JAIpur to MumbAI: US firms invest in India

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0:40Hello and welcome to The Intelligence from The Economist. I'm Jason Palmer. And I'm Rosie Bloor. Every weekday we provide a fresh perspective on the events shaping your world.

0:55The Swiss firm Nestle has been such a solid growth prospect for so long that it's the chocolatey base of many a Swiss pension. Things have started to melt down, though, and it's about to have its third boss in just a little over a year. And Robert Redford was the very definition of a movie star. Even when not playing a role, he acted as though he was starring in his own film. Handsome, always well-dressed, he played an enviable range of parts in a long career. We celebrate his life.

1:31First up, though.

1:40You'll have heard us talking about AI on the intelligence just a few times. The AI race. The culture wars are coming for artificial intelligence. Artificial intelligence. That's probably to be expected for a technology that suddenly seems to be all over our lives. One place we rarely mention when it comes to the AI revolution, though, is India. The world's most populous country could soon be one of the world's most important for AI. AI is really booming in India. Shalas Chitnis is our global business writer. In fact, the country is now the second largest market for chat GPT by number of users and soon could be the first.

2:21And potentially what happens in India could actually impact a lot of other countries in terms of how AI gets used. So it's quite interesting. So presumably tech companies are pretty excited about this. American tech companies are all over India. And there's just a whole host of offers that they have in terms of signing up users. So, for example, the version of ChatGPT, which is available in India, is almost a fifth of what it is in America, for instance. Google has made its Gemini Pro free for all the students in India. But I think the most interesting offer, as you will, is essentially Perplexity, which is a generative AI startup, which is hoping to challenge Google, it has made its version free to all subscribers of Airtel, which is a large mobile operator.

3:05And Airtel has around 360 million users. Wow. So why are US companies so interested in India and why now? I think if you talk to the companies, their perspective is India is a really big market in terms of usage. And Perplexity's chief business officer, Dimitri Shevlenko, explained why India is so attractive to his company. You just see the source of progress happening in India that, at least in my lifetime, is unprecedented in terms of economic growth and development. And you have a population, from the data that we see, that loves adopting AI at a quick pace. And some of the concerns that you see in other countries in the West, those concerns are not felt as deeply around privacy or the downsides of AI.

3:51People are embracing AI in a lot more open ways and trying out different things. So that's number one. But I think if you start to look deeper, there are other reasons as well. First and foremost, I think, is being in India, it gives them access to a really large user base and to be able to actually run these products at scale. And I think that is really, really important and very interesting to them. The second thing is the way AI is getting used is also very different from America, for example. So one of the things that a lot of these companies will tell you is they've been surprised at how quickly voice-based interactions have taken off in India, as opposed to in America.

4:24And the third thing, which I don't think a lot of them will tell you, but I think is really real, is data itself. With AI, a lot of it depends on data. The more data you have, the better your models get, the more you can tune it, and so on and so forth. It's quite a virtuous cycle. And with so many users actually using data, you're generating a lot of real-world data, which you can't really get from other places because essentially public data has been mined. And that I think is a really big draw as well. But if they're offering their services free or very cheap, isn't it hard for them to make money?

4:53That's a really good question. And I think this gets back to questions around is Silicon Valley using its old blitzscaling playbook here? There are certain ways where this particular wave is different from the past. So for example, in the previous waves of cloud computing, the essential cost of adding a new user was marginally zero. It was kind of the same platform. That's not the case with AI so far. Inferencing costs are real. Every time you ask a question and it generates a response, it is burning up real power. It is using real energy. And so the costs are real. And companies are very tight-lipped about their expenses for obvious reasons.

5:24But it's true that they are definitely not making money in India right now. But their hope is, of course, that over time inference costs come down. They can have different monetization strategies that are like subscriptions, advertising, so on and so forth. But I don't think anybody's thinking about it right now. It's more about grabbing as many users as you can. Shalash, with such a big market and, of course, so many skilled developers, why isn't India developing its own AI firms to rival these? That's a really big debate that's happening in India right now, particularly as OpenAI, Google, Meta, their models are really popular in India.

5:59And so the question is, should India invest or have its own foundational model? And that's a question many people are asking. The government has taken some attempts at financing or pushing for a local model. But I think the interesting thing for India is not so much in the models or the chips or the AI stack, which I think is really going to be really hard to replicate. The country does have a potential in terms of how AI gets used, particularly in the application side. So yes, you have the hardware, you have the models that are dominated by American tech firms, but there is an opportunity to actually build on the application layer in terms of how the end user is actually interacting with AI.

6:33And that, I think, could be a more interesting place for a lot of Indian companies. So obviously, you spend a lot of time thinking about AI. What would your prediction be about how US investment in India shakes out? So I think it's definitely here to stay. It's not a flash in the pan. The companies are really serious about their investments. It's not just these offers. They're actually building physical data centers. Microsoft, Google, Meta, they're building physical data centers in India. So they are really serious about their investment here. And I think it's here to stay. and I think the good thing is the ecosystem is fairly open in the sense that big tech companies as well as local startups kind of play in the same space.

7:10So I think it's really going to be interesting to watch over the next four years how that evolves particularly as the action shifts more towards use of AI rather than just the models themselves. Shalish, thank you so much for talking to me. Thank you for having me. And we're going to be talking about a very different aspect of AI on tomorrow's episode of the Weekend Intelligence, our subscriber-only show. Few places has artificial intelligence had such an impact as on university campuses. Why write an essay if a computer can do it for you? How do you mark a piece of work when you have no idea how much human input actually went into it?

7:48But this isn't just about cheating, though there's a lot of that. AI has raised a really fundamental question. What exactly is education for, and can the system as it's now set up survive?

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8:45The list of Nestle's brands is absolutely enormous. From KitKats to CoffeeMate, Perrier to Purina, and of course Nescafe and Nespresso coffee. For nearly 160 years, a solid company with a retail footprint a globe wide. Lately though, as one Swiss daily newspaper put it, Nestle appears to be a madhouse. First, the board chucked out the longtime boss, Mark Schneider. Then his successor, Laurent Freix, didn't disclose a dalliance with a subordinate. Not good news for him, you would imagine. Nestle CEO Laurent Frex abruptly removed from his post after just a year on the job. Then this week, the news that Paul Bulke, the chairman of Nestle's board, will be stepping down three months early.

9:33Yet the problems aren't limited to just turnover at the top. Nestle used to be the steady Swiss engine of growth. It's a staple of Swiss pension fund investment. and one of these very dependable European companies. Wendelin von Bredow is our senior Germany correspondent. But in recent years, Nestle has lost its way. Its share price slumped 31 % since February 2022, whilst that of its rivals increased. So Nestle is not in good shape. So Wendelin, walk us through what's changed here, what's gone on in recent years that it's lost its way. So things really started to go wrong when Russia invaded Ukraine.

10:17Schneider was suddenly confronted with flagging consumer sentiment, rising cost of raw material, rising interest rates, and of course, supply chain disruptions all at the same time. and quickly Nestle's share price started to react to the company really struggling because Schneider then reacted by cutting the expenditure for marketing but also increasing cost and both didn't go down very well with customers they were used to being lured by Nestle's nazi marketing number one but also they suddenly had to pay much more for their Nescafe and their KitKat Many then simply switched to cheaper private labels.

10:57And as a result, the volume of sales of Nestle suffered. So really just mismanagement in a crisis is the nub of it. Well, a poorly handled crisis in particular compared with Nestle's competitors. And then on top of everything, Nestle was confronted with a string of negative headlines. One was a tragic case of the death of two children and the poisoning of dozens of others who had eaten frozen pizza of a Nestle brand called Boutoni in France, contaminated with a particularly nasty strand of E. coli. And people got very ill and very tragically, two children died. So that was maybe the most shocking scandal.

11:36Nestle has expressed deep sympathy with the victims of the E. coli contamination. And it's also beefing up the monitoring of its ingredients. Then they were under fire for selling sugar-packed baby foods in low-income countries. So it was one thing after the other. And so it's now lost to CEOs in a year and a third one is incoming. Tell me about that person. So Philipp Navartil, the new CEO, is relatively young. He's 49. He's been with Nestle for a long time, so he's an insider. And he was the head of Nespresso, one of Nestle's very successful business units. So he is seen quite favorably. He's also seen as a combination of Laurent Freix, the French CEO who was just sacked, and Mark Schneider, the German CEO, because Schneider was an outsider who was supposed to bring fresh air.

12:28And the other one was an insider who'd been with the company for decades. And Navratil is actually a combination of those two things. Do we know anything about his plans to turn Nestlé's fortunes around? Yes. So he's expected to continue to ramp up the expenditure on marketing. So Freik started that and Navratil is expected to continue that. And he's also expected to streamline the portfolio and basically sell some underperforming brands. The water business is one obvious candidate. Then there's a vitamins business in America. Then there's Gerber baby food. Then there are some sweets brands, in particular one fairly big Chinese sweets brands that Nestle only recently bought, but it somehow doesn't really fit into their new strategy.

13:12So expect lots of sales to basically have a slimmer but more profitable Nestle. It sounds like you're fairly hopeful about his chances to give Nestle a boost. Yes. So Nestle has still lots of strengths. They're the biggest food maker in the world. They're the leader in the home consumption of coffee. They are the leader in frozen food in some chocolate brands. So they have enormous strengths. And many of their brands like Maggie and KitKat are much beloved brands all over the world. So I think Nestle can be turned around and can be revived, but it's a supertanker, so it won't be overnight. But I'm assuming in the next couple of years we can see a recovery of Nestle.

13:55Wendelin, thanks very much for joining us. It's always a pleasure, Jason.

14:13I'm Roy Hobbs, your new right fielder. My what? Standing in a baseball dugout wearing a leather jacket over an Oxford shirt with a tie, Hobbs has crow's feet and a lined face. John Fasman is a senior culture correspondent. He looks a good decade or two older than the rest of the New York Knights, as the team's manager notices. Fully, you don't start playing ball at your age, you retire. But when the manager tells Hobbs to get in uniform, he seems to gain a step, walking away swiftly and eagerly. and when he takes the field, his swing is fluid and he moves with efficient feline grace. Robert Redford was nearing 50 years old when he played Hobbs in The Natural.

14:54It came out in 1984 and he had been a movie star for almost two decades. But what is a movie star really? It's not the same thing as a great actor. John Turturro and Frances McDormand, for instance, routinely delivered terrific performances, but they could probably walk down most streets barely recognized. Dwayne The Rock Johnson and Tom Cruise could not, but nobody's waiting for them to do Hamlet either. Movie stars are always themselves. They don't disappear into roles, so much as they put their characters on their shoulders and carry them around. Redford fit that mold perfectly. Viewers believe in Roy Hobbs, because Roy Hobbs is Robert Redford, who retained his boyish charm well into middle age.

15:37If the film had remained more faithful, to Bernard Malamud's novel The Natural, in which Hobbes is a vain and bittered failure, Redford could not credibly have played him because Robert Redford's characters did not fail. He was a reliable romantic lead, especially early in his career. His breakout film role was as a conservative lawyer in Barefoot in the Park in 1967, opposite a more free-spirited Jane Fonda. Predictably, the film ended with a kiss. Six years later, he made another star-crossed lovers film, The Way We Were, in which he was an easygoing wasp opposite Barbra Streisand as a Jewish activist.

16:16That film ended more ambivalently, but its director, Sidney Pollack, cast Redford in his best romantic role, as Dennis Finch Hatton opposite Meryl Streep in Out of Africa. Unlike some of his contemporaries, such as Al Pacino and Robert De Niro, Redford did not scream, shout, or choose scenery. His most marked characteristic as an actor was a certain reliable steadiness, which is not terribly exciting on its own, but made him a good foil. The sting in Butch Cassidy paired him with Paul Newman, who was a decade older, and whose garrulous jokey charm paired perfectly with Redford's laconic watchfulness.

16:53Redford then played the older half in All the President's Men, opposite a prickly and irascible Dustin Hoffman.

17:01He worked steadily, but acclaim for his acting eluded him. His only Oscar nomination was for The Sting. He found more success as a director. He won a Best Picture Oscar in 1981 for Ordinary People, a haunting portrayal of a family that falls apart after one son dies and another tries to kill himself. Fourteen years later, he was nominated again for Best Director for Quiz Show, a weighty drama about a rigged game show. In all, he directed nine films. None of them were runaway hits, and most of them were the sort of thoughtful leftist dramas that win dutiful praise on release, but go largely unremembered.

17:40His most enduring legacy, though, may be offscreen, in his championing of independent filmmaking and environmental causes. He was born in Santa Monica, but he took a dislike to Los Angeles and to expensive, formulaic Hollywood films. He began buying land in Utah, where his first wife was raised. He built a ranch and in 1981 founded the Sundance Institute to help independent filmmakers hone their work. Four years later, the Institute took over a small film festival in Park City, Utah, and built it into the world's leading festival for independent films. It premiered works by, among others, Stephen Soderbergh, Quentin Tarantino, Guy Ritchie, and Sofia Coppola.

18:19He also fought for land conservation in Utah and beyond, becoming a trustee of the Natural Resources Defense Council. He campaigned for the Alaska National Interest Conservation Act, passed in 1980, which created most federal parkland in Alaska. And he fought against the construction of a huge coal-fired power plant on land in Utah that today is part of the Grand Stairs Escalante National Monument.

18:48Unlike many film types, Redford aged gracefully, his loping walk and craggy face suited an elder statesman of the American West. And unusually for an actor known for his looks, he was good-humored about his physical decline. He was disappointed when critics focused on his wrinkles at the expense of everything else. He said, I was blessed to look well and retain a youthful look, but that was just genes. He was a movie star, but he wanted to be permitted to be human, as he put it, on screen and off. John Fasman on Robert Redford, who has died aged 89.

19:36That's it for this episode of The Intelligence. The show's editors are Chris Impey and Jat Gill. Our deputy editor is Jonjo Devlin and our sound designer is Will Rowe. Our audio correspondent is Sarah Larniuk and our senior creative producer is William Warren. Our producers are Henrietta McFarlane and Benji Guy and our assistant producer is Anne Hanna with extra production help this week from Jonathan Day. We'll all see you back here for the Weekend Intelligence tomorrow.