How Physics build the concept of Entrepreneurship: The inside story.

Entrepreneurship, as most of us believe is not a recent phenomena but has a vast history of ideas, inventions and intersections beginning from the early 19th Century world of physics. It all started with a thought when law of classical mechanics and thermodynamics had been already established through various experiments by the likes of Galileo, Newton, Boyle, Bernoulli, Cavendish, Franklin and Lagrange. Just when these ideas of fundamental science of motion flourished, better ideas came through. As the horizontal base of the pyramid was set, vertical growth was imperative and inevitable.

The one idea, which started the era of entrepreneurship, was the invention of electric battery by Alessandro Volta in 1800. This invention led to more discoveries by Ampere and Ohm who further demonstrated the parallel electric currents exerted forces on each other and relationship between voltage, current and resistance respectively, which is the basis of fundamental electrodynamics. Just when Thomas Young demonstrated the wave nature of light, understanding of principle of interference and superposition developed. It all made sense, when Michael Faraday built an electricity powered motor in 1821 and formed the basis of current through magnetism i.e electromagnetic induction. Ideas evolved then on the basis of other ideas. Isn’t that entrepreneurship already in true sense? An idea Faraday proposed regarding electromagnetic forces was rejected by the scientific community, which was later accepted by the rest of the world and still forms the development of electromechanical devices that ruled the 19th Century engineering.

Meanwhile, in the field of thermodynamics Joule and Mayer worked on the connection between heat and mechanical energy. This connection was important for the development of steam engines. Carnot captured these basic ideas to form the dynamics of idealized engines and these ideas hold to formulate the most important idea of First Law of Thermodynamics. This led to the second law of Thermodynamics and so on by Kelvin and Clausius. Just when Maxwell through his ideas carried forward the idea of electricity and magnetism, Hertz experimentally confirmed those theories and discovered the photoelectric effect, which led to the invention of radio and television. These ideas were then carried forward by Nikola Tesla and Jagdishchandra Bose to further develop the ecosystem with different ideas. This is how physics led to application based engineering in the time when technology was not mainstream.

If this culture wasn’t prevailing then, the emergence of the 19th Century’s finest entrepreneurs, Henry Ford and Thomas Edison wouldn’t have been possible. During late 1870’s, Henry Ford started working as a machinist in Detroit, USA dealing with portable steam engines while Edison formed his Edison Electric Light company patenting electric light bulbs. By then, Edison had already invented phonograph and telegraph, which changed the way world communicated. With his creation of the first ever industrial research Lab in Menlo Park, New Jersey, Edison then quoted “We will make electricity so cheap that only the rich will burn the candles”. And this still holds true in our time, where candles are expensive than electricity. Edison also invented the motion picture camera. Thank god, he did!

On the other hand, Henry Ford became an engineer at Edison Illuminating Company where he used to work on his personal automobile experiments and his creation of a self-propelled vehicle called Ford Quadricycle. He was then introduced to Edison through a group meeting, where Edison encouraged him to work on his second vehicle. Soon, after his completion of the second project, Ford left Edison’s company to start Detroit Automobile Company with capital from a baron, William Murphy. Ultimately, that company was dissolved and with the invention of 26 horsepower automobile, the backers formed Henry Ford Company with Ford as the chief engineer. The rest, as they say is history. The inventor-entrepreneur philosophy emerged in the beginning of the 20th Century, when a sizable number of physicists were forming companies in the tune to change the world.

As the culture progressed, with the world facing two disastrous wars, one in 1914-18 and the other in 1939-45, these gave the necessity to nations forming different aerial and ground-breaking technologies, primarily to use against each other. They say, necessity gives rise to inventions. And this necessity lead nations to develop what is going to be constructive and in lives of all in the near future. The Second World War held the genesis of the Silicon Valley entrepreneurship, when Americans entered WWII in 1941. This war was literally an electronic war, where nations were battling with each other with different bombing and radar based technologies. Each nation, primarily Germany and USA, built different types of radars, to block and pursue efficient communication with their bases regarding the movements of the opposite camp’s defense. This lead to the formation of Harvard Radio Research Lab in US to understand the signals intelligence and develop electronic warfare. This secret lab was headed by Dr. Fredrick Terman, who was the Dean of Department of Engineering at Stanford University.

The Stanford director, due to the pressure from the government and the culture shift, encouraged students to turn to entrepreneurship and start their own companies. The students included William Hewlett and David Packard, who went on to start HP Computers. Since then scientific research and development in the universities across US begun to flourish and became the precursor to the beginning of 20th Century entrepreneurship. The idea of open-source mentality among the physicists led to the widening developments in science and technology entrepreneurship. After the WWII, Terman’s strategy included the setup of Electronic Research Laboratory (ERL) to promote basic and unclassified research in building radars, power-tubes and jammers. Soon after the setup of Applied Electronics Laboratory (AEL) and the merge of both ERL and AEL became Systems Engineering Laboratory (SRL) at Stanford. It was then, different microwave and systems companies emerged in Silicon Valley to produce equipments for the US defense. And that was the mark of beginning of the Silicon Valley entrepreneurship.

After the independence in 1947, India was at the forefront of social and political havoc, but the ideology among Indian entrepreneurs despite that did not change and they invested in their own independent nation for a better future. One of those entrepreneurs was Vikram Sarabhai, who after studying natural sciences at Cambridge returned to India to set up a research institution, Physical Research Laboratory (PRL) in Ahmedabad. He was the founder of Indian Space Research Organization (ISRO) and pursued the government of India to start a space research program, when Russia just launched Sputnik into the space. Moreover, he was also one of the founding members of one of the premier institutes in India, Indian Institute of Management (IIM), Ahmedabad. He was a physicist turned entrepreneur. And India is highly indebted to him for what his vision has given to the country. The idea of Entrepreneurship by then had already established by the pioneers G.D Birla and J.R.D Tata. A new wave of entrepreneurship emerged in India as a consequence of the existing business tradition and culture.

As different electronics companies emerged in the Silicon Valley in the mid 1950s, William Shockley, who was the director of anti-submarine warfare operations group at Columbia in 1942-43 and Solid State Physics group leader, co-invented the first point contact transistor with help with Bell Labs. He was then jointly awarded Nobel Prize in Physics in 1956. By then, Shockley has already founded Shockley semiconductor in 1955, which was the first semiconductor company in California. The traitorous eight which included Gordon Moore, Robert Noyce and Sheldon Roberts who were the youngest employees at the firm demanded to replace Shockley from the management team and eventually left Shockley semiconductor to start Fairchild Semiconductor. Eventually, Moore and Noyce left Fairchild to start Integrated Electronics (Intel) and others started Advanced Micro Devices (AMD). Though Shockley maybe a bad manager, but he was a great researcher and someone who laid the foundation of chip companies, which dominated the industry for the next 20 years. The 65 chip companies which were founded came from the first and second generation teams at Shockley Semiconductor. Some entrepreneurs have the tendency to make other entrepreneurs through knowledge transfer and freedom to work on their projects. Knowingly or unknowingly, he made a lot of entrepreneurs under his own belt. In true sense, Shockley was the father of the Silicon Valley, the valley that revolutionized the world of electronics.

Gordon Moore, who was a chemist and physicist and Robert Noyce, who was a physicist and co-inventor of integrated circuits, started Intel after leaving Fairchild Semiconductor with capital investment from Arthur Rock. With Intel breaking the barrier, the world changed with the inbound of microprocessors and micro controllers, the most important components of CPU used in the computers. And we all know what happened after that! (The device on which you are reading this post).

Physicists have been old hands at entrepreneurship. Today, more physicists than ever are involved in different startups all over the world either as founders or employees. Startups are inventing different physics based innovations and products, since Patenting and Intellectual Property law in US are adopted in the culture and has become popular among the early stage startups. One of the Entrepreneur who is considered as the next generation Steve Jobs, is Elon Musk. Elon has studied physics as his second bachelors degree from University of Pennsylvania and is the founder of SpaceX, who’s one of the mission is to find life at Mars by 2020, and is best known as the co-founder of online payment giant, PayPal and electric vehicles manufacturer, Tesla Motors. The interests he developed over rocket technologies and clean technologies were due to his aptitude and love for physics, and he credits the subject for all what he is today.

Today, entrepreneurship is popular among scientists and young PHDs and more people from physics background are starting disruptive technology based startups. Though starting a technology company is a complex operation and takes time to reach the break-even, the success is the idea where solid businesses endure over time, generate steady employment, develop intellectual property and conduct a mix of R&D for game-changing commercial results. To all what we see and experience today is the result of works and theories by thousands of scientists over last two centuries and the ones who implemented those works in building the future. Theories connected with realism of behavior, materials, systems and devices, and technologies erupted like the volcano. The horizontal base of physics and nature of sciences has been creating the way for our vertical future. And Entrepreneurs are the ones adapting it.

Must read blogs on economics

I read these few blogs in the recent years, as an urge to read about global economy and its shenanigans. Some of these blogs discusses the best commentaries on the global policies, workforce theories, corporate moves, industry tracks, social numbers, sectoral analysis, financial misfits and the linkage between all of them. Do subscribe these blogs to your RSS feed and keep yourself updated for your daily dose of economic times.

1. Project Syndicate:

2. Freakonomics:

3. Paul Krugman’s Blog:

4. Brad De Long’s Blog:

5. Economix:

6. WSJ:

Will keep updating the post if I come across interesting blogs.


Life and its Power of Compounding.

If you have taken a class of Finance 101, you might be aware of the consequences when we compound a present value to future value over a particular interest rate with the number of periods. That’s when, Finance turns into Magic. Let me give you an example, if someone invested $24 in buying Manhattan Islands in 1626, and over the years the interest rate, lets say is 6%, the value of Manhattan Islands today would be $240 Billion! This is the power of compounding.

We know our life today is the result of our efforts in the past. The interest rates is the result of our collective efforts. High interest rates symbolizes more efforts. More the efforts, better the gain. That’s when we know our life is being compounded each day. Let luck be the inflation! It goes up and down, but never comes in a way to our efforts. So, a lesson that Finance 101 teaches us, our efforts today will have a future value that is much more significant we can ever imagine. And luck is just a part and parcel, in some value more or less in the future.

Coming to what, we call it the Life Mantra. Think, if you can run away from the power of compounding, if you can’t, you need to take a Finance 101 class and discover the philosophical side of your life’s efforts to give and its expensive fruits to eat.


How Bitcoins changes the economics?

We must have recently learned about the virtual currency that is recognized in the digital community as the Digital Gold. We all must have come across online social games where collecting coins determines how well you have performed in the game like the recently popular game app TempleRun. With those coins, we could unlock other stages, players, equipments and other innovative features that helps us survive in the game and get addicted to it. Similarly, there are coins which are used to buy and exchange real products in a new currency form known as Bitcoins.

What is a Bitcoin? 

These Bitcoins are not controlled by any government or banks, but are algorithmically designed intangible, digital form of currency that efficiently controls the flow of money. Today, almost $750m worth Bitcoins are traded and stored through the digital wallets. One can get Bitcoins by a concept called Online Mining, like the concept in mining of gold. By running an online store that accepts Bitcoins, or by exchanging dollars, yens, pounds etc to Bitcoins or by mining bitcoins through computer generated problems, we can acquire and use the Bitcoins. The current value of 1 Bitcoin is almost $120 and the value is volatile like the stock markets. The maximum amount of Bitcoins that can be traded and stored has a cap of 21 Million and not a single Bitcoin more.

So how does this affect the economics? 

In the ancient times, different metals were exchanged to barter goods among different communities, which represented amount of grains stored. Then came the coinage, where metals were mined, weighed and stamped into different coins of gold, silver and copper. Then, the need for credit and a currency that was less burdensome to exchange led to the introduction of Paper Money from the Pre-modern China.

As Bitcoins are gaining more popularity by the attributes it showcases like acceptability, design, limited supply and easy transfer without processing fees, the economics of money will be altered in bits.

1. While some people in the US government feel that the government is excessively printing money, for the money circulation and its link to productivity and employment opportunities, they are devaluing the dollar. If Bitcoins are introduced and gains acceptability, due to its maximum cap of 21 Million, the excess printing of money will be discontinued, which alters the economics of money supply.

2. Moreover, if Bitcoins are introduced, the transfer of bitcoins through buying/selling products which are legal or illegal in nature cannot be tracked. This definitely excites the ones involved in money laundering, manipulating the black money and other illegal activities.

3. Bitcoins also eliminate the possibility of transfer of dollars by paying a significant sum of fees to payment portals like PayPal, CCAvenue etc. These middlemen companies have no role in the transfer of Bitcoins. Similarly, the processing fees charged through central banks will also be eliminated. And governments, individuals, companies can transfer money without the need of these middlemen.

4. In Bitcoins, the money supply is fixed by design, which is a limiting factor and thus will be highly volatile in terms of dollar exchange rates.

5. There is a possibility of hacking the digital wallets in which the bitcoins will be stored and hence one cannot recover the bitcoins once stolen, this excites the hacker community in general. There is no way to track these stolen bitcoins though Bitcoins are cryptographically designed.

Also, watch this video: 

Though, the new virtual currency is in the talks, the role of governments will be the most important factor in determining the life of Bitcoins. Till then in God we trust. 

The new wave of Emerging Markets- 1.0

English: Map of Emerging Markets

English: Map of Emerging Markets (Photo credit: Wikipedia)

On a friend’s suggestion, I have started reading this book the recent economic bestseller ‘Breakout Nations’ by Ruchir Sharma, who is the head of Emerging Market Equities and Global Macro at Morgan Stanley. It is one of the must reads for any who is interested in knowing how the emerging market economies run and insights on different sociological, demographical, political and industrial parameters required to judge the nation’s growth curve, or like he mentions a nation which can standout in the future of economic parade, the growth survivor Breakout Nation.

As we know, BRICS are more or less the most overhyped term used in the Emerging Market perspectives for businesses and nations. With the dominant force of the US in the world economy diminishing after the 2008 financial crises, there is an optimistic wave among investors and companies to reach out or expand or invest into these economies of the future who are turning out to be major players in the world market.

China: With China fueling over a double-digit growth over few years and dependent on exports, it runs on a constant urge to grow and become the world’s next superpower. Though, its communist political party which has been in power since a long time and has carried a legacy of their ‘its glorious to be rich’ leader Deng Xioping, it still has to keep up with the upcoming investment trends and demographical misfits which they are likely to face after 2014 read [the number of young people joining the workforce is going decrease over the next decade] and the businesses have overshot their manufacturing capacities in terms of labor and capital. The businesses in China run over exports and cheap labor, that might turn against them in the coming decade. With the center Beijing becoming a political powerhouse, the real estate market is on a high and has become unaffordable to the middle class chinese family. The first condition of girls in China for their marriage partners is that the latter should own a house. Though the per capita income is on rise, almost around $4000 and inflation at around 5.5 %, the future of the Chinese economy is not going to be based on the type of government in the center but on the kind of leadership that takes China forward. Owing to the popularity of chinese proverbs, one which their leader in Communist Party of China, Deng Xioping quoted ‘No matter if it is a white cat or a black cat; as long as it can catch mice, it is a good cat’. They have been good cats in the last three decades, surviving as a cat is going to be important for them in the coming overturns and times.

India: As India’s great hope trick continues to pervade over the minds in the west, it is anticipated to grow in building conscience over its complexity of the Coalition government, State politics, diverse Stock markets (0ver 5000 listed companies in all types of sectors from Energy to Automobile to Pharmacy) and Sadhus of the himalayas. Coming from the crony past of License Raj, a red tape-driven bureaucracy in which licenses were given to only who could manufacture goods but also determining at how much and at what price, to the liberal economy from 1991, it has come a long way in reforms and policies mostly in favor of the nation’s capitalists. As Ruchir Sharma describes India as a high context society that believes deeply in tradition, history, favoring the in-group and hence more vulnerable to corruption. The country has deepened its roots in the world economy and has got a seat in the center-stage of developmental economics. Though the per capita income is around $1400, owing largely to its 1.2 Billion population, the country has witnessed a growth boom between 2003 and 2007, nearly 9% per year. With a large savings environment inherited from its ancestors and a large workforce, the domestic consumption in India is growing every year on year basis. Though, environment of doing business in India is largely dependent on your political connections, there is a lot of divestment from the large companies now ‘outward facing’ who are in-turn expanding their businesses to other emerging markets. Investment by Indian businesses has declined from over 17% of GDP in 2008 to 13% now and overseas operations now accounts to more than 10% of overall corporate profits compared with 2% five years ago. This leads to a spike in inflation. With inflation is around 7-7.5 % and the growth rate in GDP is around 5%, the Indian crony capitalism is at its peak leading to various scams in the past 5 years. With more number of Entrepreneurs and young people joining the workforce, the reforms of the government will help small businesses measure its true value. The Congress led UPA government has disappointed in its second term, but the bucks are on the mighty of the west in the upcoming 2014 elections. Democracy can always overturn and is sociologically unpredictable. As E.M Forster remarked about India, But nothing in India is identifiable, the mere asking of the question causes it to disappear or to merge in something else. If we are able to identify our core roots, we can be an economically sound nation in decades to come, if not a superpower. Definitely, a chance to become a breakout nation.

Will write about Brazil, Russia and other emerging markets in the coming posts.

India-Superpower in 2048?

Recently, came across this enthralling TED video based on statistics. Do we envision a hope here?

I am optimistic if there is good leadership at the center of Indian Politics.

The greater fool

“The greater fool is someone with the perfect blend of self delusion and ego to think that he can succeed where others have failed. This whole country was made by greater fools.” This is when Sloan Sabbath tells Will McAvoy in the recent popular series of ‘The Newsroom‘ created by Aaron Sorkin.

I am amazed by this dialogue in the sense how perceptions work in nations with same kind of investors all around. This is not applicable only to principles of stock investing but also to our daily life situations. We believe in few things, go against those beliefs and then justify why we did. If you are in a consultancy business or a stock broker or a palm reader or a lawyer, you know your previously held beliefs over fundamentals but just to keep up with the business you are in, you tend to make sell what is against your belief just in the hope that someone will buy it in the future. Thats when we learn how to play games. Not just this, there are people who are tend to modify their beliefs over time because that’s much more comfortable and easy to maintain. Who is the greater fool then? Do we realize how we become one in real life situations?

This greater fool theory relies on trends, opportunities and psychologies in surviving in life and in stock markets. Its one thing which is common in all the nations. All of us try to supersede our peers by becoming that greater fool and make beliefs over experiences which were sustainable and not out of the box. We tend to lose out on our passion in the process of becoming that common fool and run with the world around us. Anticipating a life which we wish to live, we think, talk and express other than what is right or wrong? We know there is someone in this world who might not be as capable as you so as to buy that plan. Be it the blame game or pushing sentiments over love, honesty and integrity. When will the world be a place where we get suggestions not based on hypocrisy, advises with no manipulations, words with no hidden interests and love with no condition? World will be a better place then. We must not share what don’t believe in. Its better to remain silent then to spread something which we can’t practice, social issues will then be resolved. Until then we are all greater fools, and some of us greatest.