By Anil Sethi
Till the 16th century, India was a collection of different fiefdoms & kingdoms. Then the British came &, over time, superimposed their university education system over India’s caste based skilling system. This skill system consisted of informal training in skills that were passed from one generation to the next. Fast forward to today, where India faces a problem similar to the UK – too many university educated graduates running after too many jobs; on one side& the common refrain of too few skills on the other. As an example, give an ad for a driver & you get 1000 applications of college graduates and even post graduates who have passed with a third division or are college drop-outs, but an ad for a skilled electrician or plumber will go a-begging.
Switzerland is an excellent example of an economy driven by skills. 80% of all children in Switzerland focus on developing a particular skill after primary school, & only 20% go into university. What’s more important is that children are encouraged to find the path that most motivates them, by way of information days for different professions (there are over 800), followed by one-day work experiences in those firms. At the same time, these firms are actively solicited to provide their future evolving needs, so that the skill-based education stays relevant. The result is a skilled population with over 98% employment and average annual salaries of over $ 80K. The government completely subsidizes skill development for young people as an investment into the sustainability of the local ecosystem, and lets the market find its own balance relating to employment and wage level.If anyone loses his or her job, the government provides training in a new or updated skill and pays upto 80% of the last salary for upto 15 months.
I was pleasantly surprised when a friend mentioned that his son wanted to become a plumber instead of going to university. The reason was that he would be able to start earning by the time he is 17, rather than having to study till 25 or even later, and uncertainty about relevance of his education. His second (and more compelling) rationale was that as long as people exist, they have to use the WC.
However, the sustainability of a skill-driven ecosystem cannot be the sole responsibility of the state. At the same time, enrolling for and undergoing skill training, which can take over 2 years, cannot be something that we can expect unskilled workers, often from poor families where they are the sole bread-winners, to invest in.
An effective way forward would be to require companies to put forth a part of their budget for skilling new workers as apprentices. This could be more effective than forcing these companies to pay into a CSR activity that doesn’t directly impact them. At the same time, these companies have to commit to hiring these workers for a couple of years- & fire them at the end of this period if they don’t perform.
A good source of keeping track of future skills is international companies. China, for example, recognised this early. It mandated that all international companies that wanted access to the Chinese market had to train & hire local people as a pre-condition to permitting these companies to sell in China. Over time, this has resulted in skills (& Technologies) coming to China that have global relevance. As a consequence, the average wages in China have gone up &Chinese companies now sell their products internationally.
But there is another element to be considered. This is to recognise the transition of value, which was traditionally driven by goods & services. This began to evolve about 20 years ago, with the advent of the internet. Over the past decade, this value has moved from goods & services to how we consume them. Thus, a company like Amazon, which has insights about our needs, sometimes even before we become aware of them, is able to capture more value as a consequence. A good example is how Amazon is able to know when a woman is pregnant, even before she knows it, due to the minute changes in how she searches and other factors like time& duration of search.
This has been perfected further by companies like Google & Facebook, whose product is ‘us’. The longer they can keep us on their websites, the more they can monetise our time. This may sound obvious, but this belies an insidious undertone. Over time, there is a risk of our value as consumers transitioning out of the local economy to international social media giants, in a scenario reminiscent of the second coming of the East India Company. In such case, the value from us as products is created in another economy, to our own detriment.
The subversion of our time by social media giants is but the first step. Since the revenue drivers of these companies is our time, they can (and will) provide other market needs like software for free. Given that software services are a key export earner for India, this shift is seismic.
This is also a reason why China does not allow Facebook & Google within China. Tencent & Alibaba, both valued at about $500 billion each, exist as a result. Beyond social media & revenue opportunities, we risk providing leverage to the ability of non-state actors to adversely impact national security considerations. The current US presidency and how it may have come to be is a case in point.
Even in the area of the military,there appear to be two key roles in enabling entrepreneurship. The first role of entrepreneurship lies in the realm of‘origination’. This is seen in countries such as Israel, where military technology is subsequently tuned towards civilian applications. This includes next generation satellite, IOT and communication technology. The second role of entrepreneurial initiative is seen in ‘reference’. This is done by DARPA (Defense Advanced Research Projects Agency) of the US. DARPA actively solicits technologies, not just from the US, from around the world pertaining to national security. It provides initial funding in the form of pilot revenue and becomes a reference for these young startups. Since technology startups lack customer traction in their early stages of evolution, DARPA’s reference (and revenue) becomes a launch pad. In return, DARPA reserves the first right of use, externalising R&D. These options could become a footprint for India’s military for leveraging innovation with national security.
In conclusion, it is as important to align the population dividend of our skills needed for tomorrow & create micro entrepreneurs as it is to recognise how value transitions. This will enable India to not only transition from a nation of shopkeepers to one of micro entrepreneurs who generate skill based employment, but also capture transitioning value from the population & secure it for future generations.
–The author is Entrepreneur-in- Residence, Chair of Entrepreneurship, ETH Zurich and author of “From Science to Startup”