Capital deprivation and startup strategies

Startuppable Markets

http://webneetech.com/2009/09/04/abhijeet-vijayakar-founder-brainnook-com/

I’ve had a good opportunity to observe the last mile problem play out fully over the last few months with the Internet and phone connection at my office.

The connection was first set up in June. Since the building is old, it didn’t have a connection to the provider (Airtel)’s distribution network, so the first installation technician they sent did whatever it took to get the connection going. This meant stringing a wire from the nearest telephone pole, in the air across the street, and then taping it all around the building to the nearest window from my office, and then hooking up the cable modem inside the office to that.

I felt this state of affairs was unstable and could be brought down by rain, or something even more dangerous like a gentle breeze. After repeated calls to the customer service number, they sent out another technician, who now encased the wiring around the building in a PVC pipe to protect it better. We were still getting our Internet connection through a wire thrust through our window.

Yet more phone calls yielded one more technician, who went a bit further. He was now able to connect their wires to the building’s internal phone wiring (it did have wiring, thankfully), so that we could now plug in our cable modem into the phone outlet in the wall.

All this time the wire from the telephone pole suspended 20 feet in the air was still our Internet lifeline. The ISP was reluctant to change this since it meant digging an underground cable into the building for them. After much follow-up, they finally agreed to do this. A (small) army of labourers arrived one day and installed a “distribution box”, or DB, on the building premises. The location of this box caused some controversy among the building residents due to NIMBY-related concerns, but some negotiation took care of this. The DB was then connected through an underground pipe to the nearest point – luckily, just outside the building – that had a connection to the ISP’s backbone in Chennai, and the PVC piped-wiring attached to the building (which was itself finally connected into the building’s internal wiring) was plugged in on the other side.

We now have:
1. A cable modem in our office, connected into a wall socket, that provides us with beautiful data bits;
2. A PVC-encased copper wire circling the building;
3. Not an exposed or hanging wire in sight.

Could life get any better?

This may be an artifact of having lived in the US for a long time, but when I grew up in India I don’t remember it being this hard to understand what people really mean, as opposed to what they say. And yet it seems like most people here will almost never clearly tell you when they are unable to meet a deadline, understand what you are asking for, or simply disagree with you. Instead, they will agree vigorously with what you say, and then go off and do what they would have anyway.

I wonder if this problem is specific to Chennai, Tamil Nadu, South India, or an all-India problem. I suspect the latter.

This makes for very inefficient interactions with people – in addition to the language barrier – where a lot of time is spent simply making sure that the simple thing you asked for is actually the simple thing that is being done, not something completely different.

Over time, I have learnt to account for this and put in my own buffers as to when things will be done. This is a fine craft that needs constant practice to get right, but I have plenty of empirical data to work with.

A typical Indian lives in a city, town or village in which:

- If he is ill, there is no government-run health care facility or emergency service nearby;
- If he is robbed, he will be lucky if the police take down a complaint, let alone do anything about the incident;
- He can be waiting months or years for roads in his area to be repaved, and water/sewage/power lines to be installed;
- If he wants to buy real estate, he can’t be sure that government records will accurately indicate whether the seller is the real owner of that property;
- Public parks and public libraries simply do not exist.

There are probably other things, but these cover most areas of day to day life that are still blighted by the failure of government.

It is almost incredible that despite these factors, most cities in India are probably safer than correspondingly large American cities. This could be because of the low proportion of guns in circulation, but it seems more likely to me to be because of cultural factors (which should be explored in separate posts).

The government is probably the largest unreformed sector of the economy (and it is a part of the economy) in India today.

The positive way to think about this is that the deficiencies in governance are so glaring, and so obviously harmful to the country, that there is almost no way that they cannot be fixed if the country keeps getting richer at the rate it has been in the last two decades.

1. Moved out of our serviced apartment and into a permanent apartment near Sejal’s office, the setting up of which included unpacking our 160 boxes of stuff from the US;

2. Hunted for, found, and furnished a small office (600 sq ft) for Nunook a few kilometres from our home; and,

3. Found a nanny for the baby. This deserves its own bullet point.

(I’ve also been interviewing lots of people to work at Nunook, but that is a different post.)

My list of acquaintances has now grown dramatically and includes all of the following kinds of people:

- Plumbers
- Electricians
- Carpenters
- AC dealers and mechanics
- Car wash guys
- Ironing men (different from “iron men”, of which I don’t know anyone yet)
- Newspaper delivery people
- Milk delivery people
- Water supply people
- Home and office furniture suppliers
- New and used computer dealers
- Curtain and home furnishing dealers
- Real estate brokers
- Landlords
- Cleaning ladies
- Cooks

Many of these categories of people are necessary to just keep a household running here. I would probably not have had to deal with some of these categories (for example, computer dealers and AC dealers) if I’d had the standard corporate job; those interactions were specific to setting up the office.

Two of the most challenging things about dealing with so many people is the constant following-up you have to do with them to get things done (people almost never do what they say they will the first time); and the huge language issue, which is specific to Chennai. We’ve had to ask friends, neighbours and employees at Nunook to serve as translators with people who don’t understand even a few words of English or Hindi.

In many ways things are settling down now. In a few weeks we may even be able to take a day off once in a while!

1. The lowest price band covers items that are often unbranded, and sometimes locally produced, but can always be produced without a lot of mechanization. This is the “PPP” segment, where things really cost as much as purchasing power parity conversions indicate they should. This band includes unbranded food items and cheap toys, both of which can cost as little as a few tens of rupees. Parle-G glucose biscuits (Rs.3 for a whole pack!) are an exception to the unbranded rule, and offer high quality at an unbelievably low price. An exception to the low mechanization rule is medicines, which are also very cheap (because of the Indian law on generics, I think) and effective.

2. The middle price band covers items that are not quite dollar-priced, but not at PPP price levels either. These include items that are highly ornamented, almost always hand made or hand finished, and often export quality. These include household knickknacks (soap dishes or dispensers), cloth-based household items (curtains or bedsheets), and clothes. These are often taken back by visitors to India while exclaiming how cheap things are here. Other items in this category include personal care items (soap, shampoo, shaving cream) and commonly used household utensils. In some ways, these are items that cost more as a fraction of a typical upper middle-class income in India than in the US, but are still cheap when converted to dollars.

3. The top price band is the “international prices” segment. This includes items that are either directly imported, or made domestically but targeted at a well-off-enough customer base that they are priced the same as (or in many cases, more than) they would be in the developed world. This category includes everything from sofa sets (which can easily go over Rs.50,000), to midrange electronics (LCD TVs and laptops cost the same as or more than in the US), to large household appliances (refrigerators or washing machines), to cars (Rs.10 lakh – $20,000 – for the Honda City, which is smaller than a Honda Civic), to large tubs of ice cream (imported from Dubai and over Rs.500 for a pack that would cost $5 in the US). A common characteristic of items in this price band is a high degree of mechanization needed for production, and high reliability or robustness requirements. For some reason, anything sturdy costs a lot more in India than in the US.

I think the key is to restrict most of your shopping to the first two price bands, which going into the top band occasionally for items that you absolutely have to buy (for example, TVs or one-time household setup items). In many cases, the search for local substitutes can take you from a higher price band into a lower one.

The person who came to install our washing machine today could not help exclaiming at our 9 kg bag of Tide laundry detergent, bought several months back in the US. According to him, the largest size available in India is 1 kg.

I understand that for many people, these items are luxuries that necessitate a special trip to the neighbourhood grocery store. But clearly there is enough of a middle class that many people can now afford to buy larger quantities of items in a single purchase. And surely many people would appreciate the convenience of not having to make daily trips to the grocery store to buy tiny quantities of things. Yet the largest sizes I’ve seen here would be more typically sold as “small” or “economy” sized items in the US. As for buying Costco-sized tubs of detergent to take you through to next year, forget it.

Still, the idea of actually looking up Google Maps directions to get from one part of an Indian city to another would have seemed unthinkable a few years back. It’s also an indication of how much convergence is possible between countries like the US and India in terms of “soft” infrastructure like mapping technology, even if there is a wide divergence on the “hard” infrastructure aspects like roads and street signs.

Here is where we are currently. Viva la technology!