Vivek Kaul
At a recent family dinner I sat through two younger cousins talking about the love of their lives: their latest mobile phones. The glow and the happiness on their faces was very visible, even though they were on the opposite ends of the spectrum. One had bought the latest version of Samsung Galaxy and the other had bought the latest version of the Apple iPhone.
We live during an era where internet led technology plays a great role in the lives of people. It also gives a lot of meaning to their lives, as is the case with my cousins. Every new gadget, be it the latest mobile phone or the latest tablet, gives us a feeling of progress. And we regard these recent changes as revolutionary.
But do they really make a difference? Of course, they do. It would be foolish to say they don’t. So let me reword the question. Does the progress in information and communication technology, almost all of which use the internet, really make as much difference as lets say the availability of running water or the invention of the washing machine and other household appliances?
Robert Gordon, an American economist, has this to say in a research paper titled “Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds. (You can read the research paper here)
“The biggest inconvenience was the lack of running water. Every drop of water for laundry, cooking, and indoor chamber pots had to be hauled in by the housewife, and wastewater hauled out. The average North Carolina(an American state) housewife in 1885 had to walk 148 miles per year while carrying 35 tons of water. Coal or wood for open-hearth fires had to be carried in and ashes had to be collected and carried out. There was no more important event that liberated women than the invention of running water and indoor plumbing, which happened in urban America between 1890 and 1930.”
Cambridge University economist Ha-Joon Chang makes a similar point in his brilliant book 23 Things They Don’t Tell You About Capitalism “The internet revolution has (at least as yet) not been as important as the washing machine and other household appliances, which, by vastly reducing the amount of work needed for household chores, allowed women to enter the labour market.”
Running water, washing machines and other household appliances helped women save time on the daily chores and thus enter the job market. As Chang points out “Washing machines have saved mountains of time. The data are not easy to come by, but a mid 1940s study by the US Rural Electrification Authority reports that, with the introduction of the electric washing machine and electric iron, the time required for washing 38 lb of laundry was reduced by a factor of nearly 6 (from 4 hours to 41 minutes) and the time taken to iron it by a factor of more than 2.5 (from 4.5 hours to 1.75 hours). Piped water has meant that women do not have to spend hours fetching water (for which according to the United Nations Development Program, up to two hours per day are spent in some developing countries). Gas/electric kitchen stoves…have vastly reduced the time needed for collecting firewood, making fires, keeping the fires alive, and cleaning after them for heating and cooking purposes.”
The impact these developments have had on the way we live has been really fundamental. The same does not stand true for the internet. At least, not as yet. As Chang explains “To be sure, for some, the internet has profoundly changed the way in which we work…However, for many other people, the internet has not had much impact on productivity. Studies have struggled to find the positive impact of the internet on overall productivity – as Robert Solow, the Nobel laureate economist, out it, ‘the evidence is everywhere but in the numbers’.”
Many of us maybe spending more and more time on the internet, but that doesn’t mean it has had an impact on economic productivity and economic growth and in turn made our lives ‘really’ better.
Economist Bill Bonner explained this dichotomy very well in a 2011 column. As he wrote “Nowhere was the Internet revolution more focused than in the USA. Nowhere did people have higher hopes for it. And nowhere were the results more disappointing. The typical teenager now spends half his life…not just half his waking hours, but more than half a day on some sort of electronic device. Does it make him smarter? Richer? More civilized? More coherent? Not so’s we’ve been able to detect! Not every technological advance results in an increase in standards of living. Take Twitter, for example. Or nuclear weapons. Or dozens of other innovations and inventions. The Internet, like TV before it, is a great entertainment device. It is also very useful, improving productivity in a vast number of industries. But it has not speeded up GDP growth or improved living standards.”
To summarise the argument, the internet is not a revolutionary technology that it is made out to be. But such is the fascination for internet that it has distorted our perspectives. And these distorted perspectives have an impact on many political and economic decisions that are being made. “It would not matter if this distortion of perspectives was just a matter of people’s opinions. However, these distorted perspectives have real impacts, as they result in misguided use of scarce resources. The fascination with the ICT (information and Communication Technology) revolution, represented by the internet, has made some rich countries – especially the US and Britain – wrongly conclude that making things is so ‘yesterday’ that they should try to live on ideas…This belief…has led those countries to unduly neglect their manufacturing sector, with adverse consequences for their economies,” writes Chang.
The love for the internet led information and communication technology revolution has distorted perspectives in India as well. The Uttar Pradesh chief minister Akhilesh Yadav has been distributing free laptops to students. While that is a noble idea, it is worth remembering that UP continues to be one of the most backward states in India. Wouldn’t the money be better spent by ensuring that there is a regular supply of water in more villages? Wouldn’t that money be better spent in ensuring that electricity is available for longer hours?
In a country where resources are scarce such questions need to be asked. Of course, if Yadav goes about ensuring regular water supply in more villages and better availability of electricity, it doesn’t make for great news. Distributing ‘free laptops’ sounds so much more ‘economic’ and ‘social’ progress than ensuring the availability of water in villages (I mean, we have been trying to do that since 1947. Give me something new).
On the flip side compare this to Nitish Kumar, the chief minister of Bihar, distributing free cycles to girls and boys, so that they could continue attending school. A solution like this, clearly has a greater economic impact than giving away free laptops. (Though it needs to be said that instances of fraud have come to light, where people have collected cheques to buy cycles and then disappeared).
This distorted perspective has also led to more and more state governments in India falling over one another to attract IT companies to set-shop in their states. A similar zeal is not seen when it comes to setting up of manufacturing companies. IT companies also continue to get income tax exemptions. At an individual level almost every engineer now wants to work for an IT company, which means a shortage of talent for companies in other sectors.
But the bigger problem with this distortion is the rapidly growing belief that India can skip the manufacturing revolution. “Especially with the rise of service offshoring, this view has become very popular among some observers in India. Forget all those polluting industries, they say, why not go from agriculture to services directly? If China is the workshop of the world, the argument goes, India should try to become the ‘office of the world,” writes Chang.
But there is a problem with this distorted perspective. It has never happened before except for a country like Seychelles which has a population of around 85,000 people with a per capita income of $9,000. As Chang writes “No country has so far achieved even a decent (not to speak of high) living standard by relying on services and none will do in the future…As for the developing countries, it is a fantasy to think that they can skip industrialisation and build prosperity on the basis of service industries. Most services have slow productivity growth and most of those services that have high productivity growth are services that cannot be developed without a strong manufacturing sector.”
People often talk about Switzerland as having avoided the manufacturing revolution because all the black money of the world goes there. That is not true. “In per capita terms, Switzerland has the highest industrial output in the world (it could come second after Japan, depending on the year and the data you look out)…We don’t see many Swiss manufactured products around because the country is small (around 7 million people), which makes the total amount of Swiss manufactured goods rather small, and because its producers specialise in producer goods, such as machinery and industrial chemicals, rather than consumer goods that are more visible,” Chang points out.
Given these reasons, it is important that we rid ourselves of this obsession that we have for the ‘so called’ internet led information and communication technology revolution. There are other more important issues to think about.
The article originally appeared on www.firstpost.com on May 25, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)
Internet
Arindam Chaudhuri and the impending death of newspapers
Vivek Kaul
Talking about contradictions, here is an interesting one.
The Times of India edition dated March 18,2013, had a huge advertisement featuring Arindam Chaudhuri, the pony tailed bossman at IIPM(Indian Institute of Planning and Management) and his father Malay Chaudhuri. The advertisement congratulated Chaudhuri senior for having turned seventy five and had the vision to launch IIPM forty years back.
This advertisement came four days after Arindam Chaudhuri wrote a column titled Are you still a moron advertising in newspapers? The column ended with the rather prophetic line “However, yes, your business may not be able to cater to the next generation unless you realise that you are a moron to be still advertising in newspapers!”
Why Chaudhuri chose to contradict himself is something only he can explain. But his column does offer reasons for why IIPM seems to gradually moving its advertising budget away from newspapers, the front page advertisement in The Times of India notwithstanding.
As Chaudhuri writes “It all started changing around 2009 to 2011! As everyone knows, we were one of the country’s biggest ad-spenders till 2012! But interestingly, our returns from newspaper advertising started dropping sharply from 2009-2010. The first year, the admission applications we received from students due to our newspaper advertisements dropped to 40% of the levels we had in 2008-09. The next year, the same was 25% compared to 2008-09 levels. And finally in 2011-12, our applications from advertisements were, hold your breath, just 5% compared to 2008-2009! So basically, in three years, our returns from newspaper advertising came down by a mind numbing 95%!”
While this might also be a result of the falling reputation of IIPM, given the negative coverage its constantly got in the media over the last few years, but Chaudhuri does make an important point here.
IIPM’s target audience would be people in their early 20s, living in cities and who come from reasonably rich families (given the high fees that IIPM charges). There is enough anecdotal evidence to suggest that people belonging to this demographic group consume news largely online by logging onto the internet through their computers and now their mobile phones. Or as Chaudhuri aptly puts it “if you wanted to target the youth, or actually anyone born after 1980 for certain! None of them is reading newspapers anymore! So how will this segment see your ads in the first place and how will they pick up your application form? Yes, that’s the hard fact!”
Various readership surveys have shown over the years that print readership in India has remained stagnant. In comparison people logging onto the internet is growing at a very fast pace, albeit on a lower base. It would be safe to say that a large number of advertisers are interested in this lower base which typically comprises of youth coming from reasonably well to do families living in cities. In short these are the people who have the money to spend (either their own or that belonging to their parents).
So the moral of the story is that Arindam Chaudhuri is making an important point though he has chosen to contradict it himself.
What Chaudhuri’s column does not answer is why is newspaper readership stagnating? When it comes to the city bred youth at some level its a matter of what we can call the Levis syndrome. The jeans brand Levis over the years came to be associated as something that their parents wore, in the mind of the American youth. The same stands true for newspapers as well. Reading newspapers is not cool at least among the youth.
The newspapers in India have tried to tackle this through what they feel is younger and funkier design. The looks are getting trendier and there is more sex and entertainment in the newspaper. But this hasn’t worked beyond a point. As Chaudhuri puts it “naked bodies and titillation are far more easily available and in greater variety on the internet.” And all said and done a newspaper has its limits on this front. The internet doesn’t.
An extension of filling the newspaper with sex and entertainment has been the conclusion that most readers are not looking for serious content in a newspaper. This is what we can call The Times of India syndrome. Since, this kind of positioning has worked for India’s most profitable newspaper, newspapers (across different languages) have been looking to do the same thing. But what works for The Times of India doesn’t necessarily work for others as well.
As marketing guru Al Ries told me in an interview “Everyone assumes the No. 1 brand must be doing the right thing because it’s the market leader. Therefore, we should do exactly the same thing, but better. That seldom works.” There are newspapers which have lost hundreds of crore trying to bring out a better Times of India than The Times of India.
They forget a very basic point. If I as a reader want to read The Times of India, I will read The Times of India, and not a clone. More newspapers (at least the top English and the top Hindi newspapers) have been trying to bring out different versions of The Times of India, though their managers, editors and promoters will never admit to the same. This has stagnated readership at one level as the standard of content has fallen dramatically. There is inherently better content available on the web in India, if you know where to look.
Another reason for worry for most newspapers is that their business model is not working. In the late 1980s a copy of the Delhi edition of The Indian Express (with air surcharge) used to cost around Rs 3.50 in Ranchi, where this writer grew up. Now nearly 25 years laterThe Indian Express costs Rs 4.50 in Delhi and Rs 4 in Mumbai. Most other English newspapers cost around Rs 3-5 i.e. if you buy them off a news stand. The price point of a newspaper hasn’t really taken inflation into account at all.
If you are annual subscriber the cost can be very very low. In Mumbai newspapers have been known to offer an yearly subscription for as low as Rs 99. This basically meant that the daily newspaper was priced at 27 paisa (Rs 99/365 days). No wonder people bought newspapers so that they could accumulate good raddi and then sell it.
The idea behind this business model was to lock in a subscriber for a year by giving away the newspaper almost for free, and then go to the advertiser and tell him, we have so many readers, why don’t you advertise with us.
This has meant that most newspapers are now totally dependent on advertisers to make money. This business model worked during the period between 2002 and 2008, when companies were falling over one another to advertise. It doesn’t work at all in a low growth scenario, where everyone is looking to cut costs. Also with the advertiser getting top billing any negative stories that hurt a prospective advertiser are a strict no no. This makes more newspapers concentrate on the feel good and have a pro business attitude. In short, most newspapers dish out more of the same. There is not enough differentiation for a wide variety of taste that people have.
The other thing this business model does is, it limits readership beyond a point. The newspaper cannot expand because its not viable unless extra advertising comes in. Newspapers are a rare business in which selling an extra number of units can increase losses instead of profits. This is because the reader doesn’t pay for the newspaper. If newspapers in India have to survive, they have to figure out some way of getting out of the subscription based business models that they have got themselves into and can’t seem to come out.
These were points that go against a newspaper, but what about the internet? Newspapers are a very limited medium of communication. You only read what the promoter(and not the editor) of the newspaper wants you to read. In case of the internet people can create their own content. Hence, there can (and is) a tremendous diversity of opinion which one can never get in a newspaper. Also space is not a problem on the internet. It is in a newspaper. Thus, internet can have more diversity of opinion and thus appeal to more people than a newspaper can.
Also as the world gets inherently more complicated, the limited space in a newspaper tends to make things overtly simplistic rather than just simple. On the internet things can be explained and arguments and counter arguments can be made in detail. For anyone who is looking to understand the way the world works around him, the internet is an inherently better medium.
On the internet news can be consumed almost instantly. A reader need not wait for the next day’s newspaper to be updated on what is happening in the world around him. Even analysis on the internet is up and ready, before it comes out in a newspaper, the next day. Also, the internet is now accessible almost anywhere and one doesn’t have to go looking for it, like one has for a newspaper that one does not subscribe to.
Internet is a very low cost medium. A newspaper is a very high cost operation which involves buying land to set up a printing press and cutting trees to make newsprint on which the paper is printed.
So there are many good things going for news on the internet. The trouble though is that almost no one has till date figured out how to make money on the internet through news. Internet as a medium tends to be associated with “free”. Hence, digital subscriptions have not worked almost anywhere. Also people tend to ignore advertisements on the internet. A part of this equation is falling into space through Google Ads. Now only if websites could figure out the other half, newspapers would be dead sooner rather than later.
The article originally appeared on www.firstpost.com on March 19,2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)