poor teaching in schools run by the government of India.


    Comment by Siddharth | April 18, 2007

  9. Siddharth,

    I read your post and I must say it is one of the most creative ideas I have come across in a very long time…
    At the same time, I am not very hopeful that such an idea will be easily translated into a government decision/action…

    The “why” has a difficult explanation but ask yourself this question: “will this get you votes?”

    Look forward to your thoughts/ comments.

    Comment by Shantanu | April 18, 2007

  10. Siddharth, I am afraid I have to agree with Shantanu on this one. Self-interest rules, in all spheres. Here are two examples:

    1. The UK Parliament is discussing today whether the Parliament (and Parliamentarians) should be exempt from the Freedom of Information Act, which allows us in the UK to ask to see details of things such as how much rent and expenses MPs claim. Transparency in Democracy anyone?

    2. The Royal Society in the UK is an august body of scientists, seeking to promote science and evidence in policy making as well as in broader society. On all issues, this principle governs the Royal Soc’s policy stances. Except that they are not in favour of open-access to science research publications, even though that will promote their agenda of inspiring and invigorating access to science from schools to the general public, and internationally. Why? As a non-profit otherwise, publication is one of their sources of revenue.

    Likewise if we want to change education, we need to get involved. Agencies will do only so much and then there is the ‘agency’ problem, as you well know.

    At least 3-4 of my classmates from IIM-A got involved in K-12 education right away, some through Sunil Handa’s foundation, some otherwise. A few turned trainers by choice for managerial training and skill development, slightly later. One of them is now teaching short courses at IIMA. I, for my part, aim to do the same after getting my ‘stamp’ (PhD).

    A quote often attributed to Mahatma Gandhi comes to mind: Be the change you want to see.

    Thanks for your note.

    Comment by Shefaly Yogendra | April 20, 2007

  11. Shantanu: Its great to see your enthusiasm and optimism about India. Personally I connect with the “hope” and a certain nationalistic pride that comes across about India in your posts.

    Shefaly: Great take on the 3Ds about India.

    Comment by Indiamusing | April 22, 2007

  12. Thanks IndiaMusing…We need all the enthusiasm and optimism we can muster!

    Comment by Shantanu | April 23, 2007

  13. Hi Shantanu,

    Thanks for sending me this link. It was nice meeting you at the China VC forum in London. I am the Malaysian Chinese guy who ask the question about how the education and learning environment in China can nurture a great innovative centre like US Silicon Valley. I was so surprise that most of the panels and attendees seem to think this is not the issue (after talking with some of them offline).

    Although I didn’t grow up in China, my strong Chinese heritage leads me to take a more cynical view about the current and future in China and how China can maintain its competitive advantage. In Oxford University, we (the MBAs) have discussed extensively about the future of India and China, and some of the people argued that China heavy investment in R&D will nurture lots of innovative ideas. I think it might be true but I have to agree with Friedman that with a nation that censor ‘Google’ and discourage ‘creative’ thinking, it could be hard to compete with the young Indians and innovative-thinking American. I hope that while the Communist Party leaders think of China’s future, one thing they need to think of might be altering the K-12 education.

    I had the opportunity to ask this question to other Chinese VC veterans and they don’t really think it is an issue. They always emphasises that China has a large self-sustained market and a cheap labor force to keep China moving at least a decade. But in the Venture Capital point of view, I believe innovation (either in technology or business model) is still an essential element of VC businesses.

    Thanks for sending me this weblink. I really appreciate that.

    Keat Lee
    Oxford MBA 2007

    Comment by Keat Lee | July 14, 2007

  14. Keat,

    Thanks for your comment and for sharing your thoughts.

    You have hit the nail on the head…and although I tend to agree with most experts who believe that China’s “large self-sustained market and a cheap labor force” will keep it growing for at least another decade, the interesting debate is what happens after 2020?

    Stay tuned for more on this in the next few days…I have another post on this subject coming up shortly.

    Comment by Shantanu | July 15, 2007

  15. not sure why censoring google is that a big deal, in case you don’t know, the most used search engines in China are, etc.

    Comment by uf65ca | August 1, 2007

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