Busi­nesses have been re­gen­er­a­tive for cen­turies. To­day’s es­tab­lished cor­po­ra­tions were start-ups at some stage. Mod­ern start-ups are merely an al­ter­na­tive way to es­tab­lish busi­nesses com­pared to the tra­di­tional ways. They do so by in­creas­ing the de­grees of free­dom and agility in the ini­tial stages and giv­ing a freer rein to the founder’s cre­ativ­ity. Ad­ven­tur­ous en­ter­prises have been en­abled by a rather re­cent model of wealth as with ven­ture cap­i­tal and pri­vate eq­uity mod­els. Since the 1980s, the dis­tri­bu­tion of wealth de­vel­oped dif­fer­ently from the 1950s, 1960s and 1970s.

Among the English-speak­ing na­tions, in­come in­equal­ity re­duced af­ter World War II un­til 1980 and then started ris­ing again. In 1913, for ex­am­ple, in the US-UK-Canada, the share of the in­come go­ing to the top one per cent was about 18-20 per cent. This share re­duced to sin­gle dig­its by the 1980s; how­ever, dur­ing the last 40 years, the share of the top one per cent has risen sharply, ac­cord­ing to There has been a grad­ual rise in the Gini co­ef­fi­cient in the US and UK between 1980 and 2013. Ac­cord­ing to a Brook­ings pa­per, au­thored by three Fed­eral Re­serve econ­o­mists in 2016, the share of wealth owned by the top one per cent in Amer­ica reached 33 per cent in 2012, though other econ­o­mists es­ti­mated it to be even higher at 42 per cent. Whichever data you ac­cept, the rich­est one per cent have gained dis­pro­por­tion­ately.

Since the 1980s, in pur­suit of re­turns on wealth, the rich have sought risky ways to de­ploy their ris­ing wealth. They sought new do­mains and ge­ogra­phies that would give them a bet­ter yield on their money. The rapid de­vel­op­ment of Amer­i­can ven­ture cap­i­tal and pri­vate eq­uity owes a lot to the quest for a good re­turn on this in­creas­ing wealth. The newly emerg­ing tech­nol­ogy space has pro­vided the do­main di­ver­si­fi­ca­tion sought by the wealthy. The dra­matic eco­nomic changes in China and In­dia have made those economies a nat­u­ral mag­net for a part of Amer­i­can wealth, pro­vid­ing geo­graphic di­ver­si­fi­ca­tion to in­vest­ing.

What is a small part of rich Amer­i­can wealth is a big part of In­dian for­eign in­vest­ment cash flows. The amount of for­eign money en­ter­ing In­dia as for­eign in­sti­tu­tional in­vest­ment (FII) has grown fast in re­cent years, al­beit on a small base. In­dia re­ceives about $ 5-6 bil­lion of FII each month nowa­days, a large part of which goes into pub­lic eq­uity mar­kets, but some amount into ven­ture cap­i­tal as well. Ven­ture cap­i­tal and pri­vate eq­uity are driv­ing start-ups and val­u­a­tions of start-ups in In­dia.

In last month’s col­umn (“Can star­tups re­ally im­pact the econ­omy?”, Septem­ber 15), I com­mented that the im­pact of start-ups, es­pe­cially the dig­i­tal ones, on In­dia’s growth and em­ploy­ment may not be sig­nif­i­cant over the next decade. It elicited a large num­ber of reader com­ments. Seventy per cent lauded it be­cause it called a spade a spade and they whole­heart­edly agreed with both the con­tent and the style of the ar­ti­cle. Fifteen per cent dis­agreed that star­tups would have only a small im­pact, though they were un­sure of the time frame for the im­pact to be pal­pa­ble. An­other 15 per cent felt that the mes­sage is cor­rect but should have been ex­pressed in a more con­struc­tive way be­cause it is not ap­pro­pri­ate to put down start-ups as though they are ir­rel­e­vant.

I am sen­si­tive to the view that ar­gu­ments and facts must be stated in an “ac­cept­able way” if they are to be mean­ing­ful. In short, the mes­sage mat­ters, but the way it is said also mat­ters. It is im­por­tant for in­no­va­tors to say the right thing in the right way. A great idea that is in­ad­e­quately ex­pressed faces re­jec­tion — think of the ar­gu­ments mar­ried cou­ples have, they are rarely about the con­tent, but about the man­ner.

Nikhil Raghavan, a Whar­ton-ed­u­cated pri­vate eq­uity pro­fes­sional, made spe­cific sug­ges­tions on how to dis­cuss the im­pact of In­dian start-ups more con­struc­tively. He pointed out that much of the ben­e­fits of the start-up ecosys­tem ac­crues to the haves, the up­wardly mo­bile youth. There are hun­dreds and thou­sands of have-nots. It is the job op­por­tu­ni­ties of the have-nots that dom­i­nates the na­tional con­cern. Dig­i­tal start-ups may not help in cre­at­ing jobs for the have-nots. Tech­nol­ogy in­fra­struc­ture solves many problems, but it can­not build roads or bridges and pro­vide clean water. How­ever, those type of ac­tiv­i­ties are es­sen­tial for hu­man progress, their cre­ation pro­vides jobs and they re­quire big fi­nan­cial in­vest­ments. China pro­gressed by do­ing th­ese kinds of things, recog­nis­ing that BAT (Alibaba, Baidu and Ten­cent) can­not do such things.

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