New .com bubble!

Startups, Venture funding and profitability go hand and hand else you have a failure on hand!

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My friend Nandu Pradhan sent me a message if I have opened a blog tap! The fact of the matter is that I am on a bit of a sabbatical for a week or ten days. Thoughts keep on coming in the mind and somehow I am able to reach the end line pretty quickly.

I read an article about venture funding this morning. It said that venture fund taps seem to be shutting down, albeit slowly, at least in India. I don’t understand much about venture funding but I am told that this funding is given to start ups with brilliant ideas; then there is second and third round of funding as the idea tries to bloom into business. One term that goes hand in hand is “burn rate” while discussing startups. Burn rate is the money spent every month, without doing any business at least in the beginning.

Most of my life I have been running a small business and during this period, barring a few years, I never needed outside funds! Of course, those loans were in the form of bank facilities. I paid outrageous interest charges on the bank funds. At some stage, I decided that enough is enough and returned all the bank funds. Idea behind running my business was simple, it was my job, and it earned me a living! So idea was to keep on making money from whatever activities I was doing!

Don’t get me wrong but I honestly do not understand this concept of venture funding and startups. All can’t be Microsoft, Apple, Facebook and Googles of this world. These are some of the names that come to mind when we talk of starting up in garage and so on! Don’t forget that people behind them were brilliant people. They may not have had the best of the ideas to start with. Apple took 20 plus years to really hit it. Microsoft initially had a tough time but the idea of MS-DOS is what really took off! These guys had different business models. Microsoft has been making software products and are now also in cloud computing, in a big way! Microsoft’s obituary has been written a few times but lately they have become extremely agile to customer requirements. I need not write about Apple; once the iPod became a hit, rest as they say is history. They have real world hardware that they are selling at very high margins. Google made a brilliant search engine and the advertisements on the engine are their bread and butter; they hardly have anything else that is earning money. Facebook was pioneer in social media and have taken up Google business model but this forms 80% of their income. They have about 20% of their income from other sources. What I am trying to imply is that they are all real profit making companies and balance sheets have been in black, most of the times. They all have hard cash.

Coming back to start ups. I am sure that there is a genius lurking behind all these startups that we keep on hearing. Mr. Mukesh Ambani recently made a statement that Jio is a startup! I think what he meant by that is Jio is thinking out of box, its agile, its is taking business behemoths in the same field head on but of course there is a business plan which will make it profitable sooner than later!

I am naming two large e commerce giants in India, Flipkart and Amazon.  Amazon is doing billions of dollars of turnover world over but I understand that even after 20 years their E commerce business is not in profit! So they keep on pumping money. Because of market capitalization Bezos of this world have become billionaires. So must be Flipkart honchos. What is their business model? To my understanding this is trading business as these two companies’ sale products themselves or through their partners; they do not manufacture a single product. How come their burn rate is much more than their income? I feel that it is because of the discount war they keep on playing to gain territory It is a good thing that they do not take loans from banks; otherwise list of bank NPA’s will grow longer! Loss figures March 2016 Amazon Rs.3572/ crore, Flipkart Rs.2850/ crores, Paytm total loss Rs.7971/ crores! Not bad! Profits can always wait! (Ref. Economic Times dated 24th Sept 2017)

If the organization is not making money then what is the point in doing business? With the taps of funds being slowly turned off, the startups are thinking, in terms of operating profits! Real profits are miles away! I am not sure about operating profits too! I am surprised about both sides. Those running business are not really bothered about profits and the funding guys are hoping that one of their clients will become a Microsoft or a Google and then they will get windfall! I am sure the funding guys are very very smart people and they are pumping only part of their billions as investment in startups! But what about startups which are very small or medium size? Or do the promoters also make their money, on the side, from the “burn”? If there is no profit then how do you sustain? What do you achieve by having a high “burn rate”? Is the business model right? Do these guys have enough maturity? They must be real smart technically but running a business is different ball game! An idea, a great presentation, business plan (which always look lovely on paper) get them funding. But how long can the operations sustain on funding? Should the business not be self-sustaining? Is it easy to convert a brilliant idea into a self-sustaining business? There are many so called brilliant ideas, on paper; they face different hurdles, when they come into business domain.

Coming back to my lack of knowledge, I feel that business is a business is a business! The aim should be to make it profitable, of course not at any cost! One has to follow business ethics. When you get funding you don’t have to pay interest on funding that you get though you actually borrow it!  Funding is a cool name for this borrowing! One is really lucky that this is interest free loan. That most startups fail, is to me, an indication that most ideas don’t get converted to profitable business.

I will give you an example of a “startup”. This was not a startup in the conventional way. This person’s business and products were not hi fi type but products made for farmers and used in farming. Of course it was not cool! He was mentored by my wife Jaya. Jaya happens to be on cool side of life i.e Computers, IT and all. What she found was that the person was brilliant and knew his subject and had good products. He was trying to make too many products on laboratory scale for different produce. After a few meetings Jaya asked him, “What is the USP of your products? Which is your best product?” He said, “My products will give immediate results with very high returns in Pomegranates!” Jaya told him to concentrate only on that. He did it and rest as they say is history. Now he is a reasonably successful businessman. He received recognition from United Nations and business wise he is doing pretty alright! Mind you, he took funding but only after his business had grown reasonably well and was very much in black! Writing this story probably has answered the questions which I raised in the beginning! So startups and venture funding is good provided you have good profitable products and a profit making business plan; otherwise you have to be Amazon or Flipkart or Paytm! To hell with losses! There are enough people who will fund you, if you are large enough!

Low Aim is a Crime!

This is take on being satisfied with Money earned rather than going up the value chain!

India got its independence in 1947. India missed the industrialization bus by a century because British allowed only a few benefits of industrialization to percolate to India.  Before independence educated Indians were interested in working for British, whatever work they could get, mostly they got clerical jobs; those were the only real jobs available anyway! British chose the people for senior admin positions and made them brown sahebs. These proxy Britishers were more British than the Britishers themselves.

This scenario put India under the gloom of disease of getting satisfied on achieving small things and doing mundane things. This led to metastatic mentality of under achievers; those who were trying to do something different were looked down upon and discouraged from doing anything different. Some of us from our generation were able to improve on this thought process and later generation became even more active and started taking risks.

IT sector was the first sector where India did pretty well, financially. Y2K issue was the one that gave impetus to Indian IT sector; middle class started growing faster than ever and large Indian populace started having money, living in foreign countries for work and started buying their own homes in a big way. This of course combined with official opening of Indian economy in 90’s. Effect of higher salaries in IT sector was seen in other sectors like engineering, pharma, finance and so on. But this success hid one thing from general populace and even from IT sector that the “great” work that we were doing was actually mundane work done for others as a service. This model kept on working well till about a couple of years back. Then the signals started coming that the mundane work that was outsourced to India can be automated so….

Circa 2017! Large Indian IT companies are sitting on big pile of US Dollars. This indicates their past success, financially. But it appears that these large “successful” companies were run more by accountants than by entrepreneurs! So they have made big money, hundreds of thousands of millions, many of them in dollar terms. But since the scenario started changing a couple of years back, it is obvious that if you don’t move up the value chain, you are going to come down as fast as you have gone up! The fact that these companies are sitting on a big pile of dollars shows that our mentality of mundane “services” type of work has not changed. This pile of money should not have been there; it should have been invested in going up the value chain! But even today this money is being used to buy back shares! The big bosses have not thought in terms of creating own IPR’s or products in any field, IT or Engineering or Pharma! When “services” are generating money why bother.

To give an example of how things are changing, when you “talk” to say Amazon on chat about some issues, the “Ravindra” or “Asha” who is taking to you may be a “BOT”. What is a BOT? An Internet Bot, also known as web robot, WWW robot or simply bot, is a software application that runs automated tasks (scripts) over the Internet. Typically, bots perform tasks that are both simple and structurally repetitive, at a much higher rate than would be possible for a human alone. The largest use of bots is in web spidering (web crawler), in which an automated script fetches, analyzes and files information from web servers at many times the speed of a human. More than half of all web traffic is made up of bots. (This is Wikipedia definition of BOT)

How this is typically done is very similar to self-check-out counters in big departmental stores. At these check-out stations, for a group of ten such stations there is one supervisor helping, if you need any help. So what this system does is, instead ten people manning ten checkout stations, one person is sufficient. These BOTS also do the same thing. Now do you understand how the nature of business is changing? If your business is dependent on someone else’s way of working, you are in trouble if automation comes into picture.

What is the way out? Going up the value chain; but if you are a company with 100 to 150 thousand employees with “service” level skills you have tough task on hand. Basically it’s a tough call for the senior management to change its own ways from accountant based running module to technologist based running module. Who runs highly successful companies? Apple, Facebook, Microsoft, Google, Nvidia, you just list such companies and will see that these are technology driven companies. Yes, finances are very important but if the company is run by accountants they will never take risks! But when you don’t take risks and try and don’t keep abreast with new technologies or create new technologies, you will never know what hit you! How many of us know that Google and Apple are spending big money on Car technology, and they are creating newer technology in cars which was never even thought of. Nvidia is already a big auto system vendor to VW’s, Audis and Mercs of this world. They have invented technologies which are forcing these Auto giants to use new technologies to remain competitive in business. Elon Musk of Tesla had the audacity to start making Electric Cars and even start making space vehicles using venture capital.

Of course there is silver lining to each dark cloud! The surprise is that the silver lining is coming not from private sector but Government sector. ISRO, Metro projects implementation, Solar Energy project implementations, highways all over India are sign of we Indians have started getting hang of the situation. On IT side one of the success stories of product selling is Tally ERP. Yes it has sold hundreds of thousands of copies and is unquestionably India’s “Numero Uno” product on IT side! If Tally is doable why can’t others do it? India is the largest democracy and is the only country in the world where all elections use EVM’s- electronic voting machines! Paper ballots are Passe’ in India! The EVM’s were developed by C-DAC! Aadhar card is one such initiative that has become pride of the nation! All these projects indicate that we are slowly coming out of the Chalta Hai mentality! Chalta Hai is a phrase indicating Small achievement is good enough! We should have Sachin Tendulkar’s in each field then only we as a nation can start achieving things!

So friends we started with discussion about Indian mentality of being happy with whatever little is achieved! Will our giants survive the onslaught of market changes? They have the money but do they have the wherewithal other than money? Do they have the mind set? Do they have the technological willpower to go up the value chain? Going up value chain is real hard and smart work. I hope these giants do it, but we are still discussing US H1B visa rules, which is the backbone of current business model of sending people on site to provide services! I hope our current young generation and future generation are as audacious as Elon Musk!

 

I am getting a Toyota Prius!

One of the most important aspect of human civilization is that nobody can stop the technological advancements. Technology, the right one, is simply unstoppable. Humans do not change and they most of the time feel that so and so technology cannot become popular. There are very few visionaries who can guess, predict what can happen after a couple of decades. Initially when any technology comes the cost of its implementation as well as usage is always very high. This cost does come down with increased volume.

Let us consider the scenario in solar energy globally. Germany recently on a particular day produced, 85% of its total electricity produced, by Solar. The energy market in Germany runs like a trade market and the rate at which power is bought by distribution companies is based on demand and supply. On that particular day the rate went below zero! California on one day recently produced 67% of its electricity by Solar. US being a very large country will take a long time to reach Germany’s level as a country but it will happen in pockets. India & China are galloping fast towards solar energy in a big way.

If we think about steam engines and trains, initially people were just curious and felt that trains cannot compete with carts pulled by animals. Once the fear in people’s mind reduced, time of travel decreased and more and more people started travelling in trains and rest as they say is history. My first travel to USA was in 1981 and I had paid US $ 1076/ for return journey. Even today we pay hardly more than that in Dollar terms, for return ticket to USA. Why this happened? Because of safer, faster, larger airplanes increased the volume.

Cell phone is another classic example of technology that made it a disruptive device! When I first got my cell in late 90’s the cell phone was quite heavy, almost ugly, and it cost Rs.16/ minute to receive and make calls! In twenty years Cell phones have become sleek, they are much more powerful than computers specs ten years ago! Ten years ago GB was a word very rarely used even in computers. On top of that making calls is now free! Technologically in 20 years cell phones have gone places! Who would have thought of these changes? In the initial phase cell phone was the so called rich person’s toy. The beauty is that land line telephones have been there for more than 100 years doing same basic work that cell phones do, talking to each other. But other than becoming sleeker, land line phones did not change much in technology. Hence the landline phone population is on the wane world over.

Next classic battle that I visualize is between IC engine cars and Electric/Hybrid cars. The usual naysayers are saying that the current car companies are so powerful that they will just not allow this to happen. What are the parameters that will come into picture? Current volume of Electric/Hybrid cars is miniscule and their yearly volumes are nothing to write home about. So what is it that is needed for the picture to reverse, if it does! Fuel costs is one important parameter. Petrol/Diesel costs have come down from highs of US$ 150/ per barrel and have stabilized around US $50/. The original cartel led by Arab countries is finding it difficult to keep high rates due to new people coming in, huge American & Canadian reserves which were not known even ten years back, have suddenly become available. Their cost of production of extracting oil is also coming down. The fear of Petroleum products simply getting exhausted from the world has gone. So fuel cost may not be THE thing that will trouble current cars. But on the other hand, the cost of producing electricity is definitely going down fast. As more and more countries including India go strongly after solar energy, this cost will come down further. The countries which have lot sunlight round the year can become major players in producing next “Petroleum” for cars. Along with this wind energy is also playing a major role. One thing is for sure compared to petroleum products “Sunlight & Wind” are definitely never going to get exhausted. What all this will also do is pollution levels caused by burning Petroleum products will also come down. On top of this when more and more Electric/Hybrid cars get into use pollution levels will further go down.

Largest component of Electric/Hybrid cars is battery pack. Tesla is already building a Giga battery factory in Nevada where they will be able produce battery packs for five hundred thousand cars a year, at naturally very low cost. Already, Tesla is talking of producing cars that will be only slightly more expensive than sedans. Another limitation currently is the distance the car can travel with one charge. In cell phones  already fast charging systems have come, so I am sure it will happen in Electric cars too! So maybe when you have coffee break or wash room break, you can recharge your batteries. Once these cars are reasonably priced people may use such cars the way we use scooters in India, to travel smaller distances. For last hundred years there has been not much improvement in battery storage technology, compared to other fields and same is the case with IC engine cars. I am sure in batteries the break through is just round the corner! If automotive technology had improved as much as electronics, a car would have travelled round the globe in one liter of fuel!

If we summarize this battle, cost of production of fuel (electricity) to charge the electric cars is going down, cost of battery packs is going down ( it is like engine price going down), battery pack capacity will slowly start going up like some Tesla cars go beyond 350 km per charge, pollution improvement is a bonus. On the other side Volvo has already declared that they will not produce diesel cars from 2023 because cost of using technology for pollution compliance will go up exponentially. Volkswagen has already claimed that they will not produce IC engine cars beyond 2030. In India Suzuki & Toyota have joined hands to manufacture hybrid cars for Indian market. Suzuki and Toshiba have joined hands in India to build Lithium Ion battery mega plant. In USA GM and Ford also have big plans for electric cars. BMW i3 model electric car was quite visible when I last travelled to USA. Along with that a lot work is being done by Google and Apple in driverless car. I feel that controlling an electric car with computers will be much easier than IC engine cars! Will humanity be able to stop Electric/Hybrid car technology? Only time will tell. But in the end right technology will win!

So my next car is definitely going to be a Toyota Hybrid Prius! There is small issue of money in the bank but I will generously accept it, if someone wants to gift me a Prius! I will put big donor name sticker on the car! Happy (electric) motoring!

Forward/Backward or what?

Somethings move forward or go backward. Word forward elucidated the movement or a player’s position in Hockey or Football. A country was developed or under developed, sometimes called backward. But as things change in life the meanings of words change too. Now the word forward implies the action of sending a message, received by someone, to the next person or a group (mostly in a hurry!) on WhatsApp!

This word has become very important in our lives but it brings out different emotions from various people. Persons are so excited on WhatsApp that if they receive a message and they like it, in their excitement, they are very uncomfortable if message is not forwarded. It is like a game of pass the parcel! They will not even bother to check if the message has been recently forwarded on the same group. I have seen same message forwarded on the same group, by different people, within 2 to ten minutes of each other, five times! Have these folks read the forwarded message..nah.. no way (in most cases)

Some are very uncomfortable if too many forwards are received by them. As in life, in this new medium of WhatsApp, there are likes & dislikes, pros and cons of doing various things. We are all learning to live in harmony. I feel that a good idea will be to define a “Forward”.

My definition of a Forward” is as below.

A message received by a person

o   Which cannot be verified

o   Message in which the sender may not believe- people find a way out by saying “forwarded as received”. To me all forwards are “forwarded as received”.

o   Which is known not to be proven or proven in a small sample size

o   So called stories assigned to dignitaries

o   Anything derogatory to a race, religion or to political persons

o   Suddenly flooding with 10/20/30 messages on the same subject

o   Suddenly remembering old unknown patriots with some unknown stories and glorifying them.

o   Glorifying India’s greatness by discussing things from mythology and trying to prove how we were scientifically advanced.

o   Jingoistic stories of patriotism

o   And many more

What according to me is not a forward?

An article, poem, painting created by an individual is not a forward. In a close group of friends, relatives sharing a link about something of common interest is not a forward. For example in an alumni group if they share some news link about the Alma Mater or about a classmate, I will not treat it as a forward. Sharing a link about some new things of current common interest for example “cashless transactions” is a non-forward. But sharing old story link of recession in 2008 will be a forward. Of course this statement can be challenged and there could be improved suggestions. It’s about trial and error being done on a new medium. Sharing normal news items is a big no no! Suddenly you start getting so called home photos where Jayalalitha supposedly lived? Why would groups be interested in such photos? You may suddenly get a battery 20 photos giving details of home remedies! Oh come on! Every family has its home remedies!

There is always a question asked if we cannot send “forwards” what do we do on a group? Well on one group I see that people put puzzles and discuss them and dissect them for a couple of hours to many hours. On the same group suddenly a discussion started about the hostel stay from college time. If there is a will one can discuss many different topics but people always want to find an easy way out. On some groups people discuss songs, one of the friends is a painter who shares his paintings with others. Some people share photos taken by them or their family members.

Advent of WhatsApp has proliferated Ultracrepidarian – it is pertaining to a person who criticizes, judges, or gives advice outside the area of his or her expertise. At the same time the “non-forward” group objects to information, link, article shared by an expert in that field. This is treated as breaking the rule!  I understand that it is tough to find a golden mean.There is a sudden proliferation of people who have become experts on demonetization, in medical field, internet, and old mythology, Shivaji, lately on Jayalalitha and on majority of the subjects existing on the earth. This is because they just “forward” messages on any of the subjects. When challenged they get very excited and try to defend the forwards without any knowledge on the subject. When all their arguments fail they go to the last resort “Forwarded as received”. I tried to question this “Forwarded as received” by someone, I asked him if you did not believe in a message why did you forward it? He replied, “Just in case it is right, it may be useful to someone!” I had no argument on this statement. I am talking about the persons who are professionals and who have worked in large organizations and have seen the world. The interesting aspect is they don’t “own” the forward so why the need to justify? Ego?

The suggestion of non-forwards group is fought valiantly with freedom of speech argument! But what about freedom of not receiving stuff which is not sent by known people, which is not verifiable, which cannot be proven? At the end, non-forward thinkers can prevail only if they are patient, persistent and logical.  

I will finally tell a story of extent to which people go and try to prove things and create stories and forwards out of the same. A story suddenly started circulating on WhatsApp about Shivthar Ghal, a valley in which Ramdas swami, Shivaji’s guru, lived. The story came with a website link about the valley. The story said that this Valley is a very special space and world’s ultimate place, where no signals from anywhere in the world reach. Ok I agree and be done with it. But story does not end there. It says that Ramdas swami wrote the treaties, Dasbodh, in the valley because of the ultimate peace the valley provided, as no signals could reach the valley. To prove this, a so called satellite signal scientist Bhopale was created. He is supposed to have tested with 24 satellite devices that no signals reached the valley. A curious person will naturally write to the website about apprehensions. They had engineer available to reply to such queries in a scientific language so that one felt that well may be it is possible! Ramdas Swami died in the year 1681! My current tools, including Google, are still searching which type of signals were present in Shivthar Ghal at that time.  When there were no signals there was peace anyway! When you drive through a long tunnel, you lose your FM signal, is it not?

 

Friends, Texting……

Today I have 380 “friends” on Facebook. Who are my friends? What is a friend? Are these 380 my friends; except 15/20 “friends”, 30 others interact with me on yearly basis, maybe. Do we interact with our first family on Facebook, especially when we stay in the same house? Some do! I know of husband/wife wishing happy birthday on Facebook! This is a social networking site but it is turning out to be an antisocial technology. What has FB achieved? It has “connected” people virtually but in real life it has disconnected people. For an event, in “friends” life, we feel that it is good enough to wish on FB and be done with it. We have forgotten the art of talking to friends on phone. That too because we don’t have time to talk on phone; where is the time left after FBing, WhatsApping and surfing in general!!  New technology, “bane or boon discussions” have started long back. With proliferation of “smart” phones, which carry FB and WhatsApp, population of dumb people is increasing!

I am old enough to say “In our days things were different”. And yes they really were different. When friends called you to play it was cricket, football, I spy, lagori, gili danda and so on. Now it is X box or Nintendo. We is used to get hurt because we fell down, playing. Now I am told the kids are hurt because their parents haven’t bought the latest game.

Photo1

The above caricature is a representative of current thinking. In olden days we used to stop and talk to people to ask directions or an address. Now you have your GPS on and it guides you to the exact address, in most cases. Goal of reaching the destination is achieved but so is disrupt with people. Advantages of talking to someone are many. Just tell me how you feel when you “talk” to a wall called call center? We might as well send them, sms or an email. Some have met their future spouses as they asked them the direction while locating an address!! Can this happen in today’s cutting edge technology era! People’s interactions in general have reduced to a large extent. Probably this is leading many couples preferring to get a dog as a pet instead of having children. Is having children passé?

Photo2

This caricature implies the same thought. It’s a great pun on the word “friend”. Does family talk to each other like it happened in olden days? Do kids know their parents and vice versa? I doubt, at least in some cases, because all are busy with their “friends”. You see caricatures of husband telling wife to pass on the salt, through WhatsApp message! Kids don’t become “friends” with their parents. I know of one family who track their child’s FB activity through a family friend, who is their child’s “friend”. What is so secret about an activity which is open to the whole world but is “shut” for the parents? What can be the logic behind this?

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This caricature indicates the undue importance given to the cell phone. The person is just blind to the nature’s beauty. What causes this addiction? I can understand this happening in the initial phase of cell phone ownership but why the addiction level goes up, up & up? Why do people need to take cell phone to bed? All I need to know when I am in bed, is time, when I wake up in between. So I started keeping devices other than cell phone on my side table. My current device is a Kindle! The world does not stop if you do not see an e mail, WhatsApp updated after you go to sleep!!

Photo4

Another addiction area that I see is talking on cell phone & texting while driving. The caricature above perfectly shows about this addiction. Are we in such a great hurry that we keep on talking and texting while driving? How did we handle our life pre cell phone era? Do we become over confident that we can multi task easily? Is our brain designed to drive a car at say 60 km and text on cell phone, simultaneously? I don’t think so. What can happen even if a minor emergency arises? How will our brain react? Aero plane accidents have occurred due to wrong pilot reaction in emergencies, though pilot was fully busy in flying the plane (hopefully not texting). Here people try multitasking while driving.

This is a lovely caricature taking a humorous snide at texting while driving!

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Coming back to basic thought of pros & cons of FB’s, WhatsApp, texting. Why are people so addicted about these activities when people know that there can be a real danger to lives. Some time back there was an accident on a ring road. A lady was busy talking on her cell phone while crossing the road. A heavily laden dumper truck swerved to save the lady, lost control and six people died. Truck fell down from a bridge 10 meters high. We read of people, listening to music with ear buds in the ears, have been crushed by trains! Two people fell down while taking a Selfie and drowned in the sea. We also read of people trying to take Selfies on mountains standing very close to the edge of valleys. I recently read about a woman who sent whatsapp messages on New Year Day for six consecutive hours. Then she had to be taken to a doctor to take care of her swollen hand and fingers! Or is it swollen brain!

What is it really that makes people do such stupid things. If you tell someone doing such activity, he/she will not want to listen to what you are saying, if at all they listen to you, they ignore you. Stupidity or over confidence? Are these people trying to impress someone?

Volkswagen has come up with a brilliant film on “Effect of Texting while driving”. Such real life campaigns hopefully will make people realize dangers of what is being done under the guise New Technology usage.

Disclaimer: The caricatures & video are used only for better explanation, there is no commerce involved in writing this.