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A LETTER

W

FROM

e stand at the dawn of a profoundly new era ...because of the revolution in information and technology that is sweeping the globe," said U.S. President Bill Clinton recently. "Just consider this: There's more computer power in a typical Ford automobile than there was in Apollo 11 when Neil Armstrong took it to the moon . Nobody who wasn't a high-energy physicist had even heard of the World Wide Web wh~enI became President."

Many people I speak with in India are also talking about the information technology revolution. In fact Indian computer experts are held in high regard in the world of software-in Silicon Valley, in Bangalore and elsewhere. And this issue of SPAN zeroes in on some aspects of the information revolution with a 23-page Special Section: "Software Wars and the Internet."

The Internet means computers and software, and one of the new business wars in software is the battle between Oracle and Microsoft. Janice Maloney talks about this in the lead article, "Larry Ellison [of Oracle] is CaptainAhab and Bill Gates [of Microsoft] is Moby Dick" (page 2). It's a war about what kind of hardware will dominate the market-personal computers (PCs) or network computers (NCs). In the interview on page 3, Anil Kaul of Oracle India (cover photo) emphatically states that NCs are the wave of the future. On a lighter note, Stewart Alsop bemoans the fact that "these guys want to take away our PCs" (page 7).

The Special Section also carries an interview with Tim Berners-Lee, the inventor of the World Wide Web (page 8); a candid assessment by Charles McGrath of the pains and pleasures of surfing the Net (page 14); and a report by Alison Sprout on how dozens of companies are working on new technologies to disentangle the mess of Internet overload and traffic jams and make it easier to find what you want on the Web (page 21).

Everyone's getting on the Web these days. Even us. USIA, which is the name of US IS headquarters in Washington, D.C., now has a Website. This "USIA International Home Page" is a major, accurate information resource for anyone in the world doing research on U.S. foreign policy or seeking commentary on American culture, society and political processes. The Web address is www.usia.gov/usis.html.

We realize that only a small percentage of Indians have computer access to the Internet and the Web. But we believe this will change fast. The global information revolution with

THE

PUBLISHER

advanced wireless and satellite technologies will "leapfrog" developing countries into state-of-theart telecommunications.

India can bypass the whole copper-wire era. Putting copper wire across the United States and most of the industrialized world involved enormous cost. But India can use wireless and satellite technologies at a fraction of the cost oflayingwire. This means significant savings while providing the most high-tech telecom products and services. Prices of these advanced technologies are falling dramatically in those parts of the world where there is freemarket competition in telecommunications.

Developing nations will be able to enter the "information age" at a steeper point on the learning curve and at a lower point on the cost curve. A corollary of all this is that the U.S. and other industrialized countries will no longer dominate the market for telecom equipment. There are large untapped telecom markets in India and other developing nations. When India starts manufacturing telecommunications products in a big way, it will develop new technologies on its own. And when India's information revolution really gets going, it will do more than improve the telecom infrastructure. It will improve medical care and education as well as business. In this sense, the information revolution holds a promise of lifting hundreds of millions out of poverty worldwide.

Many people, in the U.S. as well as India, are in the dark about the magnitude of the revolution engendered by the new technologies in~general and the Internet in particular. We hope the articles in this issue shed light. The revolution may be more revolutionary than any of us realize. Neil Rudenstine, president of Harvard University, said recently: "From one point of view, the Internet marks just one more point on a long continuum of inventions. But we know that certain events along a continuum can represent much more than another simple step. There are moments of real transformation, and the rapid emergence of the Internet is one of them."

As our lead article says, the Internet and the World Wide Web are a little like the great library in Alexandria, which in the fourth century contained all the world's information in one place. Only this time anyone anywhere will have access to it by computer. It will bring us all closer together.

SOFT""ARE

""ARS

The Battle Between Oracle

USA

Larry Ellison Is Captain Ahab and Bill Gates Is Moby Dick "You'll never amount to anything." Those words still kick around in Larry Ellison's head. He hears them-his father's standard greeting to him when he was a child-some 40 years later, even as he sits, legs crossed, on the deck of one of his multimillion-dollar homes. In part, he says, his character has been forged by those words. They have driven him to become one of the most powerful men in high tech and certainly one of its most ruthless competitors.

It seems inconceivable that this wildly successful entrepreneur would need to hear anything but the ka-ching! ka-ching! of his $6 billion fortune getting bigger. At 52, Ellison runs Oracle Corporation, the second-largest independent software company in the world, and he figures the only way to go is upafter Microsoft and his nemesis, Bill Gates.

As adversaries, the men are a matched pair. Both Ellison and Gates are visionaries who have led their companies for 20 years.

Both consider themselves technologists but are more famous for their hardball tactics. Both have been known to leave employees' in a puddle with sarcasm and biting criticism of ill-conceived presentations. But Microsoft has a couple of things that Oracle doesn't: a world-famous name and mass-market clout.

Not too clear on what Oracle does? Galling to Ellison, perhaps, but you're in grand company. Many of the software giant's own senior managers, including president and Chief Operating Officer Ray Lane, weren't quite sure what went on in Oracle's Oz-like green glass towers in Redwood Shores, California, until they met The Man. "Larry's a very persuasive, very aggressive guy," says Lane, who saw himself as a lifer at Booz Allen & Hamilton before Ellison recruited him in 1992.

Oracle has had a hard time grabbing headlines because its technology is drier than a burnt boot. Oracle develops sophisticated and wickedly expensive software programs called relational databases: digital warehouses that store and manage massive amounts of information, mainly for FORTUNE 500 companies. Oracle also sells software that handles critical behind-the-scenes tasks like billing, inventory and reservations.

Oracle and micr[]s[]ft III Brave New World of Network Computers"

Oracle's "0" standsfor openness and Microsoft's "M" denotes monopoly, says Anil Kaul, the young and exuberant chairman and managing director of Oracle India. Like his billionaire boss, Larry Ellison, Kaul is a crusader with a one-point agenda: to move to the top slot in the software business pushing behind the ubiquitous Microsoft. Kaul and his group of dedicated professionals are drawing up strategies to capture a major chunk of the Indian software market and give Microsoft a chasefor its money.

Joseph Thachil speaks to Kaul tofind out his game plans, see how he looks at the Indian software market, the competitive advantage of Oracle's software, and, of course, to discuss his personal accomplishments.

Q. Mr. Kaul, you've read the Fortune article calling Larry Ellison Captain Ahab and Bill Gates Moby Dick. In the famous novel, the whale Moby Dick destroys Captain Ahab and his ship.

Is Fortune magazine hinting that Microsoft will destroy Oracle in the software wars?

A. You will have to ask Fortune what they are hinting at. I recently read William Blundon writing on "Javaworld" and he said: "In a world where diplomacy is the art of war with manners, Oracle looks like a winner."

Q. What are the corporate objectives of Oracle India? Let me put that another way because nowadays people like to talk about "the vision thing." What is the corporate vision of Oracle India?

A. Our vision is to build a networked society and a networked economy, by providing low cost, easy access to networked computing. This will require us to provide a visionary framework which we call network computing architecture, or NCA. This is Oracle's global vision and it has particular relevance in India, whose people and institutions urgently need access to robust computing facilities.

Q. In the networked economy and society that you describe, are network computers, or "NCs" as they are called, a vital ingredient?

(Continued on page 4)

Even if Oracle isn't a household name, plenty of its customers are-Sarah Lee, Pacific Bell, American Airlines. And they pay a lot for what they get. An Oracle back-office management system can cost $125 million, including hardware, and takes up to 18 months to install. All told, last year Oracle's revenues topped $4 billion, up more than 40 percent.

Database software will never be as sexy as, say, a new operating system for everyman's PC or a next-generation Web browser. That's too bad, because databases will be the backbone of the networked economy. Every year the world's companies conduct more and more business via networks, be they corporate intranets or the global Internet. This commerce would be impossible without databases and the speedy, powerful computers called servers that manage them.

Ellison knows it. With almost 50 percent of the world's relational database market tightly in his grasp, the urbane, polished entrepreneur, known for being able to dis his peers better than a schoolgirl holding court at her locker, believes this is his moment to dethrone Gates and become the software industry's No.1 son.

For Ellison, competing with Gates isn't just about business. In interviews, he quarrels with Gates as if the two were in the same room, even though they barely speak anymore.

Aligned with Oracle in its anti-Microsoft crusade are such technology players as Sun, IBM and Netscape-all of which would love to break Microsoft's hammerlock on the desktop.

(Ellison doesn't want to; he thinks that Gates will try to coopt his ideas.) "This is the dawn of the Information Age, not the PC Age, Bill," Ellison declares in his Atherton, California, home. "The Information Age! And there's a chance that what we do will change everything: It will change commerce, it will change culture, it will change the way we educate our children, the way we communicate amongst ourselves, the way we entertain, the way we work.

That's pretty heady stuff."

It's gone to Ellison's head, at least. Suffering from hubris-the condition is chronic-Ellison describes himself as "grabbing this Archimedean lever and moving the world." He is known as a loose cannon among industry insiders. His best friend, Steve Jobs, hardly shy himself, calls Ellison the "outrageous CEO poster child."

Oracle's reputation for playing fast and loose with the (Continued on page 6)

A. Yes, in that NCs are the means through which people can access applications, "the things they need to do," easily, securely and cost-effectively. NCs are user-friendly and useful for thy daily operations that an individual or a corporation requires.

Q. Do you think that the NCs will revolutionize the computing world?

A. Yes, currently about 5 percent of the world's population has access to computing. Through NCs and by making information access easier, we could create huge productivity increases and thus "revolutionize," and make computing more egalitarian.

Q. How do you compare yourselves with Microsoft?

A. We are very different from Microsoft. Our raison d' etre is to make computing more accessible and to provide much greater value to everybody. I am not sure what the Microsoft vision is. I certainly have never heard it articulated. I believe the core philosophy and cultural values of Oracle and Microsoft are completely different. Microsoft seems to mostly provide stand-alone, expensive, PC-based applications that are too cumbersome and inaccessible to many people.

We provide mission-critical applications for corporations and are facilitating low cost universal access to networked applications.

Q. Would it lead to a duopolistic situation where Microsoft and Oracle would corner the market?

A. I do not think such a situation will emerge because technology in our industry is changing very fast. Companies which you have not heard of will become major competitors in four to five years' time. That is how the information sector works.

Q. Oracle India is a 100 percent subsidiary. Why didn't you go in for a joint venture?

A. Oracle policy is to go for a 100 percent subsidiary wherever the law permits. We believe this is more effective and allows us to serve the marketplace better.

Q. Five years from now, where do you see your position in India?

A. As the leading player in networked computing solutions in India, in particular providing high-quality competitive solutions to the power, telecom, transportation, insurance, automotive, manufacturing, consumer and education sectors.

Q. Are you interested in entering the aviation sector?

A. We do provide software solutions to Boeing and other aviation companies in the United States. One of the determinants of involvement of companies like ours in the aviation (Continued on page 6)

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truth is pure Ellison. Sun Microsystems Chairman Scott McNealy says, with some admiration, "There's a bit of PT. Barnum in him." Netscape CEO Jim Barksdale may feel differently. Oracle and Netscape are allies against Microsoft in the fight for Internet-related business, but lately Ellison has loudly said he doesn't like Netscape's chances. A press report quoted Barksdale saying: "He is talking down Netscape's stock because he wants to acquire the company."

Asked point-blank whether he is a liar, Ellison says no-then adds, philosophically: "Does anyone tell the truth all

As adversaries, Ellison and Gates are a matched pair. Both are visionaries who have led their companies for 20 years. Both consider themselves technologists but are more famous for their hardball tactics. the time?" He launches into a fatherly tale of how he did once convince his daughter that pepperoni pizza is made from snakes.

Ellison, like his company, is intriguing once you scratch the surface. He can be disarmingly candid about his shortcomings, and his outrageousness is mixed with just enough tragic-prince vulnerability and genuine vision to make him magnetic. This explains why some of his peers tolerate him, in the words of a top Silicon Valley executive, as "the burr under the industrY's saddle." Besides Jobs, Larry counts Intel Chairman Andy Grove, the statesman of the PC industry, as a close friend.

Yet even his pals think of him as a predator. "Larry's not one who would stand up and say, 'The meek shall inherit the earth,''' says longtime business associate and friend Kc Branscomb, a former senior vice president of Lotus Development. "Larry believes in strength, and the swift and effective exercising of power. In his view, he's just rising to the top of the food chain in the same way that a lion doesn't think too much about the antelope it takes in the bush for dinner."

Ellison says he's been typecast, that the buccaneer label no longer fits. He has mellowed with age, become more refined, built relationships with human beings. His bad name is just a leftover from days gone by. He says: "Once you have a reputation, whether you're Doc Holliday or Wyatt Earp or Mick Jagger, it's over. There's no changing it."

Outside the office Ellison is quite the Renaissance man.

He spends only about 50 hours a week on Oracle; he reserves the rest for his seemingly limitless outside interests.

(Continued on page 42)

sector is flexibility in policies. India requires a lot of investment in the development of airports and in increasing the carrying capacity of airlines.

Q. What are your specific activities in India?

A. We supply software solutions to companies to run their manufacturing processes. We also provide solutions for financial accounting and reporting. We have a research and development center in Bangalore which employs about 140 professionals. They develop software for worldwide use.

What we really do in India is to provide software solutions that are unique. We supply and support relational database management software, application development toolsets, world class enterprise resource planning (ERP) software for manufacturing and financial control, and exciting Internet products. No other company in India is able to do all this by itself. ,"\hat's why I'm saying our solutions are unique.

Q. Are you into training?

A. We provide highly specialized sophisticated training so that the professionals who buy our software get more return out of their investment.

Q. There has been talk about the great potential of the Indian software industry. What's your view?

A. India is known for providing low-cost professionals.

India's share in the total software market of the world is only 0.4 percent, which is very insignificant. One would like this industry to grow. It is up to the businessmen and the government to put in place a pragmatic policy so that the software sector in India can really take off.

Q. What policy changes are required?

A. The policy objective should be to capture 5 to 10 percent of global software revenues in five to ten years. For this to happen we must produce world-class products. A company can produce one product and sell it millions of times, as opposed to sending thousands of professionals to execute projects. While the former approach provides high returns, revenue realization from the latter is relatively small.

Secondly, we have to develop world-class skills.We have to empower millions of Indian youth with the right skills. I do not see major progress in this area yet. Oracle India will soon announce a special project for educational institutions to help develop world-class software expertise. Thirdly, Indian software companies must execute larger projects with full project management responsibilities.

Q. How long do you think India will enjoy the low-cost advantage?

A. Countries like the Philippines, China, Russia and Israel are emerging as low-cost centers for software development.

(Continued on page 42)

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By STEWART ALSOP

ight now, chief information officers (CIOs) around the world are rejoicing. The mainframe is back, and this time it looks cool, a lot cooler than those damn personal computers, which have been giving technology managers headaches ever since they started showing up in companies in the early eighties.

The mainframe is back because of the network computer (NC), which looks like a small, sleek and cheap personal computer but has an aspect CIOs really love: control. Like anything that seems too good to be true, the NC is a lot better in theory than in reality.

The NC is just the latest chapter of an epic struggle between the official honchos of technology, information systems managers and the users of the technology, us.

The information systems (IS) people tend to spend a lot of money--every year, year in and year out. Often the rest of the company can't tell what the money is being spent on. What's worse, IS people often act as if we-the users-are too stupid to understand the technology, and as if our departments in the company are irritants that get in the way of taking care of computers.

Of course, those few times when we really need something from the technology, the IS department is generally incapable of delivering service.

Originally, the IS department, then called data processing, had the edge in this struggle because all computing was done on mainframes or minicomputers.

The only way to get access to these machines was through dumb terminals, which offered you nothing more than a display monitor and a keyboard to tell the mainframe what to do. And the way you told the machine what to do was by typing commands in a language the machine understood. In other words, the whole system was devised to be used by specialists.

The personal computer changed the balance of power for two reasons. First, people started doing company work on their own computers. That meant that the IS department could no longer control or protect all corporate information, could not keep such data from being stolen or misused and

R

could no longer make sure that the info on your PC was merged on a regular and reliable basis with other company information.

Second, and more important, personal computers taught users that computer technology isn't really all that complicated.

Once you've got the basic concepts of processing, memory and storage in mind, you can use a computer. The fact that users suddenly understood these concepts meant that they started to look at IS budgets with a much more skeptical eye.

These two factors have wreaked havoc in information systems over the past ten years. All the concepts of downsizing and reengineering can be traced back to the idea that the using parts of the corporation suddenly felt empowered to demand that computing systems be more effective, and to take control of the IS department and reorganize its basic functions.

So if you've been working in an IS department, much less trying to function as a CIO, life for the past ten years has been hell.

But now, like the proverbial refugee on a deserted island, you're promise9 a lifeboat: the network computer.

The network computer, in theory, is made possible by the fact that we now have a network connecting all our comput: ers-the Internet combined with the World Wide Web. With a wire plugged into the back of your computer, the theory goes, you don't need to go to a retail store to buy software, and you don't need a floppy-disk or CD-ROM drive to install or upgrade the software you used to buy at a store. You no longer need a hard disk to store software or files on your computer. Instead, you can store everything on the network, where the masters of the technology can make sure your software is always up to date.

If all this is true, the NC should be a lot cheaper to make and a lot easier to use than a Pc. It should be cheaper to make since it is bereft of expensive and complicated components. It should be easier to use since you no longer have the headache of configuring and updating software.

The NC supports the latest standards for corporate computing. Intranets based on World Wide Web and Internet technology

allow for network applications that run on any desktop machine, regardless of whether it's a PC, a Mac--or an NC. With a network computer running a Web browser that supports Sun Microsystems' Java programming language, the user gets a machine that's as cool as any PC out there, while the IS department gets cost savings, a new generation of computer tools and control over the system.

Sounds like computing nirvana, huh?

Users and IS people in happy harmony?

Dream on.

P

ersonal computers are complicated and expensive. More than 200 million PCs have been sold to date, at an average price of somewhere around $2,100 (higher in corporations, lower in homes and schools). There must be something about these things that people like; otherwise they wouldn't have paid so much money for them or spent so much time trying to get them to work right. Here's the irony, the essence of this epic struggle: The thing people like about their personal computers is that they are personal, that the computers are theirs.

This is neither logical nor rational. But it is true. It is so true that when PCs first showed up, and there was no such thing as a budget for desktop computer equipment, people would spend their own money on PCs or try to convince the budget types that PCs were expensive typewriters or office furniture. It is true enough that this sort of behavior still goes on today, to such a degree that IS departments often cannot tell you exactly how many PCs the company owns.

Forecasting that 50 percent of a company's users will give up their personal computers to get network computers is like forecasting that 50 percent of the people who drive to work will suddenly give up their cars because there is a subway line between their neighborhoods and where they work. We already know the state of urban mass transit. That's exactly where the NC is headed.

0 About the Author: Stewart Alsop writes the "Digital Watch" column in Fortune magazine.

Tim BBrnBrs The man who wove the first few strands in what has grown into the World Wide Web-and who oversees the organization that coordinates the Web's further development-peers into the future he's helping to create.

T

he World Wide Web is giving Tim Bemers-Lee a problem. He is eager to demonstrate a new feature he is working on, which will make it much easier for users of the World Wide Web to forge connections between documents, or "pages." But Bemers-Lee's mouse clicks seem to fall on deaf silicon; supposed links appear not to exist, and when connections do get made the text and images flow onto the screen at less than eye-popping speed. Since everyone who has used the Web has experienced this dozens of times, it is perversely gratifying to see Berners-Lee suffer the same frustration.

Wouldn't we all love to see the inventor of the VCR get hung up on programming it to record a TV show? "Usually, this is blindingly fast,"

LBB:

he insists, and with persistence he prevails.

But the man who invented the World Wide Web is, at least for the moment, trapped in his own glorious creation.

The Web's key feature is information connected through hypertext "links"-c1icking on a word or a picture summons into the user's computer text, pictures, sounds, software or any of a thousand and one gimmicks.

So powerful is the appeal of the graphics and hyperlinks that newcomers to the online world might be forgiven for thinking that the Web is the Internet, rather than just an especially powerful and convenient way to navigate through the worldwide collection of networked computers.

Berners-Lee did not set out to invent a contemporary cultural phenomenon; rather, he says, "it was something I needed in my work."

He wanted simply to solve a problem that was hindering his efforts as a consulting software engineer at CERN, the European particlephysics laboratory in Geneva. Mainly to become more efficient, he developed a system that provided easy-to-follow links between documents stored on a number of different computer systems at this internationallaboratory and created by different groups.

Hypertext had been proposed as early as 1945 by Vannevar Bush, and rudimentary hypertext software had been developed to interlink material among different files on individual PCs. Berners-Lee's innovation was to apply the idea of hypertext to the growing reality of networked computers.

His timing was just right. In the late 1980s and early 1990s, the Internet was just starting to blossom and achieve recognition beyond a small cadre of military and research institutions that had formed its early clientele. As the number of interconnected computers grew from dozens into the tens of thousands, the Web offered an ideal way to tap into the information scattered among these machines.

Berners-Lee expanded the system he had devised at

CERN and made it available on the Internet in the summer of 1991.

Unlike other computer-industry figures who have become household names, he has stayed in the shadows. Rather than spin off a company to cash in on his ideas, the Britishborn Berners-Lee became in 1994 the first director of the World Wide Web Consortium, a nonprofit organization with more than 100 member organizations that coordinates the development of Web software and standards.

When looking for a place to locate the consortium, Berners-Lee chose MIT's Laboratory for Computer Science in Cambridge, Massachusetts. "MIT has a reputation for doing the right thing on technical standards," Berners-Lee explains. Typically, he says, MIT will hold the copyright on a standard but keep it for the public good; "this isn't a place that will turn around and slap on license charges when you're five years down the road."

Berners-Lee is not, it turns out, a typical user of the World Wide Web. His use of the Web is almost exclusively related to his work ,on devising standards for it. Asked if he surfs the Net for pleasure, he replies that he doesn't have time for that kind of thing; Henry Ford is too busy in the garage to go out for a Sunday dlive. In any case, Berners-Lee tends to dismiss complaints that the Web is too hard to search and that the gems are hopelessly submerged in gigabytes of drivel.

"There's no fundamental right for people to be able to discover anything instantly," he maintains.

The glitch on the Web soon surrenders to Berners-Lee's careful, persistent and knowledgeable ministrations, and the illusion of the machine taking revenge on its inventor recedes. Close call. With electronic tools now acquiescent, a confident Berners-Lee speaks in this interview about how he devised the Web, why its critics are off base and how he envisions it will change and improve in the years ahead.

HERB BRODY: Do you ever step back and marvel at how rapidly your idea has taken root? The World Wide Web has to have set some kind of record in the speed with which it progressed from unknown and esoteric to fashionable and then to almost commonplace.

BERNERS-LEE: Yes, the Web's growth has been exponential. For the first three years, the load on the servers was always ten times what it was the year before. But after a few years of that kind of growth, you get used to it.

BRODY: Hypertext had been proposed many times before, and implemented on a small scale. Why do you think the concept caught fire with the World Wide Web? BERNERS-LEE: Earlier hypertext systems had generally been limited to pointing to documents within the same local file system. Those systems often used a central link database to keep track of all the links. The advantage of this kind of approach was that it ensured that a link would never point to someplace that didn't exist.

BRODY: And the disadvantage?

BERNERS-LEE: There was no way to scale up such a system to allow outsiders to easily contribute information to it.

BRODY: So the original concept of the Web involved a trade-off favoring universality over reliability.

BERNERS-LEE: Yes, I sacrificed that consistency requirement to allow the Web to work globally. What was really new with the Web was the idea that you could code all the information needed to find any document on the network into a short string of characters.

These strings, originally called universal document identifiers, are now known as universal resource locators, or URLs. The notion that all these tagged documents from computers all over the world could share a common naming and addressing "space"

was what made hypertext more powerful.

links so much

BRODY: What was your goal in designing the World Wide Web? BERNERS-LEE: It was something I needed in my work. CERN is composed of a variety of bright and creative people from institutes in many countries. When they work together on a project, the result can be a tangle of complexity. Coming into this organization as a software consultant, I found a tremendous need to be able to find out what was going on, particularly the interdependencies-what work was related to what. If I needed to modify some program module, for instance, what else was that change going to affect? I wrote a program called Enquire, which had a little bit of what we think of now as hypertext: at the bottom of each document would be a list of references that you could follow to immediately jump to another piece of information. I found this really useful because it was so flexible-I used it to keep track of everything I did.

BRODY: But this wasn't the Web as we now know it, right? Weren't you interlinking things like computer programs and their documentation?

BERNERS-LEE: Yes, mostly, but it wasn't limited to that. You could put recipes in, if you wanted, and link them back to your ingredients-so that you could follow the link from onion pies to onions, or whatever you liked.

BRODY: Did Enquire solve your problem?

BERNERS-LEE: Not entirely. I had details of my own work nicely organized in this weblike fashion, but what I really needed was to make links to other people's documents. We needed a program that was so easy to use that everybody would end up putting their data into it. That way when you wanted to collaborate with other people you could easily share data, you could point to things that they had written before, rather than having to copy them. It was also crucial to allow different people to be able to start their own webs in different places and later link them with only incremental effort.

BRODY: How was this an advantage over what was available to you at the time?

BERNERS-LEE: In a typical documentation system, if you wanted to make a reference from one document to another, you had to merge the two computer databases that held the information. That entailed moving all the stuff onto the same computer and arguing about who would keep it maintained. That wasn't going to work.

BRODY: So the Web was born not as a "world wide" system but as an internal computer network-a closed universe.

BERNERS-LEE: The network was used mainly by people working for CERN, but "closed" may not be the best word. The people at CERN did come from all over the world. And I was working before, during and after on other projects with people from the Stanford Linear Accelerator and FermiLab in the United States and from Britain's Rutherford Lab, to name just a few.

BRODY: Still, it seems like a pretty big leap from a network for nuclear physicists to the cultural phenomenon that the Web has become. How did it get from there to here?

BERNERS-LEE: The first few years involved a lot of persuasion-we had to convince people to use the Web and to put information up on it. But what really made it go was the set of specifications we had developed early on.

BRODY: You're referring to the alphabet soup of Web standards?

BERNERS-LEE: Yes-there was hypertext markup language (HTML) for creating the documents with hypertext links, and hypertext transfer protocol (HTTP) for specifying how the network would respond when a user clicked on a link. And above it all was the system of URLs, which ensured that every item put up on the Web had a unique "address." For the Web to function and to grow, everyone had to stick to these specifications, and to agree on any changes to them.

BRODY: How has the Web departed from your early vision of it?

BERNERS-LEE: The original idea was that anybody would very easily be able to write documents that could be connected

through hypertext links. What has surprised me is the way people have been prepared to put up with manually encoding text. HTML was never supposed to be something that you would see-it was intended to be something produced by an editor program. An analogy is with word processors. Computer users don't have to write in all kinds of codes to format their document with fonts, margins and so on. So it staggers me that people have actually put up with having to write HTML by hand. Similarly, I had not expected people to have to work out the hypertext links by looking up and typing in those long, complex codes for addressing. URL syntax was never intended for human consumption. It was intended for a machine.

BRODY: But ordinary users of the Web don't need to know HTML-that's only for the people who create content.

BERNERS-LEE: Yes, but the Web needs information providers as well as readers.

And the fact that creating Web pages has been difficult has directly influenced the type of information m(lde available on it; content is produced only by those with enough incentive to learn to write HTML. BRODY: How had you envisioned it working?

BERNERS-LEE: In the prototype, you could create a link without having to write any code. You'd just browse around, find something interesting, go back to the thing you were writing, and then just make a click on a hot key, and it would make a link for you automatically. This ability is now starting to become available-in a couple of years, all the documents on the Web will probably be created without the direct use of HTML and URL syntax that is now so much a part of the Web. BRODY: The Web has a reputation in some quarters as more sizzle than steakyou hear people complain that there's no way of judging the authenticity or reliability of the information they find there. What would you do about this?

BERNERS-LEE: People will have to learn who they can trust on the Web. One way to do this is to put what I call an "Oh, yeah?" button on the browser. Say you're going into uncharted territory on the Web

and you find some piece of information that is critical to the decision you're going to make, but you're not confident that the source of the information is who it is c1aimed to be. You should be able to click on "Oh, yeah?" and the browser program would tell the server computer to get some authentication-by comparing encrypted digital signatures, for example-that the document was in fact generated by its claimed author. The server could then present you with an argument as to why you might believe this document or why you might not.

really at the White House-you're at something like white-house. com instead of the real thing, which is whitehouse.gov. So you ought to be able to press "Oh, yeah?" and the browser sends out a request to cryptographically check the authenticity of the site.

BRODY: Another common gripe is that the Web is drowning in banal and useless material. After awhile, some people get fed up and stop bothering with it.

BERNERS-LEE: To people who complain that they have been readingjunk, I suggest they think about how they got there. A link implies things about quality. A link from a quality source will generally be only to other quality documents. A link to a lowquality document reduces the effective quality of the source document. The lesson for people who create Web documents is that the links are just as important as the other content because that is how you give quality to the people who read your article.

That's how paper publications establish their credibility-they get their information from credible sources. A journal on the Web, for instance, needs to have an editor who is paid to make sure that the pointers lead to good ill stuff. You don't go down the street:, after all, picking up BRODY: This would be We" •• 1 of 1 PR every piece of paper 5.

TIteNew • iTl.~'''''''' Mo1.... m Internet !\'lath particularly useful, I'd think, •• "lwm"~ml91J4.:'!JjlJ!&iJ{{21JQ~~1f,,:.Lt~c1J-,~PH~ill'2ll2--mEl ~l~ b low ing in th e breeze. If you find in verifying orders or payItl _________ i1.-:SUbffiUJ ments for electronic comthat a search engine SeBJ'CI\ with Digit-a}'s Alt •• Vista [AdV<lltt'l'd Sean-h] gives you garbage, I\l-=~~:-~:I merce. don't use it. If you BERNERS-LEE: Yes-it Afi$ would help if, for example, don't like your local you find a beautiful offer on the Web for paper, don't buy it. If you find that an article refers to stupid articles, don't read it, and some product and you want to find out if it's for real. But this kind of verification is don't quote it yourself. Pretty soon you'll important for more than just buying and seIl- have some bookmarks on places you trust, and your reading quality will increase. You ing things. Every political candidate, for instance, seems to have two or three "spoof' may find that the better sources have involved considerable human effort, and so Web sites-they look almost, but not quite, like the real thing. When you visit the real there will be either advertising to read, a subscription to pay, or a volunteer to thank.

White House Web page, for example, you can click on an icon of a cat and hear a meow.

Or did you want quality for nothing?

Then one day you click on a White House BRODY: While there are a number of tools link from somebody's page and you click on to help users find information on the Web, they the cat and you hear some awful noise instead-you've been spoofed. You're not aren't terribly precise. Wouldn't it be better if

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the creators of Web pages labeled them with keywords that could be searched for?

BERNERS-LEE: Yes, that would make searches more productive, but there are two big snags. The keywords, or the topic names, form a rather centralized rigid point in the system, which can never change fast enough to keep up with the Web. And the classification of material, like authorshi p of material itself, can be subjective and controversial, and quickly become obsolete.

The job of classifying all human output is a never-ending one, and merges with the job of creating it.

BRODY: But Web users nevertheless crave better ways of searching through the sea of information. The searching tools available now give you a list of Web pages very quickly, but many of these "hits" seem to have little if any relevance to what the person is looking for.

BERNERS-LEE: People have no fundamental right to discover everything instantly. Information providers want to be found easily and will use standard ways of registering themselves and their products, and there will be tools to scan the Web so that users may quickly find them. But other providers will prefer to express themselves any way they want and thus might be more difficult to track down. They might not be cataloged, and they won't mind. So just as you have a right to scribble anything on paper and not show it to anybody, you'll also have the right to post things on the Web and not make them easily found. The Web, like paper, should be a universal medium, in which it is possible for all kinds of information to exist.

BRODY: People are developing high' expectations, though: they want to know why, if we have all this information online, it is so hard to find what we want.

BERNERS-LEE: This question goes back to the early days, when I was really pushing this idea of a World Wide Web uphill. My response is: If there's a person in the world who is apt to have the information that you're after, go and persuade him or her to put it on the Web for you and others to find it. For instance, you can't as an academic just sit back and say, "Why can't

I see a list of all the journals in my field?"

Go write that list! Somebody has to put in the effort; the existence of a network doesn't give you a well-sorted catalog of all the information on all the machines on that network for free. The existence of paper doesn't give you a library. You need a whole lot of librarians working hard, plus a whole lot of journal editors working hard, plus a whole lot of academics working hard at writing and supplying references.

Together all these people produce a library full of good journals.

BRODY: Although begun as an academic project, the Web stands to make a few companies a lot of money. Do you see any dangers posed by this commercialization?

BERNERS-LEE: Commercialization of the Web is giving it a lot of momentum, helping it expand, and bringing it a lot of new ideas. It is true that some people feel that there is a threat that a particular company will try to take over the control of the standard protocols that govern the Web's operations.

BRODY: How might that happen?

BERNERS-LEE: A company could start by releasing Web browser software and make it available free or at very low cost, to capture the vast majority of the market.

Later, that company decides to introduce a feature in this product that can be taken advantage of only if the designer of the Web page deviates from accepted Web standards in some fashion. A Web user would then suddenly begin encountering pages that read, "Sorry, you need software from Company X to enter this site." Anyone who slaps a "this page is best viewed with Browser X" label on a Web page appears to be yearning for the bad old days, before the Web, when you had very little chance of reading a document written on another computer, another word processor or another network. And once a browser vendor has established such a monopoly, it has an incentive to continue to make arbitrary changes to the de facto standard, forcing potential competitors to play an endless game of catch-up.

All the other bright ideas at all the other software companies are stifled because they have to be compatible with a "standard" that changes at one company's whim.

BRODY: What forces might tend to prevent this?

BERNERS-LEE: If the competing companies band together and move in a different direction, then the monopoly company could lose out badly for having introduced an incompatibility. The World Wide Web Consortium helps people to agree on standards. We also sometimes write and disseminate the progranuning code to give people an idea of how to put these standards in place. We recently did this, for example, with style sheets, which are a nice clean way to give Web pages consistent and distinct layouts, fonts and so on without having to insert all the formatting codes each time.

Another good example is Java-a programming language used, for example, to create small applications programs, or "applets," which can be put into a Web page. When Java first came out, three companies-Sun, Microsoft and Spyglass-introduced three different applets for insetting an animation or video file into a Web page. Since none of the companies wants to be called the incompatible one, each has to make sure it supports the other two. This is an awful lot of effort, which would be better spent improving the products. The consortium got everybody around a table, and we now have a draft of a standard that is a compatible, consistent way of doing this operation.

BRODY: In what ways do you think the Web is being underutilized?

BERNERS-LEE: A lot more people can browse the Web than can put up their own Web pages. The Web is therefore not being used so much the way I originally conceived it-as a communications tool that would enable small groups to work more efficiently in teams.

BRODY: How do you envision that kind of use?

BERNERS-LEE: Say that you conduct a meeting as a hypertext document. You start by dragging in a video version of yourself, with real-time sound. You remind those invited to come by sending them a hypertext E-mail with a pointer to the meeting. To join, they just follow the link. They can not only read this meeting/document, but they also write to it. Some join by audio and some drag

their own video into the document. People introduce points by writing them into the minutes, making links to background material. At one point in the meeting three people realize they need to discuss something separately, and with a single keystroke one forks off a new meeting document that they will catch up with later. There is no rocket science here, but an integration of group editing, hypertext editing and real-time audio-video technologies. These technologies all exist in crude fOlms, but must mature and be standardized before global hypertext teams can feel comfOltable using them.

BRODY: So the Web could be used for a kind of videoconferencing?

BERNERS-LEE: Yes-participants would have video cameras connected to their computers, and they would all see on their screens a picture of the meeting. This kind of videoconference is possible right now, but not everyone has a fast enough Internet connection-that is, enough bandwidth-to transmit all the data needed for full-motion video. One option is to represent people who don't have enough bandwidth with flat, cutout shapes, which could change when the person is talking or indicates a desire to talk. Other people will be present as a real-time video image. All of these will be put into the virtual space so that they all seem to be part of a room.

BRODY: Wouldn't this require a leap forward in graphics? Images on the Web now are pretty two-dimensional.

BERNERS-LEE: Yes, but I expect threedimensional rendering and graphics to become common. I mean, look at that screen over there. You call that a "desktop"? Maybe that's how a real desktop looks from a camera flying at 10,000 feet.

BRODY: It's stylized, but it seems to work. What's the benefit of 3-D, other than razzle-dazzle?

BERNERS-LEE: It provides a better model of the real world. In the physical world, people's documents overlap each other and stack up in piles. Imagine if you could build "shelves" on your screen and you could fly through them and find some(Continued on page 40)

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The internet Has made Some of the most conspicuous people on the Net tend to be just like those you meet in everyday life. Then there's E-mail, the feature everyo~e loves. Where would we be without this unobtrusive courier swiftly toting hither and yon-our letters, business memos, greetings, news about families. You type, click and-blip!-your message is on its way. couPle of weeks ago, during a long afternoon surfing the Internet, I experienced an overload. First I checked my E-mail (messages from the kids, from a former colleague setting up a lunch date and from someone in an electronic discussion group I joined a few months ago, talking about the Battle of Trafalgar). Then I made a brisk electronic tour of the Uffizi and the Louvre. I read some valuable tips on lockpicking written by someone named Ted the Tool. I checked out the standings on the College Hockey home page. I browsed through the various online journalsSlate, Salon, Hotwired, Suck, Feed and Swoon. I consulted a weather map customized for my neighborhood. I visited the poetry archive at the University of Toronto and ran a little search on the number of times the word "thistle" turns up in Byron. I window-shopped-screen-shopped-for a yacht in the Buzzards Bay classifieds. I stopped by the Kraft Interactive Kitchen and watched the dancing utensils for a while. I went to the Timothy Leary home page and read some of the gibberish posted there by fans of the doctor. I also went to the Internet cemetery, a place where people leave testimonials to their departed loved ones. And then somehow I found myself by the pool at the Cybercity Hotel, sipping my third or fourth virtual martini.

Or, rather, it wasn't me exactly; it was my Net self. Let's call him Chuck. He's 23, 6 foot 4, 220 and has an amazingly sculptured hard body combined with the creativity and passion of an artist. Around me-him, I mean-were, I recall, Zak,jamhead, Texas Honey, Budda, Mako, Nikki, Endorphin Man, Naughty Nancy and several others, most of them also in their early 20s, also with amazingly sculptured hard bodies.

All these people were preparing to go upstairs to one of the Cybercity Hotel's six floors of rooms and have fun.

I sat there for a while, until my brain began to click softly, the way my computer does when it's getting ready to undergo the process known as "cache cleanup"-a kind of selfpurging intended to relieve an overtaxed memory. All those

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Reprinted from The New York Times Magazine. Copyright Š 1996

by The New York Times Company. Reprinted by permission.

chattering cyberbeings! All that bad spelling! I reached over and with my left hand pressed the control and command keys on my keyboard. And then with my right index finger I hit the nuke button. There was a pause, followed by a single, Mahleresque "boing," and my screen went silently, blessedly blank.

Like most people of my generation-people who grew up in the 19S0s and '60s, with books and typewriters-I began exploring the Internet partly out of curiosity but mostly out of fear. If, as the techies and the zealots keep telling us, the Net is the world of the future, the place where we will work and play and think and socialize, I wanted to know what this brave new world was like. What I discovered, not really to my surprise, is that the Net is all too much like the world we already live in. It's essentially a vast, ever-sprawling shopping mall, anchored, as they say, by a great many upscale emporiums but also cluttered by countless tacky storefronts that are the electronic equivalent of fast-food joints, video arcades and those places that sell incense and earrings. And some of the most conspicuous people on the Internet tend to be just like the people you run into at the mall: proselytizers and leafleteers and all those sullen young people shuffling along aimlessly.

Or think of a labyrinthine and cosmically cluttered basement. If you shine your flashlight over here by the stairs, you find all the bric-a-brac for grown-ups: the gateways to the world's museums and the archives of countless libraries and research centers; the Web sites maintained by IBM, Time Warner, the ACLU and just about every other corporation or important organization you can think of. Over here are the tools, useful stuff to know about. Poke around a little and you can read the paper, you can place bets, you can buy insurance, you can look for a spouse, you can even buy airline tickets and groceries. Over here, lounging on the old sofas and spring-bursting easy chairs, are the devotees of the chat rooms-the freewheeling conversations devoted to every subject imaginable, from home construction to bird watching to record collecting to investing to bomb building. But

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keep going, past the coal chute and the sump pump, and you come upon a corner of the basement that Mom and Dad don't know about: an immense trove of trivia, trash and pornography-the aspect of the Net that's a monument to idleness and wasted time. Here's an entire site cheerfully devoted to fecal matter; over here are dozens that recycle feeble jokes and gags and still more that specialize in extreme sexual practices. And, while we're rummaging through this stuff, let's not overlook all the home pages lovingly maintained by individuals. Move your cursor here if you want to see a picture of Larry's grad-student apartment, here for a list of his favorite rock groups, here for a synopsis of "Good Chemistry," his last semester's term paper on De Quincey, Coleridge and Burroughs.

To make matters worse, there's no map to all this clutter, not even a promontory where you can stand and get your bearings. You have to either trust yourself to a Virgil, someone who's been here before, or else, like a character in a Beckett novel, you have to grope and delve and sift your way along, learning by trial and error. Snaking beneath the rubble, you quickly discover, are invisible cables connecting one part of the Net with another, so that if you click on a highlighted word or phrase on one site you are instantly transported to another, related site. This is the much-vaunted link feature, the one that is supposed to have transformed the Net from a linear medium to one of infinite and serendipitous multidimensionality. In fact, the links are merely an elaborate footnoting device, and their serendipity is serendipity that is preordained; what the mechanism really creates is not multiple coexisting levels of connection but a series of forking paths all, alas, on a single undifferentiated plane, so that it is almost impossible, for example, to take short cuts-you have to follow every twist in the path-and it is all too easy to forget the way home. omething the Net surfers, with their quickfiring synapses and nonlinear thought patterns, don't like to tell you is that the Internet is slow. If you're trying to get on via modem, through one of the consumer E-mail providers, like Compuserve or America Online, good luck.

Even if you have a state-of-the-art hookup, with an Internet browser like Netscape, say, and a direct connection, you can expect maddening pauses, interminable delays and even sudden crashes as, first, the "host" is contacted and then your screen fills up with pixels sifting down line by line. This is partly because our home computers are already outmoded;

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"There isjust too much traffic on the information highway ...all these delays andjam-ups." they're Model Ts, as the Net groupies like to say: balky, hand-cranked flivvers compared with the turbocharged limos, with cable modems, accelerated circuitry and highresolution screens that even now are idling in high-tech garages all over Silicon Valley. But there is also just too much traffic on the information highway. With the number of new loggers-on growing at the rate of about 2,300 percent a year, the data pipes have already become sclerotic. Like many people, I've learned never to venture onto the Net without equipping myself the way I do when I set out for the doctor's office: I bring along something to read while I wait.

It's customary in Net-speak to make a distinction between "r/t," or real time-the time in which all these delays and jamups occur-and "v/t," or virtual time, which is time on the Net: a kind of eternal present in which it is neither day nor night and the clock never ticks. VIt is time without urgency, without priority. One factor contributing to the Internet traffic jams, in fact, is that the system makes no distinction between the electrons carrying your Elle MacPherson photos and those carrying the verification codes for my six-figure stock transaction; it devotes exactly the same amount of attention, and at the same pace, to each. Vlt is also time without subjectivity. It affords neither those moments of speeded-up intensity when everything seems to be happening at once nor those moments of deep immersion when you

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sink so thoroughly into a project or activity that afterward you can't recall where the time went.

VIt is shallow time, surface time-time elongated in such a way that to me it most resembles that skittering, half-suspended state that occurs just before sleep, when random circuits begin firing in your brain, initiating loops of thought that never quite connect and causing your body every now and then to twitch in slow motion. But the main thing that has to be said about vlt is that it is an enormous waster of rlt, which is a problem if, instead of hanging out at the computer mall, you happen to have a full-time job. Most people I know who have embarked even halfheartedly upon the Net say they have no time anymore to read, watch TV, visit with their friends-no time to do all the things they used to like to do.

There would be fewer delays on the Net if there was less graphic material-fewer pictures and illustrations and animated icons; this stuff uses more bandwidth, or channel capacity, and takes much longer to load. But who in his right mind would want fewer graphics? A Net without pictures would be a boring Net indeed. At the moment, most of the really interesting and sophisticated material, and certainly most of the fun, is visual. This is probably because the challenges of getting graphic material onto the Net appeal more to the kinds of people now working there-people who grew up with computers and animation-than do textual challenges. The writing on the Net will get better, you keep hearing, when writers, and not techies, start writing for it. ctually, there's some pretty good writing on the Net already, much of it in Salon, a lively online magazine financed by Borders, the bookstore chain, and featuring interviews, book reviews and brief social and political commentaries. Salon has evolved an on-screen style that is smart and literate and inflected with sufficient attitude and irreverence so as not to seem a mere print journal recycled onto the screen. This, for example, is what Salon had to say when Slate, the much-heralded but (by Net standards) somewhat staid publication edited by Michael Kinsley and bankrolled by Microsoft, finally came on line in June 1996:

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After a buildup only slightly exceeded in length, fervor and stick-twirling bombast by the interminable drum solo on Iron Butterfly's "In-A-Gadda-Da- Vida," Slate, the Great Web Legitimizer, has finally made its entrance before a gaping world. ot even the most epochal of publications could have lived up to this not-since-amoebas-crawled-from-the-oozehype ....Before donning surgical mask and gloves, therefore, we will pause for a brief moment of commiseration with our new Web colleagues. Pause. O.K., nurse, hand me that chain saw.

Slate, for its part, has maintained consistently high literary standards and has also experimented with a feature, at once old-fashioned and state-of-the-art, in which writers are asked to keep an online diary for a week, updating it daily. Among

the contributors are Muriel Spark and Cynthia Ozick.

But it remains to be seen whether in the long run the Internet will really prove hospitable to writing. The problem in part is that technology isn't particularly hospitable to reading right now. The typical computer screen doesn't offer anything like the degree of clarity and resolution achieved with ink and paper. Even in the classiest, most sophisticated presentations, type that is on screen has an undifferentiated, flyspeck quality, and though some of us have taught ourselves how to look at this stuff long enough and carefully enough even to make our livings from doing so, few people, I think, would do this for pleasure. As far as the editors of Slate can determine, their publication, by far the brainiest and least gimmicky of the online offerings, is still being read the oldfashioned way; many people are printing it out, that is.

And then there's the disorienting business of scrolling, as opposed to simply turning a page. The old technology is still more satisfying-that mounting stack of paper, slightly splayed, imprisoned gently under your left thumb, while the first and second fingers of your right hand eagerly (or sadly, as the case may be) riffle ahead, feeling the heft of what's to come before decisively flicking over the next sheet, instantly turning recto into verso. Page turning is actually faster and more flexible. By taking away many of the visual and tactile clues we use to measure our progress through a text-by making it harder to find our place-scrolling helps render those texts shapeless.

But there's another, deeper limitation, one that has less to do with screen technology than with the value-free nature of online writing. Electronic communication prizes content over form, information over style, immediacy over proofreading and fact-checking; it tolerates an ungrammatical, misspelled sentence as happily as a correct one, and, by instantly storing a muddled thought in memory or displaying it on a screen, it can make that thought seem as shapely and permanent as a profound one.

The Internet also lets anyone become a publisher, literate or not. If you read enough stuff that's been written for or on the computer, in fact, you can at times find yourself thinking that what you're seeing is nothing less than the dumbing down of writing itself-the dilution of prose into a gruel that's thinner and far less nourishing than what we grew up on. What works best in this new writing-or what's most effective, at any rate, and what is imitated most often-is not subtlety but cuteness; emoticons, as those ubiquitous happy and sad faces are called-:) and :(-and all the in-group acronyms and abbreviations that make up so much of what passes for discourse in the discussion groups: "101," "f2f' and so on. Loudness works, too-lots of CAPITAL LETTERs, that is-and so does rudeness and incivility. ho owns the Internet and who controls it? No one at the moment, and for many of its users that's precisely the point. They see in the Net our last great avenue to freedom-a place where everyone can say and be what he likes. Perhaps the highest-minded champion of this philosophy is Jon Katz, who writes "The Netizen" column for Hotwired. He has argued that the Net, free of the corruptions of advertising, the pettiness of Government, the moralism of the right and the rigidities of religious fundamentalism, can enable a kind of free, open and rational discourse that will instill in us nothing less than a new Enlightenment. Elsewhere on the Net this strain of thought is snarlier and less exalted; every now and then you stumble on a user group or a chat room that seems an extension of those aggrieved, establishment-baiting conversations whipped up by early-American firebrands like Daniel Shays or Nathaniel Bacon-except that these sessions, as often as not, are about freedom in the abstract rather than about the whiskey tax or landlord-tenant relations. They're about the freedom to be free.

The philosophers and the cranks alike are united in their opposition to censorship on the Net. The issue is more than just a freedom of speech and press issue; it has to do with the very nature of the Net and of their hopes and dreams for it.

The Net, its champions believe, needs to be free-in every sense of the word-and free, in particular, from the restraints imposed by editors, publishers, cultural policemen and standard-bearers or authority figures of any sort. Some of the Net patriots even resist, on principle, the notion that it might make sense for the various networks, services and providers

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to get together and agree on a few protocols that might speed up the traffic flow. The way to keep the Net egalitarian, they say, is to keep it decentralized.

You wonder what A.J. Liebling, who said that freedom of the press belongs to whoever owns one, would make of this.

In a way, the Net is just such a forum-the electronic newsstand for millions of pri vate presses-and yet the result is often cacophony rather than wisdom, a form of expression that follows not parliamentary principles but the Hobbesian law of the boring dinner party: it belongs, that is, to the person who talks loudest, logs on most often. At the moment, at least, discourse in cyberspace seems to favor lengthy, reasoned arguments less than it does dialogue or, more often, statement and riposte, declaration and put-down. Because everyone must be free to speak what is on his or her mind, everyone is also presumed to have something worthwhile to say. The Net is full of ranters standing on invisible soapboxes, and a great many exchanges essentially come down to: Enough about you. Let's hear from me.

There is even a movement on the Net to liberate us from the tyranny of the author and from texts that mean only one thing. The hotbed of this effort has been the Hypertext Fiction Workshop at Brown University, which has assembled dozens and dozens of novels, and even autobiographical and critical texts, that operate according to the principles of those "Choose Your Own Adventure" books. At different points along the way, you click on this or that character or location or plot development and thus shape-help create, even-the very story you are reading. Some of the Brown texts are so complicated, with proliferating links and options, that they have probably never been read the same way twice.

Accompanying the hypertexts, needless to say, is an outpouring of faddish theory and philosophy-about the erotics of cyberspace, the ontology of cyberspace and the role of the Leibnizian monad in same, all of which argues that hyperreading is immeasurably superior, more faithful to ourselves and the nature of the world, thanthe unhypered version.

In truth, though, this whole enterprise seems for now little more than an electronic parlor game-partly because the hypertexts themselves are so dreary. Take away the bells and whistles, and they're snippets of undistinguished prose, usually about thinly characterized folks wandering about in cyperspace, naturally. But the hypertext philosophy-and some of the libertarianism on the Net-also ignores that at a certain level reading is not about freedom at all but about submission, about stifling your own voice, stilling your mind and yielding fully to the designs (in every sense) of another. If I'm going to read Villette, say, I don't want to choose my own Bruges, I want Charlotte Bronte to do it for me. Similarly, I don't want to tell Conor Cruise O'Brien what I think about Thomas Jefferson. I want him to tell me what to think. I want him, that is, to temporarily take over my mind and make use of it. Ultimately, reading is about what happens between a writer and me; it's not a community activity.

Many of the censorship battles on the Net are being fought on the shabby ground of pornography. The best that can be said for all the porn on the Net is that most of it is presented in a straightforward, businesslike fashion. And though it is a heaven-sent gift-a daydream come true-for legions of horny youths, most of it is ostensibly aimed at mature, consenting adults. Unlike sex in the rest of our culture, sex on the Internet doesn't assault you. You don't have to look hard for it, but you do have to look. (And you usually have to click in a little box to certify that you're 18 or older and don't object to explicit material.) The worst that can be said is that Internet pornography is far more accessible to young

less sexual imagery is the kind of fantasy and role playing that prevails in the various chat rooms and electronic hot-pillow joints, like the Cybercity Hotel and a popular hangout called bianca's Smut Shack, where people go to have online sex with one another-or, to put it bluntly, where they pretend to have sex in v/t. Typically in these encounters, the participants introduce themselves, describe what they look like and what they're wearing and then exchange back-and-forth descriptions of what they're doing to each other. The language'in these transactions is invariably the ripely cliched, overheated language popularized by Penthouse. Forum, among others, and they follow a plot as ritualized and unvarying as that of a Japanese tea ceremony. True variety or innovation is not in fact a particularly desirable commodity in online relationships; what's valued, oddly, is familiarity. you're f a "lurker," as those who prefer to watch but not join in are known, the spectacle of all this transparent loneliness and longing, of all this second-rate and secondhand fantasy life is more than a little depressing. Who are these people, you wonder. To judge from what they say about themselves, they're college kids, lonely housewives, bored office workers (a lot of computer sex seems to happen on company time), or people who want to explore the possibilities of bisexuality, say, in a safe, un threatening way. But of course what they say may not be true. A frequent annoyance reported in the chat rooms, for example, is the problem of men posing as women on screen. And in the land of computer sex you rarely come across anyone who is middle-aged or has a weight problem or difficulty with hair loss. These cyberselves are always available, always turned on. And they're amazingly free of self-consciousness: there's almost never a wink, a parenthesis or an exclamation mark, to indicate that everyone knows this is just a game. It's too simple, obviously, to conclude that these electronic heavy breathers inhabit a world that, in Alice in Wonderland fashion, is a mirror image of the real one, and yet clearly there is an enormous amount of wish projection going on. The sub text-or anti text-of all these humid, feverish encounters is not bliss but its opposite: solitariness and frustration.

The other striking thing about Net sex is that, for all the emphasis on physical description, it actually suggests a deep-seated wish to shuck off the body altogether; it's sexin-the-head. And the same tendency toward disembodiment can be found in less steamy areas of the Net, in the many "virtual communities" that have sprung up-places where you, or a three-dimensional icon of you, your avatar, can go and live full time if you'd like. One of them, Sherwood Forest Towne, has an elaborate form of town or community government that sets policy, passes laws, figures out how to deal with intruders. It also has gardens, glades, communal rooms with glowing hearths-places where you can kick back and share your innermost thoughts with other three-dimensional icons. The implicit assumption behind this and

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children than all those low-tech magazines and tapes, and that the sheer volume of it is astounding.

You don't have to be a member of the religious right to think that most of this stuff is highly inappropriate for kidsthough the real danger, I think, is less that they will be corrupted by it, turned into lust-crazed monsters, than that they will be de-eroticized, their natural curiosity sated too quickly and easily, and that they will eventually become bored, or even turned off, by this endless display of naked grown-ups carrying on in such weird and embarrassing ways. Needless to say, most of the sexual material on the Internet is not particularly erotic; it's not really concerned with sex at all, in fact, but with sexual imagery, devoid of even that filmy peignoir of narrative or context that usually accompanies the cheesiest of magazine spreads, the most low budget of videos. Context and narrative, you discover in their absence, are no small part of what makes sex sexy.

The one exception to this general blight of almost content-

"The Net is the gateway to the world's museums and the archives of countless libraries. It contains all of Greek tragedy and the full texts of most of the classics of English literature." other movements on the Net may represent something like a major philosophical shift: the assumption that virtual is better than real. Virtual, or virtually, used to be a loophole, a term of elastic qualification: your new car is virtually maintenance-free, your refund check is virtually in the mail. Now it's reality that has been qualified; virtual is newer, cooler and far less fuss and trouble. he Internet, we should recall, had its origins in the cold war-as a way of decentralizing communications and making them less vulnerable to attack-and its greatest virtue may still be its capacity to become a repository for our more presentable side. If the Net is a basement in need of cleaning, it's also the library at Alexandria rebuilt or a permanent, distortion-proof version of that archive maintained by the band of outlaws at the end of Ray Bradbury's Fahrenheit 451, who have each undertaken to learn a book by heart in case the printed texts are burned.

The Net contains, in accessible, searchable form, all of Greek tragedy, for example, and the full texts of most of the classics of English literature. It is also an unparalleled research tool-even if at the end of your search you still

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wind up turning to a book.

And then there's E-mail, the one feature that everyone seems to love-young and old, Flintstone and Jetson alike.

Where would we be without this reliable, unobtrusive courier, swiftly toting hither and yon-to the next apartmeI:lt or to an office across the world-our memos, our business correspondence, our mash notes, our holiday greetings, our chain letters, our missives of complaint or of thanks, our news about our families and ourselves. You type, you click and-blip!-your message is on its way. It's already there, in fact. Too swiftly sometimes. Most of us have either sent or received an electronic jolt that would have benefited from the cooling-down period afforded by the traditional drawer-yanking search for an envelope and fumble for a stamp. But these occasional meltdowns are a small price to pay for such a benign and transforming invention, one that, if you allow it to, pleasingly combines the virtues of ease and immediacy with those of contemplation, of forethought. The great advantage that E-mail has over the telephone is not just that the line is seldom tied up but that it forces you, literally, to compose yourself-to create a text that presents you in your own best version.

If nothing else, the Internet has made pen pals of us all, and sometimes, sitting at my computer, I really do feel connected, part of a vast interlocking web. Once in a while, I even feel a twinge of the excitement and adventure that the Net pioneers are always writing about. All that virgin space, unspoiled and unclaimed-a gleaming ethereal vista brimming with the promise of freedom, adventure and possibility. Sometimes I can almost believe that we have embarked on a brand-new mode of being, one in which our minds are free to travel anywhere. And then I think, nah.

To me, the Internet for now more often recalls that blacklit, book-stuffed, beer-sticky, hemp-smelling, hormone-raging grotto that was my college dorm room back in 1968.

Think of it: a place where, at any hour of the day or night, you can order a pizza, shoot the breeze, skim through library books, utter profundities, listen to music, look at pictures of naked girls, read poetry, watch movies and deliver tirades against the Government and the professoriat-all without the bother of having to get dressed up, as Truman Capote once said about another solitary activity or, indeed, without budging from your chair. No one, I suspect, would choose to dwell in the grotto, but it was fun to hang out there for a while-oh, to have been hot-wired back then!-and there are worse places to be reminded of and even to drop by from time to time. Eventually, the Internet will grow up, or maybe we will. We will know that this has happened when the Net becomes invisible and we can finally stop talking about itwhen it has become a place you wouldn't be ashamed to have your parents visit.

0 About the Author: Times Book Review.

Charles McGrath is the editor of the New York

Waiting to Download Traffic jams are clogging up the Internet. But dozens of companies are beefing up the infrastructure to solve the traffic problems as well as investing in new technologies that will make the Net robust enough to support new businesses. ou're lounging on the sofa in the den, remote control in hand. That familiar thwicketythwack bass riff signals a commercial break, and another of those unbearable battery ads takes over your TV. Anything would be better than this junk, so you punch in channel 41 to check out the biography of Jimmy Stewart. The picture goes gray, a tiny hourglass icon appears and a message scrolls across the bottom of the screen: "Connect: Host A&E contacted. Waiting for reply ...." You wait.

And wait. .

Oh, well. So you pick up a magazine from the coffee table. You flip to page 20 for a look at the article about inventors, and what do you find? Blank paper. Thirty seconds later, words and images trickle into view, only to stall in mid- ...

What's wrong with this picture? Talk about an ungratifying experience. Yet for millions of people this is often what it's like to use the Internet, that incredible electronic medium that's supposed to be the biggest thing since the printing press.

Binary biilionaires and pundits tell us that the Internet is the digital plumbing everyone's been waiting for: It will open the way to true electronic commerce, vivid interactive entertainment and an efficient wired workplace. By the turn of the century, they predict, our very economy will rely on this paradigm-busting virtual world.

Dozens of industries and hundreds of businesses are collectively wagering billions of

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dollars on the assumption that the Internet will be everything its proponents say.

Yet there's one little hangup-the Internet often doesn't work the way it's supposed to.

The Internet is bedeviled by bottlenecks-the electronic equivalent of mismatched pipes, underpowered pumping stations in a badly-run municipal waterworks. The result is a balky system that too often displays that irritating hourglass on your monitor. Consider what happens when you click on a Web link with your mouse.

This electronic request for information must navigate a treacherous route through your modem, over local and long-distance phone lines, through different devices that push it along, to the computer where the Web page is stored. Then the digital packets that make up that page must find their own routes back to you.

Worse yet, traffic is now flooding the Net. Longtime users complain of "brownouts" and yearn for the good old days when the Internet was a private thoroughfare for academics. In some key parts of the Internet, 10 percent to 20 percent of all messages sent get lost. Even though the Internet has yet to go fully mainstream, some experts are predicting its imminent collapse, or at least its decline into the virtual equivalent of a clogged drainpipe.

Technology is supposed to surmount all obstacles in its path, not buckle under heavy usage. For decades semiconductor performance has doubled every 18 months. If to-

day's videogame player has better graphics than yesterday's mainframe, why is the 28-year-old Internet bogging down?

Part of the problem is the piecemeal way this monster was assembled. The Internet started out in 1969 as an experiment to build a national-security computer network capable of surviving nuclear attack. To accomplish this, computer scientists devised a way for computers to exchange data via a large number of possible paths.

The designers made this work by segmenting the information being sent-say a program or a document or a table of numbers-into tiny "packets." Think of these as electronic envelopes containing part of a photograph or a few pages of text. Besides holding data, each packet is labeled with its destination, a return address and an ID number. At the heart of the network are specialized devices called routers that read a packet's address and move it closer to the computer it's supposed to reach. If part of. the ne.twork got annihilated by bombs, the rest would still function.

This packet-switching system has the virtue of being practically indestructible. It has scaled up handily from hundreds of "nodes" in the seventies to the globegirding system that now links tens of millions of computers.

But the system was not designed to be fast or efficient with so many users.

Clearing up its congestion is no simple matter. Says Andy Grove, CEO of Intel: "The sobering truth about the emerging net-

worked world is that the very thing that is bogging us down is what we most want, namely bandwidth."

Ah, bandwidth. That techie buzzword denotes the capacity of a telecommunications medium to convey data. If networks are like waterworks, bandwidth is a function of three elements: the size of the pipes-the wires, cables and fiber-optic lines that carry data between computers; the speed of the pumps--:-namely routers and switches that direct data from pipe to pipe; and the responsiveness of the reservoirs-corporate computers and Web servers that store and dish up the information people want to see.

Logjams happen all along the line. Many involve the pipes themselves, starting with the mundane copper telephone wire to which your PC modem at home connects.

The fastest modems sold with most systems cost around $200 and send and receive information at 28.8 kilobits per second (kbps). That's roughly the equivalent of getting Alice's Adventures in Wonderland in six seconds. Sounds fast, but downloading a Web page full of graphics by modem can feel like waiting for a stoplight to change. oreover, local phone systems, many of which date from the Sputnik era, were designed to juggle scads of voice calls averaging a few minutes in duration. Online customers, however, often stay on for hours. That can tie up the connections in a local switching center.

(Telltale sign: a rapid busy signal when you try to make a call.) Internet service providers-companies that offer dial-up Internet access in exchange for a monthly fee-likewise get overwhelIiled if too many customers try to connect at the same time.

If your employer has a well-managed internal network, you probably find things work better at the office. Many companies use Tl lines, advanced coaxial-cable or fiber-optic circuits designed to retrieve data at up to 50 times the speed of a 28.8 kbps modem. Still, corporate networks hooked into TIs can get flooded-particularly if too many employees simultaneously try downloading the digital video clips that are now trendy on the Web. That's the story close to home, and it's

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"People need to start paying for what they consume, because if they don't, there will be no economic incenti ve to keep building the infrastructure." bad enough. But what's really frustrating about the Net is that so many of the problems that hang you up occur far outside your reach. At least you think you can fix that software bug on your Pc. Once you venture beyond your modem or company network, you throw yourself on the mercy of thousands of companies whose equipment makes up the Internet.

Some of the largest phone companies support the Internet's backbone, the digital equivalent of Rome's great aqueducts.

Pacific Bell, Ameritech, Sprint and MFS Communications operate so-called network access points linking all the biggest pipes of the Net. Over MCI's portion of the backbone, information flows at 155 megabits per second-l 00 times the speed of a Tl. Unfortunately, the packet sent from your PC requesting a World Wide Web page doesn't just flow smoothly through one pipe en route to its destination. Even as it traverses the most developed portions of the Net, your message has to wend its way through pipes of different sizes, and through the pumping stations called routers, which are mostly made by Cisco Systems and operated by the tekos and ISPs. A router looks at each packet of information and passes it along to another router that helps it toward its destination, after determining the best path available at that moment. That means bypassing any routers that might be inoperable or backed up.

A router makes such judgments by consulting the equivalent of a telephone directory stored in its memory, which lists addresses of other routers around the Net. As more routers are added (there are now at least 40,000 on the Internet), the directories must be updated and expanded. This can slow processing, especially with "transit routers," which pump data along the Net's

backbone. Each transit router keeps a giant international master list of every functioning router on the Net. When trouble comes, such as when equipment failure shuts down part of the Net, the transit routers must update their lists immediately-a processing task so demanding that it can tie up the machines, compounding the traffic delays.

Ultimately, if you're lucky, your request reaches the "reservoir" containing the Web page you want. But there's no guarantee the reservoir is anything more than a puddle. It could turn out to be a Website operated by some college bd in Kenosha who stores information on a hand-me-down 486 PC that dribbles out data over an obsolete 14.4 kbps modem. What's worse, there are 37 other requests waiting in line to download the same page. Now, that's a bottleneck.

If this really were a waterworks, you'd be calling the plumber. Problem is, no single plumber will do. On the Net, a solution in one place (the kid in Kenosha gets a Pentium with a 28.8 modem for Christmas) can shift the bottleneck somewhere else (now that people can actually get stuff off his site, the demand swamps the local Internet service provider). For the Net to truly change, it will have to be upgraded on many different fronts.

Luckily, a multitude of companies believe that any collapse of the Internet would seriously damage future revenue streams.

These companies include America Online (AOL), which can sustain a critical mass of consumers only if the Net becomes almost as easy to use as television; Cisco Systems and Bay Networks, wruch stand to earn millions by selling routers and switches that will make the Net faster for companies connecting their own networks and reaching out to suppliers; and MCI and US West, which see high-speed, reliable Internet access as part of the bundles of telecom services they want to sell consumers.

These competitors are beefing up the infrastructure in an effort to dodge today's traffic problems, as well as investing in new technologies that may make the Internet robust enough to support new businesses tomorrow.

America Online, for example, has purchased many "proxy servers," computers (Continued on page 50)

DEMOCRACY IS NOT A SPECTATOR SPORT Ambassador Frank Wisner recently presided at the awards ceremony of Mayo College in Ajmer.

The following is an abridgment of his speech.

I am delighted to be here with you today, and to take part in an event that figures so prominently in the life of this great institution.

As for the occasion that draws me here, I understand that in the 113 years that Mayo College has presented these awards for excellence in academics, sports and cocurricular activities, I am the first American ever to have been asked to officiate at this function. I further understand that I now join the illustrious company of Lord Curzan as one of only two foreigners to be so honored.

With all of the changes going on in India and the world today, those of you attending Mayo College can expect to have opportunities that earlier generations of students likely never imagined.

Yet as your opportunities have grown, so have your responsibilities-to yourselves, your families, your nation and the world around you.

On the eve of the 50th anniversary of India's independence, I thought it might be worthwhile to reflect briefly on what some of these responsibilities are-as well as some of the challenges you are likely to face as you assume positions of leadership in the years to come.

I speak to you as young men who have been privileged to receive the finest education India can offer. To you falls special responsibility, therefore, for your nation and society; for the choices India has to make. You, to whom much has been given, owe a great deal. That is the spirit my father imparted to me, and his father to him. It is why, like my father, I willingly accepted the responsibility of public service.

Let me begin with a word about one of the choices India faces, a relationship that is very important to me, and I hope will be important to each of you-that of the United States and India.

Though we are very different nations, we share a great deal: a commitment to democratic traditions, freedom of speech and religion, respect for minorities, the rule of law and an independent judiciary, a free press and the idea that each individual should have the opportunity to develop his or her talents to the ful1est, to pursue prosperity and to contribute to the betterment of his fellow men.

The fact that India has so clearly associated itself with these values is important to the United States and, indeed, to all people who concern themselves with the future of free nations. You are the world's largest democracy, a model to nations around the world of a civil society that has found strength in its diversity.

You have learned to find your way forward and address your problems through consensus reached democratically.

The United States also attaches great importance to India's security and prosperity. From our experience, we know that these are inextricably tied to the exercise of fundamental democratic principles. For this reason, we have been especially pleased to witness, and indeed to support, the important moves India has made in the last five years toward liberalizing its economy and allowing the productive energies ofIndia's people fuller scope.

Economic liberalization has produced important changes in India, and in its relationship to the global community.

India is now seen increasingly by foreign investors as a place to

do business-and this investment has brought with it jobs, technology transfer, managerial expertise and, perhaps most important, capital that India desperately needs to improve its infrastructure and-in the process-attract more investment and more capital. The result is a cycle of growth and economic expansion that, if pursued to its logical conclusion, will place India among the world's more dynamic economies in the next century. In fact, the World Bank estimates that, given the proper economic management, India could be the world's fourth largest economy by the year 2025.

You will, of course, need to be attentive to the effects of economic development on other aspects of your life-the environment, for example. Continued growth must be managed in a way that will preserve human health and well-being, and reverse existing environmental damage. he United States hopes to be a partner with India in this growth, and in your efforts to protect and improve the environment. In very important ways, we are already partners. The United States is India's largest trading partner, and American enterprises are the largest investors in India, accounting for 40 percent of direct foreign investment in crucial areas like electronics manufacturing, software development, power, consumer products and telecommunications.

As India's economy continues to expand and as barriers to investment are lowered or eliminated, American interest and investment in India will also grow.

How fast this happens is largely up to India. There are many important tasks ahead of this nation, and ahead of you as its future leaders, if India's potential for greatness is to be realized. If you have proven nothing else in the past 50 years, you have demonstrated to yourselves and to the world your fierce determination to safeguard India's independence, its people and its territory. You will make choices about your future-not because of outside pressure, but because the choices are good for India.

One of these tasks is to ensure that the momentum for economic reform is maintained, and that its benefits spread, both horizontally across the nation and vertically through all strata of society.

To do otherwise jeopardizes not only the future of India's economic growth, but also the future of India's democracy. To succeed, democracy must be inclusive. It must be fair. It must be prepared to be judged on its willingness to attend to the needs of the weakest members of its society.

Some of you may be surprised to hear me speak of threats to the democratic way of life we share, but they are real, and they demand our attention. How can this be, you might ask. India has existed as a democratic nation for 50 years and the United States for even longer. The Cold War is over, communism and statism discredited, democracy and individual enterprise triumphant. Let me suggest, however, that the gravest risks democracy faces today come not from external forces but from within our own societies.

These threats will confront you directly as you complete your education and assume your place in society.

What are some of the threats?

The first, and possibly the most dangerous, is cynicism. In my

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own country, I am forced to admit, fewer than half of those eligible to vote actually did so in last November's presidential elections.

Once individual citizens begin to disassociate themselves from the fundamental practices of democracy, they surrender the management of their lives to others, more mobilized, who may reflect narrow, not national, interests.

Citizen participation is the lifeblood of democracy. That is true in the United States, and it is true in India. It is true if the election is for the panchayat or the Parliament or the Presidency. It is fashionable today to scorn politics and its practitioners, those to whom we apply the dreaded "P" word: politicians. Let me suggest to you, however, that there is one very good antidote for whatever ills exist in our political system, and that is also a "P" word: passion.

As soon as we lose our passion for the way of life we have inherited, as soon as we become complacent about the protections and privileges democracy provides, we risk losing them all.

It falls to you, the students of this college and your peers across India and the United States, and in democratic nations around the world, to bring your passion to politics, to make it participatory.

Democracy is not a spectator sport.

Complacency in democratic societies also breeds another ill that we must address effectively: corruption.

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e need look no further than our daily newspapers to find ample evidence of political leadership around the world charged with misusing the power entrusted to it by the citizens they have been elected to serve. Such headlines simply fuel cynicism, further persuading us that those in positions of power or influence use their offices, not to improve the people's welfare, but only to enhance their own.

What is the solution? Let me suggest two things to you as a start. .

First, democratic systems must be transparent. Rules and laws and regulations must be clearly spelled out, and must be applied to everyone, regardless of who they are or who they know. Whether you are a student or teacher at Mayo College, a software engineer from Bangalore, a bureaucrat from Delhi or a businessman from Mumbai or Manhattan, the same rules must apply. People in a democratic system must be convinced that rules cannot be bent or corners cut or processes speeded or slowed to favor one person or one group. They must also be shown that there are consequences-serious consequences-for those who try to do so.

Second, to guarantee that officeholders do not use their positions for personal gain, each should be required to reveal to the public the sources of their income. We do this in the United路 States through a system of public disclosure: senior government officials-including, I might add, ambassadors-are required to file an accounting of their assets and liabilities, of what they own and what they owe. Even candidates for high public office are required to provide the competent authorities with copies of their tax H(turns. In fact, if you had occasion to read an American newspaper and magazine during our recent presidential campaign, you likely came across some details of the personal finances of both the Clintons and the Doles.

When such disclosures are mandated and become a part of the public record, disparities between what one has upon entering office and upon leaving become abundantly clear. Ill-gotten gains become more difficult to hide.

Even with such protections in place, our system is far from perfect. Politicians still need money, lots of it, to finance their campaigns. The late Tip O'Neill, a former Massachusetts Congressman and a much beloved Speaker of our House of Representatives, called money "the mother's milk of politics." But there are ways to limit the influence of money, and the health of our democracies depends on identifying these methods and using them effectively.

Which brings me to a third threat to democracies, and one that I touched on earlier in reference to the need for economic reforms to improve the lives of all the people of this country. I refer to inequalities in society. Enormous disparities between the rich and the poor weaken the political and social fabric of any nation, but most especially those based on democratic, egalitarian principles. ne of the great sources of America's democratic stability is the size of its middle class. Though there has been some concern in the United States over the last decade that today's children will not be as well off as their parents when they reach adulthood, our traditional optimism has returned, as has our belief in an ever-growing economic pie from which everyone may take a slice, a slice whose size is limited only by one's talents, energies and willingness to work.

In India, one of the great benefits of economic reform has been the growth of the middle class, now estimated to include as many as 250 million people-almost as large as the entire population of the United States. While this figure remains relatively small in terms of India's total population, it represents an important stabilizing element for India's political future. It represents people with a growing stake in the nation's economic progress, people who will not be easily swayed by political fads or passing fancies.

The important task that now lies before India is to bring more and more of its citizens into the middle class, and it is in this effort that foreign investment can make such an important contribution, through job creation, training and small business development.

In addition, economic reform and a liberalized climate for foreign investment-especially in areas like financial services-will generate the kind of capital needed for development of India's infrastructure: roads, ports, power, telecommunications-elements that will benefit large sectors of the Indian public.

But there is a social dimension to infrastructure development in India that also must be addressed. By social infrastructure, I mean the improved access to clean water, health care and educational opportunities-particularly at the elementary level-so that your generation of Indians and those that follow will be able to realize dreams that we all share of a job, and the ability to provide our families with the essential elements of food, clothing and shelter. It is a large and daunting task, but India has proven time and again its ability to tackle such tasks successfully. We stand ready to help, but you must make it happen.

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I personally believe that all of us-as individuals, as families, as parts of larger groups like schools, businesses and governmentshave obligations that go beyond those I've just mentioned. I believe we must do what we can to help the traditionally disadvantaged not only to but through the doorway of opportunity.

Minorities must receive some special help and protection.

Historical disabilities must be dealt with. What kind of special help to provide, and how long to provide it, are issues each society must decide for itself. There are no easy answers.

We in the United States, for example, are still grappling with the problem of past discrimination. But we are also now facing the question of whether some of the solutions we have devised-most specifically, various kinds of affirmative-action programs, often referred to in India as reservations and quotas-are generating hostility and sapping initiative that will corrode and, in the long run, prove to be detrimental to our society. here are other problems, still: legal systems that break down as legislatures fail to do their jobs; excessively burdensome rules and regulations that stifle initiative; courts so clogged that cases take years to resolve, delaying-and thereby denying-justice.

Each requires remedy.

But I am confident that effective remedies will be found. India has not come this far to fail now. Nor, for that matter, has the United States.

Each of us will draw on the greatest strength of our democratic way of life-our belief in the power of the individual-to ensure a future for our people that is both prosperous and secure.

It has been truly written that democracy i's the worst possible system of government, with the exception of all others. It is unwieldy, unruly, difficult to manage and breathtaking in its inspiration. It empowers each of us. As I stand here today within the walls of this great institution, I cannot help but feel encouraged that our democratic tradition is in good hands.

I urge all of you to take up the challenges and grab hold of the opportunities that democracy and free markets and the future provide. As you do, I further encourage you to remember that there is another great democracy halfway around the world that wishes you well and wants very much for you to slicceed. It seeks your friendship.

As difficult as it may appear to you today to figure out how you. might make a difference in the lives of 900 million people, the day is fast approaching when this question, for each of you, will be more than rhetorical.

In the 50 years since India gained its independence, many nations have been born; many have struggled to prove their nationhood. India is special among these nations as it always has stood for principle, and its principles have been universal in their application. Over the past 50 years, India has proven more than nationhood, it has proven that democracy can work, it can solve problems, and it can provide justice, peace and a measure of prosperity to its citizens. India is now beginning its second halfcentury. The responsibility for maintaining this nation's course and securing its ideals lies with you and those who educate you. 0

T

or" Under U.S. law, it is illegal for American businessmen to give or accept bribes anywhere in the world. The United States has taken the lead in enlisting international cooperation to banish bribery in business. The author argues that "the developing world has a strong self-interest in keeping corruption out of the international economic arena."

A quarter of a century after the deed, a bungled burglary at the Watergate complex in Washington, D.C., is inspiring a drive to cleanse international trade and investment of the stain of corruption. One of the lesser-known legislative consequences of the Watergate crisis is today slowly transforming the way firms and governments operate in the world economy.

While inspecting the seamy side of the administration of Richard Nixon in the 1970s, U.S. Government investigators uncovered political slush funds, filled with undisclosed corporate payments. This led the Senate Foreign Relations Subcommittee on Multinational Corporations to dig around and see if similar payments were being made overseas. It found out more than it expected. In 1976 Lockheed Aircraft Corporation admitted to the subcommittee that it had paid $22 billion in bribes to foreign officials and parties to win contracts. The ruckus this kicked up brought down a Japanese government, tarred the reputation of a European royal family and led the U.S. Congress to pass what is commonly known as the Foreign Corrupt Practices Act. At the core of the act was a simple no-no: it made it a criminal offense for U.S. companies to pay bribes to win business overseas.

It was a revolutionary idea. All countries have laws against corruption in business within their borders. one, however, cared what their businessmen do in other countries. If anything, corporate palm-greasing was considered part and parcel of doing business overseas.

When Senator William Proxmire introduced the bill in March 1976, it caused an uproar. U.S. Treasury and Commerce Department officials complained that the bill required U.S. companies to act like saints in a field of sinners. Being forbidden to make under-the-counter payments, U.S. companies would be

running against European and Japanese rivals with a ball and chain shackled to each ankle. The then U.S. Commerce Secretary, Elliot Richardson, argued that anticorruption legislation had to be part of a large multilateral remedy. Let everyone forswear bribery at the same time and U.S. firms would not be left in the lurch.

The act's supporters, however, would have none of it. Proxmire noted that "most of the foreign bribes revealed thus far involved American companies competing with American companies for the same business." A former Undersecretary of State, George Ball, argued that the U.S. should pursue a moral manifest destiny. Let the U.S. set an example for the rest of the world to follow.

What won the day was the charged political atmosphere of the time. In post-Watergate Washjngton, the air crackled with moral outrage. Only a few businessmen and academics worried about the economic consequences of the act. Congressmen recognized only one thing: any politician who voted in favor of bribery was digging his electoral grave. The two houses voted in December 1977. The Senate passed the act by voice vote. The House of Representatives voted in favor, 349 to zero.

The Foreign Corrupt Practices Act spent the next two decades in limbo. Largely forgotten by the average American, a source of amusement to the rest of the world, it gave only heartburn to corpOl'ate America.

As far as U.S. firms were concerned, the act was nothing more than a painful weight on their shoulders. Much ink was spilt over just how much the law cost the U.S. economy, but the evidence was inconclusive. Some U.S. firms took advantage of loopholes in the law and disguised bribes as commissions or presents.

Lockheed, for one, showed itself to be once bitten and not at all shy. One of its vice-presidents got tossed into jail in 1995 for bribing an Egyptian politician. A few firms welcomed the act, and cited its penalties as an excuse to avoid paying bribes. One positive fallout was that companies tightened their internal accounting standards and introduced new internal controls to abide by the law.

Generally U.S. companies grumbled that the law was a moral millstone around their necks. Nearly a third of the FORTUNE1,000 companies claimed in 1981 that they had lost overseas contracts because of compliance with the law. The U.S. General Accounting Office, a government watchdog agency, issued a report fretting that U.S. companies would be net losers if honesty as an international trade policy was not adopted by other countries.

There were a few attempts to place the principles of the Foreign

â&#x20AC;˘ up',on

regulating global tenders or monitoring insider trading. The gap between the market and the rulebooks that appeared in many countries provided much room for gray economic activity. At times the problems seemed existential: how do you curb stock-market speculation if there are no laws recognizing the existence of stocks?

One lucrative but very sticky honey pot is the trillion dollar market for infrastructure development in Asia. Infrastructure projects-whether highways or telephone systems or power plants-are big ticket items, handled by a government agency with a politician at the head, and negotiated entirely outside the scrutiny of the press. This is fertile ground for corruption. Asian markets Corrupt Practices Act on a global pedestal. The UN General are fiercely competitive, but often lack sophisticated regulatory Assembly passed a nice sounding but insubstantial resolution consystems. In China, for example, contracts cannot be enforced by courts because the law does not empower them to do so. demning corruption in global business in 1975. Two years later the The second development led to a renewed concern about the International Chamber of Commerce put out a good manners guide for companies. It took special aim at payments in brown encosts corruption in international business entailed for the U.S. velopes. But these moves were few and feeble. The world genereconomy. A secret November 1995 study by the U.S. Commerce ally looked on the U.S. law as a product of moral epilepsy, an Department carried out with the help of intelligence services cataeccentric throwback to a puritan past. loged how improper commercial inducements were used by rivals For the next 15 years the law and its consequences would proto deny contracts to U.S. companies. In 1994 alone, it concluded, voke the odd flutter of debate among America's chattering classes. of 100 deals worth a total of $45 billion, U.S. companies lost 80 of All to no avail. It was impossible for a politician to come out and them because of the greater leeway among French, German and Japanese firms to grease palms. This was confirmed by an indesay he or she opposed a ban on bribes. On the other hand, making other countries take measures pendent, statistically based study against corruption came far down last year by the Harvard economist, the foreign policy list. After all, there James R. Hines Jr. He showed that was a Cold War on. after the passage of the 1977 law, U.S. companies suffered a dramatic Then came the nineties. The collapse of the Soviet Union caused a decline in investments and exports sea change in U.S. attitudes and polito countries generally rated as the most corrupt. cies, not least toward the Foreign Corrupt Practices Act. The Commerce Department reThere were two underlying reaport is the basis of the mantra-like sons for the new prominence of the declaration by the U.S. Trade law. One was a sudden explosion of Representative's office over the past market-based economics into areas year that corruption in the global like Eastern Europe, Russia and economy costs the U.S. $45 billion "You caLLit a bribe-l prefer to call it many parts of the Third World that in business every year. a stimulus package. " abandoned socialism. And this was Washington has a particularly Drawing by Eric & Bill. Š 1996 Tribune Media Services, Inc. on top of the continuing East Asian strong reason to stamp out bribes Ali Rights Reserved. miracle. The other was a belief in a and the like. Unlike large multinaU.S. battered by Japanese exports tional corporations, smaller firms often lack the resources or clout to avoid or absorb the costs of corthat maintaining the country's economic competitiveness had to be right at the top of its foreign policy agenda. ruption. One characteristic of the new economic order is the The first development was accompanied by an enormous and hordes of small and medium-sized corporations that have entered disproportionate surge in corrupt business activity in world comthe global marketplace. And the bulk of them are American.

Mickey Kantor, the former U.S. Trade Representative, wrote that merce. There were a number of reasons for this. Much impropriety had been hidden from public view in places like Latin America, one reason his office was waging war against COITuption was to Africa and Eastern Europe. Introduce democracy, a free press, keep "U.S. small and medium-sized businesses competitive and freedom of information laws, and automatically many dirty deeds expanding in the global marketplace." find their way to the front page of the local newspaper. The other The administration of Bill Clinton has been especially aggreswas that the sudden burst of unfettered capitalism in many previsive about removing obstacles to U.S. overseas business activity. ously closed economies overwhelmed existing administrative sysBut it ran into the~me political dilemma that previous White House denizens had faced when it came to the Foreign Corrupt tems. Churning out five-year plans is a different cup of tea from â&#x20AC;˘

Practices Act. The solution: if you can't beat them, make themjoin you. During the past three years, Washington has lobbied long and hard to make what was long considered a U.S. legal curiosity into an accepted international standard.

As the U.S. Trade Representative put it in March last year, when it came to foreign trade and investment the U.S. was commjtted to making "the rules fair, and that everyone plays by the same rules."

Bribery is no longer simply an ethical issue. Much more useful in the drive to eradicate it from business, bribery has become a competiti ve issue. As former World Bank President Robert McNamara recently said: "The subject of corruption could not have been discussed [in official international forums] 20, 15 or even five years ago." Today governments cannot stop talking about it. The U.S. has also found Western Europe, once the strongest opponent of any global understanding on the issue, more amenable to the idea.

One reason for this is that European companies are finding themselves being outbidded under the table by a new generation of tough East Asian firms. An Ernst Young LLP consultant, William Bartlett, warned last year that Asia's competitive edge in the un-

"Corruption has an insidious and corrosive effect on popular support for political institutions." derhand deal would force all Western companies to "rethink" their reluctance to provide "incentive" payments, unless the world agreed to put a stop to it first.

The U.S. has a two-pronged campaign against corruption in international business. With its developed-world partners it seeks binding legal bans on such forms of corruption. For the Third World, where enforcing such laws can be more problematic, it prefers to stress transparency in business deals. In both cases it has used the whole range of multilateral bodies to promote its position.

The toughest nut was getting the stamp of approval from the Organization for Economic Cooperation and Development (OECD), the lich countries' club. The European members initially put up stiff resistance to the idea. But by early 1994 a nonbinding OECD resolution was passed officially frowning on illicit payments to foreign public officials in international deals.

Last year the OECD recommended its members comrillt themselves to ending the common practice of allowing commercial bribes to be declared as legitimate business expenses and hence tax deductible. This common European practice had been a major irritant for the U.S. This was more than tolerating bribery; it was providing financial incentives to commit the crime. About half the OEeD's 27 members had to change their tax laws to comply with the resolution. Washington is now pressing to make bribes a straightforward criminal act, with no ifs and buts. An OECD working group has supported the move but ministerial approval is still awaited.

Perhaps nowhere else has corruption been better put in its place than in Latin America. The Organization of American States, in part because of U.S. prodding but also because of public disgust at decades of gross official pocket-lining, opened the Inter-Arnelican Convention Against Corruption for signature last year. One of its clauses requires the cririllnalization of all forms of bribery.

NotewOlthy is the speed with which the agreement was reached: negotiations began in earnest only in 1994. On paper, Latin America now leads the world in multilateral comrilltments against corruption.

A suitably emboldened United Nations is also getting in on the act. The UN Economic and Social Council approved a strongly worded declaration urging all its members to criminalize bribery.

Despite European resistance, the declaration was passed by the UN General Assembly as the "UN declaration against corruption and bribery in international commercial transactions" in December 1996.

The World Bank and the International Monetary Fund have also taken up cudgels. James Wolfensohn, the World Bank president, during his endless globe-trotting makes it a point to stress the need to curb corruption in projects financed by his institution.

When the World Bank announced a $5 billion loan to India's states for road improvements, it added the rider that open bidding procedures would be required. This reflects a trend among aid agencies to insist on their funds being used more effectively.

During the Cold War much aid had political goals and its misuse was often quietly winked at.

If the words "international" and "business" can describe any powwow, it can be expected that anticorruption will be somewhere on the agenda. Last year's Singapore ministerial conference of the World Trade Organization (WTO) saw renewed efforts to get more transparency in trade deals written into its treaties. Most of these efforts are centered" around the WTO's government procurement code. Countries that sign the code open up government contracts to international tender, minimal small print and promise "transparency, openness and due process" in the bidding. So far 22 countries have signed on. The U.S. is lobbying hard for more to add their names.

There is still healthy skepticism about how far international agreements can curb something as ubiquitous in the world market as the bribe. Every country in the world has a law in its books banning the practice in domestic economic transactions. Yet no country can claim the bribe is an extinct species within its borders. If national law enforcement agencies find it difficult to uphold such bans, how much harder it is for multilateral regimes which often lack methods to police adherence.

The Journal of Commerce, in an article on the OECD's new anticolTuption codes, quoted a French corporate executive saying: "It is a very theoretical approach far removed from what is really going on." Many point out that such codes of conduct tackle only the most obvious banknotes-in-the-envelope sort of colTuption.

They do not stop influence peddling from resurfacing elsewhere in the accounts, through disguised payments like special commissions for middlemen, jobs for nephews or free trips to Monaco. A U.S. corporation recently flew a group of foreign government (Continued on page 51)

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An Interview with

"I am very optimistic about Ind ia' s futu re.

It is true that India . has been a caged tiger. Its real entrepreneurial spirit, its in novativeness, the true potential of its people and the country have to be unleashed. What we need is an environment that sti mulates that."

atan Tata, chairman of the Tata Group, is a doyen of Indian industry. He represents an ethos which very few in the business community do. And his claim to fame doesn't rest merely on the fact that his family company, Tata Sons, is an awesome empire of over 70 companies with nearly 400,000 employees, and with sales close to Rs. 300 billion.

Ratan Tata is in his own right an extraordinary entrepreneur, a creative thinker and a distinguished leader.

In 1995 the Harvard Business School conferred on Ratan Tata its highest honor, the Distinguished Service and Alumni Achievement Award, given annually by the institution to a select few who "represent the best this school offers." The citation succinctly summed up Ratan Tata's effOFts in 'Turning the Tatas towards the latest in the technology and global markets. From Cars to Computers, from Software to Steel, you have strengthened the collection of companies in your care ...with well-honed skills in strategy and planning ...."

Ratan Tata, who attended Harvard's advanced management program during the summers of 1974 and '75, is quiet, almost introvert and, perhaps as a result, media-shy. But under his leadership, the Tata House today exudes a new spirit of adventure, of commitment to be, as it has been historically, in the forefront of India's industrial development. From telecom to insurance, from aviation to oil exploration, from building a private airport at Bangalore to a grand technology park, Tatas want to be everywhere. The hallmark of this omnipresence is quality. As Ratan Tata often says, the name of Tata carries a certain level of trust even while occupying all the open spaces in 'the industrial universe. Tatas want to keep that trust, because in India the word trust is synonymous with the Tatas.

R

KUMAR KETKAR: Mr. Tata, let's begin by talking "globally."

Since yours is the largest and oldest industrial house in India, your views of the world economy and India's participation in the globalization process are extremely important to understand the current trends.

RATAN TATA: I don't think that today there is a single world economy. If you look at the economic ups and downs, different parts of the world are operating differently. For example, the economies of Asia are, in many ways, booming. Perhaps Japan has slowed down because of its dependence on Western countries. But if you look at Indonesia, Malaysia, Vietnam and China, their economies are growing at rates that most people would have had doubts are sustainable over a period of time. By contrast, Europe is kind of flat in terms of economic growth. While Germany is stronger, by and large, when you talk of even a 3-4 percent growth rate, people in Europe say: "We wish we had that kind of growth rate today." The U.S. economy is robust to say the least. All the economic indicators are positive. Even those who may criticize the administration would end up saying that in terms of domestic economy, it is faring well.

So, I don't think there is a single world economy that we can find. Each one now is interdependent on the other. In a manner of speaking, if you look around the world, you can see different economic scenes.

In this kind of a topsy-turvy world economy, how do you think India will be able to operate? What are the opportunities and what are the problems?

RATAN TATA: I should answer you, in a manner of speaking, in the reverse. I think India would make a very great mistake in choosing to keep the barriers and the walls around it that it has had for the past 40 years. I do believe that today it is very difficult for a single country to isolate itself from the rest of the world. So upfront one has to say that India did the right thing in breaking down these barriers and becoming part of the world economic and trade arena, if you might use the word. The question always in such a transition is whether you are doing too much, too fast, or too little and too slowly. And all this revolves around supposedly what you are doing to protect the local industry. I believe that what we should be saying is: Are we doing what is right for the consumers of our country? You should do what is right for the people of the country so that they can get the best products at the best price and in ample quantity, without exploitation, without monopolies, etc.

How that is done, whether it comes from outside or whether it comes from inside; whether you have tariffs or you don't have tariffs, is a functional aspect.

Hasn't Indian i~dustry taken a slightly conservative view and felt overwhelmed or invaded by this process of liberalization?

RATAN TATA: What you are saying is true. I don't think all businesspeople in India have gone running seeking protection.

But, yes, some of them have. Some of them are the ones who have been making lots of noises for liberalization. I, for one, am of the view that we should have said this before-that we should fight competition with competitiveness, not with protection. I believe the only engine, or the only motivator, for India's global competitiveness will be an open economy and a high level of competition ..

Indian industry is innovative and is entrepreneurial enough to become competitive. There may be some short-term pain. But what will emerge will be a very lean, competitive Indian industry that the world will have a problem competing against. But we will never get there unless we take these steps. We should not be afraid of external competition.

How has the situation changed since the collapse of socialism and particularly the Soviet Union in 1991? India had special economic ties with socialist Europe. How do you think Indian industry has responded to this challenge?

RATAN TATA: I think the Soviet market, we will have to call it the Soviet market because there was never any other market after

the collapse of the Soviet Union, was not a truly international market. The demands of the Soviet consumers at that time were very similar to the demands of the Indian consumers on the Indian goods, in terms of quality, in terms of finish, etc.You might say that it was an extension of the Indian market, more than a real export market in terms of hard currency.

"I really don't take the view that the Western world is exploiting India.

Today markets are there to be developed by whatever is the right product, from the right place at the right price."

There is a trend of emerging blocs like NAFTA and the European Union.

India is not part of any such bloc and SAARC has not become an economic bloc. Indian business looks Westward rather than taking a genuine worldview. Why? RATAN TATA: I agree with you. In the coming years we cannot be a single country. You need to be part of a trading bloc and that trading bloc ought to be an important trading bloc. When we go further in time, I think, what will happen is you will have alliances between trading blocs, and eventually those alliances will lead to an amalgamation of those trading blocs in terms of tariff barriers or elimination of tariff barriers between these blocs. In effect, the blocs will expand. You may well have two or three or four trading blocs working together as one. Now there is a Latin American bloc. Earlier than that there was the trading bloc between Canada and the United States. NAFTA has extended to Mexico. Eventually these blocs will work together and those Latin American countries left out of these blocs will sooner or later join one of those blocs. I think the Americas will be working together with one or more trading blocs, with very low barriers or no barriers, meaning no common currency but in effect a free exchange of trade and common currency over freer exchange of trade and commerce.

Then NAFTA and APEC will start to work together to try and form some alliance. Then there will be other conflicts where there will be barriers. So what will happen is, I think, there will be alliances of trading blocs, which will make larger trading areas. An individual country or two or three countries left out of those will be seriously disadvantaged.

I think that the initiative for such kind of blocs came in the West from the industry and trade. Whereas in India, despite liberalization, the private sector looks forward to government taking the initiative.

RATAN TATA: Even in the U.S. it wasn't industry that forged NAFTA. I am sure there were elements of industry that were opposed to NAFTA. It took the governments of Mexico, the U.S. and Canada to really forge NAFTA. In many cases, perhaps, the industrial units in some place or the other, or unions in one place or the other had, opposed the creation of it.

I think in some ways that was unique.

The United States' industry looked at Mexico's low labor production costs for their products. The Mexican industry looked at the United States' large market. NAFTA opened the market which was hitherto affected by tariffs.

Likewise in Canada. The unions looked at it negatively because they saw the jobs being taken away from them in the United States. The unions in Mexico, probably, looked at it positively as having a greater piece of the pie.

I think the cementing forces were the governments in those countries.

Is it possible for India and Pakistan and Bangladesh, and India and China, to come together? We have the lowest possible trade with our neighbors. Is it possible for industry and trade to take the initiative and suggest to the government how it can take certain steps, as you were saying now, for expansion of trade which will considerably reduce the tension on the borders?

RATAN TATA: I am certainly not in a position to say whether it is possible or not other than to say that I believe anything is possible. An expansion of our markets, such as what you describe, becomes a very important market. What is also necessary is that those markets or trading blocs should be prosperous. What I would have liked to see would have been India as a part of one of the prosperous Asian trading blocs today. So, the question I would ask would be: Why should India not be a part of a trading bloc that had Thailand, Malaysia, Indonesia-an ASEAN kind of bloc?

But SAARC and China together are two-fifths of the world's population. The emergence of the new middle class in South Asia and China is, perhaps, the largest single marketplace in the world.

We are allowing, either by our inaction or lack of initiative, the Western world to exploit this market, one of the largest markets.

RATAN TATA: I really don't take the view that the Western world is exploiting India. Today markets are there to be developed by whatever is the right product, from the right place at the right price. That's why I said earlier that whatever is best for the consumer is right. And, as governments take a more passive role in a free-trade situation, the consumer is going to be the final decider of who takes what in which market.

It so happens that McDonald's is a Western company. McDonald's could have been a Japanese company, with the same product, with the same push. I think companies are going to end up being global in the sense they will start to lose the identity of where they come from. They will become universal companies.

The trading blocs will have geographic character. I think if you look at Russia or Japan or France, McDonald's is McDonald's. It

happens to be American. Coca-Cola is the same. Barring where its genesis is, where the company is registered, it becomes a universal brand, universal product, something you come to accept. The same is becoming true of hotels and of other things around the world.

They are taking on a global character.

Do you think that Indian industry is as quality-conscious as it should be particularly in the context of what you saidjust now that we can choose the markets and it is not necessary to have China or Pakistan as markets? The demand for quality in goods in the Western markets, or even in the developed markets of Asia, is very high, and the complaints about Indian products are far too many.

Now, on the one hand, we say we want to enter the global marketplace, but, on the other hand, the global marketplace tends to resist our entry not because they do not want us but because the quality of many of the Indian products is not up to their standards.

What in your opinion is the solution?

RATAN TATA: That's back to the same issue. Finally, the consumer is finding us, as a product, less appealing than the product that he gets from somewhere else. It may be in quality, it may be in after-sales service, it may be in appearance, it may be in fits and finishes, it may be in performance. Finally, the consumer is deciding because he is in the discretionary position today, he has the choice of anything. For example, you find the Lada car which, I think, today is definitely not of the same standard as some of the more developed countries' vehicles, is being sold in Western countries only on price considerations.

Since liberalization in 1991, India hasn't been able to attract as much foreign capital as it had hoped to or as it should have. At this moment the country is attracting about $1 billion a year. But India needs much more of it to be on the fast track of economic growth. What do you think should be done to attract more foreign direct investment or joint ventures into India?

RATAN TATA: I think several people have said what I am about to say. The foreign investor certainly looks at India being a very attractive market. It has a large middle class. The labor cost is low. The skills cost is even more attractive to set up industry here. But despite what the government's stated policies may be, the reality when someone tries to make an investment here is different.

There is much too much unsaid-formalities or complications that arise when a person decides to come here. It may be at the center; it may be at the states; it may be at different ministries or it may be about different approvals.

Of late, it may be public-interest groups, it may be the environmentalists-it goes on and on and on. And finally, what is happening is that people are not getting a clear signal as to what really is the government's policy on investment. It is different from ministry to ministry; it is different from industry to industry. What is stated as a public policy to attract investment, what is stated when the Prime Minister and others go abroad to attract companies to come to India, is different when foreign investors come.

What India must do, if it is to attract foreign investment ideally, in an ideal world, is to say that this is our policy. If you are complying with these criteria, then we just have some kind of declaration that we have satisfied ourselves that you're complying and you don't need anything more. But here is someone who thinks he is complying, then for months he is tied up in some little thing because this ministry feels that this way it affects "X" or it affects "Y"-and it goes on that way. So there is actually negotiation on the terms of the collaboration, the joint venture agreement has to be agreed upon, the level of his investment has to be scrutinized, the level of his ownership comes up because of vested interests claiming that in this industry you can have 5 I percent and in this industry you cannot have it, etc. I think we have to become much more transparent.

Continuing on that note, do you think that independent of the political establishment, there is a kind of parallel bureaucratic establishment which is holding up the FDI? RATAN TATA: I would say that is true. I would go further and say that behind that so-called bureaucratic environment there may also be a vested interest-business environment-that is making that happen.

"The foreign investor certainly looks at India being a very attractive market.

But despite what the government's stated policies may be, the reality when someone tries to make an investment here is different."

The United States is India's largest foreign investor. Is it because they have more capital to invest here or 7s it because the U.S. thinks that India is a good place to invest?

RATAN TATA: I do not really know.

Probably-I do not want to sound oversimplistic-it's the case that we are an English-speaking country. It's easier for an American company to do business in .

India, or to find a partner in India. In many ways our peoples, the people of India and the United States, seem to have a lot of affinity, as people. Our governments have had different views or different ideologies over the years, but the people of the two countries, I think, have been very compatible. There is a tendency to like the same things. In many ways we seem, today, to be a country with an English heritage but (Continued on page 49)

ALAN GREENSPAN

The Second Most Powerful Man in America Even the above exalted tribute understates the influence of Alan Greenspan, chairman of the Federal Reserve Board, the central bank of the United States, since 1987. His utterances command global attention. A few weeks ago, in a speech in Washington, D.C., he commented on an "unduly escalated" stock market, and financial markets around the world plunged. An economist of the Ayn Rand school of free-market intellectuals, Greenspan has fashioned monetary policies that have kept the American economy ticking. His efficient handling of the stock market crash of 1987 won him nationwide praise. Since the 1990 U.S. recession, Greenspan has steered the economic ship of state with a cool and steady hand. He has kept inflation down and the money markets buoyant. Last March, Greenspan began another four-year term at the "Fed," as it is popularly known. Experts expect him to do what he does best: keep the U.S. economy growingrecession-free and inflation-free. The author believes Greenspan will be remembered "not only as the best Fed chairman ever, but perhaps as the preeminent central banker of the age."

Thank God for Alan Greenspan. As important as who won last November's U.S. presidential election is the fact that Greenspan is still running the Federal Reserve Board-the closest thing the U.S. economy has to an economic pacemaker. In a recent poll of FORTUNE1,000 chief executives, 96 percent backed the chairman's reappointment last year (how's that for an approval rating?). More than half gave Greenspan an A for his performance at the Fed; almost all the others gave him a B. Greenspan's peers think just as highly of him. "He's the best chairman the Fed has ever had," says Allan Meltzer, a professor at Carnegie-Mellon University and longtime critic of Fed policy.

Meltzer isn't just shooting the breeze-he's in the midst of writing a history of the Federal Reserve system. Says Lawrence Lindsey, one of Greenspan's fellow Fed governors: "If the curve you're grading on is 'What's attainable by mortals,' he certainly deserves an A." Not everyone loves Greenspan, of course, and he doesn't walk on water. He presided over one of America's worst recessions as chairman of Gerald Ford's Council of Economic Advisers. Lots of people-including businesspeople-remember that well and think he was and is too worried about inflation and not enough about growth.

There are even some who positively hate him, and concoct dark conspiracy theories about how he's subverting the will of the people to benefit Wall Street.

So who is this guy? And why should we bet that he can continue to keep the economy on track? If you think you know, wait a second.

Sure, you know his public persona: the professorial bureaucrat who speaks before Congress about boring subjects in intentionally ambiguous cadences. But the real man is more interesting. His is a story of intellect and street smarts-of how he learned to examine the clockwork of the U.S. economy and how he built a hugely successful business by explaining its workings to executives. How he turned himself into the ultimate Washington operator and how he became chairman-as if by destiny-of the Federal Reserve just when it most needed him. There's even a lighter side somewhere behind Greenspan's opaque mask: He's a wry observer of the political folkways of Washington, and though he has a monastic streaksometimes spending entire weekends lost in the data, preparing for congressional testimony-he's also a bit of a bon vivant, making the Washington party scene and playing tennis at mountain resorts with

his longtime companion, NBC news correspondent Andrea Mitchell.

Not that Greenspan seeks the limelight. He's happiest when his profile is low. Fed chairmen are in the news in only two situations: when inflation is rising or when recessions happen. The U.S. economy under Greenspan has pretty much stayed out of trouble and has performed fairly well. Greenspan himself seems far more relaxed these days than he did a few years ago. He even told a visitor to his hushed office not too long ago (the loudest noise is the hum of the well-used PC) that he was managing to catch up on his leisure reading-of early econometric theory.

Happily, there is good reason to believe-as Greenspan and many of the Fed's other senior policymakers do-that America will see even lower inflation over the next two years and that the economy will continue to grow, recession-free, through the near future.

But you'll never hear Greenspan promising more than he can deliver. He's a cautious person, and pragmatism, for him, is a way of life. The chances of a recession right now are low, in his judgment.

Greenspan was born and raised in New York City, went to public school and attended New York University-eventually winding up with a PhD in economics. Always interested in public policy, he hung out with libertarian novelist Ayn Rand's band of free-market intellectuals in the early fifties, about the time he got started in economic forecasting. That was also a golden age in econometric research, and chances are that he spent as much time with Measuring Business Cycles, by Arthur Burns and Wesley Mitchell, as he did with The Fountainhead. David Mullins, vice chairman of the Fed from 1991 to 1994, credits Greenspan with inventing a business back in the 1950s: economic analysis for senior business executives. "He was the first to adapt forecasting specifically for CEOs," says Mullins, now a partner at Long Term Capital Management, the quant trading firm. Greenspan was soon in demand as a forecaster and adviser, and eventually wound up on the boards of companies like Alcoa, Capital Cities/ABC, J.P. Morgan & Co. and Mobil.

Greenspan began visiting Washington in the late sixties, first as an adviser to then presidential candidate Richard Nixon. He served in the Ford Administration during the tumultuous mid-seventies.

Along the way, he developed the perfect Washington personality: rock solid in his own beliefs and impervious to the ritual abuse that comes with the territory. He became a master at suffering foolspatiently if not gladly-and he learned when not to take things too seriously.

A story about Greenspan in the Ford years goes like this: Once he was waiting to testify before a Senate committee chaired by the late Hubert Humphrey. Greenspan had back trouble at the time, and Humphrey knew it. As another Administration official's testimony dragged on, Humphrey sent Greenspan a note saying: "Alan, I can see you're having trouble with your back. Why don't you leave, and we'll say you were called by the President." Greenspan replied by note that he was okay. Later, as the questioning of the other official droned on, Humphrey motioned Greenspan to the dais and whispered: "Go. We've got enough testimony. I don't want you to be in pain." Again, Greenspan declined.

Finally it was time for Greenspan's testimony, and the red light came on, signifying Humphrey's turn to ask questions. "Dr. Greenspan," he intoned balefully, "are you ashamed, as you should be, about how destructive your policies have been to this country?"

Greenspan gritted his teeth and answered without smiling.

Such training was invaluable for a future Fed chairman. Think of the ranks of nitwit Congresspeople who take shots at the Fed chairman today during his appearances on Capitol Hill, sometimes as often as once a week and for several hours at a time.

Today Greenspan's power as the undisputed leader of the Federal Reserve system is downright awesome-but he had to earn it. The Fed is a strange governmental creature. It's made up of the 12 regional Federal Reserve banks, each with a president, board of directors, officers and research staff, plus the Washington-based board of governors, with the largest phalanxes of research economists. The Fed is secretive by nature, suspicious of outsiders and possessed of an esprit de corps that borders on fanaticism. When Greenspan was appointed chairman in 1987 by Ronald Reagan, he was greeted with some suspicion. "You get a new chairman who hasn't had a career at the Fed, and there's a period of intense observation," says one Fed official. "Greenspan was different; he was a political guy, a bit of a celebrity." And remember, he succeeded Fed insider Paul Volcker, the towering, glowering legend who had slain the demon dragon of the 1970s: double-digit inflation.

Two things helped right away. First was his manner. Greenspan is libertarian in person as well as in theory-a believer in individual liberty and rights. He treats everyone from hotel waiters to heads of state with respect, and there's not a hint about him of the snobbery that's typical of academic economists. The other things that helped were his mastery of the theory and details of the economy, and his obvious love of data. That impresses people at the Fed, and it can't be faked.

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reenspan's first big test was the stock market crash of 1987. It came just two months after he showed up at the Fed. His cool and decisive reaction to the crashguaranteeing enough liquidity to preclude the cycle of asset deflation and monetary contraction that drove the economy down after the 1929 crash-has been widely praised. Inside the Fed, though, his ability to see that the stock market problem was transitory and his willingness to reverse policy and raise interest rates in mid-1988 were equally impol1ant. It sent the signal that the Fed was determined to keep its foot on the throat of inflation and was willing to take risks to do it. A case can be made that this attitude helped produce the 1990 recession-or at least prevented Greenspan from fighting it more aggressively once it began.

Greenspan bonded, early on, with the Fed's research staff. Fed economists at the time were studying a way of predicting inflation called p* (don't ask). Greenspan supported the project and got involved personally. When the research paper was published, buried in a list of acknowledgments, in alphabetical order, was the name Alan Greenspan. It was a classy, egalitarian touch, and Fed economists beam even today when they tell the story.

Leading by example and winning over the staff is especially important at the Fed because of its idiosyncratic management structure. The chairman's power derives almost exclusi\jely from his position as presiding officer over two committees. One is the Board of Governors-made up of himself and the six other presidential appointees who serve in Washington (it is mostly concerned with regulatory and administrative matters). The other, which holds the real statutory power over monetary policy, is the Federal Open Market Committee (FOMC), made up of the seven governors and the presidents of five of the 12 regional Federal

.

Good Cheer at the Fed

By ART BUCHWALD

he second most important man in America is the chairman of the Federal Reserve, Alan Greenspan, who sets the interest rates for the country. When he sneezes, the whole world gets galloping pneumonia.

Recently during a speech, Greenspan referred to the "irrational exuberance" of the money markets, and Wall Street fell into the Hudson River. People who live in the nation's capital are well aware of Greenspan's power, and when he shows up at a party, everybody tries to stand as close to him as possible, listening to his every word.

The other night some Washingtonians were at Mark Woorman's house drinking eggnog and eating plover's eggs when Greenspan walked in.

"I'm sorry I'm late," he said to Mark. "I couldn't find a parking place."

Our ears perked up. The key words were "parking place." If the head of the Fed couldn't find a parking place in Georgetown, what was going to happen to the Japanese yen?

No immediate reaction was reported on the Hong Kong Stock Exchange. But then he turned to us and said, "I love Christmas because it makes people feel good."

Woorman whispered to me, "How good? Does it make him feel good enough to raise the prime rate by a percentage point, or is he going to put the screws on the banks by lowering it?"

I whispered back, "Don't ask him anything or he'll have to leave and we'll never know what the German mark will go for in Korea."

T

*

*

*

Greenspan sang one chorus of "Silent Night," but there was no hint in the lyrics of how upbeat the dollar would be against the British pound.

Then he sang: "Deck the halls with boughs of holly, fa, la, la, la, la, la, la, la, la."

'That's it," Woorman said. "No Fed chairman sings 'fa, la, la, la, la, la, la, la, la' unless he plans on raising interest rates."

I agreed.

We went into the library to call our brokers. Mark was on the phone first and his face turned ashen. He said, "Tokyo is down 800 points."

"How could they possibly know Greenspan's intentions when we were the only ones in the room?"

"Sony must have planted a bug in his fruitcake."

D From The New York Times Magazine. Copyright Š 1996

by The New York Times Company. Reprinted by permission.

Reserve banks (they take turns voting).

Outside the committees, the chairman has little pure executive power. Running the Fed, then, depends crucially on the chairman's ability to run a meeting. Greenspan, by all accounts, is very good at it. Newly released transcripts of FOMC meetings (they are published with a five-year lag) show him at work, letting all members have their say, softening the edges of disputes and suggesting areas of compromise when there is disagreement. "He shows a lot of respect for other people," says former vice chairman Mullins, "and he has the confidence to defer to their expertise." Greenspan, they say, has only been on the losing side of one vote during his entire time at the Fed, and that was a bank regulatory matter so arcane that no one seems to remember what it was about. "By the time I arrived on the scene, in the middle of 1994, this was Alan Greenspan's Fed from top to the bottom," recalls Alan Blinder. "It was like the Fed was an orchestra being played by an expert conductor."

Blinder, who left the Fed in 1996 to return to teaching, never did figure the place out. He's a brilliant man, widely respected in academia and the pride of Princeton University's economics department. And he has a rare ability to communicate complex ideas, both in print (he coauthored a best-selling introductory economics textbook) and in person. Blinder even had some previous Washington experience, having spent the first part of the Clinton Administration as a member of the Council of Economic Advisers.

But he evidently alienated the Fed staff in a hurry. Blinder announced that he did not wish to serve another term at the Fed in a letter to President Clinton. He expressed dissatisfaction about his treatment by the staff and said that he felt isolated and excluded during his 19 months at the Fed. Blinder also had a substantive complaint about the way the Fed is run. He considers the institution's penchant for secrecy excessive, and he tried to get the Fed to be more open and communicative. He mostly failed. "I can't go into details," he says, "because everything at the FOMC is confidential. I have to respect that, even though I don't agree with it." By lobbying for glasnost, Blinder was setting himself up in opposition to a sacred tradition at the Fed-its insistence on discretion and silence. Fed staffers rarely talk to the press on the record. Interviews with governors are subject to elaborate ground rules, such as how close to the FOMC meetings they can take place. One can speculate that Blinder's agitation for openness was one of the reasons for his isolation. After all, if you feel the place ought to keep its secrets, would you share them with someone who feels it should not?

But Blinder never disagreed fundamentally with Greenspan about monetary policy. While the two differed about such details as the timing of interest-rates changes, he voted with Greenspan through the long series of rate increases in 1994: That lack of dissension is highly significant, since it undercuts the most serious charge against monetary policy in the Greenspan era: That the Fed is needlessly holding back the growth rate of the economy because of unfounded fears of int1ation.

Critics have said this for years, and they're a varied bunch, ranging from N aderite consumer activists to supply-side

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Republicans to trade associations such as Worth magazine in 1995 spent 11 pages tryTALl< ,0 ALAN~ffN.~. the U.S. Chamber of Commerce and the ing to prove that Greenspan was carrying II National Association of Manufacturers. out a secret agenda of free-market fanaticism-unbeknownst to anyone in the U.S. The business lobby has disagreed vociferously with Greenspan in recent years, Government-based on his youthful acespecially when the Fed began tightening quaintance with Ayn Rand. What these monetary policy in 1994. "We scream wide-eyed critics have in common is their loudly whenever we think he's doing a ignorance of the vast literature on monetary wrong thing," says one trade association economics and central banking. Granted, economist, adding wistfully, "If only it's pretty dry stuff, full of math and pragmahe'd let the economy grow half a percent tism. But if you read it, you will be conmore." vinced that there's nothing all that These "growth critics" argue that mysterious, much less outre, about the Fed. changes in economic conditions, espeGreenspan has grown an amazingly Drawing by Eric & Bill. cially increasing productivity, and also in thick skin and pays little attention to the Š 1996 Tribune Media Service. Tnc. AU Rights Reserved. such things as global competition, have more personal attacks on him. According transformed the economy so that it can grow much faster than it has. to people who know him well, if he hears about some piece of The idea that there is a limit, at any given point, on how fast the journalism that's likely to be upsetting, he just doesn't read it. economy can grow without causing inflation is not controversial The only criticism that does bug him is what he sees as among economists. Real GDP growth is a function of how much hypocrisy, when self-serving people pretend to be disinterested. labor and capital are available and how productive those "inputs" Example? When Mort Zuckerman, the owner of U.S. News & are. If the economy consistently grows faster than its potential, inWorld Report (and other media properties), lambastes the Fed in dustries and regions will run out of either workers or materials, or his personal column for raising interest rates, without reminding both-resulting in rising wage demands, rising prices and other readers that his primary business-real estate development-is imbalances. No one knows exactly what that noninflationary one of the industries that gains most from inflation. growth rate is, but most estimates cluster around 2.5 percent.

Alan Greenspan likes to talk in sports metaphors when he's feeling relaxed, so let's hazard one about him: Going into his ninth reenspan has said often that the Fed would welcome year as quarterback of the Federal Reserve, Greenspan is at the faster growth, so long as it's sustainable. But he and height of his powers and the unquestioned leader of the team. He other analysts at the Fed are suspicious of the has a near perfect record (though he fumbles once in a while), and "growth school" arguments. If productivity improvehe usually does better than the oddsmakers expect him to. He has ments really are increasing the potential rate of noninflationary the look of a winner. growth, for instance, the gains have yet to show up clearly in the What remains for him to do? One smart move would be to instinational data. Of course, it may be that the data are bad, and tutionalize the changes he has wrought by adopting a formal inflaGreenspan has delivered thoughtful, technical (and widely igtion target for monetary policy. Several other nations have done this in recent years, including Canada and Britain, and the Young nored) speeches on the issue. But there are also reasons to believe the growth school is all wrong. Roger Brinner, chief economist at Turk monetary economists at the Fed like the idea.

DRI/McGraw-Hill, for example, notes that growth of the labor But the real answer to the question, prosaic though it may be, is that Greenspan simply needs to keep doing what he has been force has been much weaker in the 1990s than in other recent decades, which would drive the potential growth rate down. doing. Monetary policy may be hard to do and hard to describe, Greenspan, above all, is a practical and cautious person. He's but the basic idea is pretty simple. His first job is to keep the. economy growing. A serious 20th-century recession would ruin not about to fool with monetary policy and risk an outbreak of inflation based on nothing more than speculation. Besides, while the Greenspan's reputation-though one milder than the last one might be forgiven. The other thing he needs to do is to keep intrue potential growth rate is unknowable, Greenspan believes there are good indicators that show when the economy is running flation moving down toward 2 percent-or at the very least, keep it from rising. up against its limits, such as a stretching out of lead times in deliveries of goods and increases in overtime hours.

Should he be able to do all that, it will be Greenspan's shadow Most of the other criticisms of Greenspan are less consequential. that future historians see when they look back on the finde-siecle Some "monetarist" economists quibble about the details of moneAmerican economy. He will be remembered not only as the best tary policy. There are the gold bugs, who argue that either the U.S. Fed chairman ever, but perhaps as the preeminent central banker of the age.

D should return to a gold standard or the Fed's monetary policy should be determined by gold prices. Then there are the conspiracy theorists. Most of their critiques revolve around simple anticapitalism or About the Author: Rob Norton is an executive editor of Fortune magazine. populism. Some of them move in even stranger orbits. A profile in

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thing that you put somewhere. Maybe this way of presenting information will click with how people actually store and retrieve things.

BRODY: What other refinements in the Web are you most eager for?

BERNERS-LEE: I hope that the notion of having a separate piece of software called a "browser" will disappear.

A browser is something that (a) only allows you to read and not write, and (b) is a single window on the wgrld. Instead, your entire screen should be a window on the information world, with a small part of it representing what's on your local "desktop." Browser

and operating-system interfaces will become so interlinked that they will, for all practical purposes, become one. Whether the operating system swallows the browser or the browser swallows the operating system, there will be one interface. As with the television and the home computer, the question of which will "win" is really a question about which companies will come out on top; the resultant object in any case will be both.

BRODY: What will using the Web be like in a few years, assuming these developments occur?

BERNERS-LEE: You won't see a browser, you will see a document. You'll follow

some links and find other documents and these documents will leave a trail of documents across your desk. And then you might find that one of them takes you to a store, and in the store you find a shopping cart that you can move around and put into it things that you want to buy. And then at the end of the day you can buy what's in the cart. The code that makes this cart do what it does won't be anything you have bought, but when you first click on the cart icon that software will be automaticall y transferred through the Net to your computer. lnu-OOUcmgth.inl,l P.fWUmIlll"0<"'Oflt'11h~ ~ V1Vl.d<"lo,~>~xalltlg ,.,.<ItId,i."'''oUl",Y1d<o'S"-y''P l.Odlonoo!t.ar.MMX nchnologyby'ego.t.=t\....u.

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BRODY: So software would be acquired on a need-to-use basis?

BERNERS-LEE: Yes, as you wander around the Web, your computer will become encrusted with pieces of software necessary to allow you to interact with and represent to you the things that you're reading about. If you happen to be an astronomer and you've been looking at spectra, then spectrum-analyzer software will allow you to manipulate them. If you're a biology student and you download some images of DNA molecules, then the code to send this DNA will come with a little bit of software that allows you to spin it around and break it up. And so your computer's software ability will not depend on where you've been shopping but just where you've been reading-where you've been browsing on the Web. The very idea of software will become a bit more submerged.

It will be seen less as a discrete entity that you go out and buy and more as a support to the objects that are part of the information space. The software will move on and off your machine without your having to worry about it.

BRODY: What you're talking about sounds like a world in which far more people write software than do now.

BERNERS-LEE: Yes, but they won't think of it as creating a program. They will just be creating documents, but the software

needed to view and manipulate these documents will be part of it. Tables of data will have spreadsheet software built into them, for example, but the person writing the table certainly won't have to write a spreadsheet program. Java is a step in this direction. But an incredible amount of work needs to be done to achieve the user interface that I have rather glibly described. We also have to establish a level of trust that makes it possible for information to move from the Net onto your computer and to do work, possibly including writing files onto your hard drive.

You want to make sure that it's not possible for a malicious person to be able to send you something that will look at your personal files and override them, or broadcast their contents.

BRODY: Are there any other items on your World Wide Web wjsh list?

BERNERS-LEE: I want better international access, especially in developing countries. And I'd like to see a more organized market of Web server space, so that everybody with an Internet connection could put information out cheaply. I expect that computers able to use the Web will become fairly ubiquitous, about as pervasive as televisions are now. In fact, the last computer I bought can play video-when you have a computer and good Web access, who even needs a television? I don't think everybody will want to post information on what amounts to a global bulletin board, but I certainly hope that every business has a Web page. I would also like to see deregulation of telecommunications globally so that Internet access to the home becomes cheaper. The United States is better than Europe in this regard, but even here Net access is not as cheap as it could be.

BRODY: Why do you think the Web has resonated so strongly with today's culture?

BERNERS-LEE: The openness of the Web is a powerful attraction. Everyone can not only read what's on the Web but contribute to it, and everybody is in a sense equal. There's a sense of boundless opportunity.

0 About the Author: Herb Brody is senior editor of Technology Review magazine.

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His athletic endeavors; which he is delighted to recount-he confesses to "personal vanity and desperately trying to hold on to youth"-often bring him into the spotlight, and into the hospital. He has broken more bones in the past three years than a Hollywood stuntman. During a bike race in 1992, he shattered his elbow. Six months before, while surfing, he broke his neck and punctured a lung.

Larry Ellison's influence extends to Washington and the halls of academia as well. He has called himself an FO.B., and gave $95,000 to the Democratic National Committee in support of Bill Clinton's 1992 presidential campaign. He didn't endorse a candidate last year, perhaps because he is

Even if Oracle isn't a household name, with almost 50 percent of the world's relational database market tightly in its grasp, Ellison believes this is his moment to become the software industry's No.1 son. also friends with Jack Kemp-who sat on Oracle's board until August 1996. He lunches with Silicon Valley Congressman Tom Lantos, and once threw a party where five Nobel laureates gathered on the deck of his house to jaw about the latest in molecular biology research.

The high-powered schmoozing with scientists reflects Ellison's main interest in his company-technology.

In fact, he says, his role at Oracle is really just to run R&D: "It's not that I don't think sales and support are important. I'm just not very interested in them, and I'm not very good at them."

He pretty much proved his point in 1991, when he nearly ran the company into bankruptcy. Customers grew so disgusted with buggy software and inflated product claims that many withheld payment; a McKinsey study found that customers thought of the company as a bunch of "thieves, crooks and bandits," as Ray Lane puts it. Earnings fell by over $90 million, and into the red, in 1991; the stock sank by 61 percent. Ellison says: "Anyone who had any experience could have seen what happened coming a mile away. I was clearly a completely inexperienced and incompetent CEO." He hired Lane and Chief Financial Officer Jeff Henley, who today run most day-to-day operations while Ellison plays in the labs. Lane says: "He talks to the kids. That's where he connects."

Maybe he's been talking tOlhem too much. Ellison's great rival is also a self-styled technologist, but while Gates can get his employees to play nicely with each other, Oracle is infamous for its intramural competitions. According to Christine Comaford, a technology strategist with C2

These countries can replace India as a cheap destination for developing software. But India still has certain advantages like the English language (which the Philippines has too). We also have business practices that are ideally suited for transacting business with Americans and Europeans. But this advantage can cease to exist at any time. Therefore we have to move up in the value chain. We have to develop high-level skills which can help establish us as a major software power.

We must become strategic advisers to major global companies. I do not think any of the Indian software firms are taking up such lucrative work. There is a lot of challenge and rewards in these types of work.

Q. Oracle believes that the future belongs to NCs and not PCs. What are your global game plans?

A. Our global game plan holds good everywhere, perhaps with a little bit of local flavor here and there. Our cofounder Larry Ellison would be happy to see a world which is moving away from PCs and toward network computing. A network computer has some inherent advantages. It is easier to operate at much lower cost and has very low ongoing maintenance costs compared to PCs. The NCs are particularly relevant to countties like India and China and they are more democratic and user-friendly than current PCs. Q. You have not mentioned your game plans.

A. Our game plan is to proliferate network computing solutions. The low cost ofNCs versus PCs will enable us to do so.

Computing is only available to 15 percent of the world's population. In countries like India and China, the figure is much less. We feel that instead of using expensive PCs with wordprocessing, E-mail, spreadsheets, time management, etc., use NCs to access these applications on the networks. One big advantage is that the security of the system is managed by the network itself. Our approach has been endorsed by most of the computing firms all over the world, such as IBM, Sun, etc.

The only exception is Microsoft, which is concerned about the likely impact such cost-effective devices will have on its own market.

Q. Do you think that the demand for NCs will go up phenomenally in the corning years?

A. We certainly feel that networking computers will become popular worldwide due to the inherent strengths and cost efficiency. In India we expect to do well. In India the opportunities are significant. We were to increase computing ability at relatively low cost.

Q. Does this mean that PCs will become obsolete?

A. No. The need for PCs will continue for complex solutions which may need expensive stand-alone computing as opposed to an NC. But as NCs become more popular and

Ventures in Mill Valley, California, it could be the company's undoing. "I have never seen a company that has so much infighting," she says. "It's phenomenal. At Oracle they don't hold hands and sing 'Kumbaya.' They'll be holding one hand and have a dagger in the other."

Lane acknowledges the problem: "Most Oracle employees have a love-hate relationship with the company. It gives us a competitive edge, but no one feels secure. The first couple of months they work here, there's excitement on their faces. Then all of a sudden it's like a deer in the headlights.

They just go, 'What did I do to myself?' " But the engineers stay-their average tenure is ten years-because they're Ellison's fair-haired boys, and well paid too. So is Lane. His net worth was under $5 million when he came to Oracle; now it is $30 million.

Ellison wants the long knives at Oracle to be out for Microsoft. Part of his attack plan is to do whatever he can to call attention to Oracle's name. The company got its feet wet three years ago with interactive-TV (lTV) trials in Britain, partnering with British Telecom and Apple Computer to deliver video on demand to a handful of Brits. Oracle took part in similar trials in the U.S. The Age of ITV was postponed when the players learned how much it would cost. But the projects paid off for Oracle nonetheless. The $3 million it spent on advertising ITV put Oracle on the radar screens of people outside the information-services departments of FORTUNE500 companies. In a 1995 survey, 40 percent of respondents recognized the name Oracle. In 1992 only 2 percent did.

Still, names like Microsoft, Apple and IBM are far more likely to spill off the lips of the world's ordinary Joes. So Ellison has begun a new campaign to win attention. If it works, he'll shore up his main line of business. But what he really wants, in his ostensibly new, mellow, refined way, is to cut off Microsoft's air supply.

As audacious as it sounds, Ellison has declared war against the Windows-based Pc. He argues that today's personal computers are too expensive and complicated for most people. In their stead he is talking up a new class of inexpensive appliances called network computers (NCs), which will be easy enough for anybody who has ever used a telephone.

The premise behind the NC is that most people need an apparatus only for simple tasks-word processing, preparing presentations, exchanging E-mail, Web browsing-and not a PC loaded with dozens of applications. But a musclebound PC is the only choice today, says Ellison, because Microsoft has no competition: "It's a little bit like the old Soviet Union deciding how many size 8 brown women's shoes they're going to make this year."

NCs, by contrast, will assume any number of guises.

Some may look like today's portable and desktop computers, but they will also take the form of screen phones, set-top boxes and TVs. The common element, and best of all from (Continued on page 46)

Q. Ever since you have been operating in India, what are the changes you have seen in the business scenario?

A. Several changes have taken place. I feel that India's business leaders have an increased awareness of the need to become more competitive, particularly in the manufacturing sector. There are visible qualitative changes in the vision of leaders of some of the public-sector undertakings (PSUs).

They are becoming more proactive. Yet, there are a number of PSU executi ves who need to be put in touch with the real world. But we still lack a coherent and integrated development policy. To fully exploit our core competencies and tremendous emerging opportunities, we must. participate more actively in world forums like the World Trade Organization (WTO). While we have progressed, India needs to be a more proactive and influential player in these powerful groups.

Q. There are perceptions in India about the role of MNCs as the domestic sector does not seem happy to welcome them.

What are your comments?

A. That is a negative perception. In the real world, the only way to grow stronger is by facing competition. Postponing or slowing down this process can damage our future competitiveness. That is not good for the majority of people.

Q. We have been talking about the WTO. What are the benefits that would accrue to India by participating actively in the WTO and similar forums?

A. First of all, our programs have to be taken in a relative context with 'other emerging and developing countries. We have to realize that the world is not waiting for us. Our success or failure primarily depends on how actively we engage ourselves in these forums. To make our presence felt and to intensify the process of opening up, we have to participate in international forums and trading bodies. We have to put in place a policy framework. You asked about the benefits that India will achieve by participating in these forums. The biggest advantage will accrue to the consumers. While the economy opens up, the consumers would be able to buy quality goods at the most competitive prices. By knocking down the artificial tariff barriers, the goods become really cheap-leading to a better quality of life for the common man. Let me take the example of information technology. The average duty, a few years ago, was 85 percent. This is presently down to 30 percent or so, and I hope that it will be further scaled down.

Q. But there is a strong resistance to such opening up.

A. Yes, there is strong opposition to such reforms. This comes from uncompetitive industries. This is true univer(Continued on page 46)

ON THE LIGHTER SIDE

Drawing by Eric & Bill; © 1996 Tribune Media Services, Inc. All Rights Reserved.

"He'll never wear out. He has no moving parts!"

Reprinted from the Saturday Evening Post. © 1995.

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Ellison's point of view, is that NCs will have no hard drive.

Instead they will hook up to the World Wide Web or a corporate computer network. All the data and applications will be stored in-you guessed it--databases on servers connected to the network.

If that happens, all these appliances could be tethered to Oracle technology. The NC itself-the hardware, the operating system and even the browser-would pale in significance compared to the network and the data residing at the other end of the pipeline. Ellison and his team modestly compare their work to rebuilding the Library at Alexandria, which was destroyed in A.D. 391-the last time all the world's information was stored in one place.

Ellison has plenty of help on his anti-Microsoft crusade.

Aligned with Oracle are dozens of technology players, including Sun, IBM and Netscape-all of which would love to break Microsoft's hammerlock on the desktop. A handful of hardware companies, including Olivetti, Nokia, Uniden and Acorn Computer, have also announced plans to build NCs. Still, industry analysts are not taking the NC too seriously, at least in the early going. Analyst Jim Mendelson of SoundView Financial in Stamford, Connecticut, says: "The NC does have a meaningful market, but I don't think it threatens the pc."

Ellison remains undeterred. After all, the NC, like ITV before it, is raising Oracle's flag before the public. "Everyone thinks that Microsoft's dominance is an inevitability," he says. "Of course, everyone thought that IBM's dominance was an inevitability too."

Besides boosting his database business, Ellison hopes the NC will help turn Microsoft into lunchmeat for an Oracle sandwich-and undo Gates. Oracle will continue to apply pressure from the top of the market-a task made easier by Microsoft's preoccupation with its war on Netscape.

"Then," says Ellison, "if we can sneak underneath Microsoft with appliances that are much cheaper and easier to use than PCs, rather than Windows everywhere, it could be Windows nowhere."

A ridiculous statement? Jim Allchin, who runs the Microsoft division responsible for high-end server software, laughs when he hears Ellison's claims. "A large chunk of Microsoft's $2.1 billion in R&D spending is going to our server business," he says.

Then again, Ellison can afford to be preposterous. He is poised to prosper even if he is wrong. If the world becomes a network of Windows machines, he still wins out, because any network will depend on Oracle's technology.

Besides, Ellison's claims about his business are rarely just about business. For him, this is personal. In the world according to Larry Ellison, Bill Gates has just been keeping his ~w~.

0

About the Author: Janice Maloney is a staff writer for Fortune magazine.

sally, not just in India. We should, however, seize the moment and embrace the new opportunities created for the Indian consumer.

Q. To change the subject a bit, does Oracle have any corporate citizenship programs?

A. We do undertake socially relevant programs. Before explaining the details of these programs, let me say that we have a "vision" in this field also. We like to provide assistance through direct involvement without seeking publicity. We normally do it in partnership with appropriately qualified agencies. Let me explain with a project in Delhi.

There is a slum colony in trans-Yamuna. The inhabitants are mostly Bangladeshis. There are many school-age children. We fund the expenses incurred for running four classes in the school. The project is being implemented by the Delhi Police. Additional Commissioner of Police Kiran Bedi took the initiative with help from charitable organizations like the HopeFoundation. We have thus far funded the annual cost of running four classes in the school, and we hope we are helping children to make a new start.

Q. Mr. Kaul, could you tell us about your educational and professional background?

A. I was educated in several countries as my parents were in the Indian Foreign Service, and gave me the opportunity to move with them. Their travels took me to Indonesia, Scandinavia, the Caribbean, England, Germany, Romania and many other places. I graduated in economics and psychology from the London School of Economics.

Q. What about your professional experience?

A. I have worked in the information technology sector since 1976. Prior to joining Oracle five years ago, I worked with Olivetti, Wang Laboratories, a financial information provider. I ran my own consulting company in England. I moved from the United Kingdom to India three-and-a-half years ago, specifically to set up Oracle India.

Q. To conclude, let's return again to the NC-PC battle.

Oracle global CEO Larry Ellison said, "Rather than windows everywhere, it could be windows nowhere." That's a strong statement, but we know that Ellison likes strong statements.

What do you say?

A. I think Larry's words are very positive. We've both talked about vision. Let me conclude by saying that Oracle has a vision of a brave new world of network computers. It is a wonderful vision of a new world in the making. It signifies the proliferation of computing via NCs and heralds a productive, vibrant and proactive networked economy and society.

That is our goal.

0 About the Author: Joseph Thachil is the 'editor of Skyflier magazine and afreelance economic writer.

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very American in many other ways. In addition, the opportunities as seen by American companies in India are great.

adding approximately 18 rrtillion people every year-an Australia or a Malaysia.

There is a large population under the age of 16 for whom we need to find jobs. We will have a very great potential problem unless we deal with it now. I do not have a solution for what needs to be done. To curb population growth, clearly the very draconian means that were undertaken at one time is not the solution.

Tata Steel has been very successful in bringing down the population growth in Jamshedpur by educating the women, particularly when they come for checkup for their second childbirth.

Our' experience shows that women seem to be much more adaptable to the need to practice birth control than men.

I think each corporate entity should consider its social responsibility to make a contribution in that area. But not very many companies undertake social responsibility in the communities in which they operate, or even have a concern about the quality of life in the community around them. So the first thing to do is to educate the companies to believe that they have that responsibility to the community in which they operate.

"In many ways the people of India and the United States seem to have a lot of affinity ... we seem to be a country with an English heritage but very American in many other ways."

We have a large number of young bright technocrats and other professionals graduating each year from our educational institutions. But many of them head Westward rather than work in India. In afew years, Indian software engineers have begun to dominate, make their presence felt, in America:S Silicon Valley. What should be done to reverse this trend, so they workfor India rather than somebody else?

RATAN TATA: Why only in Silicon Valley? The best Indian doctors dorrtinate major American hospitals. You see many Indians in NASA and other very highly respected engineering locations. You see Indian professors at the Harvard Business School, etc. The very unpleasant answer to that query is that what we are not providing is the environment to stimulate the best of our rrtinds. We are not providing the environment for the best technical people to find satisfaction. They may like to come back.

But what they need is to be where the action is, and the action is not here. It's not money alone. I think many of them are dedicated enough that if there was a real excitement in their field here, they would come back. Maybe what we need to do is to create an environment where Indian business can own companies where the action is, which rrtight attract Indians in the United States or elsewhere to come and work for that company.

Since you head the grandest and the oldest organization in India, how would you elaborate on your House diversifying into what we call the modern sector or frontier sector. What is your vision for your House in the next ten years?

RATAN TATA: I think we are going through an exercise of refocusing on ourselves, on where we are. We are consolidating our business diversity into what one might call our areas of core competencies or core businesses. Our endeavor in each of those businesses would be to be within the first three in the country, or we should question whether we should be in those areas.

An important part of those core businesses is not our historic businesses only, but also the newer frontiers of information technology, advance materials, etc.

We have this problem of over-population. There are too many people. The result is some of our growth is frittered away in feeding the masses. What do you think should be done to bring down the rate of population growth?

RATAN TATA: You have touched on what I would consider to be India's No. 1 problem: population growth. As we all know, we are

What kind of world do you visualize for India in the near future?

RATAN TATA: I am very optimistic about India's future. It is true that India has been a sort of a caged tiger. Its real entrepreneurial spirit, its innovativeness, the true potential of its people and the country have to be unleashed and to be opened up. What we need is an environment that stimulates that. I thought that when we embarked on liberalization in 1991, we started on the first steps of making that happen.

We keep talking of direct foreign investment by way of investment in industry. What about tourism? We have a beautiful country with wonderful natural resources, lovely beaches. What do we attract-a little over a mj]]ion tourists a year, less than what Bangkok does in a year as one city. Those are the things that, among others, are the potential of the country, which are not being exploited.

But you're starting to see those kinds of things happening.

You're starting to see, as India opens up, people considering that India is a destination worth considering, India as a place worth building a plant.

I am very bullish on the fact that India will be an important player in this part of the world. I think there is tremendous entrepreneurship even in the small shopkeeper in India-upward.

Given that chance, India should be a terrifically prosperous country.

0 About the Interviewer: Kumar Ketkar Maharashtra Times published from Mumbai.

is editor-in-chief

of the

that sit in AOL's own network and hold facsimiles of the Web pages most often requested by customers. This so-called data caching helps AOL deliver better service.

Subscribers get to see these pages much more quickly than if they had to catch a wave all the way across the Internet. As with so many of today's investments, AOL's also happens to benefit the Net as a whole. By keeping subscribers within one network, the proxy servers alleviate some of the congestion that clogs the Internet. "If we didn't take this approach," says CEO Steve Case, "Web sites might be brought to their knees by the sudden influx of [our] traffic."

The telephone companies have an alphabet soup of technologies aimed at turbocharging phone lines. One result of that effort is faster Net service for those who can afford it. ISDN (integrated services digital network), for example, has been marketed in limited ways by Baby Bells for over a decade. But it caught on only when it became popular with techies hungry for speedy home Internet service. An ISDN modem delivers data five times as fast as a standard modem. But ISDN is still hard to get, difficult to install and expensive.

US West, GTE and Bell Atlantic are experimenting with a similar technology, called asymmetric digital subscriber line (ADSL), that promises Net surfers download speeds comparable to those of Tl lines. There's a hitch, though: ADSL conveys data back from your PC to the Internet at a much slower rate. That probably makes ADSL an interim fix-futuristic applications like videoconferencing from your PC to your grandchildren's PC may require equal bandwidth in each dir~ction.

Like the phone companies, cable outfits believe the biggest future profits lie in selling customers a wide array of premium services. The cable companies hope to cash in on a big bandwidth advantage: The lines they use to deliver TV to the home are far more capacious than telephone wires. By introducing a new breed of modem that will let homeowners use those lines to download data at more than 300 times the speed of a 28.8 kbps modem, ComCast, TCI and Time Warner all plan to jump into the Internet game in a few areas. Most services will

Cable TV outfits hope to jump into the Internet game by introducing a new breed of modem that will let homeowners use cable lines to download data much faster. charge between $15 and $45 per month for unlimited use; that fee should include the cost of leasing cable modems built by General Instrument, Hewlett-Packard or Motorola. But early cable PC services will have drawbacks: they won't be available everywhere, since, according to a report

by Forrester Research in Cambridge, Massachusetts, only about 20 percent of existing cable networks can handle two-way transmission. Those that do will upload data from your PC at a much slower speed than they download from the Internet. nother promising technology would dispense with wires altogether. Hughes Electronics, purveyor of the hot-selling DirecTV satellite video service, now offers an Internet service called DirecPC. It relies on a two-foot satellite dish (not the same one you use for TV) to pull in data at ten times 28.8 kbps modem speed. DirecPC is expensive-more than $1,000 for the dish, software and installation, plus up to $40 a month in service charges. You also must pay for a standard Internet account, so you can request Web pages and send E-mail over the phone lines -DirecPC data flow just one way, from the satellite, not to it. But Motorola and other companies are exploring ways to retrofit their satellite systems to support two-way Internet access. And in the next ten years, Craig McCaw's $9 billion, 840-satellite Teledesic project may spread two-way, high-speed Internet access around the world [see SPAN, August/September 1996].

These technologies do little to help corporations that have opted for the Internet as the way to connect to important customers and tie together far-flung offices. The pub-

A

lic Internet offers them a way to avoid the expense of leasing dedicated lines from telephone companies. "By the turn of the century, the public Internet will usurp the private corporate data network," says Tom Pincince, an analyst at Forrester. But even if valuable corporate data are safely encrypted, sending information via the Internet's myriad routers can be unnervingly slow and unreliable. Corporations are looking for Internet service providers that can guarantee fast and efficient service.

That's why the biggest Internet providers-like MCI, UUNet and ANSare spending to bump up the performance of their sections of the Net. For starters, they are snapping up specialized digital switches that let messages leapfrog intermediary Internet routers. (Demand for switches has set off a free-for-all among suppliers like Cisco Systems, Cascade Communications and 3Com.) They are also allying with one another, closely linking their networks to speed customers' traffic by allowing it to bypass small providers.

To earn adequate returns on the added bandwidth, MCI and others are likely to charge more for certain services. "People need to start paying for what they consume, because if they don't, there will be no economic incentive to keep building the infrastructure," says Vinton Cerf, a founding father of the Internet who is now a senior vice president at MCr. Users willing to pay more will get premium services such as guaranteed, secure on-time delivery. If you don't have that kind of money, don't worry-basic service at cheap rates will still be available from both megaproviders, like Sprint, MCI and AT&T, and smaller localoutfits.

Of course, the Internet that will emerge from all these changes-different customers paying different fees for different levels of service-is hardly the egalitarian Net envisioned by longtime users, who cherish its sense of community. But these alterations are crucial steps toward electronic commerce, interactive TV and other innovations that will help jazz up life in the 21st century.

0 About the Author: Alison L. Sprout is a contributing writer of Fortune magazine.

officials to a holiday resort and provided them generous amounts in the political winds. Thus a company asked to pay a bribe by one of shopping money. The difference between this and an out and out government suddenly finds itself in the brig when a different party or faction comes to power. The Chinese President, Jiang Zemin, has bribe may not seem obvious.

More optimistic are people like Francois Vincke of the used anticorruption drives to pull the lUg from under political rivals.

International Chamber of Commerce and secretary general of Recently he had to temper his enthusiasm for such programs bePetrofina, Belgium. "I don't believe everyone is doing it [bribing] cause so many foreign investors were getting caught in his nets that and has to continue doing it to stay in the race." People like him arcapital flows into China were being threatened. gue that commission payments at least find their way into the The reverse is also trne. Regimes that offer transparent corruption-free systems of bidding and contract approval are more attracledgers and provide tax inspectors the opportunity to judge whether the payment was legitimate tive to foreign investors. Costs are or not. Only if you get it in writing less, risks reduced. The state govfirst is interpretation possible. His ernment of Gujarat, among the most organization issued a report last year aggressive wooers of foreign investthat banned bribes, kickbacks, offment in the subcontinent, includes the-book accounting among its its stringent antibribery safeguards members. It urged that intermediamong the package of incentives it aries be paid only "appropriate reproffers to would-be investors. muneration for legitimate services."

Corruption, at least when the meA consequence of all this diplodia find out about it, has an insidious matic footwork and the large number and corrosive effect on popular supof high profile business scandals port for political institutions and worldwide has helped raise conspecific policies. Particularly in sciousness about corruption to the case of newly democratic unusually high levels. The first regimes or governments that have known nongovernmental organizabegun economic reforms.

The "Your HonOl; if 1knew I'd get caught, tion to exclusively combat corrup1996 International Chamber of 1 never would have done it. " tion, Transparency International, was Commerce report warns that if corDrawing by Eric & Bill. Š 1996 Tribune Media Services, Inc. founded in 1993 by a former World ruption increases at its present rate it All Rights Reserved.

Bank executive. The group's nation"could undermine the most promisby-nation corruption ratings are now ing development of the post-Cold widely cited by the press and in official reports. A U.S. State War era, the spread of democratic governments and of market economics worldwide." COITUptofficials and businessmen are likely Department official said this late last year: "For a long time there was a view that the United States was naive, this [fighting corruption to oppose more open societies. Frank Vogl of Transparency in international business] wasn't a real issue that national governInternational put it bluntly: "Corruption is patently the enemy of ments could deal with. We've gotten past that point." democracy." Olusegun Obasanjo, the respected former ruler of While the U.S. may be motivated by a fear of losing business, Nigeria, warned that "Young people now have as their role models the developing world has a strong self-interest in keeping corrupthe leaders who have made money as a result of corruption. tion out of the international economic arena.

Corruption is destroying the future of our society." He has since One reason is that a reputation for corruption can have a dampbeen arrested by Nigeria's military regime, rated among the world's most venal. ening effect on foreign investment flows into a country. Especially as there are so many alternative places these days for a firm to take In the end, corruption is about money getting in the wrong its money. All companies know that paying bribes is no guarantee hands. It can ensure a nation will spend money and get little or of getting economic leverage on a deal. Many companies find their nothing in return. The story is told of a turn-of-the-century English reputation muddied for making such payments while having no salesman peddling warships in the Balkan states. He paid a succession of commissions to officials to win a contract for a cruiser. contracts to show for their trouble. U.S. companies, at present uniquely, run the additional headache of facing criminal prosecuEventually one official made an exorbitant demand. The tion at home if found out.

Englishman complained: "How can I build the cruiser?" The reply The financial costs of bribing are not burdensome for the biggest was quick: "What does that matter, so long as you get paid and we companies. Privately multinational corporations state that the cost of get paid?"

0 conuption in Asia, for example, adds only a 5 percent premium to their expenses. What hurts is the degree of uncertainty that business About the Author: Pramit Pal Chaudhuri, a graduate of Cornell by bribe introduces. According to the risk analysis company, University, is senior assistant editor of the Telegraph, Calcutta. In 1994Political and Economic Risk Consultancy, the main danger in pass95, he was a Hubert H. Humphrey Fellow at the University of Matyland where he studied topics related to international economics. ing out bribes in Asia is finding oneself behind bars if there is a shift

Spice Trade Renaissance AVT-McCormick, the only joint venture in Kerala for spice processing, is giving India a name for quality products.

Its business philosophy: Make the best, someone will buy it.

lmost five hundred years ago the Portuguese explorer Vasco da Gama sailed around South Africa and landed in Kerala, the first European in modern times to set foot on Indian soil. He landed in a place called Kappad, some IS kilometers from Kozhikode, better known as Calicut. The year was 1498.

Da Gama was soon followed by the Dutch, then the French, and finally the British. They all came, braving the wind and the wave, the fatigue and the sickness of months at sea, hunting for the same treasure: spices. Except for the royalty and the very few rich, spices were a luxury in Europe of that era.

Today, of course, it's a different story. There's perhaps no place or people in the world whose cuisine does not include spices, which add delectable distinctive aromas and flavors to a host of dishes.

Kerala, in fact, had been the fabled land of spices long before the Europeans arrived. By the 2nd century B.C., Greek, Roman, Ethiopian and Arab traders had already established trading stations in Kerala for the export of pepper and other products. These contacts, in turn, led to the arrival of Christianity and Islam into Kerala-the first place in India to host these two faiths. (A Jewish architect named Thomas Didymus, one of the 12 disciples of Christ, came to Kerala in A.D. 52 from Syria and effected a mass conversion of local people to Christianity, thus creating the Syrian Christian Church long before the Roman Catholic Church was established in Rome. Still later in A.D. 643, came a disciple of the Prophet Mohammed named Malik Ibn Dinar.)

A

One of India's most verdant states, Kerala is nothing if not water and green. The entire state is dotted with hundreds of rivers, estuaries and backwaters and dense forests, rubber trees and coconut palms. (Kerala probably got its name from "Keram," which is the local name for coconut palm.) And if it was the spice trade that made Kerala famous in the past, the same trade is enjoying a renaissance today-thanks to liberalization.

One visible sign of this resurgence can be seen in Aluva, about 40 kilometers from the busy port of Cochin, where Vasco da Gama founded the first European factory in 1502.

There's a legend in Kerala that wily Vasco da Gama asked the local ruler of Kozhikode for a favor: to let him take back to Portugal a few rooted pepper vines as a souvenir. And when the ruler's prime minister advised his king against granting the request, the ruler dismissed it, saying: "They can take our pepper but they can't take our climate." The Portuguese, however, planted the pepper vines in their tropical colony of Brazil, and today Brazil is Kerala's biggest competitor in the international pepper market.

The area around Cochin is a microcosm of Kerala-full of inland waterways and dense forests. Cruising on those placid backwaters, which in the early hours sport an almost ethereal silvery sheen, and later driving through the town's bustling bazaars and narrow lanes to Aluva, one can see green fields winding and twisting between raised banks of land and around lush green hillocks crowned with little ham-

lets. As you savor these picturesque sights through 40 kilometers of driving, all of a sudden you begin to smell the aroma of cardamom. You look around. You see two tall buildings, striking a discordant note amidst their green surroundings. One of these houses the "spice mill" of AVTMcCormick Ingredients Ltd., a 50-50 joint venture between A.V. Thomas Group of Chennai and McCormick and Company, Inc., of the USA. The other structure houses the AVT Industrial Products Ltd, a wholly A.V. Thomas Groupowned company.

With an annual capacity of 18,000 tons, this plant has the capability to clean, pasteurize, grind and blend to customer specifications a wide range of spices-pepper, cardamom, chilies, turmeric, ginger, celery, fenugreek, fennel, coriander. You name it, they process it.

Although the 72-year-old A.v. Thomas Group is engaged in diverse businesses-apparel, leather goods, plant biotechnology, oils and extractions, project engineering-spices have been one of its oldest and major businesses. The group is India's largest producer and exporter of cardamom, the queen of spices.

Left: Technicians at A VTMcCormick's "spice mill" in ALuva continuousLy conduct microbioLogicaL, physicaL and chemicaL tests in the Lab to ensure totaL quaLity of processed spices. Far Left: AVTMcCormick maintains sampLes of each shipment for anaLysis in case of a complaint Later.

Left bottom: Finished goods, packaged in worLd-class paper sacks or corrugated cartons, are containerized at the factory to ensure highest sanitation standards.

AVT believed that competition would sizzle as major world players in spice processing and trade entered India in the wake of liberalization. They also believed that liberalization offered the group new opportunities to prop their products and profits. So AVT sought new ways to differentiate and diversify its product line. It decided in 1994 to set up a spice-processing plant as a joint venture with McCormick, one of the group's major foreign clients and the world's biggest spice company.

"AVT-McCormick symbolizes a paradigm shift for the Indian spice industry," says Managing Director M.S.A. Kumar. "You see, India is still an important global player; India holds about 40 percent of the world spice market. But until now we have been mostly exporting raw spices. We were losing money on what processing adds to the value of spices, and this was quite a significant loss."

Kumar adds: "McCormick was equally keen to set up the plant in Kerala as it offered an economy of location since the state is the hub of spice cultivation in India. For us it was a

unique opportunity to use McCormick's technology and expertise to process spices and thus add value to the raw spices at source. Value addition by processing is about 40 percent.

That's enormous."

Although McCormick is the world's biggest seller of spices, seasonings and flavors, it's not a FORTUNE 500 company (it figures in FORTUNE 1000). But McCormick has something more endearing and enduring going for it. It is rated among America's hundred best companies to work for.

McCormick was started in Baltimore in 1889 by 25-yearold Willoughby M. McCormick (WMM) with a staff of three. Its first products were root beer, flavoring extracts, fruit syrups and juices-all of which were sold door-to-door.

The company's motto was "Make the BestSomeone Will Buy It," a commitment that is as sacrosanct today as it was 108 years ago. No wonder, McCormick has a lock on much of the world's flavorings market. It accounts for about 40 percent of the spices sold in American grocery stores and supermarkets. It also sells flavorings directly to most of the top 100 U.S. food

manufacturers and restaurant chains like McDonald's.

Belief in quality has rewarded McCormick. But there's more in its claim to fame and success. Another factor is the astounding loyalty of its employees-the result of McCormick's progressive management practices, some of which, when they were first introduced, were truly revolutionary.

It was unprecedented in the 1930s when Charles P. McCormick (CP), who succeeded his uncle WWM as head of the company, abolished time clocks, cut working hours from 56 per week to 45, increased wages by 10 percent and started involving employees in decision-making through multiple management boards. McCormick also was among the first U.S. companies to offer employees medical and life insurance and profit-sharing.

"Our processed spices must meet with international standards of food safety and hygiene. Otherwise who'll buy our product?"

Add to this list the company's annual "Charity Day" and you have a perfect recipe for what makes McCormick a good place to work. Charity Day, started by CP in 1941, is the one day a year when the company keeps its plant open on a Saturday for the employees who want to work to donate their wages to the community. The employees' earnings on that day are matched by the company and given to charities of the employees' choice. On a recent Charity Day, almost $800,000 was donated.

Reflecting on CP's legacy, a former McCormick chief executive once said: "There were people who thought he was a communist because these [management practices] were unheard-of [in the 1930s]. Turning over your business to employees to run was considered a radical concept. In some respects I think he probably pioneered a lot of the systems that are really coming into [their own] in the '80s and '90s."

McCormick has grown a great deal since CP's days, but it retains much of his spirit. The informality and people-orientation in CP's era still prevail. Says William Smith, a lab technician: "It really has a family atmosphere. When I first started working here I didn't believe it, but then I found that was just the way it is. It's contagious."

In recent years, McCormick's Total Quality Program has extended employee involvement to include lower-level workers.

Management pundits marvel at the way McCormick has decentralized decision-making, broken down organizational boundaries, and promoted cooperation between labor and management.

"Quality" is also a word that liberally spices every conversation you have at the AVT -McCormick plant near Cochin. Everyone talks about quality, and their efforts to make a product that's second to none in the world. In fact, the huge plaque that greets the visitor at the mill's reception area has these words engraved on it: "Quality is our signature."

"We simply can't afford to compromise on quality because we're dealing with a food item," says Kumar. "There's such fierce competition in the world spice trade today. Our processed spices must meet international standards of food safety and hygiene. Otherwise who'll buy our product?

Though Indian industry is now becoming conscious about quality, for long Indian goods in general have suffered from shoddy quality and brought a bad name to India. So, when it comes to Indian products, importers have some kind of an in-built bias against them. We have to change this mindset with quality. I can proudly say that we're succeeding in this.

Our processed spices are among the finest in the world."

Quality Control Manager Ravindran Nair goes a step further. He says that theirs are the finest spices in the world. "I have no doubt about that. We get samples from around the world and we compare them with our spices and I can confidently say that we produce the best. We not only meet customer specifications but often exceed them."

What they say is borne by the facts. In less than a year since it went into commercial production in May 1996, AVTMcCormick has not only notched up sales of Rs. 250 million but, what is more important, it has created a niche for itself in the international processed spice market. It counts such demanding and discerning customers in its export basket as Australia, England, France, Germany, Holland, Italy, Singapore, Sweden, the United States and, above all, Japan.

"Japanese are perhaps the most fastidious, especially when it comes to food," says Kumar. "If you can sell it to the Japanese, you can sell to anyone in the world. They are perfectionists, starting not only with the product, but the way the product is packaged, even the way the packaging is aligned.

And we have succeeded in making inroads into this marketa testimony we're especially proud of."

Buoyed by its success in putting India on the international map for processed spices, AVT-McCormick, which is the only joint venture in spice processing in Kerala, is already in the process of completing the formalities to get the prestigious ISO 9000 certification, an international guarantee of quality. "Companies take years before they even think of applying for this certification. We hope to get it sometime soon and that will be a feather in our cap," says Kumar.

Europe was reveling in the Renaissance when Vasco da Gama came to Kerala in 1498 during the golden age of India's global spice trade. Now India builds itself anew as a global economic power in diverse areas-and AVTMcCormick is leading the spice trade Renaissance.

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