Saturday, January 10, 2009

The Scourge of Satyam: One Former CEO's Account

Satyam: Will India's Culture of Corruption Finally Go Home?

This week I had the privilege of recording a meeting with a friend and former Silicon Valley CEO to discuss the potential impact of Indian outsourcer Satyam’s fraud on the local business community and the people who live here. Although “Mike” (not his real name) doesn’t say much about the disgraced firm Satyam, he does offer a few unabashed insights about how the culture of corruption has permeated Silicon Valley and describes India’s “distinct culture of corruption” and its overall, negative impact on the downward spiral of Silicon Valley here:

“Andy Grove talked to Businessweek recently, and he indicated that Silicon Valley needs to innovate. Well, he got that part right. But what he didn’t say is how, over the past twenty years, Silicon Valley vc’s and executives have descended into a corrupt and soulless culture of literally selling out their greatest assest: the American scientist. Nowhere in that article did Andy mention how his colleagues turned against the American professional while a few greedy bastar$s befriended the morally bankrupt culture of India, by outsourcing our jobs to their population so they could personally profit. It is you know, no different than human trafficking, and they are ok with that. What Silicon Valley needs to do now is invest in sustainable, local talent and business plans that will make modest, sustainable ROI. The days of the fast IPO without a sound/working product or service are over. If Satyam’s fraud sends any kind of message at all to the public, let it be this: the days of using American livelihoods for bargaining chips to enrich a few global elites through Indian outsourcing firms are over. If they're not, welcome to the seventh circle of Hell.

Thirteen years ago, my venture backed, thirty-five person start-up was eventually sold to a larger U.S. corporation (a portfolio company of one of our lead investors). The company was founded three years prior, and although our technology was still in its early stages of development, there was no shortage of vc introduced “suitors” expressing interest in acquiring the technology. This was my first and last start-up, and I am now retired, occasionally working on a consulting basis or in an advisory capacity on referral. I used to sit in meeting and listen, with shock, really, how these vc’s had no compunction whatsoever to tell us how we didn’t really need the guys we had (computer scientists) on staff and that we needed to replace them with extra “IT guys” who could do “the same stuff for less!!” IT guys! Many vc’s I have dealt with do not even know the difference between computer scientists, engineers and “IT guys”, but they were ALL quick to instruct us to work with a predetermined list of legal/HR firms to “get the staffing ratios right.”

It is unfortunately pretty likely that the fallout of Satyam’s scandal will be minimal, since I do know there are executives and vc’s scrambling around to do “damage control” in order to protect the Sacred Cash Cow of outsourcing. Ever hear of Compete America? A powerful lot of lobbyists who will stop at nothing to keep cheap workers coming in here from India whether Tata, Satyam, Wipro or the rest of them. It’s hard to say if it will backfire, but it is long overdue that it does. This practice of hiring Indians to do the work of local professionals has been an obvious boondoggle from the get-go, and anyone from the boardroom to the cubicles who is the least bit honest will tell you the same thing. It has been a disaster. Most of them don’t even speak English, and are they are thrust anyway at the local scientists whom they are supposed to “help round out” product teams before having to “train them” right before they are laid off. Is this right? Of course not. Does it happen? Every day around here.

The practice of hiring Indians was the brainchild of Larry Ellison and Bill Gates who realized, without any conscience, they could wildly, wildly pad their personal profits by paying their workers less, and get away with creating a culture of indebted servititude to boot. This is no small coincidence that the quality of customer service and product development has continued to degrade with the onset of outsourcing. Twenty years ago, businesses cared about the customer experience. With Silicon Valley’s flood of Indian workers, came a rise in Indian elite executives who particularly emulated the culture of entitlement, seeking to entrench themselves on the financial side with the investment banks. This culture is poor, and by extension, seeks to take from others in order to survive.

By the way, it’s also no secret around here that the Goldman Sachs guys running the TARP are “appointed” to make sure a few well-connected elites from the local vc community are taken care of. You see, the collapse of technological innovation is the direct result of Silicon Valley’s venture capital community plying their start-up investments with sleazy MBA’s instead of seasoned technologists. (THERE HAS BEEN NO OVERSIGHT out here for so long, that it is a wonder Satyam even got the press coverage it has.) The number one goal is, of course, for any vc to make money. I have no argument here. But the emphasis upon the deliberate sacrificing of quality in exchange for a quick in-and-out IPO or acquisition established the precedent of “me first” corruption that the Valley is now stuck with.

Although an American business person’s handshake was/is supposed to mean your word, this is not -- nor has it ever been the case with the Indian businesspeople, a predominant culture of back stabbers, liars and cheats, and this is no secret. That’s the way it is. Sure, we have our share of corrupt Skillings (Enron) and Maddoffs; but these people are far worse. From my first and last business dealings with Indians, they have no qualm with lying and cheating and they operate on this level as if it were expected. And they use the people of their populations as human trafficking chips so that our vc and business community leaders can exploit them for personal profit. I know that the collective spirit of our population would find this reprehensible, if they only knew. The perpetual chokehold Bill Gates and Compete America has on the U.S. government to silence the atrocities of outsourcing through its payoffs to elected officials is staggering, and the American public is left with only propaganda about how wonderful outsourcing is while it destroys the lives of Americans. It is a globalists dream, not an American one.

Most people would be amazed by the aura of protection that these people are afforded by the local vc community here; but the demand for cheap labor and suppliers from India is their cash cow, as innovation dried up, it was and is their one tried and true line to personal profit. It is the only one they have left. There are comparatively not many of them, but these few insulated vc’s and associates hold enormous power to seek protections with D.C. inititiatives and paid off think tanks which shield them against the general public as they cook up business plans and seek tax incentives to keep them in positions of power, prestige, and “wealth creation.”

It’s no secret that venture capitalists will not fund start ups here who do not use questionable HR firms to hire H-1bs and other “preferred and/or recommended” Indian workers who are paid less than their American counterparts. It is also no secret that, with little exception (and there are a few exceptions, of course) the quality of the Indian workers is far inferior. What most people do not understand is that the vc’s structure of funding companies has changed considerably over the past twenty years. They now do not want a strong American base of support, but prefer to hold secretive parties amongst Indian elites to broker lucrative deals, (primarily labor and supplier related) that negatively impact the people here in the local community. This is going on all over the country, too. HR firms are wedged between start-up executives who are When Al Gore joined KPC&B (Kleiner Perkins, Caulfield & Byers) the stealth mode/secretive “need to know basis” climate has only increased, with the local press as well as the business community members finding themselves in a heighted “invitation only” business culture dominated by East Coast MBA’s. There is also this curious rise of republicans who seem to have forgotten what partisan politics are. Twenty years ago it was common for executives to donate to both parties somewhat equally, but today, there is no discernable distinction between loyalties and this is also what is different.

At any rate, start-ups are now finding it difficult to obtain funding from an increasingly anti-nationalistic funnel of money that simultaneously is being administered by the foxes guarding the hen house, Goldman Sachs. Obama takes his marching orders from them, and not vice-versa and Gore is the man behind the curtain. Funny, how Obama is talking about “IT spending.” The increase in IT health spending is no accident, and has his carbon footprint all over it. Do you really think IT health spending is going to cure cancer or expand access to quality healthcare? Hahahaha, the American public is duped again. That “IT healthcare” spending Obama is talking about is merely a giveway to a few wealthy people out here, (I’ll get you the list) just like all that TARP money is also.

Satyam is on of several corrupt, shameful organizations that should never have taken root in this country, just like the other outsourcing companies that have ruined the quality of our products and lives of our scientists and their families. Now the “productive sector” is all but exhausted by the burden of debt and the small, global wealthy elite (maybe there are six million, I don’t know) are desperately continuing their hording behavior to ensure that they buy the right politicians to keep that money all in the family. What Andy Grove didn’t mention, or certainly didn’t have the guts to say, is how the pre-czarist Russian mob M.O. has arrived here, right here, only in the form of a caste system. It will take some “act of God” to clean up the stench left from the embedded outsourcing culture of corruption and to return this business community to a semblance of integrity, if ever at all.

Ironically, I still must say, the next Silicon Valley will be…Silicon Valley.

I’m personally proud to have been a part of being one of the boring old technologists who managed to employ a few smart, talented computer scientists and engineers, some of whom I helped contribute to early retirement. I have no regrets being here, only to say that I wish my unpopular (by comparison) commitment to ethics and goodwill was more pervasive.

Maybe with a little luck, this next generation will throw all of these bums out. In the meantime, why isn’t the Indian government working with its own business community to get their people busy doing something sustainable for themselves in their country for a change? I know that question is on the minds of many people around here right now. It might not make Bill Gates horde as many billions as he desires, but just think of the re-emergent potential for innovation by returning to the roots of what made this place great: support of our own communities first.”




Citizen Carrie said...

2Truthy, I keep thinking about this part of your post "There is also this curious rise of republicans who seem to have forgotten what partisan politics are. Twenty years ago it was common for executives to donate to both parties somewhat equally, but today, there is no discernable distinction between loyalties and this is also what is different."

To me, on the surface, it seems like there's no difference between "20 years ago" and "now" in Mike's statements. Do you think "Mike" was saying that 20 years ago, executives considered themselves to be either "Republican" or "Democrat", but hedged their bets by donating equally between the two parties? And now they don't even have party affiliations anymore, or even check out which parties their favorite politicians belong to? They just give to whoever will help them personally profit?

JerseyCynic said...

tt - glad your feeling better. I was getting worried about you. I was going to suggest "more cowbell"!

this is just so depressing.

Red Oak said...

Interesting stuff, 2T, but I just remain so puzzled about this decline of innovations stuff. I mean, innovation has no correlation to an undergirding culture, does it? (I'm sure that thinking it does has to be racist or xenophobic or something.) For the life of me I just can't see how the brilliant globalist business plans of our time could hinder innovation. I mean, transforming a prospering, forward-looking nation into a Third World shithole with crap living standards, life-long job and income insecurity, and negative return on investment in education (or anything else, for that matter) for everyone but the crème, and rising levels of corruption, can't reasonably be considered to affect levels of innovation, can it? I mean, come on - next you'll be telling us that not getting enough protein and calories in the diet negatively affects children's development. Pshaw. The deft deployment of Occam's Razor tells me that it's all because Americans are stupid and lazy.

P.S. I was also wondering about the statement discussed by Carrie.

Anonymous said...

My dear Mr. Red Oak,

Americans are not lazy. We won World War II with blood and ingenuity. We went to the moon. We, “the conquerors,” rebuilt Europe and helped Japan become the giant that it is. We have given billions in aid all over the world. We host the UN. We are a virtual clearinghouse of self-criticism. We Americans are not bad. We are not lazy. But we have become cowed.

Once upon a time, we spoke our minds. Now, we remain quiet in Diversity Class. Once, we took our chances and paid the price. Now, we put on our bicycle helmets, buckle up, recycle and use environmentally friendly condoms – and we feel SO good about ourselves. And we sue if we don't get our way. Once we willing pitched in. Now we ask “what’s in it for me?”

This has come to pass not because of Democrat or Republican or liberal or conservative. It has come to pass because of money. Lots and lots of it. If there’s money to be made selling our grandmothers to appear in a Romanian porno flick, let the Will of Money be done. There is no honor, integrity or shame. Those are for mugs. We have sold ourselves to the highest bidder. (Have you seen the California girl, Natlalie Dylan, who is selling her “virginity”? It’s a sign of the times.)

You used to see that in India or Thailand or the Philippines or in Japan right after World War II and not even flinch. But now, it’s happening right here in America. The sad thing is, this girl isn’t poor. Not by a longshot. She could work a “regular” job to put herself through college. Easy. Instead, she has chosen the lazy way out. To sell her body for a hand full of silver. A shabby, but bankable proposition. (What she fails to understand is that men will be willing to pay millions not to take her virginity as she assumes, but to humiliate her. This is something she does not understand.)

American men and women in this country used to work hard. They used to work an honest day for an honest day’s pay. But someone, the globalization fiends if you will, told us that, hey, you guys are stupid. You don’t have to work so hard. Mexicans will do it for you. Or, better still, Indians in warehouses stacked like bags of curry in cities like Bangalore or Hyderabad.

So yes, Mr. Red Oak, on some level I agree with your comment about laziness.

Today it’s all about the highest bidder. The bottom line. Not necessarily what’s BEST but what’s CHEAP. What’s the old saw? GOOD, FAST, CHEAP. Pick two. That’s capitalism. Once upon a time, we didn’t have to worry about competition from India or China or Bangladesh. We sent them hundreds of millions of dollars in aid money and hoped they’d be able to just feed themselves. Well, they’ve done far, far better than that. They are after much more than just a bowl of rice these days. They are after our jobs, our homes and our Way of Life. And they won’t have to take it with guns. Rich “American” bankers and businessmen and women will GIVE it to them in the form of H-1B visas. And when that won’t work any longer, they will set up factories and offices where these foreigners can work online and write our newspapers, teach our classes and take our Big Mac orders without ever leaving the comforts of the Orient.

Xenophobic? Racist? Please Mr. Red Oak, you bore me. I spent 20 years in the Middle East and the Far East. There is no diversity training in China. There is no social security in India. It is social Darwinism. Survival NOT ONLY of the smartest, but of the toughest, meanest and most selfish men—and I do mean MEN—on the block.

This is where we are headed. And we must stop. NOW. India must learn how to take care of its own. It needs to raise its own standard of living as does China and Mexico and Paraguay and Nepal. Without our help any longer.

We have been betrayed by our own people in this country. Vicious, mean-spirited and brilliant bankers and businessmen who have squandered the treasure and the labor of honest Americans.

We must—somewhat, I fear like the old Soviet Union—stop treating economic crime in this country as if it were a badge of honor. We need to see the Millikens and the Madoffs and the Fulds and the Greenspans of the world hanging from a few lampposts.

That said, Ayn Rand, has more to say about human nature than Marx and Lenin ever will.
But that is a discussion for another day. Right now we need to nip this outsourcing menace in the bud. No more American jobs overseas. And no more coddling the trailer trash and the ghetto black. If you do not work, you starve. Times are tough. We will hang those at the top who steal from us. And we shall turn our backs on those at the bottom who have spurned society’s efforts—time after time after time—to help them become something other than blind consumers led by hip-hop pied pipers to the promised land of pleasure. This goes equally for the wealthy, prescription drug-abusing housewife who cheats on her husband with her daughter’s boyfriend, and the double-wide denizens who snort crystal meth, wave the flag, and rob liquor stores.

Bread and Circuses. Juvenal. Satire X. Read it. That is what our government is trying to do to us. Seduce us with stuff. Shut us up. And keep us entertained. It is working in Europe. And “they”—those gourmands of globalization—are longing for it to catch on here.

Let’s make sure it doesn’t. Long live jobs in America. E pluribus unum. From many, one. Let us live again—honestly, and for one another.

I remain, cordially and otherwise,


2Truthy said...

CC, As you ask "They just give to whoever will help them personally profit?" is how I interpret his view, in that although bipartisan donations were/are hedged, the behaviors/expectations amongst Dem/Repub execs/CEOs are more alike today as both party affiliations are following the $$$ first before ideology. This is how I take that comment. I can see this, as even Dem Obama is talking about tax cuts for corporations. I also can see this view from my own personal experience. I went to a MoveOn party last Oct. where there were a few Repubs (something I wouldn't have seen two years ago) who were supporting the Dem (Obama) candidate.

Red Oak, you are too funny:)Honestly, I have to ask myself "how badly must the growing millions of smelly and lazy, over-educated Americans from our best universities be willing to assume they are too good to use the streets as a perfectly viable mode of 'indoor' plumbing? Don't these "racisits" see that there is a whole other third world out there who would never dream of expecting profits to be spent on improving the quality of life? And these loser Americans want access to quality healthcare and jobs that are ACTUALLY commensurate with their experience/educations that afford compensation plans adjusted to hellatious cost of living standards? Who do these uppity Americans think they are, anyway? Well, Congress and the Obama administration will fix them once and for all, won't they?

And why the hell can't these worthless, overeducated Americans innovate a goddamn thing? The next thing we know, THEY'LL be blaming their own failure to innovate on their worthy slave lords who kicked their non-elitist asses to the curb -- like the venerable one worlders, John Chambers and Bill Gates, the brilliant 'thought leaders' who made their whole demise possible? Oh -- did I leave out Bono? Or Brangelina? My bad.

Hey JC! Nothing a little R&R and time can't cure... Stay well during killer flu season:)

This stuff, to me, is not "depressing" but rather a despicable example of how unwilling the American public is; they can't fight/protest/boycott their way out of a paper bag, choosing to whine instead like mopey sports enthusiasts about Middle East (granted, I agree the U.S. should NOT be funding Israel) wars when there is an economic war against them right here -- our educated middle class, our kids ---and they are too stupid to hear the shots and see the one world "globalization" propaganda.

Red Oak said...

Superb rant, Mr. Melvin. I, too, spent some formative years living and working in points East, so I was pre-emptively cured of the "evil whitey" virus that so perniciously infects and debilitates our poor, cowed, buggered populace these days. When you've worked up close and personal with the cheerful and unapologetic racism (and sexism) of other nations, you don't bring home any time or patience for the burbling cant of dumbass politicians, academics, and corporate whores about how our (really very admirable, at least what it was and what's left of it) civic culture requires tearing down and reconstituting on superior Latin American and Asian lines. Damn them all to hell. (But if the Lord in his infinite wisdom, or the Furies, plump for lampposts, I won't curse heaven). I think it was Chesterton (?) said, "It is terrible to contemplate how few politicians are hanged". Along with a select few other miscreant classes.

I loved the line about selling your grandmother into Romanian porno flicks. I can even see the whole line of justification trotted out for it - "Dude, granny's being empowered by this free movement of labor and capital". Or, "Without the wonders of free trade in sex slaves,er, porn artists, wages for porn actors would force costs so high that the cheap porn we all so take for granted would be priced out of reach. Did you like, fall asleep during the comparative advantage lecture in Econ 101, moron?"

2T, "cowed" is exactly it. Sometimes when I read public fora, I think, "man, people are finally starting to get it". Then I move on to the next article or group and find the moderator shutting down a thread or banning a commenter for discussing, say, some simple truths about labor arbitrage, while the regulars cluck approval and congratulate one another on what enlightened beings they are for bending over and taking it without lowering themselves to, dear me, "xenophobia" or "demonzing immigrants" (which nobody, as a matter of fact, is doing) or whatever the hell the Ovine Phrase of the Week is.