Irrational Exuberance or Stupidity? Part - I

For an individual that has been closely associated with the two business sectors in the US - IT Enabled Services and Retail, that have or are about to take off in the Southeast Asia region, especially India I sometimes find myself having a feeling of deja vu when reading excerpts of the astounding economic growth happening there. I have used the terms ITES in the US context because just as in India they were part of the IT growth boom in the US also.

This sense of deja vu is not of the same optimistic kind promoted and shared by a lot of other evangelists of developing world growth patterns.

I rejoice at the phenomenal growth that has and is continuing to happen in India; however I keep waiting to see some measure of hardcore economic activity in the development of physical infrastructure take place. Even when any activity to shore up physical infrastructure has / does happen it is only in response to an ancillary investment in islands of economic boom in places where there is already an ITES infrastructure.

Let's not forget what the acronym ITES stands for - Information Technology Enabled Services, in the majority of cases this is nothing but once again a fancy term for low end backroom processing support work that has been offshored to India from the more developed nations.

Support activity can only happen if there is primary business activity to be supported, if we keep on creating and encouraging an environment where home grown physical industries are decimated and discouraged we will face the same consequences that the US is currently facing.

The home grown US economy is already frayed at the edges and is starting to tear apart due to the lack of regular investments in in the physical infrastructure for almost the last 30years. Let's not forget even the robust internet era of the 1990's in the US could not keep the economy going for long.

I understand all investments follow the money trail, but you cannot have isolated islands of economic prosperity and growth in a land of 1.2billion people, not have some kind of equitable balance being maintained without having nasty repercussions. We have seen the former USSR implode and explode over ten years ago, which had similar kind of isolated pockets of growth. Granted India does have a wider base of business, but we have already seen the erosion and extinction of numerous small scale businesses and industries all over India, especially in areas far from these Special Economic Zones - SEZs.

At the time when I was moving to the US in the early '90s, major trans-national consumer (hard and soft goods) corporations were making a beeline to India to capitalize on the spending power of the - emerging Indian middle class. Many of them lost their shirts in the ensuing years and some have barely managed to stay around profitably even after all these years. This despite all the years of boom activity.

There is risk in all activity, however when people lose sight of rationality in understanding and accepting risk, it is politely termed - Irrational Exuberance, or in layman terms - Stupidity!

The Indian stock market has been growing at a double digit rates for the past few years, the real-estate situation is even worse prices are going up in triple digits and the lay people are lapping it up in the name of growth, being led around by organized opportunists - like rats dancing to the tune of the Pied Piper!

My opinions may seem harsh to many, but I have my reasons and will elaborate on them going forward.

Sample of my musings on Linked In - 10

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Google is a leading company on Internet, in the ads market, in video distribution services, mail services, map services, in networks and datacenters. They're everywhere, before everybody, how long do you think the others will survive ?



“Disruptive new offerings that would take peer to peer social networking technology and apply them to the CRM and ecommerce fields, making the marketing and sales of various services on a peer to peer targeted basis. This would eventually lead to greater and more diverse outsourcing of various services / functions by large corporations, as their scale would prevent them from entering this realm. These customized offerings could be monetized or be offered gratis depending on the provider of such services. The above could be achieved by advances in technology - hardware and software, which would come from the creation of the much anticipated and hyped ‘neural net P2P computing grid’ where each peer node would be a server and client simultaneously, thus doing away with the massive data centers that companies like GOOGLE have. Secondly, a lot of information being part of the public domain would be the base on which individual services would be built. Once again making the individual the master of their domain. I’m sure someone will point out privacy and security concerns; however I’m sure supporting technology would be available to filter and scrub the relevant personal information and yet make the information meaningful enough to others for various purposes. That’s my vision of the future…”