Ep 59: Adi Berlia on India's Remarkable Rise Out of Socialism & How to Strengthen U.S.-India Ties

0:00It used to take three to five years to get a phone line. You would pay up front for a car and you had three options. And you had two toothpastes, right? There were like two television channels. And it was very much like Soviet Russia type stuff. And we had a massive crisis. And in 1991, the government said, look, in order to sort of get over our financial crisis to really grow, we need to switch off socialism.

0:30India is the largest democracy in the world. It's one of the fastest growing countries in the world today. My friend Adi Berlia is at the cutting edge of a lot of leading industries and businesses there. Let's find out from Adi how to think about India's path ahead the next decade. Really excited to have my friend, the philanthropist, entrepreneur, and all-around global man of mystery, Adi Berlia with us here today. Thanks, Adi. It's great to be here, Joe. I love the global man of mystery. I know how much more mysterious I can get, but happy to be here. And I love the name of your podcast, The American Optimist.

1:02I think we have so much to be optimistic about, both about the future of America and honestly about the entire world. So Adi, you grew up in India. What city were you born in? I was born in New Delhi. I wish I had some exotic little city that no one's heard of, but it's the capital. It was a fun, idealistic childhood. It's pretty cool. You have a family business in a few different areas. Tell us about your background. So, you know, grew up in India. I think third or fifth generation family business, just depends how you cut it. Yeah, grew up in a family that really prioritized two things. You know, one was what is the impact that we're having on the world?

1:39And so my classical education in my family was to wake up every morning and say, how are you making the world a better place? And that's through your actions. That includes, you know, the creation of wealth. But it's not just a creation of wealth as in how much money you can make, but what is the impact you're having on your community and society and how you're using that wealth, your connections, your intellect to really make a wide scale impact. And I think my childhood was really obsessed with learning from a lot of people. My grandfather in particular, who would just hold salons in his house and I would get to meet some amazing people who shared those common values.

2:18You've been an entrepreneur across multiple sectors, which your family has as well. Tell us a little bit more about that background. You had these salons at your grandfather's house. Would you learn about building from them? What would you learn? So I think there's sort of two, three aspects of this education, right? One is India itself. I think India, particularly when I was growing up, we were just getting off our socialist hangover. And pretty much there was a culture in India that if you had to do anything really amazing, you had to have two skills. One, you have to hack the system. Because the system, the government system, the government system, right?

2:50It was sort of engineered to make sure that a very small number of people succeed very well, but not allow a lot of people to be entrepreneurs. There was a license system. You could go to the government and they would give you a monopoly on a certain sector. So if you wanted to do anything new, innovative or novel, you had to find ways to work with the system as well. And so that was a very early education in being entrepreneurial that, OK, ask your question, how can you do things differently? How can you disrupt? How can you build something that's sustainable? And the second thing for India, any problem is a problem at scale that you're trying to solve.

3:28Right. I talked to my friends in Europe and they're looking at a total addressable market, number of people they want to have an impact. the entire country's population is 5, 10 million. That's half a city in India. I joke with some of my friends that their entire country is the size of my neighborhood. Because there's just so many hundreds of thousands of people. How many people are in India these days? What's the number? 1.3 billion people. But you were telling me there's only about 40 million who are middle class and above. So it's two different markets. It's two different markets. And my definition of middle class is a little bit different from a lot of classic middle class definitions.

4:02And these are people that if you're creating a value-added product beyond bottom of the pyramid, you have an addressable, easy market around about$40 million. After$40 million, you start to hit price points, which have to be very, very good. And that's when you start hitting the shampoo sachet markets. You start hitting people who have to take a lot of loans and credit to really participate in what you're trying to achieve. So these different markets, and I want to talk about what you went into, but I want to go back to a point you made. This is very interesting, I think, for a lot of people in America to think, what's a free society do?

4:36What's a socialist society do? India, as you said, was getting out of their socialist hangover. In a socialist society, the government is just really involved in business, and you have to hack it. You actually have to get permission to work in different areas. They actually grant people. This is a little bit how healthcare works in America. We're very top-down here, as an example. You get a lot of cartels that don't really function because it's so hard to get into these areas. But this was true of almost every industry in India for a while. You basically had to have a cartel, special permission, very low competition, huh?

5:06No, absolutely. And it was actually extreme. You had to, like, if you ran a steel company, right? Steel, huge, big investment capital. You would think these are people who are, you know, conquerors of industry, etc. And you would get a quota that you have to manufacture X amount of steel and you can manufacture X amount of steel. So bureaucrats decide how much you're doing. And obviously that lends to corruption. Because, hey, if you want to increase your quota of steel, someone has to okay that. And so it created a sort of a clubby system where those who had great contacts with bureaucrats, with the government, with the ministers, they're the ones who kept winning and winning and winning.

5:47If you were an entrepreneur who was trying something new, either you had one of these people who was your friend or a relative or someone who really thought you were smart and they wanted to support you. Otherwise, you had no option. This is fascinating because I think in America, just to tie it back a little bit for people, when we have areas where the government is growing, is regulating more, is getting more powerful, you see certain corporations start to have the same politics as those people in government. And when you say, oh, these world corporations, what are they doing? But that is actually a very strong incentive.

6:16The bigger the government is, the more the corporations are going to have to have the same views in order to get ahead in those areas. I think it's a little bit more than that. You know, once you grow to a certain size, and, you know, this is what I think Milton Friedman, there's a beautiful video of him. He made a great point. Now, there is a difference between a capitalist society and a crony capitalist society. And what tends to happen is that once you reach a certain size, you are highly incentivized to stop new entrants from coming in. And the only way to do that, and particularly in a democracy, is to do state capture, is to work very closely with governments, parrot what they're saying.

6:53And then, you know, when you were coming up, there weren't regulations or at that time you were saying, hey, this has to be free and open. But now more regulation actually works in large companies' favor because they have the money, the expertise, the people to get around those. It's the new entrants that are stuck. And I think that sort of creates this perverse incentive for even large corporations to actually get more regulated, to ask for more regulations because the new entrants can't really come in. It's a big barrier to entry. That makes sense. We got to be really wary of the politics of big corporations.

7:27Their incentives are to close things off. Absolutely. How did things open up more in India? They've opened up more. They're not perfect, obviously, but it's not what it was 30, 40 years ago. Why is that? So I think two, three things happened. One, it failed. You know, it used to take three to five years to get a phone line. Wow. You would pay up front for a car and you had three options. And you had two toothpastes, right? There were like two television channels. And it is very much like Soviet Russia type stuff, right? There were really limited options because if you hand out licenses to a very limited number of people, they're highly incentivized to not give consumers a choice.

8:03This is why always the cable companies here have been so bad because there's only one choice. Absolutely. And I think we had a massive crisis. And in 1991, the government said, look, in order to sort of get over our financial crisis to really grow, we need to switch off socialism. and we really need to embrace a more capitalistic economy. And you can understand for a democracy to do that, to just change their system midstream. It's a big move. It's a big move. And the effects were dramatic. I think in 10 years, you did not recognize India. We had a burst of our human development index just shooting up.

8:41We had actual consumer choice. Fast forward 10, 15 years from there, you could get a cell phone delivered to your home and there are like 10 people vying after you to sort of give you something. You have an impressive amount of entrepreneurship that's come up. And I think it's created a much more equal society. Today, even the common man feels that they are empowered and entitled to truly participate rather than, you know, just say, hey, there's a small number of people. And my calculation was something like 5 ,000 to 6 ,000 that decided everything. These people all control the top down. Now it's spread out.

9:16You must have been, what, six or seven years old when things started to open up. Absolutely. You went to Stanford with me. Milton Friedman was there at the time, actually. So let's start with your work in education. You're the co-founder of Abhijay Staya University, ASU, not the Arizona State University. Not the Arizona State. And, you know, they have an impressive social media presence in a lot of parties. And sometimes we have to explain to people it's a differentiator. You get in trouble in India. Adi, why do you have so many parties at university? All these girls from ASU, it's inappropriate.

9:46There you go. So, India's first industry-centric technology and liberal arts university. You know, one question we get asked a lot because, you know, building UATX, like, why build a new university versus go help another one or fix another one? What inspired you to do this? So, for us, I mean, we are one of India's oldest education nonprofits, right? We started building out colleges and schools, you know, right after independence in 1947. So, your family's proud of having been in education for a long time. Absolutely. My grandfather was a freedom fighter. After India got its freedom, he was invited to be in politics.

10:19He didn't think he wanted to do that at all. And his way of giving back to society was to, you know, start in his backyard a school. And that moved on. And, you know, as the business grew, you know, every year he would put some money aside. And, you know, we end up with something like by 2009, 2010, about 10 schools, 12 colleges. The problem is that because we had been there for so long and we'd worked very closely with the government, education in India was still very much top down. So the government told you what you could teach in the classroom. You had centralized authorities that would set the curriculum for the entire country.

10:59And no matter what your context, you had to learn approximately the same things. Regulations were really stifling innovation. We were still in road learning. I call the 90s sort of the dark ages of education in India. And now we have a very good new education policy. So I do want to say that they've done incredible work in the last three years at the top government level. But it's still top down saying what to teach. I think they're trying to change that. It's going to take them five years. I think they scared a lot of people by changing the policy. But it's a democracy. It's going to take five to ten years.

11:32But back in 2010, what we really wanted to demonstrate to the world is what a 21st century university looks like. And we had a lot of help. So we went to all the top universities in the US, in the UK. We went to CEOs, chairmen, and we asked them a very simple fundamental question. If you were to press the reset button and recreate a top university today, what would it be? How would it interact with students, with faculty, with industry? And our key takeaways were very simple. They said, look, the modern world is changing. The requirements of students coming in, especially if you want them to be leaders and great citizens, is changing.

12:06They need to critically think. They need to be aware of history. They have to be able to connect the dots across a wide variety of fields. They need to have a technical education to be able to really understand the world and have an impact. And when we put this together, we figured out there's no one has done anything like it in India. And so part of us was even going to, you know, provost, so very well-established top 10 universities in the U.S. and saying, you know, you guys are huge if you could press the reset button and change. And we got a huge amount of feedback from them. Oh, my God. It's probably very disparate feedback, I'm sure, from a lot of people.

12:42Absolutely. But I think one was very consistent. They fundamentally believed that things had to change, that the way education is done across the world and in India is not working. I think that was the impetus. You went to Stanford, Harvard afterwards as well. How is this different than your education in India? Tell us. What did you experience in American education that was different than what you had experienced? So I think one, what I loved about the American education is the freedom that they gave. I mean, we were at Stanford, right? We could take any class that we wanted. We could take any course.

13:15If we woke up one morning, two years in, we could say, hey, you know what? I want to be a doctor. And as long as you're willing to put in the time, effort, energy, and really work hard, anything was possible, right? Versus an Indian institution. And I know a lot of US institutions have this, but you basically at grade 11 or grade 12, when you still can't kind of figure out what you want to do in life, you pick a stream and then you're stuck with it for four years, right? The other thing is you sit in the same classroom with the same people, with the same professors, and everyone says, oh, you're getting an education.

13:47But a lot of times to me it felt it was just high school extended by four years. And I think if you really want to create entrepreneurs and leaders, you have to put agency in their hands very early on. You have to get them to take personal responsibility for their learning journeys. And you have to match that with a university system that allows them to do that. And quite frankly, for example, allows them to fail. But basically give them the freedom to fail. And I like that. Take personal responsibility for your learning journeys is important. People are the author of their own lives. Sounds like you're talking about freedom to me.

14:18No, absolutely. And I think part of us was why it took us so long. I mean, we had 40, 50 years of creating colleges. Why did it take us so long to do a university? and because every time we met the government, we said we just want two, three basic things. We want academic freedom and we want the freedom to choose who we admit and we want operational freedoms. And before 2010, most of them were unwilling to give us these three, which is a little bit shocking, but I mean, that was the system that was India. I think now, fast forward 2022, we've sort of acted, I hope, as a metric of how other universities think, how the government can think about regulations as well.

14:56Now they are a lot more open. But back then, this was revolutionary. I still remember a press conference where we said, hey, we are doing these 11 core subjects and we are going to have engineers learn philosophy and psychology and maybe improv and photography. And this reporter stands up and he says, why are you making terrible engineers by making them learn philosophy? Yeah, no, it's funny. People assume engineers are bad if they do philosophy, which is very funny because actually here sometimes we even go too extreme the other way. But by the way, Elon Musk, Peter Thiel, Charles Koch, as we've had on this show, they're all philosophers.

15:30They're success. And they're all, you know, except for Peter, maybe they're engineers as well. So, I mean, having both of them is pretty useful. For us, our key takeaway, it's one world. Yeah. Right. There are different ways and frameworks of looking at it. Right. But it's still one world. and the more frameworks and perspectives you understand, I think that just makes you better at everything, whether you're trying to build a company or you're trying to solve an environmental problem or you're trying to work in politics. It's just understanding the world better from a different perspective. And thinking about the world.

15:58My friends who are leaders like Elon Musk who think about the world, they come to some very powerful conclusions, they do some very ambitious things. A lot of the engineers who just go along with whatever the politics they're told is, they don't think at all about the world, they just do what they're told. And I think that ends up actually causing more problems than people who are taught to think for themselves. And absolutely. I mean, look at how naive we were in the 2000s. You know, I remember us being in the Bay Area in tech. And we all thought that if you just sprinkle tech into everything, we'll solve all the worst problems, right?

16:27I mean, fast, but like 15, 20 years. I've had to eat crow a lot in saying that, well, you know, yeah, I mean, if you don't know what you're building, why you're building it, who you're impacting and what the long-term ramifications are. You can cause some big issues, obviously. That's a lot of trouble. I want to ask you on that. You recently chaired a conference or a panel in Japan on DeFi and crypto, on central bank digital currencies. So speaking of sprinkling tech into certain areas of the world, what are your thoughts on that area? What inspired you to talk about crypto in that context? So, you know, one thing, Joe, which drives me absolutely crazy, right, is that the perspective on digital currencies and all is still very much a first world problem, right?

17:09I love the concept of having a libertarian view of currencies, giving people choice. But the true impact is about economic justice. And by economic justice, I mean the vast majority of the world. They are born into a particular country. They can't immigrate. And the economic system is foisted upon them. They can't decide that whatever the local currency, often very volatile, the moment they get paid the next morning, it's already devalued or it's going up. they can't convert it to a stable currency like the US dollar or the euro or the pound. But in Africa, for example, a lot of people are using US dollar coin, which is a version of crypto tied to the US dollar.

17:49Exactly right. So that's what they're trying to solve for, is basically these people are beholden to their governments and their central banks, often who are not the best at setting monetary policy. If I am a freelancer sitting in Africa, my clients are all across the world. I'm earning in dollars and euros. It's been converted to my local currency because I have to pay taxes. But I can't invest in capital markets. I can't access the worldwide financial system. I'm a small business. I can't take loans there. I am stuck in a very high interest rate. Crypto in a way to give people access to markets.

18:23It's about economic justice. Now, where I think the failure of certain cryptocurrencies have come, and which is why I loved them earlier, was the volatility doesn't give the same stability that we would have hoped for economic justice. And I think that's where country-backed digital currencies come. But what's ended up is that we've now stuck in an arms race, right? Because the problem is so vast, and you've already said it, like you have Africa who's going for a USDT, right? They're going for USDC. You have people who are trying to find proxies for stable currencies. But if you look at if somebody came out with a China renminbi or a US dollar or a euro, The first country that gets out a widely used digital currency that a lot of the world can adopt for personal consumption, trade and stability is going to take up rapid, rapid market share.

19:15And that's amazing in some ways, but it's also dangerous because you have economies and people beholden to whichever country now, in effect, has taken over their financial system. It's not just whichever country, it's the people within that country. So one thing I'm very personally concerned about is a digital dollar that can be turned on and off at whims. So you get these woke committees in the background and they say, oh, you're being penalized for this. And suddenly, rather than it being my money, it's money that someone decides they're going to turn off. The same way Twitter would turn off for the wrong reasons, those same people are in the government and they could turn them off for the wrong reasons.

19:48That seems really scary to me to give them that power. It's very scary. But let's look at a more broader political context. Let's say the Chinese cryptocurrency or the Indian cryptocurrency or any cryptocurrency starts to take headway in a country. They can go to the government and say, or even the U.S. dollar, for example, that, hey, if you don't listen to us, we're going to turn off. Exactly. For all your people in this neighborhood or all those are associated with a particular political party in your country. Which it seems like this is why we would never use these things, because who's going to keep their money on something that could be turned off?

20:21You think, right? But I think the problem with the current monetary system is so stark once you go beyond the first world, it is really hard to transact. It is really hard to get finance. Is independent USDC a better solution? Because if they turn something off, they know no one's ever going to work with them again. So they're a company, right? So isn't it better to have an incentive and have competing groups that can compete rather than a centralized government solution that's much scarier? Absolutely. But the issue is about credibility, right? We've had FTX blow up. We've had a lot of other currency exchanges blow up.

20:52You need a mechanism that gives them credibility. You have a mechanism that gives them freedom and credibility, and that comes out of just regulation. And I really hope the U.S. takes lead on this because I think there are only maybe four or five economies in the world that have the credibility to really put out something that a vast majority of the world would want to use. And quite frankly, it's a race. Is it going to be China? Is it going to be U.S.? Is it going to be Europe? The respective viewpoint, I hope the winners are private companies with the U.S. dollar coins rather than the government.

21:21But I understand where you're coming from. No, but in the sense that I think an ideal system, which you have said, is something that a framework in the U.S. that allows private companies to sort of take the lead. And there is competition among them. And they're able to. And transparent regulatory frameworks. Exactly. And by the way, those regulatory frameworks could be driven by the market as well if it's done correctly. And people could learn, okay, don't trust it unless I have this regulator, which I'm going to go along with. This is what happens if the government doesn't crowd out those frameworks.

21:47And it's great for the U.S. because it gets to have the best of both worlds. It gets to keep the dollar as the fiat currency of the entire world, which is really important for the U.S. But also it allows that transparency for countries to, rather than feel that their currency is being invaded by this foreign currency, actually say, you know what, we really like what this company is doing and their philosophy and how they're doing it. We're going to work with them, actually, to sort of help our currency and economy be stronger, better, and come up with a better world. Totally makes sense. Adi, you're a man who wears many hats.

22:18I want to ask you a bit about biotech and pharma. You're active in these areas. You presented India's drug policy to global conferences on behalf of the government. Tell us about the work you're doing, first of all, in policy in this area and the challenges India faces. So I think one is that, you know, in 2022, what we've seen is a huge, huge change in how the world sort of views the role of pharmaceuticals, the role of health care. I think if you look at the amazing innovations we've had in the last 20, 30 years, and the amazing innovation that we see that's coming out in the next 10, 20 years, it's going to fundamentally change the quality of life that we've had.