[Paleopsych] Mitchell Consulting: India and China may not have so many engineers

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India and China may not have so many engineers 
Common Sense Technology
Common sense views on technology and related subjects
Read in 152 countries since 1995
January 10, 2006
[Referenced articles to the second degree appended.]

[Add the creativity gap to the IQ gap. When trying to reform their 
education systems, Asians are not so concerned about instilling basic 
literacy and numeracy (as Africans, Middle Easterners, and Latin Americans 
are doing) as they are about getting their students to think for 

[As GRIN technologies continue, fostering creativity is going to become 
more and more critical, as well as higher paying.

[The article supplies a much needed corrective about overcounting 
engineers in India and China. I should add that lawyers are undercounted 
there, as much of the work that lawyers handle in the United States are 
handled by those without law degrees, at least in Japan, where conflict 
resolution is also handled at a lower level. It's not that there is less 
conflict so much at that it is handled differently, as far as the 
statistics go. So when you hear that Americans produce ten times as many 
lawyers as engineers, while Japan does the opposite, question it.

[Of course, there is lots of Central Planning rhetoric throughout these 
articles, as though some bureaucrat, or even pundit, can say how many 
engineers (or even lawyers) "we" will "need." If there's a market 
failure, I want to hear about it, and if the prospective government cure 
will have a government failure less onerous than the market failure, I 
really want to hear about it.

[As far as getting an MBA goes, I certainly can't tell Vivek Wadhwa, the 
author of most of the articles below, that he would have done as well by 
learning on the job, gaining more job experience, not having had to pay 
tuition, and not having his salary reduced while he got the MBA than by 
doing what he did. But those that wasted their time in business school 
usually don't write about it. All studies I've seen (none of them very 
good) show that the private rates of return to post-baccalaureate 
education is less than that for college (and college is less than high 
school and high school less than K-8). All these studies give exaggerated 
rates of return, since most leave out innate ability (heredity) and all 
leave out effort (free will), but the sheer consistency of lower rates of 
return as one goes up the education ladder is very strong evidence that it 

[While I'm at it, there are also studies of the public rate of return to
education, meaning here how GDP goes up. If the public rate exceeds the 
private rate then there is a case, hardly conclusive, for subsidizing 
education. Alas, these studies have different kinds of flaws from those 
estimating the private rate of return but similarly exaggerate it. The 
estimates from both of these kinds of studies vary enormously, with no 
showing at all that the public rate of return is greater than the private 
rate. One reason--I've just thought of this--is that, since Big Ed has 
managed to get every other form of job qualification besides educational 
credentials banned for being "discriminatory," educational credentials have 
become a costly surrogate for IQ tests (and aren't as reliable, as we 
learned from the analysis of the National Longitudinal Study of Youth in 
_The B*ll C**ve_) and have value as positioning. Not as irrelevant as the 
examinations in ancient China to get into the bureaucracy, it is not at 
all clear that what gets learned by sitting behind desks listening to 
professors drone on for all those extra years is actually good for.

[Here are two paragraphs from an article below, which draws the 
distinction between "dynamic" and "transactional" engineers:

  DYNAMIC RANGE.  Dynamic engineers are individuals capable of abstract
  thinking and high-level problem-solving. These engineers thrive in teams,
  work well across international borders, have strong interpersonal skills,
  and lead innovation. Transactional engineers may possess engineering
  fundamentals, but not the experience or expertise to apply this knowledge
  to larger problems. These individuals are typically responsible for rote
  and repetitive tasks in the workforce.

  What differentiates the two types of engineers is their education. The
  capstone design course that dynamic engineers study in their senior year
  enables them to integrate knowledge gained from fundamental coursework in
  the applied sciences and engineering.

[Somehow I doubt that how the senior year in engineering school is spent 
makes much difference. I would think that heredity dominates, but even 
still this senior year (hey, why not all one's years in school!) could be 
thought out much better than it has been and those who have the capacity 
and temperament to become dynamic engineers could be helped become so.

[We will be hearing much more about the creativity gap in the future, so 
stay tuned.]


Amidst reports that India and China are graduating more "engineers"
than the U.S. comes some more actual data that notes we are not
comparing the same skill sets when we compare most engineers in India
or China to U.S. engineers. See [7]Filling the Engineering Gap
Interesting quote:

   Contrary to the popular view that India and China have an abundance
   of engineers, recent studies show that both countries may actually
   face severe shortages of dynamic engineers. The vast majority of
   graduates from these counties have the qualities of transactional

This reminds me of a number of years ago when I was doing on campus
recruiting of software and computer engineers. At one university
campus, the majority of the students we interviewed were international
students, studying in the U.S., and most from one or two countries.
This report echoes our observations - we talked with many smart
engineering students. They all would do great work if told rather
specifically what to do. But we were looking for a willingness to
think outside the box, to be creative, to lead, to fight for radical
ideas - all traits we were not finding in this bunch of students. That
does not mean these international students were ineffective - but it
is clear that many U.S. firms prefer dynamic engineers versus
transaction engineers as described in this article. [snip rest]

Filling the Engineering Gap
JANUARY 10, 2006
By Vivek Wadhwa

The U.S. doesn't need to simply graduate more engineers. It needs more of the
right kind of engineers. And more research into the problem sure would help

  The stakes are very high in the global economic race. As India and China
  strive to catch up, the debate continues about what the U.S. needs to do to
  maintain its lead. While it seems inevitable that other economies will
  grow, the issue here is whether their success will lead to greater
  prosperity for Americans or threaten our way of life.

  One of the few things on which both sides agree is that the U.S. needs to
  increase spending on education and research. Both the Democratic Party and
  the U.S. Chamber of Commerce announced policy initiatives last month
  prescribing an increase in the number of engineering graduates. They cited
  statistics that show the U.S. graduates about 70,000 engineers a year,
  while India and China graduate five and eight times that number,

  APPLES TO LITCHIS.  While the remedy sounds good, the problem they're
  trying to solve isn't what it seems. The statistics that are being cited
  are inaccurate (see BW Online, 12/27/05, [3]"Engineering: Is the U.S.
  Really Falling?"). And simply mandating that the country should graduate
  more engineers may lead to a situation in which we graduate the wrong types
  of engineers and discourage future generations from studying engineering.
  As reader feedback shows, this debate is based more on emotion than fact. A
  lot more research is needed, and we need to differentiate between

  As I wrote in my last column, (see BW Online, 12/13/05, [4]"About the
  Engineering Gap"), our study at [5]Duke University revealed that the
  engineering graduation numbers commonly cited in this debate are
  inaccurate. In an apples-to-apples comparison, the U.S. actually graduated
  more engineers than India last year, and the Chinese numbers aren't
  comparable. It's not that the U.S. graduation numbers are wrong. as Salil
  Tripathi from The Wall Street Journal reported, the comparison was false:
  Washington apples were being compared to Alphonso mangoes and Chinese

  Reader feedback to my column shows the diverging views and opinions on this
  topic. Some claimed that our numbers are absurd and that we were painting
  an unduly rosy picture of America. Others suggest that this was a
  misinformation campaign against India. Some thanked us for setting the
  record straight. Others felt that by saying America was strong, we had done
  a disservice to the country. Many who lauded our study suggested that
  previous inaccurate data was being used to disadvantage American workers.
  Some experts attacked our motives.

  HEATED DEBATE.  Most surprising were comments from two journalists who
  interviewed me about the study. A reporter from a top Indian newspaper said
  this story would hurt India's "national ego" and chided me for being
  disloyal to the country of my origin. And the editor of a U.S. tech weekly
  demanded to know my nationality and asked if the Indian government had
  funded our project.

  On the other hand, Gail Pesyna, program director at the prestigious Alfred
  P. Sloan Foundation, said our report had generated a lot of excitement not
  only in the larger world, but also inside the Sloan Foundation. She thanked
  us for taking the debate up one notch.

  The most perceptive feedback we received was from Professor Jesse Ausubel
  of Rockefeller University. He was impressed that a team of students was
  quickly able to make a contribution to the factual aspects of the debate.
  He wrote, "I have never believed all the moaning and groaning about how
  hard it is to figure out the numbers.... I learned the main problem was
  that no one chose to break a sweat doing the research.... 'Facts' are few
  because few people work on ascertaining them, and many of those who want to
  use the 'facts' are happy to use a misleading selection that serves their

  UNDERSTANDING OUTSOURCING.  With facts being in short supply, both sides of
  the debate use available statistics to justify their positions. Many have
  lobbied to raise immigration barriers based on the threat from abroad. Yet
  in its State of American Business 2006 report, the Chamber of Commerce uses
  the incorrect engineering graduate numbers to argue that we should allow
  more immigration.

  So what should be done? Further research is needed on a subject of such
  critical national importance. The Duke study was a small step toward
  establishing certain baseline facts and reliable statistics. As Professor
  Ausubel notes, if a team of engineering students can accomplish so much
  within a semester, why not the experts and analysts?

  The Duke study tried to differentiate between the skill and education level
  of engineers and suggested that those with higher-quality education would
  always stay in demand. Study contributor Dr. Richard Schroth of Katzenbach
  Partners, who coined the terms "dynamic engineers" and "transactional
  engineers," argues that this is the best way of understanding the
  outsourcing threat.

  DYNAMIC RANGE.  Dynamic engineers are individuals capable of abstract
  thinking and high-level problem-solving. These engineers thrive in teams,
  work well across international borders, have strong interpersonal skills,
  and lead innovation. Transactional engineers may possess engineering
  fundamentals, but not the experience or expertise to apply this knowledge
  to larger problems. These individuals are typically responsible for rote
  and repetitive tasks in the workforce.

  What differentiates the two types of engineers is their education. The
  capstone design course that dynamic engineers study in their senior year
  enables them to integrate knowledge gained from fundamental coursework in
  the applied sciences and engineering.

  Contrary to the popular view that India and China have an abundance of
  engineers, recent studies show that both countries may actually face severe
  shortages of dynamic engineers. The vast majority of graduates from these
  counties have the qualities of transactional engineers.

  BEYOND THE NUMBERS.  Dynamic engineers develop renewable energy sources,
  solutions for purifying water, sustaining the environment, providing
  low-cost health care, and vaccines for infectious diseases. They also
  manage projects and lead innovation. Talk to any CEO, CIO, or engineering
  manager, and they'll likely tell you that they're always looking for such

  With all the problems that need solving in the world, we probably need many
  more dynamic engineers. India and China need them as badly as the U.S.
  does. But by simply focusing on the numbers and racing to graduate more,
  we're going to end up with more transactional engineers -- and their jobs
  will likely get outsourced.

  [6]Wadhwa, the founder of two software companies, is an
  Executive-in-Residence/Adjunct Professor at Duke University. He is also the
  co-founder of TiE Carolinas, a networking and mentoring group.


3. http://www.businessweek.com/bwdaily/dnflash/dec2005/nf20051223_7594_db039.htm
4. http://www.businessweek.com/smallbiz/content/dec2005/sb20051212_623922.htm
5. http://memp.pratt.duke.edu/outsourcing/
6. mailto:vivek at wadhwa.com

Engineering: Is the U.S. Really Falling?
DECEMBER 27, 2005
By Pete Engardio

Numbers cited to prove that graduation rates in India and China dwarf those
in the U.S. may be flawed. But the fear is all too real

Is America losing its competitive edge in engineering? Top Silicon
Valley executives, U.S. think-tanks, industry associations, and
university deans have all pointed out dropping enrollment in American
science and tech programs and warn of a brewing problem. And in a
November survey of 4,000 U.S. engineers, 64% said outsourcing makes
them worry about the profession's future, while less than 10% feel
sure America will maintain its leadership in technology.

Such gloom is reinforced by a raft of oft-cited statistics: the U.S.
graduates only 70,000 engineers a year, and enrollment in engineering
schools is declining fast. India, meanwhile, turns out 350,000
engineers annually, while Chinese universities produce 600,000, by
some estimates. Indeed, with Asian techies earning anywhere from a
quarter to a tenth of what their Western counterparts do, doomsayers
might ask why any intelligent young American would pursue engineering.

FUZZY DEFINITIONS.  But how accurate are such numbers? And how does
the theory of American decline square with the reality that graduates
of good U.S. engineering schools seem to have little problem finding
jobs? Vivek Wadhwa, a founder of several tech startups and an
occasional contributor to BusinessWeek Online who's now an executive
in residence at Duke University says he got so disturbed by the
anxieties of bright engineering students that he helped supervise a
study released in December to get to the bottom of such questions.

The conclusion: Because of fuzzy definitions of "engineering
graduate," estimates of Indian and Chinese numbers can be wildly
exaggerated, while America's are understated.

Just look at the numbers using consistent criteria. If one counts
people who study computer science and information technology as
engineers -- as India does -- then the U.S. grants 134,000 four-year
engineering degrees annually. Indeed, the U.S. is producing far more
engineers per capita than either of Asia's emerging superpowers.
Indian schools grants only 122,000 four-year engineering degrees (and
almost as many three-year degrees), while China generates 351,000.

"SPREADING PROPAGANDA."  But China's statistics may still be inflated
because the definition of an engineer can vary widely from province to
province. In some cases, auto mechanics are included. "The numbers
seem to include anybody who has studied anything technical," Wadhwa

The bottom line is that America's engineering crisis is a myth, Wadhwa
argues. Both sides in the globalization debate are "spreading
propaganda," he contends. India and China are using inflated
engineering numbers because they want to draw more foreign investment,
while fearmongers in the U.S. use dubious data either to support their
case for protectionism, to lobby for greater government spending on
higher education and research, or to justify their offshore

The study, though, is already coming under fire. Wadhwa says he's
getting notes from researchers who challenge its soothing conclusions,
and some U.S. engineers say it doesn't match the grim reality they're
witnessing in downsized American R&D labs. And other studies point to
different signs of ebbing American dominance in science and
technology: The U.S. share of scientific papers is declining. Federal
funding for research is falling. And even though American engineering
schools may be producing more grads than some data might indicate,
many of their students come from overseas.

"ARE YOU KIDDING?"  The debate raises an intriguing question: Does
hype about the rise of India and China unnecessarily demoralize
American engineers and scare U.S. students away from technical
careers? Most surveys of U.S. corporate executives, after all,
conclude that America is already facing a shortage of engineers in
everything from software and chemicals to life sciences, and these
shortfalls will worsen in coming years. Even the November survey of
4,000 engineers, by public relations firm McClenahan Bruer
Communications and CMP publishing group, found that 56% said their own
companies currently have a shortage of engineers.

The survey confirms that the psychological impact of U.S. offshoring
may be just as big as the reality. In focus groups, engineers
overwhelmingly said they believe their work is important to society.
"But when we asked whether they think society appreciates what they
do, they looked at us with blank faces and said, 'Are you kidding?'"
says Kerry McClenahan, who runs the PR company behind the survey.

Another problem is that many of the U.S. engineers who are getting
displaced lack the more demanding skills required by American tech
companies today. Because routine tasks can be done more cheaply
offshore, many executives say, they need U.S. engineers who can
rapidly move on to next-generation technologies, work well with
customers, and manage R&D teams.

COUNTERARGUMENTS COMING.  Wadhwa describes it as a gap between
"transactional" engineers and "dynamic" ones. The former are good at
fundamentals but have a hard time applying their knowledge to broader
problems. Dynamic engineers are more capable of abstract thinking,
work well in teams, and can lead innovation. India and China have
dynamic engineers, too, but U.S. companies still need many of them on
staff at home. "What I'm seeing is that transactional engineers in the
U.S. are being replaced by dynamic engineers offshore."

The contention that only engineers with routine skills are put at risk
by offshoring will surely provoke counterarguments. But at very least,
the Duke study has helped take the debate over declining U.S.
competitiveness up a notch.

[4]Engardio is a senior writer for BusinessWeek in New York


4. mailto:pete_engardio at businessweek.com

About That Engineering Gap...
DECEMBER 13, 2005
By Vivek Wadhwa

Is the U.S. really falling behind China and India in education? Not really.
Take a closer look at the data

  There are few topics that generate as much heated debate as outsourcing.
  One side argues that globalization will lead to greater innovation and
  prosperity, the other says we are increasing unemployment and misery.
  Everyone agrees that what's at stake is America's standard of living and
  world economic leadership.

  One would expect that the numbers used in such debate would be defensible
  and grounded. Yet researchers at Duke University have determined that some
  of the most cited statistics on engineering graduates are inaccurate.
  Statistics that say the U.S. is producing 70,000 engineers a year vs.
  350,000 from India and 600,000 from China aren't valid, the Duke team says.
  We're actually graduating more engineers than India, and the Chinese
  numbers aren't quite what they seem. In short, America is far ahead by
  almost any measure, and we're a long way from losing our edge.

  Unfortunately, the message students are getting is that many engineering
  jobs will be outsourced and U.S. engineers have a bleak future of higher
  unemployment and lower remuneration. This could result in a self-fulfilling
  prophecy, as fearful young scholars stick to supposedly "outsourcing-proof"
  professions. In other words, we have more to fear from fear itself.

  RESEARCH FELLOWS.  Having been a tech exec and co-producer of a Bollywood
  film, I've long been at the center of the outsourcing debate. I wrote about
  how my own son called me unpatriotic and argued that I was doing wrong for
  America (see, BW Online, 3/12/04, [3]"My Son, It's Time to Talk of
  Outsourcing..."). Yet, in my new life in academia, I couldn't answer the
  first question my engineering students asked (see BW Online, 9/14/05,
  [4]"Degrees of Achievement"). They wondered what courses would lead to the
  best job prospects and what jobs were "outsourcing proof."

  I knew that with a master's of engineering management from Duke, these
  students were destined to be leaders, and that leadership can never be
  outsourced. Yet I was no expert on engineering majors across the world.
  Dean Kristina Johnson of Duke's Pratt School of Engineering suggested we
  research the topic.

  I enlisted the help of Professor Gary Gereffi, a world renowned sociologist
  and Duke outsourcing expert, and we picked a team of our brightest
  students. We set out to compare international engineering degrees and
  analyze employment opportunities. As you do in any study, we started by
  assessing the facts. The problem was that facts were in short supply.

  BIPARTISAN CONSENSUS.  In recent years, the worldwide media has cited
  graduation numbers that show a huge imbalance of engineering graduates
  coming out of Chinese and Indian schools. One commonly cited set of figures
  is 600,000 engineers graduated annually from institutions of higher
  education in China, 350,000 from India, and 70,000 from the U.S.

  Top business publications have repeated these numbers. So have political
  leaders across the spectrum -- from [5]Ted Kennedy to [6]Newt Gingrich. The
  Congressional Record references these numbers. Even the prestigious
  National Academies issued [7]a press release asking federal support to
  bolster U.S. competitiveness, citing these numbers as part of its argument.
  The U.S. numbers were easy to verify. The National Center for Education and
  the American Society of Engineering Education provided useful data.
  However, international numbers were a different story.

  LOST IN TRANSLATION.  Several reports cited the Ministry of Education in
  China and the National Association of Software & Service Companies
  (NASSCOM) in India. Yet none of the reports issued by these authorities
  that we read matched the numbers being reported.

  So we called registrars of the largest universities in India and China.
  Chinese universities readily provided high-level data, but not enough
  detail. Some Indian registrars were helpful and shared comprehensive
  spreadsheets. Others claimed not to know how many engineering colleges were
  affiliated with their schools or they lacked detail on graduation rates by

  We eventually found our way to knowledgeable employees of the Chinese
  Education Ministry, and the research head of NASSCOM, Sunil Mehta. After
  extensive discussions and reviews of more reports and data, we learned that
  no one was comparing apples to apples.

  The word "engineer" didn't translate well into different Chinese dialects
  and had no standard definition. We were told that reports received by the
  ministry from Chinese provinces didn't count degrees in a consistent way. A
  motor mechanic or a technician could be considered an engineer, for
  example. Also, the numbers included all degrees related to information
  technology and specialized fields such as shipbuilding.

  DATA BANK.  There were also "short-cycle" degrees, which were typically
  completed in 2 or 3 years. These are equivalent to associate degrees in the
  U.S. Nearly half of China's reported degrees fell into this category.
  NASSCOM maintains extensive engineering graduation data. They gather data
  from diverse sources and create and validate projections and estimates. We
  couldn't get the data to perform accurate comparisons with China, so we
  matched the NASSCOM definition of engineer to U.S. numbers.

  We found that the U.S. was graduating 222,335 engineers, vs. 215,000 from
  India. The closest comparable number reported by China is 644,106, but it
  includes additional majors. Looking strictly at four-year degrees and
  without considering accreditation or quality, the U.S. graduated 137,437
  engineers, vs. 112,000 from India. China reported 351,537 under a broader
  category. All of these numbers include information technology and related
  majors ([8]click here to read the full Duke report).

  WORLD OF DOUBT.  What's the point? We hear repeatedly that America is in
  trouble and that the root cause lies with our education system. There's no
  doubt that K-12 science and math could be improved, and few will dispute
  that America needs to invest more in education and research.

  However, our higher education system isn't in trouble -- in fact, it's
  still the world's best. We spend the most on research, produce the most
  patents, have the most innovative curriculum, and educate many of the
  world's leaders. Take Duke University. It spends $50 million a year just on
  engineering research, and members of its faculty are world renowned.
  The message that our engineering graduates compete with 1 million graduates
  from India and China has created a sense of fear, uncertainty, and doubt.

  Why would a smart student enter a field where their job might soon be
  outsourced? Rather than encouraging our children to study more math and
  science and become engineers, we're turning them into lawyers.
  When the world hears that the U.S. education system is in decline, we scare
  away those who would otherwise come here to study. To keep America
  competitive, we must keep attracting the world's best and brightest.
  America needs to do all it can to fuel innovation and maintain its lead in
  science and technology. By repeatedly sending the message that we're weak,
  we in fact become weak.

  [9]Wadhwa, the founder of two software companies, is an
  Executive-in-Residence/Adjunct Professor at Duke University. He is also the
  co-founder of TiE Carolinas, a networking and mentoring group.


3. http://www.businessweek.com/smallbiz/content/mar2004/sb20040312_5086.htm
4. http://www.businessweek.com/smallbiz/content/sep2005/sb20050914_959737.htm
5. http://www.govtrack.us/congress/record.xpd?id=109-s20051025-16
6. http://www.newt.org/index.php?src=news&prid=1191&category=Speeches
7. http://www4.nationalacademies.org/news.nsf/isbn/0309100399?OpenDocument
8. http://memp.pratt.duke.edu/outsourcing
9. mailto:vivek at wadhwa.com

Download Duke Outsourcing Report

   Download: [1]Framing the Engineering Outsourcing Debate: Placing the United
   States on a Level Playing Field with China and India

   Download: [2]Appendix

This report is part of an ongoing study to compare the number of U.S.
engineering graduates to those in developing nations, particularly
India and China. This is a complex issue and requires further study
but this preliminary report raises several questions about the numbers
quoted in the popular press. This report was developed by graduate
students of Duke University's [4]Master of Engineering Management
Program in the [5]Pratt School of Engineering under the guidance of
[6]Dr. Gary Gereffi, and [7]Vivek Wadhwa with consulting assistance
from Katzenbach Partners LLC.


1. http://memp.pratt.duke.edu/downloads/duke_outsourcing_2005.pdf
2. http://memp.pratt.duke.edu/downloads/duke_outsourcing_2005_appendix.pdf
3. http://memp.pratt.duke.edu/downloads/duke_outsourcing_2005.pdf
4. http://memp.duke.edu/
5. http://pratt.duke.edu/
6. http://fds.duke.edu/db/aas/Sociology/faculty/ggere
7. http://memp.pratt.duke.edu/people/staff.php

My Son, It's Time to Talk of Outsourcing...
MARCH 12, 2004
By Vivek Wadhwa

...and how, without those Russian programmers I hired, neither my U.S.
startup nor the jobs it created would ever have existed

When I got involved with a venture to produce a Hollywood movie in
Bollywood, I was very excited about helping educate Americans on India
and its culture, thinking we could make the world a better place by
entertaining audiences for two hours. We were creating some jobs in
the US, many more in India, and providing huge financial upside to
American investors.

True, we were going to film the movie in India to save money. But we
were also planning to spend about half our budget in the U.S. And if
we couldn't film in India at a lower cost the movie might not happen.
So I figured some money spent in the U.S. economy is better than no
money spent in the U.S. or India. In that sense, we were doing plenty
to help the U.S. economy.

FAMILY FEUD.  I didn't imagine that anyone could call this unpatriotic
or wrong. Not only was I mistaken, but my own 16-year-old son, Tarun,
was the one who objected and called me unpatriotic. He said it was
wrong to ship more jobs to India. The debate about outsourcing has
become so heated and emotional in this election year that it is
difficult to have a rational discussion about it, even at home.

This isn't the first time I have had to deal with the issue of
outsourcing. In the late 1980s, I was a vice-president at a major Wall
Street financial institution, in charge of building technology to help
improve the way the investment banking arm of the outfit did its
business. Eventually, we spent about $150 million to modernize the
computer systems, and the company was happy with the results. That
success in 1990 led to a joint venture with IBM to market the
technology we had created.

There was one technical problem we were never able to solve even after
spending $150 million. That solution could have cut the cost of the
project in half. We needed an automated way of translating old IBM
mainframe code to modern computer languages that run on the latest
computer platforms. To solve this problem, we needed computer
programmers who excelled in both mathematics and computer science, and
we simply couldn't find the right people for this task. We spent
millions of dollars trying, however.

HOMEGROWN JOBS.  As fate would have it, I visited Russia, in 1992,
just after the break-up of the Soviet Union, and hired a team of 30
brilliant and hungry computer programmers who boasted just the right
skills. They were grateful to work for a small fraction of American
wages, and labored for years to solve this complex problem.

Eventually, this technology led me to start my own company, Relativity
Technologies. That company would not have existed, or saved its
customers many millions of dollars if we hadn't outsourced development
to Russia.

Relativity Technologies employed nearly 100 people in the U.S., paying
many of them close to $100,000 per year -- jobs that would not have
existed without help from our 50 Russian programmers. Despite this
fact, I often received angry e-mails from people who learned about my
company from news articles describing our venture. They accused me of
"taking jobs away from the U.S." Some of the messages asked if I was
ashamed of myself, and challenged my patriotism.

Now, this was all before outsourcing became an election issue. I have
always done everything possible to give back to the community in which
I live. I have been loyal to America, the country which readily
accepted me as a citizen, and have helped to create jobs. So I thought
my logic was beyond reproach. But I must admit that the recent debate
with my son really shook me up.

A WORLD OF POSSIBILITIES.  My current project is to help produce a
feature film in India. We have American producers. The script was
written by Americans. We will have an American director working side
by side with an Indian director. The lead actor will be British, but
we will also have many Indian actors. We will shoot the movie in
Mumbai using local talent, but expect to do the final production and
editing in Los Angeles. We expect to spend $300K on marketing in the
US. The budget of this film is less than $1M. I hope that it will
gross many times that sum and deliver magnificent returns for its
American investors, who will turn around and hand that money to money
managers and accountants and car dealerships -- maybe even donate some
of it to charity.

And if the movie turns out the way I hope, it will educate both
Americans and Indians about their respective cultures. Maybe those
Indian directors will collaborate on more projects with American
directors, perhaps and start their own studio with offices in Mumbai
and Hollywood. They will employ actors, writers, directors,
electricians, and computer wizards in California, where they will do
the special effects. Films that could not be made before because of
the cost or risk might now become feasible.

The point of all this is that the current view of outsourcing and
resulting job loss is simplistic and binary. The economies of the
world are now interlinked more tightly than ever before. Witness my
film and my story. A child of India, immigrates to America from
Australia, where he has been educated, starts a technology company and
invests his own money to employ Americans. When I was growing up in
Canberra, the Australian capital, such a trajectory would have been
nearly unimaginable. Foreigners didn't start technology companies in
the U.S. Today, it's an old story. In fact, the story today is that I
am involved in making a movie in India. And the technology company
that I started is now expanding rapidly and is looking for more
employees in the US.

GRUDGING CONVERSION.  Back to my 16-year-old son. I am always grateful
when my American-born teenager has time to talk to me. Between all
those instant messages and cell phone calls, teenage life is really
busy. I was delighted that he wanted to talk to me, but the fact that
the discussion was about outsourcing really surprised me. His views
were even more unexpected. His concern was that, with so much
unemployment and poverty in America, we needed to create jobs locally.

Why was my company employing all those people in Russia, and why was I
now working on creating jobs in India? He lectured me about the need
to give back to the local community before we gave back to the world.
Fortunately, it is easier to convince a teenager than a politician in
an election year. After a discussion lasting hours, and walking him
through some of the details, and showing him that we were making the
pie bigger for everyone, he said that maybe what I was doing was okay,
after all. He still believed that outsourcing was bad, but maybe we
could do things in a way that everyone wins.

[3]Vivek Wadhwa has co-founded two technology companies, and is
currently chairman of Relativity Technologies in Raleigh, N.C. When
not producing movies or battling venture capitalists, Wadhwa mentors
fledgling entrepreneurs.
Edited by Alex Salkever

Degrees of Achievement
SEPTEMBER 14, 2005
By Vivek Wadhwa

Much of what I learned at B-school seemed irrelevant -- until it boosted my
earnings, launched a new career, and ushered me into academia

  Early in their careers, entrepreneurs have to make difficult decisions
  about the level of education to pursue. Business school is costly and takes
  years to complete -- and even longer to pay dividends.

  If you're a Bill Gates or Steve Jobs, schooling clearly won't make or break
  your career. However, for me, education probably made the difference
  between success and mediocrity. I've gained so much from my education that
  I've decided to give back to the system.

  TUITION BURDEN.  Long ago, I had to make some very tough choices. With a
  bachelor's degree in computing, I was well set in my technical career. I
  took great pride in being a geek and would boast about my coding exploits
  at cocktail parties. Yet I knew that my understanding of the business world
  lacked depth, and I harbored a deep-rooted desire to get the best education

  I signed up for an MBA at [3]New York University, but this was no easy
  decision. My wife and I had to choose between tuition and the down payment
  on a new house. Having a child on the way made it even more difficult. We
  ended up having to manage with a tiny, one-bedroom apartment in North
  Bergen, N.J., while I went to school.

  After starting the program, I wasn't so sure why my study included topics
  like economics, accounting, marketing, and operations management. These
  seemed so far from my technical world that I wondered if they would ever
  help me.

  About the time I completed my degree, I received an offer from
  investment-banking powerhouse Credit Suisse First Boston ([4]CTNX ) to join
  its programming staff. I'm still not sure if my MBA helped me land this
  job, but it didn't hurt.

  SELF-ESTEEM BUILDER.  For the first couple of years, my business degree
  seemed totally irrelevant. Knowing about how the capital markets worked or
  understanding operations management didn't help me write better code. So I
  used to wonder if I had made the right choice.

  Over time, I realized that I had a much better understanding of how the
  business worked than some of my peers. And I felt confident in my dealings
  with the bank's managing directors as well as with user departments. I
  could present business proposals and participate in technology design
  meetings. I was able to persuade the company to invest in technology I had

  When my team's success led to IBM's ([5]IBM ) funding of a spin-off
  company, I was offered the chief technology officer post. That's when my
  education really began to pay big dividends.

  A FEW ODDBALLS.  In the startup world, it's simply survival of the fittest.
  You have to involve yourself with almost every aspect of the business --
  and leverage all skills. I would find myself having to develop and manage
  budgets, help market and sell, hire, and motivate employees, assist in
  setting corporate strategy, and review legal contracts. Plus, I still had
  to develop technology and deal with all the uncertainties and failures that
  come with a startup.

  My MBA classes seemed to fit our business needs like the pieces of a jigsaw
  puzzle. Even obscure topics like corporate finance came in handy in IPO
  discussions with investment bankers and when I later raised capital for my
  own company.

  To be fair, there were some jigsaw pieces that I'll never use and others
  that didn't fit well. I can't imagine when I'm ever going to price an
  option with the Black-Scholes Model, for example. I wished that the program
  had had classes on selling and given us more interaction with the real

  HIGHER GOAL.  In previous columns I've written about my adventures with
  India's Bollywood (see BW Online, 1/24/04, [6]"Bollywood, Here I Come!").
  To my surprise, my education even helped in that universe. The principles
  of marketing, management, and accounting all have the same applications, no
  matter what the industry.

  With My Bollywood Bride nearing theatrical release and my having become
  disenchanted with this world of glamour, I began to wonder where I'd find
  the next mountain worth climbing.

  A chance meeting with Kristina Johnson, dean of the Pratt School of
  Engineering at Duke University, presented the opportunity I was looking
  for. With a PhD in Electrical Engineering, 44 patents to her name, and her
  involvement in many startup technology companies, Kristina is no ordinary
  academic. And she has a mission.

  GLOBAL EDGE.  Kristina worries that the U.S. is losing its competitive edge
  as the graduation rate of engineers and scientists declines. To hold on to
  quality of life, we have to maintain our competency and leadership in
  engineering, science, and technology. She also feels that graduating
  engineers and technicians generally lack business skills.
  She introduced me to Dr. Jeff Glass, who heads the Pratt Master's of
  Engineering Management (MEM) program, which had put together a very
  innovative one-year course of study.

  The program seeks to prepare engineering graduates to go beyond their
  technical roots when they enter the workforce. By teaching topics such as
  marketing, management, and law, the MEM Program gives students a head start
  in the corporate world.

  And MEM graduates can better compete in the global economy, where
  lower-level technical functions are rapidly relocating to countries like
  India and China.

  HONORIFIC GETTER.  Jeff wanted to bring the program closer to the business
  world, to set up an advisory board that comprised business and academic
  leaders to guide the school. He wanted assistance in mentoring students and
  his faculty. Kristina wanted help in commercializing some of the
  revolutionary technologies her school was researching. And she wanted to
  create ties to universities in other countries.

  When Kristina asked me to join the university as executive-in-residence, I
  said yes immediately. I was looking for a way to give back to the education
  system that had given so much to me, and this seemed like the perfect role.
  Plus, it would allow me to add a title that I have respected since

  So, Professor Wadhwa it is.

  [7]Wadhwa, the founder of two software companies, is an
  Executive-in-Residence/Adjunct Professor at Duke University. He is also the
  co-founder of TiE Carolinas, a networking and mentoring group.
  Edited by Rod Kurtz


3. http://www.businessweek.com/bschools/04/full_time_profiles/stern.htm
4. javascript: void showTicker('CTNX')
5. javascript: void showTicker('IBM')
6. http://www.businessweek.com/smallbiz/content/jan2004/sb20040121_6183.htm
7. mailto:vivek at wadhwa.com

Bollywood, Here I Come!
JANUARY 21, 2004
By Vivek Wadhwa

Meet our latest columnist, a U.S. entrepreneur-turned-film producer, who
will be reporting on his new business in the world's busiest movie mecca

After 25 years as a geek, hacker, programmer, project manager, chief
technology officer, and finally, chief executive officer of a
technology company, I have added a new title to my resumé: Bollywood
film producer. And I owe it all to a heart attack, venture
capitalists, and my son. My story is a simple one. I spent five years
running at top speed to build a software outfit called Relativity
Technologies, which helps modernize their legacy computer systems.

Relativity received worldwide recognition and in 2001, a top business
magazine named it one of the world's 25 "coolest" companies.
Like all other tech players, the dot-com crash hit us hard. To make
ends meet, we had to lay off good employees and raise more money. We
believed so much in our company that my management team and I
personally invested the first $1 million in a $5 million round of
financing. After we succeeded in getting back to solid growth and
profits, I decided to take a much needed vacation.

HEART OF THE MATTER.  It must have been the lack of Internet access on
my Caribbean cruise that led to a massive heart attack. I woke up in
the hospital glad to be alive. While still in the Critical Care Unit,
I received a phone call saying that my investors felt the need to
renegotiate the terms of the current financing. Two days later and
still bandaged, I left the hospital and walked, uninvited, into a
closed-door meeting, where investors were trying to convince my
executive team to accept more money for a revised agreement that would
give them majority ownership. I flatly refused, and ended the meeting.

My friends sent me lots of "get well" flowers. My investors sent me a
letter demanding that I step aside and allow the younger brother of a
partner in one of their firms to take over -- the company I had
founded, built with most of my life savings, and paid for with a
cardiac arrest. For the next few months, I spent what little energy I
had fighting people I formerly held in high regard.

Fortunately, that chapter of my life story had a happy ending. I won
critical battles, kept control of Relativity, and eventually recruited
a new CEO to take over from me. I also took my doctors' advice to do
something less stressful than fight venture capitalists for a living,
and regained my health. I kept my role as chairman of the board, but
decided that my chief priority was to make up for lost time with my

A FATHER'S DUTY.  That led me to India, where my eldest son, Vineet,
was taking his semester abroad in New Delhi. He is as American as can
be, but Vineet had not only discovered his Indian roots, he also had
acquired the Indian addiction to Bollywood movies. An Indian
specialty, these films tend to be spicy, dramatic, and romantic
musical extravaganzas, and should never be watched without a ready
handkerchief. Think Moulin Rouge or Chicago with family-values morals,
but even more over-the-top musical numbers and costumes. In India,
Bollywood's stars are practically worshipped by the masses.

When I told Vineet that I was taking a month off to spend with him, I
don't think he believed me. I asked him where in India he would like
to travel. His immediate answer? Bollywood, in the city of Mumbai --
formerly known as Bombay -- home of the world's largest film industry.
And he asked for a rare favor: Could we meet some movie stars while we
were there? His dad was famous and knew everyone, right?

Of course I didn't know any movie stars -- I was just a techie who
started a software company. However, I couldn't admit this to him. To
make things worse, I didn't think I knew anyone who knew any movie
stars, since most of my friends were like me. Yet I couldn't let my
son down.

After exhausting my list of Indian contacts, I recalled corresponding
with an investment banker, Brad Listermann, who was raising money for
a telecommunications outfit. When I talked to him a couple of weeks
earlier, he had mentioned something about Bollywood. Grasping at
straws, I sent him an urgent e-mail asking him for more information.

LIMO TO LUXURY.  What luck. As it turned out, he was married to former
beauty queen and Bollywood star, Kashmira Shah. He had met her on the
Internet, and after months of romancing via e-mail, they got together,
fell in love, and married.

Unfortunately, she was scheduled to be in Hollywood for a film that
was shooting the week we were to be in Mumbai. Brad offered to
introduce us to Feroz Khan instead. In most of South Asia and the
Middle East, Feroz Khan is as well known as Clint Eastwood or Robert
Redford. I gladly took Brad up on his offer. Believe me, we would have
traveled anywhere to shake hands with Feroz.

Still, we were taking all this with a grain of salt. I mean, who gets
to meet Robert Redford after a couple of e-mails? We were surprised to
get a phone call from Feroz when we landed in Mumbai, but even more
surprised to get an invitation to his house for dinner. Would it
really be Khan, Vineet asked, or a practical joke? Our doubts were
dispelled when his Mercedes showed up at our hotel and drove us to his
beachside mansion in Mumbai's prestigious Juhu Beach neighborhood. On
the ride over, Vineet's only question was: What would we talk to Feroz

Feroz greeted us at the door and showed us around his palace. The
house boasted beautiful artwork and sculptures, massive crystal
chandeliers, a film production studio, a gymnasium, and an indoor
pool. Between the butler, servants, chauffeur, and security guards,
there were at least 11 employees on duty that evening.

STAR POWER.  Feroz apologized that his son, Fardeen, was delayed in
New Delhi. Fardeen is akin to the Tom Cruise of Bollywood. Instead,
Feroz had invited Celina Jaitley, Miss India 2001, who has since
become a popular Bollywood actress. My son and I looked at each other
in utter disbelief when she walked in the door a few minutes later.

Vineet almost fell off his chair. Clearly, that night we were visiting
a different universe than the one we inhabited back in North Carolina.
It was an enchanting evening. They told us stories about the
production of their upcoming film, gossiped about their fellow
Bollywood stars, and discussed the inner workings of beauty pageants.
Feroz also gave me an interesting lesson on the dynamics and economics
of the entertainment industry, and took me to his production studio,
where he showed clips of his upcoming movie, Janasheen.

I learned a lot in those four hours, later calling Brad Listermann to
thank him and to ask how I could possibly return the huge favor of
making me look like a superhero in the eyes of my son. He hesitated,
then wondered if I could spend some time to review a business plan,
and possibly introduce him to any members of the Indian tech community
who might be interested in funding it.

He had developed this plan with the help of his mentor, Duncan Clark,
the ex-President of Columbia Tri-star's International Theatrical
Division, who was fascinated by Bollywood's potential. The plan was to
produce quality Hollywood movies in Bollywood, and to do so for one
tenth what a comparable independent production would cost elsewhere.

OLD SKILLS, NEW PLOT .  Brad had also written a lovely story about an
American who falls in love with an Indian movie star, and follows her
back to Bollywood (sound familiar?). It showed India through the eyes
of a bewildered Westerner. This script provided an opportunity to test
Brad's theory about producing quality movies in Bollywood at a low
cost. What excited me the most was that it would help build on the
momentum of independent cross-over movies such as Bend It Like Beckham
and Monsoon Wedding -- box-office successes that have done a great job
of educating Americans about Indian culture, and have helped change
old, hurtful stereotypes.

Brad wanted to produce this movie called "My Bollywood Bride". Duncan
Clark had agreed to take the role of executive producer and oversee
the production and distribution of this film. He wanted me to take a
similar role and help with funding, review budgets and project plans,
and assist with positioning, marketing, and promotion -- all things I
did for a living as a tech executive.

I didn't take much time to think about this, and readily agreed. I had
already caught the "Bollywood bug."

[3]Vivek Wadhwa has co-founded two technology companies, and is
currently chairman of Relativity Technologies in Raleigh, N.C. When
not producing movies or battling venture capitalists, Wadhwa mentors
fledgling entrepreneurs.
Edited by Alex Salkever

3. mailto:vivek at relativity.com

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