June 7, 2009
June 1, 2009
Wall Street Fables: The secret of the Bonus
Following is a crude con-job. A far away analogy would be the way Wall Street quants (A term used to describe people with more than their share of quantitative skills ... typically guys who can do spreadsheets in their head) have financially engineered returns on dead assets ...
A city boy, Raj, moved to the village and bought a donkey from an oldfarmer for Rs.1000. Thefarmer agreed to deliver the donkey the next day.The next day the farmer drove up and said,
"Sorry Raj, but I have some bad news, the donkey died while I was bringing him here."
"Well then, just give me my money back", replied Raj.
The farmer said, "Can't do that. I wentand spent it already."
To which raj replied, "OK then, just unload the donkey."
The farmer was inquisitive. "What you are going to do with him?"
"I'm going to raffle him off." replied Raj
"You can't raffle off a dead donkey!" exclaimed the farmer.
"Sure I can. Watch me. I just won't tell anybody he's dead." There was a twinkle in Raj's eye.
A month later the farmer met up with Raj and asked, "What happened with that dead donkey?
"I raffled him off", said Raj with a casual look, "I sold 500 tickets at Rs. 10 each and made a profit of Rs 4990 with the donkey worth Rs. 1000 as the prize."
"Didn't anyone complain?", the farmer asked with a look of astonishment.
"Just the guy who won .... So I gave him back his Rs. 10."
And that my friends is a fable on how investment bankers across the world made their hefty bonus'.
March 30, 2009
Know thy pension plan
I was the audience. A pitch was being made to buy into a pension plan. The salesperson gave the keeping aside for old age spiel. In short the dynamics were like this - I was to put in a fixed amount for the first five years, say INR x per annum. From thereon, till I was fifty, this cash would grow and after I turned fifty I would get a monthly income from this kitty till my passing into the next world.
She was doing her job well until the point where I asked at what rate my cash would grow between the last installment and me turning fifty.
“15%”, came the reply.
“Will you guarantee that?”
“Well we don’t guarantee it but if you invest the money in an aggressive mutual fund you will see those returns”
“Which mutual fund? I thought this was a pension plan”
She unfolded the literature for the plan. It showed options of allocating my annual contributions towards various asset classes – the most aggressive of which (also took on the most risk) and would, assuming the world didn’t fall apart in the intervening years, assuming that Indian equity markets delivered, assuming the fund manager wasn’t a rogue, assuming the companies in which my pension money was invested didn’t blow up due to fraud, bad management, business cycles or otherwise and assuming a million other risks which my tiny brain couldn’t fathom or whose impact I couldn’t ascertain, would potentially deliver 15%! … It was getting clear now …
“So your literature says 15% return annually if I invest in this scheme and allocate my pension to this asset class (Fancy term 1: ‘asset class’ is money that is exposed to similar risks – bonds, shares, etc are examples of asset classes)
“Well on the letterhead we can mention a maximum of 10%. But you can get 15% if …”
“Why 10%? You just said 15%!”
“Well sir, on the letterhead …”
“OK. No issues, So if your letter mentions 10% I assume my cash grows at 10% in the intervening period.” … PS: whatever you may hear from stock brokers, cash growing 10% assured annually for a long time is a pretty good investment, especially for pension plans
“No sir that again would depend …”
“Then why mention 10% on the letter?”
(Uncomfortable babble) … “Sir you can choose our as your asset class. The current NAV (Fancy Term 2: NAV means Net Asset Value – the price of a mutual fund at any given point in time) is INR 4. The NAV will surely rise (?) and your pension money will grow faster than 15%”
(I smile) … “What was the offering NAV?”
“INR 10 sir”
“Don’t you think it’s a concern that it has fallen from INR 10 to INR 4?”
“It’s a five star scheme sir and they invest in AAA+ corporates” … she doodled AAA+ on the literature, possibly to drive home the point
“Is there a possibility the NAV can drop further?”
(again that uncomfortable silence)
“Never mind … I’ll take this literature and get back to you”
As I was leaving I felt a little sorry for grilling her after I came to know about the asset classes logic. I understood the plan fundamentally then but was exploring the possibility that the pension plan scheme actually had a fixed rate of return. There was none. Instead there was a hell lot of market risk. (It actually seemed a clever way to seek contributions to the company’s mutual fund schemes) It called for taking a call on the capital markets for the next 23 years. (I’m around 27, and it would be 23 years till I turn 50). Ideally I would like my pension money to be risk-free. A large portion, say 95% of it, should grow at a fixed rate and the rest in equity shares of AAA+ corporates and pension funds should see to it that the float (Fancy term 3: Float is the premium on insurance / pension contributions collected by such companies in this business) is managed in a similar way. Unfortunately the fees component from selling these products has become huge income drivers for banks. A cross-sell like this gets fees form the pension plan as well as the mutual fund. Obviously bank executives will not want to sell the safer plans which gets fees for just the pension fund.
Just to give you one example of the impact a decision like this will have, assume someone invests in this scheme (most people will eventually). Their money grows in this mutual fund based pension plan till they are 49. Just before they turn 50, we see a recession the likes of today, there is mayhem in the markets and they are left with the capital they started off with, maybe less, which over 23 years has lost its value due to inflation. Assume that this was their only safety net. Isn’t their retirement royally screwed? Where has all the hard work to support old age gone? What if there was someone with a terminal illness at home? As usual the only beneficiary is the bank manager who collected bonuses every year for growing the capital (maybe completely due to luck) till our friend grew 49 and then who gave up his bonus when the fund went under.
Unfortunately, most people are unaware of what they sign up for in such schemes. One old-timer I know very happily told me that he invested most of his savings in a fixed rate investment which is market determined (?). My attempts to explain that there is no instrument that can pay a fixed rate and at the same time be market-determined was met with a “Do you think the managers at the insurance Co are fools?” Well they were not fools, they met their annual targets and scooted off into the sunset.
Financial innovation may have got people access to investment options they never would have, which is a good thing if they understood it. But financial innovation coupled with ignorance could well be disastrous. Know thy investments!
She was doing her job well until the point where I asked at what rate my cash would grow between the last installment and me turning fifty.
“15%”, came the reply.
“Will you guarantee that?”
“Well we don’t guarantee it but if you invest the money in an aggressive mutual fund you will see those returns”
“Which mutual fund? I thought this was a pension plan”
She unfolded the literature for the plan. It showed options of allocating my annual contributions towards various asset classes – the most aggressive of which (also took on the most risk) and would, assuming the world didn’t fall apart in the intervening years, assuming that Indian equity markets delivered, assuming the fund manager wasn’t a rogue, assuming the companies in which my pension money was invested didn’t blow up due to fraud, bad management, business cycles or otherwise and assuming a million other risks which my tiny brain couldn’t fathom or whose impact I couldn’t ascertain, would potentially deliver 15%! … It was getting clear now …
“So your literature says 15% return annually if I invest in this scheme and allocate my pension to this asset class (Fancy term 1: ‘asset class’ is money that is exposed to similar risks – bonds, shares, etc are examples of asset classes)
“Well on the letterhead we can mention a maximum of 10%. But you can get 15% if …”
“Why 10%? You just said 15%!”
“Well sir, on the letterhead …”
“OK. No issues, So if your letter mentions 10% I assume my cash grows at 10% in the intervening period.” … PS: whatever you may hear from stock brokers, cash growing 10% assured annually for a long time is a pretty good investment, especially for pension plans
“No sir that again would depend …”
“Then why mention 10% on the letter?”
(Uncomfortable babble) … “Sir you can choose our
(I smile) … “What was the offering NAV?”
“INR 10 sir”
“Don’t you think it’s a concern that it has fallen from INR 10 to INR 4?”
“It’s a five star scheme sir and they invest in AAA+ corporates” … she doodled AAA+ on the literature, possibly to drive home the point
“Is there a possibility the NAV can drop further?”
(again that uncomfortable silence)
“Never mind … I’ll take this literature and get back to you”
As I was leaving I felt a little sorry for grilling her after I came to know about the asset classes logic. I understood the plan fundamentally then but was exploring the possibility that the pension plan scheme actually had a fixed rate of return. There was none. Instead there was a hell lot of market risk. (It actually seemed a clever way to seek contributions to the company’s mutual fund schemes) It called for taking a call on the capital markets for the next 23 years. (I’m around 27, and it would be 23 years till I turn 50). Ideally I would like my pension money to be risk-free. A large portion, say 95% of it, should grow at a fixed rate and the rest in equity shares of AAA+ corporates and pension funds should see to it that the float (Fancy term 3: Float is the premium on insurance / pension contributions collected by such companies in this business) is managed in a similar way. Unfortunately the fees component from selling these products has become huge income drivers for banks. A cross-sell like this gets fees form the pension plan as well as the mutual fund. Obviously bank executives will not want to sell the safer plans which gets fees for just the pension fund.
Just to give you one example of the impact a decision like this will have, assume someone invests in this scheme (most people will eventually). Their money grows in this mutual fund based pension plan till they are 49. Just before they turn 50, we see a recession the likes of today, there is mayhem in the markets and they are left with the capital they started off with, maybe less, which over 23 years has lost its value due to inflation. Assume that this was their only safety net. Isn’t their retirement royally screwed? Where has all the hard work to support old age gone? What if there was someone with a terminal illness at home? As usual the only beneficiary is the bank manager who collected bonuses every year for growing the capital (maybe completely due to luck) till our friend grew 49 and then who gave up his bonus when the fund went under.
Unfortunately, most people are unaware of what they sign up for in such schemes. One old-timer I know very happily told me that he invested most of his savings in a fixed rate investment which is market determined (?). My attempts to explain that there is no instrument that can pay a fixed rate and at the same time be market-determined was met with a “Do you think the managers at the insurance Co are fools?” Well they were not fools, they met their annual targets and scooted off into the sunset.
Financial innovation may have got people access to investment options they never would have, which is a good thing if they understood it. But financial innovation coupled with ignorance could well be disastrous. Know thy investments!
February 15, 2009
Machiavellian Infomation Overloads
I have stopped reading newspapers. Unless of course it’s a lazy afternoon and the options to spend my time in other pursuits are non-existent.
There was a time when I used to read every bit of news that came along. As a student, I read the Economic Times (even though at the time I could not appreciate the significance of most of the news), The Times of India and the Bombay Times (for funsakes). I was told that the middle pages of the newspaper are the ones where the juice is. The Editorials and comments by wise men of industry and society were on these pages. As a young mind, one was supposed to assimilate the oracle-like opinion (no matter that it could be released verbatim later in front of a group of stunned teenagers … man this guy has god-level insights!) All this until one day some few months ago, I saw one of my friends draft a press release. And no my friend is no journalist; we’ll come back to him a bit later.
Noam Chomsky is a Professor of linguistics at Massachusetts Institute of Technology and given his background in studying languages and their structures ends up learning a fair bit about society. He says that as part of a democratic setup, people have access to a lot more information than those making decisions for that society would be comfortable with. Making policy and implementing decisions thus becomes a challenging process to the extent that ones reputation hangs on its success; and this is true across the spectrum from industry to state. Hence the need to control, filter, jazz up, seduce. In other words: shape public opinion.
One look at Indian media today and you will know what I mean. Apart from just information dissemination, there is entire other world where the significance of the news is forced down my throat. I as a receiver of communication am not allowed to think. The broadcast of any news in any medium is accompanied by ‘expert opinion’ where there is a well known celebrity-like media friendly character who sagely comments on what has transpired and how it will affect our life.
Who is our ‘expert’? What are his credentials? How has he performed in his line of expertise? – Are questions which immediately come to mind. Now to some slightly uncomfortable questions - Who selects him? Why is he on the show? Does he have vested interests? Who does he represent? More importantly, why is he predicting events? What is his track record in predicting events? These may never be answered.
Coming back to my press release drafting friend – Why was an employee drafting a press release? Isn’t that a job for a journalist? Does this rob the journalist the opportunity to ask important questions? Maybe if he asked, the merit of the release would lose significance. Maybe it would be relegated to the obscure parts of the newspapers which are used for personal packing of dirty linen during a long trip. How much more is there in this release that does not meet the eye? Are journos reduced to selecting what news goes where? Do they get incentivized for selecting what news goes where? Who decides these incentives? Why all this cloak and dagger style?
Don’t get me wrong. I have nothing with the withholding of information. In a competitive world, it is necessary. One can’t publish confidential data in the name of the free press. My issue is more with the unholy nexus of journalists and publicists. News has moved on from reporting to generation and sensationalism. Grand quotes from people who have given up something valuable to be on the front page. Which means we are being misinformed. Which means reading newspapers is a waste of time.
You may ask what does one do to be upto speed with the happenings around you? Scan the headlines of a respectable media org. Mostly it is possible to jazz that up to. But given that you see it for a split second, the ability to be influenced is much less.
There is another non-Machiavellian reason that I have stopped reading. There is just too much information. I once tried to list down the central theme of the previous days news stories. I couldn’t. Rarely did I come across an article I remembered. That too because I relayed it several times in my head and told others – it was interesting. Otherwise, for most of the time it was just too much noise. Filtering the noise to come to matters that concern my work / me is painful. I’d rather scan the headlines of a publication that focuses on it; or wait for somebody who finds it interesting to tell me about it. Either way I am not missing much.
There was a time when I used to read every bit of news that came along. As a student, I read the Economic Times (even though at the time I could not appreciate the significance of most of the news), The Times of India and the Bombay Times (for funsakes). I was told that the middle pages of the newspaper are the ones where the juice is. The Editorials and comments by wise men of industry and society were on these pages. As a young mind, one was supposed to assimilate the oracle-like opinion (no matter that it could be released verbatim later in front of a group of stunned teenagers … man this guy has god-level insights!) All this until one day some few months ago, I saw one of my friends draft a press release. And no my friend is no journalist; we’ll come back to him a bit later.
Noam Chomsky is a Professor of linguistics at Massachusetts Institute of Technology and given his background in studying languages and their structures ends up learning a fair bit about society. He says that as part of a democratic setup, people have access to a lot more information than those making decisions for that society would be comfortable with. Making policy and implementing decisions thus becomes a challenging process to the extent that ones reputation hangs on its success; and this is true across the spectrum from industry to state. Hence the need to control, filter, jazz up, seduce. In other words: shape public opinion.
One look at Indian media today and you will know what I mean. Apart from just information dissemination, there is entire other world where the significance of the news is forced down my throat. I as a receiver of communication am not allowed to think. The broadcast of any news in any medium is accompanied by ‘expert opinion’ where there is a well known celebrity-like media friendly character who sagely comments on what has transpired and how it will affect our life.
Who is our ‘expert’? What are his credentials? How has he performed in his line of expertise? – Are questions which immediately come to mind. Now to some slightly uncomfortable questions - Who selects him? Why is he on the show? Does he have vested interests? Who does he represent? More importantly, why is he predicting events? What is his track record in predicting events? These may never be answered.
Coming back to my press release drafting friend – Why was an employee drafting a press release? Isn’t that a job for a journalist? Does this rob the journalist the opportunity to ask important questions? Maybe if he asked, the merit of the release would lose significance. Maybe it would be relegated to the obscure parts of the newspapers which are used for personal packing of dirty linen during a long trip. How much more is there in this release that does not meet the eye? Are journos reduced to selecting what news goes where? Do they get incentivized for selecting what news goes where? Who decides these incentives? Why all this cloak and dagger style?
Don’t get me wrong. I have nothing with the withholding of information. In a competitive world, it is necessary. One can’t publish confidential data in the name of the free press. My issue is more with the unholy nexus of journalists and publicists. News has moved on from reporting to generation and sensationalism. Grand quotes from people who have given up something valuable to be on the front page. Which means we are being misinformed. Which means reading newspapers is a waste of time.
You may ask what does one do to be upto speed with the happenings around you? Scan the headlines of a respectable media org. Mostly it is possible to jazz that up to. But given that you see it for a split second, the ability to be influenced is much less.
There is another non-Machiavellian reason that I have stopped reading. There is just too much information. I once tried to list down the central theme of the previous days news stories. I couldn’t. Rarely did I come across an article I remembered. That too because I relayed it several times in my head and told others – it was interesting. Otherwise, for most of the time it was just too much noise. Filtering the noise to come to matters that concern my work / me is painful. I’d rather scan the headlines of a publication that focuses on it; or wait for somebody who finds it interesting to tell me about it. Either way I am not missing much.
December 10, 2008
United Holdings of America Capital Partners???
Came across this interesting copy on the auto bailouts. At the pace at which things are going the US should change its name from 'United States of America' to 'United Holdings of America Capital Partners LLC' or something of that sort
Whats in a name ...
... A rose by any other name would smell just as sweet. Maybe not. (Scroll to the bottom of the page)
December 6, 2008
... and politicians across the Board put their foot in their mouth
One of the positives in the gloom of last week is the mass public outrage at anyone of political ilk. I was at a public rally on Wednesday to show solidarity and for the first time in my life I saw Indian civilians with blood in their eyes. More than 100,000 people thronged the streets of South Mumbai shouting slogans against Pakistan and vilifying politicians.
It has not just been inaction of the government machinery that has stoked public anger but the foot-in-mouth statements made by politicians in the wake of the terror attacks, which spanned from inept to rude and from insensitive to shocking. Some creative minds have channelized this energy into some interesting posters which have been photographed by an anonymous person and which found their way to my inbox.
The Communists fell first. Comrade Achutanandan, the Kerala Chief Minister, was asked by slain soldier Maj. Unnikrishnan’s father to vacate his premises. Clearly not used to such snubs, our Comrade challenged a dog to visit the martyrs house had it not been for his sacrifice. To which our friends at the rally had this to say –
For my non-Hindi speaking / reading / understanding friends reading this blog, the breaking up of some of the syllables in the Comrades name, especially the part in between the two ‘a’s refers to a certain part of the female anatomy. Comrade still refused to apologise despite being criticised from all quarters. Finally Prakash Karat, the CPI supremo did the apologising.
The poster above summaries most of the blunders made by Indian politicians in the aftermath of the terrorist attacks. It includes RR Patil, the Deputy Chief Minister of Maharashtra saying that such things happen in big cities. In bizarre logic he justified the statement by indirectly saying that he had saved 4,800 people (They came to kill 5,000 we contained the damage to 200). 
All the gentlemen above are however left far behind by the Hon. Shivraj Patil, who has been in stellar form, wearing his incompetence on his sleeve. In what can only be described as shocking, the Home Minister gaily announced the size and time of arrival of the assault team. Later, in an interview after his visit to Mumbai, Mr Patil told the media that the terrorists had left Cama Hospital and the railway station (both terror targets) before he had reached the site. Dear Shivraj, what were you smoking? Did you expect to have tea with the terrorists? Maybe you wanted meaningful intercourse as you indicated when you took charge of the Home Ministry.
It has not just been inaction of the government machinery that has stoked public anger but the foot-in-mouth statements made by politicians in the wake of the terror attacks, which spanned from inept to rude and from insensitive to shocking. Some creative minds have channelized this energy into some interesting posters which have been photographed by an anonymous person and which found their way to my inbox.
The Communists fell first. Comrade Achutanandan, the Kerala Chief Minister, was asked by slain soldier Maj. Unnikrishnan’s father to vacate his premises. Clearly not used to such snubs, our Comrade challenged a dog to visit the martyrs house had it not been for his sacrifice. To which our friends at the rally had this to say –
For my non-Hindi speaking / reading / understanding friends reading this blog, the breaking up of some of the syllables in the Comrades name, especially the part in between the two ‘a’s refers to a certain part of the female anatomy. Comrade still refused to apologise despite being criticised from all quarters. Finally Prakash Karat, the CPI supremo did the apologising.Others (below) indicated that they prefer the canine.
Next caught with his pants down was Maharashtra Chief Minister, the Hon. Vilasrao Deshmukh, who invited Ram Gopal Verma (RGV), a Bollywood film-maker and his actor son, Ritiesh Deshmukh in his official entourage to survey the damage done to the Taj. RGV has in the past made movies like RGV ki Aag which you can review here. (Note - RGV ki Aag flopped at the Box Office). The move surprised even Bollywood. That resulted in this response –
And then from a respectable name, the meaning of which is analogous to ‘landlord’ his name was adapted, with a few nifty changes, and captured in the font of RGV’s previous movie posters, a name that means ‘a national fool!’ 
Mukhtar Abbas Naqvi, the BJP Vice-President, had probably never interacted with the urban, educated and presentable woman before. When he saw some of them in media coverage deriding politicians he ejaculated (pun intended) ‘Some women wearing powder and lipstick have taken to the streets of Mumbai …” No specific interesting poster on this, but the remark drew the ire of women parliamentarians, some even from his own party.
The poster above summaries most of the blunders made by Indian politicians in the aftermath of the terrorist attacks. It includes RR Patil, the Deputy Chief Minister of Maharashtra saying that such things happen in big cities. In bizarre logic he justified the statement by indirectly saying that he had saved 4,800 people (They came to kill 5,000 we contained the damage to 200). And this man was conspicuous by his absence – Raj Thakeray of the MNS did not mind as the NSG, which had North Indian representation, including the slain Gajendra Singh - who lost his life in the operation - protected our nation. But then stooping low as their wont, the MNS put up a poster outside Malad railway station clearly mentioning that three ‘Marathi’ top cops, Karkare, Kamte and Salaskar had gave up their life to protect outsiders and foreigners.
All the gentlemen above are however left far behind by the Hon. Shivraj Patil, who has been in stellar form, wearing his incompetence on his sleeve. In what can only be described as shocking, the Home Minister gaily announced the size and time of arrival of the assault team. Later, in an interview after his visit to Mumbai, Mr Patil told the media that the terrorists had left Cama Hospital and the railway station (both terror targets) before he had reached the site. Dear Shivraj, what were you smoking? Did you expect to have tea with the terrorists? Maybe you wanted meaningful intercourse as you indicated when you took charge of the Home Ministry.
December 4, 2008
Of root causes and a change of perception ...
It was 10 pm on 26th November. I was at my office, working on the business plan of an opportunity we are currently evaluating. For some reason the financials were not stacking up. Frustrated I decided to call it a day. I was to travel early next morning and had to pack. I plugged my earphones and listening to some of my favorite tracks, made my way to Churchgate station.
Minutes earlier, not too far away CST, Leopold Café and the Taj Hotel were attacked. For a good five minutes I was on one of the two roads that connect these locations to the Oberoi-Trident. A few minutes later the Oberoi was under siege. In hindsight, there was a good probability of the terrorists using the road since it has relatively less traffic. It gives me shivers to think that the walk could have been my last. I was of course, oblivious to the developments.
A lot has changed for me when I reached home and took in the full impact of the attacks. I have never been prejudiced towards Pakistan and have always attributed the misgivings between India and Pakistan to a narrow minded leadership way back in 1947-48. When two men who both wanted to become Prime Minister of a young republic resorted to religion to resolve their issues. Events, however strong, in other parts of the country did not change that. OK, Kargil veered me a bit to the other side but I was optimistic that things could be worked out. But last week was the last straw. The scale and impact of the attack has been horrific. The thought that I could have been a target has been unnerving. And the heap of evidence against Pak has been too hard to ignore.
In a thought that surprised me as well, I don’t think war is a bad option. It is a sad day when the educated and the objective crowd start thinking of war. It means that solutions are extremely limited and that the inevitable is necessary. Apart from just plain evidence, this time a long time Pakistan ally, the US has made statements like ‘India has the sovereign right to protect itself’ and ‘Pakistan is an international migraine’. Strong statements if you look at the past US-Pak relations.
It also makes me wonder why does most of world terror have an Islamic face? What makes Islam a favorite exploitation ground for religious extremists? Why is this religion repeatedly and consistently used out of context compared to other religions? I have Muslim friends and they are good and righteous people. If their faith had conflicting ideas with them being good human beings they would not be Muslim; which says that it’s definitely not the religion. Is it the method of delivery? Are there too many middle men subverting the message of the Prophet and mixing it with economic and political themes? Other causes do not seem to fit in – Education? There are poorly educated nations in South America and Africa as well. Resourcefulness? Prominent sponsors of the Middle East are so wealthy it stinks. Economic well-being? Ditto.
Which brings us back to political agendas. Though it seems the most plausible, it will be interesting to know.
Minutes earlier, not too far away CST, Leopold Café and the Taj Hotel were attacked. For a good five minutes I was on one of the two roads that connect these locations to the Oberoi-Trident. A few minutes later the Oberoi was under siege. In hindsight, there was a good probability of the terrorists using the road since it has relatively less traffic. It gives me shivers to think that the walk could have been my last. I was of course, oblivious to the developments.
A lot has changed for me when I reached home and took in the full impact of the attacks. I have never been prejudiced towards Pakistan and have always attributed the misgivings between India and Pakistan to a narrow minded leadership way back in 1947-48. When two men who both wanted to become Prime Minister of a young republic resorted to religion to resolve their issues. Events, however strong, in other parts of the country did not change that. OK, Kargil veered me a bit to the other side but I was optimistic that things could be worked out. But last week was the last straw. The scale and impact of the attack has been horrific. The thought that I could have been a target has been unnerving. And the heap of evidence against Pak has been too hard to ignore.
In a thought that surprised me as well, I don’t think war is a bad option. It is a sad day when the educated and the objective crowd start thinking of war. It means that solutions are extremely limited and that the inevitable is necessary. Apart from just plain evidence, this time a long time Pakistan ally, the US has made statements like ‘India has the sovereign right to protect itself’ and ‘Pakistan is an international migraine’. Strong statements if you look at the past US-Pak relations.
It also makes me wonder why does most of world terror have an Islamic face? What makes Islam a favorite exploitation ground for religious extremists? Why is this religion repeatedly and consistently used out of context compared to other religions? I have Muslim friends and they are good and righteous people. If their faith had conflicting ideas with them being good human beings they would not be Muslim; which says that it’s definitely not the religion. Is it the method of delivery? Are there too many middle men subverting the message of the Prophet and mixing it with economic and political themes? Other causes do not seem to fit in – Education? There are poorly educated nations in South America and Africa as well. Resourcefulness? Prominent sponsors of the Middle East are so wealthy it stinks. Economic well-being? Ditto.
Which brings us back to political agendas. Though it seems the most plausible, it will be interesting to know.
August 21, 2008
Beauty and the Beast
For the past week I have been living at Mumbai Airport. In my spare time I am rushing for meetings across the length and breadth of India, drinking coffee to stay awake, rushing back to airports, visiting a place I used to call home for a quick shuteye and meeting the Nose of India.
If things described above aren’t bad enough to screw with your body clock there is nothing more jarring to the senses than a young bald man in a ghoulish wig. The man at security in front of me was puny, short, nondescript and was sulking. Maybe he’s not a morning person and thankfully there wasn’t a mike, cap or vest in sight.
As if to make up for the disturbing imagery earlier, God presented me a seat in the business section with a seat in the same row as Meow! Well I don’t know what you think of Jaane Tu … and frankly I thought the movie sucked. But this young damsel is attractive and I was just warming up to tell her that we shared something deep (We apparently share the same surname) and that such things are obviously indicative of long term synergies. Alas a matronly woman filled the empty seat that separated us – could have been Mommie, Chaperone or bodyguard – I don’t know.
Ms D’Souza, all of 21 years, curled up and slept well whilst I analyzed financial models … my head turning ever so often to check if a different kind of model a seat away would wake up and observe her surroundings with some interest. I toyed with the Handsome-Prince-with-a-kiss-that-brings-back-maidens-from-comatose-states fantasy a bit when the plane hit the tarmac. In minutes we were separated and I found myself at yet another airport.
Things in life balance out. High pitched nasal tones balance pretty upcoming actresses. The beast balances beauty. Maybe I should become a beast.
If things described above aren’t bad enough to screw with your body clock there is nothing more jarring to the senses than a young bald man in a ghoulish wig. The man at security in front of me was puny, short, nondescript and was sulking. Maybe he’s not a morning person and thankfully there wasn’t a mike, cap or vest in sight.
As if to make up for the disturbing imagery earlier, God presented me a seat in the business section with a seat in the same row as Meow! Well I don’t know what you think of Jaane Tu … and frankly I thought the movie sucked. But this young damsel is attractive and I was just warming up to tell her that we shared something deep (We apparently share the same surname) and that such things are obviously indicative of long term synergies. Alas a matronly woman filled the empty seat that separated us – could have been Mommie, Chaperone or bodyguard – I don’t know.
Ms D’Souza, all of 21 years, curled up and slept well whilst I analyzed financial models … my head turning ever so often to check if a different kind of model a seat away would wake up and observe her surroundings with some interest. I toyed with the Handsome-Prince-with-a-kiss-that-brings-back-maidens-from-comatose-states fantasy a bit when the plane hit the tarmac. In minutes we were separated and I found myself at yet another airport.
Things in life balance out. High pitched nasal tones balance pretty upcoming actresses. The beast balances beauty. Maybe I should become a beast.
August 15, 2008
Genius
Are we born intelligent or can genius be created? How do people achieve Nirvana? What is that sixth sense? I had a chat with a colleague sometime back and we agreed to the following conclusion - 'THAT genius is Thought that has travelled extensively, created gazillions of permutations, evaluated the results and wired one's brain to think along these terms'
In simpler terms, it's all about pattern recognition. Most people I consider genius' have devoted considerable time to this pursuit. When they spent all their time on stuff they liked to do they were, at some subconcious level, storing patterns and creating natural software to evaluate them. Of course, passion and strong grasping power helps a bit and also limits us - one can't be passionate about multiple things.
So with all this gyaan that I am freely disbursing why am I not a genius? Well efforts are on and progress is slow, but frankly I'm just plain lazy to educate myself. I am too busy working that I am cheating myself of intellectual energy. Aren't we all?
In simpler terms, it's all about pattern recognition. Most people I consider genius' have devoted considerable time to this pursuit. When they spent all their time on stuff they liked to do they were, at some subconcious level, storing patterns and creating natural software to evaluate them. Of course, passion and strong grasping power helps a bit and also limits us - one can't be passionate about multiple things.
So with all this gyaan that I am freely disbursing why am I not a genius? Well efforts are on and progress is slow, but frankly I'm just plain lazy to educate myself. I am too busy working that I am cheating myself of intellectual energy. Aren't we all?
June 1, 2008
Gloomy May
May has finally ended. It was a bad month bringing bad news with amazing regularity that at one point I was expecting bad news when the cycle said it was due.
Two tragic accidents and passing away of young people my age ... A middle aged heart attack case ... A little girl losing her mother ... News of a friend with a disease that is in advanced stages ... A celeb classmate who drowned during a picnic ... An old lady who is related in a longish sort of way ... And a freak accident on my way to work when four unfortunate people fell in between bogies while boarding the 8:08 am Malad local ... (Thankfully they were saved in time)
It's a gloomy feeling to know that the same could happen to you. The kind of lives we lead these days - stressing our bodies in the name of competition, eating junk and when we eat healthy food we eat at wrong times; liberally using chemicals and intaking toxins in pesticide 'cleaned' food, pollution and wot not - I won't be surprised if my generation burns out when they reach forty, maybe thirty five.
On a philosophical note, I got a quote which was made by George Costanza of Sienfeld. It goes like this -
"The most unfair thing about life is the way it ends. I mean life is tough , it takes up a lot of your time and what do you get at the end of it ? A death. What's that, A Bonus?!? I think the life cycle is all back wards. You should die first , get it out of the way. Then you go live in an old age home and get kicked out for being too healthy.Go collect your pension, then, when you start work. You get a gold watch on your first day. You work for forty years before you are young enough to enjoy your retirement..You drink alcohol , you party, and get ready for high school. You go to primary school ,you become a kid, you play, you have no responsibilities. You become a little baby, go back ,spend your last 9 months floating with luxuries like central heating, spa, room service on tap, then you finish off as an orgasm!! Amen"
RIP dear friends. I may have not known you very well but I'm sure you enriched the lives of everyone around you. Shine on you crazy diamonds
Two tragic accidents and passing away of young people my age ... A middle aged heart attack case ... A little girl losing her mother ... News of a friend with a disease that is in advanced stages ... A celeb classmate who drowned during a picnic ... An old lady who is related in a longish sort of way ... And a freak accident on my way to work when four unfortunate people fell in between bogies while boarding the 8:08 am Malad local ... (Thankfully they were saved in time)
It's a gloomy feeling to know that the same could happen to you. The kind of lives we lead these days - stressing our bodies in the name of competition, eating junk and when we eat healthy food we eat at wrong times; liberally using chemicals and intaking toxins in pesticide 'cleaned' food, pollution and wot not - I won't be surprised if my generation burns out when they reach forty, maybe thirty five.
On a philosophical note, I got a quote which was made by George Costanza of Sienfeld. It goes like this -
"The most unfair thing about life is the way it ends. I mean life is tough , it takes up a lot of your time and what do you get at the end of it ? A death. What's that, A Bonus?!? I think the life cycle is all back wards. You should die first , get it out of the way. Then you go live in an old age home and get kicked out for being too healthy.Go collect your pension, then, when you start work. You get a gold watch on your first day. You work for forty years before you are young enough to enjoy your retirement..You drink alcohol , you party, and get ready for high school. You go to primary school ,you become a kid, you play, you have no responsibilities. You become a little baby, go back ,spend your last 9 months floating with luxuries like central heating, spa, room service on tap, then you finish off as an orgasm!! Amen"
RIP dear friends. I may have not known you very well but I'm sure you enriched the lives of everyone around you. Shine on you crazy diamonds
22nd June 2008:
PS: Systematic Confusion has more time and energy now that his exams are over. He has a much better take on the same subject here
May 6, 2008
Investing in the IPL: Whom would you go with?
The IPL is not about cricket, big sixes or cheerleaders. Instead its about more mundane things like TRP ratings, media spends and a big bet on the regulations in the broadcasting sector. But I could be wrong.
Because Mr. Reliable thinks its project execution by one key man with loads of serfs (precisely the way he runs his businesses) Unfortunately his key man was injured and Mumbai looks more confused than sheep without a shepherd. Mr. Raja Fisher thinks its entertainment and ended up selecting the cheerleaders leaving Dravid to select a T(est)20 team. King Khan's Lal Mirch Manoranjan thinks its the movies ... which is why he's paid each of his players deserving (Ishant, Gayle, McCullum) or underserving (Saurav, Ponting, Akhtar, Agarkar) like movie stars. The wage bill of the Knight Riders is the highest of the eight at $6.2 million. The Deccan Chronicle thinks its all about big sixes which is why they packed their side with so many pinchhitters like Gilchrist, Symonds, Afridi, Sharma, Gibbs and Styris that they forgot to select bowlers. To their credit Delhi and Chennai have a well balanced side. But then they have also overpaid for their respective licenses. Given that all the above teams have superstar players they will also have to increase the player fees significantly next year which will put more strain on the team finances.
But the man who has got it all right is the man who understands TRP ratings, media spends and maybe has a sneak preview of what may unfold in Indian broadcasting. That is Lachlan Murdoch of Emerging Media and son of media mogul Rupert Murdoch who owns the Jaipur franchise - A man who understands that break even is more important than glam dolls. He went shopping for decent players with a budget of $3.3 million, half of what Mohali and Kolkata paid; a license that was available cheap since nobody wanted the relatively small Sawai Mansingh Stadium where gate revenues would hardly amount to anything and one star player whom all the boys would look up to as captain, coach and master. The sole blemish being Kaif who I guess would have had a better career in athletics than cricket.
My gut feel, and I again say I may be wrong, is that Murdoch has bet on two things - one that the IPL opens more franchisees - which means more matches to be played but more importantly that broadcasting regulations in India are at an inflection point. Today, 10-15% of subscribers of cable TV networks are reported which means that 85% of people who watch the IPL fund the mafia (which owns the cable networks). If somehow in the future regulations were to change, these monies would flow to the broadcaster, which after Lalit Modi and his BCCI friends take their cut, would flow down equally to all franchisees. There is a performance bonus too! A portion of what flows down to the franchisees (20%) is proportional to the points scored. Now the more matches you play the more people watch (given that we are a cricket crazy country), the more TRP ratings are, the more media spends are (considering that there is 60% less advertising time than a one-day match hence more premium), the more broadcasters make and if Murdoch gets the regulatory call right, he breaks-even faster than anyone in the league irrespective of whether his team wins or loses considering his threadbare budget. Which then allows him to be the first one to make decent transfers since he would have recovered his investment.
There could also be more than just numbers here. My guess is that Murdoch thinks the IPL is a much safer bet to get evening prime-time in Indian households than the content on Star TV. Why go through the hassles of creating content, making directors, producers, actors and spot boys rush through the rigamarole of soap operas and reality shows when you have the biggest reality show all served on a platter. Where people have overpaid (Mumbai and Bangalore licenses were bought for a staggering $111 million. Players fees another $6 million) Murdoch has made a $70 million investment everything included. The synergies he gets far outrival all other teams. The great perfornance of the team is just an icing on the cake - Kicker as is called in the investing world.
Jaipur was the most financially viable side before the tournament started primarily because they didn't play the auction like it was played; rather they made an investment. As my Finance Prof in MDI said, 'The only guy who makes money in an auction is the auctioneer.' My money is firmly behind Jaipur. But don't listen to me. As I have said umpteen times - I could be wrong ;)
PS: I do not doubt Mr. Reliable's and Mr. Raja Fisher's business acumen. However, in an interesting twist to my hypotheses above is the fact that came to light when I was discussing soccer clubs. It seems that businessmen with loads of unaccounted cash indulge themselves in club ownerships. Not to suggest that the two gentlemen above are enagaged in such activity. I do not care if they do or not. But an interesting thought nonetheless.
PPS: Names have been changed on request!
Because Mr. Reliable thinks its project execution by one key man with loads of serfs (precisely the way he runs his businesses) Unfortunately his key man was injured and Mumbai looks more confused than sheep without a shepherd. Mr. Raja Fisher thinks its entertainment and ended up selecting the cheerleaders leaving Dravid to select a T(est)20 team. King Khan's Lal Mirch Manoranjan thinks its the movies ... which is why he's paid each of his players deserving (Ishant, Gayle, McCullum) or underserving (Saurav, Ponting, Akhtar, Agarkar) like movie stars. The wage bill of the Knight Riders is the highest of the eight at $6.2 million. The Deccan Chronicle thinks its all about big sixes which is why they packed their side with so many pinchhitters like Gilchrist, Symonds, Afridi, Sharma, Gibbs and Styris that they forgot to select bowlers. To their credit Delhi and Chennai have a well balanced side. But then they have also overpaid for their respective licenses. Given that all the above teams have superstar players they will also have to increase the player fees significantly next year which will put more strain on the team finances.
But the man who has got it all right is the man who understands TRP ratings, media spends and maybe has a sneak preview of what may unfold in Indian broadcasting. That is Lachlan Murdoch of Emerging Media and son of media mogul Rupert Murdoch who owns the Jaipur franchise - A man who understands that break even is more important than glam dolls. He went shopping for decent players with a budget of $3.3 million, half of what Mohali and Kolkata paid; a license that was available cheap since nobody wanted the relatively small Sawai Mansingh Stadium where gate revenues would hardly amount to anything and one star player whom all the boys would look up to as captain, coach and master. The sole blemish being Kaif who I guess would have had a better career in athletics than cricket.
My gut feel, and I again say I may be wrong, is that Murdoch has bet on two things - one that the IPL opens more franchisees - which means more matches to be played but more importantly that broadcasting regulations in India are at an inflection point. Today, 10-15% of subscribers of cable TV networks are reported which means that 85% of people who watch the IPL fund the mafia (which owns the cable networks). If somehow in the future regulations were to change, these monies would flow to the broadcaster, which after Lalit Modi and his BCCI friends take their cut, would flow down equally to all franchisees. There is a performance bonus too! A portion of what flows down to the franchisees (20%) is proportional to the points scored. Now the more matches you play the more people watch (given that we are a cricket crazy country), the more TRP ratings are, the more media spends are (considering that there is 60% less advertising time than a one-day match hence more premium), the more broadcasters make and if Murdoch gets the regulatory call right, he breaks-even faster than anyone in the league irrespective of whether his team wins or loses considering his threadbare budget. Which then allows him to be the first one to make decent transfers since he would have recovered his investment.
There could also be more than just numbers here. My guess is that Murdoch thinks the IPL is a much safer bet to get evening prime-time in Indian households than the content on Star TV. Why go through the hassles of creating content, making directors, producers, actors and spot boys rush through the rigamarole of soap operas and reality shows when you have the biggest reality show all served on a platter. Where people have overpaid (Mumbai and Bangalore licenses were bought for a staggering $111 million. Players fees another $6 million) Murdoch has made a $70 million investment everything included. The synergies he gets far outrival all other teams. The great perfornance of the team is just an icing on the cake - Kicker as is called in the investing world.
Jaipur was the most financially viable side before the tournament started primarily because they didn't play the auction like it was played; rather they made an investment. As my Finance Prof in MDI said, 'The only guy who makes money in an auction is the auctioneer.' My money is firmly behind Jaipur. But don't listen to me. As I have said umpteen times - I could be wrong ;)
PS: I do not doubt Mr. Reliable's and Mr. Raja Fisher's business acumen. However, in an interesting twist to my hypotheses above is the fact that came to light when I was discussing soccer clubs. It seems that businessmen with loads of unaccounted cash indulge themselves in club ownerships. Not to suggest that the two gentlemen above are enagaged in such activity. I do not care if they do or not. But an interesting thought nonetheless.
PPS: Names have been changed on request!
February 12, 2008
The Coarse Fabric
This doesn't seem like Mumbai. A city which has always been in a fixed temperature range since as long as I remember, has suddenly become cold in more ways than one. Mercury apart, it has also lost its heart. It's sad to see people in a secular, free country run for their lives, rushing to take the first train North of the Vindhyas. Their only mistake being that they were 30 years late in life. Can you blame them?
Mumbai is what it is because it is the melting pot of India. People come here with dreams in their eyes and with hard work, perseverance and a stubborn belief usually achieve it. The city is entrepreneurial because of migrants who came here many years ago. Gujaratis, Marwaris, South Indians, Punjabis, Sindhis, all of them have shaped Mumbai. My grandfather came here two generations ago and set up a paan-beedi shop at Lower Parel. He stayed above the shop with his wife and five children. He was a migrant. My uncles came here some 50 years ago and worked in kitchens and workshops. My family is just one drop in the ocean of Mumbai. Almost everybody I know has come here and has made Mumbai their home. And Mumbai in return has welcomed them and added different colours to her personality.
Which makes me come to the next point of the rabblerousers that migrants don't enrich Mumbai. Enrichment is a long process. It is not fast food. It took two generations for a betel leaf trader to get the first engineer and consequently the first MBA in his family. What if he was evicted when the Tiger came singing 'Lungi hatao, Pungi bajao'? I guess we would all lose.
Then the entire episode is inconsistent. On one hand unemployed North Indians are forced out. The salaried class against which Maharashtra's New Construction Army actually has an issue with; since they have caused the manoos his job loss; is left alone. Probably because the manoos and the bayka causing the havoc is permanently employed as cook, bai or driver with the Verma, the Singh and the Thakur. If that lacked consistency, then there are expats who are left alone. Well these guys spend dollars at pubs where the manoos is the bouncer or at the gym where the manoos trains him. You Northie. Where do you spend your last rupee? It goes to your village where your family can now have a pukka roof. But since I don't get any of that New Construction pie I'm pissed.
Mumbai creaks under loads it wasn't designed for because the design is outdated. It needs to grow and for that it needs better infrastructure and more planned townships and central business districts. (BKC is a start, I hope Navi Mumbai takes off). Lets leave the betel leaf traders, bhel-puri wallas and the majdoors alone. They make up the coarse fabric that balances the silk. Maybe their grandsons will one day be a part of a team that finances the very infrastructure we need.
Mumbai is what it is because it is the melting pot of India. People come here with dreams in their eyes and with hard work, perseverance and a stubborn belief usually achieve it. The city is entrepreneurial because of migrants who came here many years ago. Gujaratis, Marwaris, South Indians, Punjabis, Sindhis, all of them have shaped Mumbai. My grandfather came here two generations ago and set up a paan-beedi shop at Lower Parel. He stayed above the shop with his wife and five children. He was a migrant. My uncles came here some 50 years ago and worked in kitchens and workshops. My family is just one drop in the ocean of Mumbai. Almost everybody I know has come here and has made Mumbai their home. And Mumbai in return has welcomed them and added different colours to her personality.
Which makes me come to the next point of the rabblerousers that migrants don't enrich Mumbai. Enrichment is a long process. It is not fast food. It took two generations for a betel leaf trader to get the first engineer and consequently the first MBA in his family. What if he was evicted when the Tiger came singing 'Lungi hatao, Pungi bajao'? I guess we would all lose.
Then the entire episode is inconsistent. On one hand unemployed North Indians are forced out. The salaried class against which Maharashtra's New Construction Army actually has an issue with; since they have caused the manoos his job loss; is left alone. Probably because the manoos and the bayka causing the havoc is permanently employed as cook, bai or driver with the Verma, the Singh and the Thakur. If that lacked consistency, then there are expats who are left alone. Well these guys spend dollars at pubs where the manoos is the bouncer or at the gym where the manoos trains him. You Northie. Where do you spend your last rupee? It goes to your village where your family can now have a pukka roof. But since I don't get any of that New Construction pie I'm pissed.
Mumbai creaks under loads it wasn't designed for because the design is outdated. It needs to grow and for that it needs better infrastructure and more planned townships and central business districts. (BKC is a start, I hope Navi Mumbai takes off). Lets leave the betel leaf traders, bhel-puri wallas and the majdoors alone. They make up the coarse fabric that balances the silk. Maybe their grandsons will one day be a part of a team that finances the very infrastructure we need.
January 24, 2008
Points to ponder
1.The man in the pic alongside is smiling. And why not? The first ever IPO from his fold has managed to mobilise $200 bn. If that number makes you shrug, think about it this way - Thats 20% or 1/5th of the value of all the goods and services provided by our nation (in other words the GDP) this year. And all this in 4 working days. Staggering no?
2.
People haggle like crazy when they buy Rs.50 worth of groceries in the market. They will consult experts in person when they buy electronics worth Rs.5,000. They will make sacrifies and carefully calculate monthly budgets when they pay Rs.500,000 for their childrens education. They will save for years to buy a house worth Rs.5,000,000. Yet when it comes to buying a piece of some company worth some Rs.50,000 crore they rely on stock tips, brokers and speculation. Amazing no?
December 30, 2007
You don't need no graduation
I got this link from Sidin's blog. Apparently some program goes through your blog in like a few nano-seconds and pops up its impression of what kind of people read the trash you type. For a minute a conspiracy theory floated in my head which suggested that a kutty program somewhere did a random match-the-columns routine. (Entirely possible)
Anyway Pseudoforce did OK. We fall in 'High School' readers category. Which is not bad since the Greatest Common Divisor of education of all my friends who read this is above that level. And those, if any, below that level will not know what a blog is or read it anyway. Which means, to read my thoughts you don't need no graduation.
Anyway Pseudoforce did OK. We fall in 'High School' readers category. Which is not bad since the Greatest Common Divisor of education of all my friends who read this is above that level. And those, if any, below that level will not know what a blog is or read it anyway. Which means, to read my thoughts you don't need no graduation.
December 23, 2007
Celebrating India with cognac
Some time last month I had the pleasure of being in the private audience of Prof Ramchandra Guha, noted historical commentator (one of the best we have says abyuthvad) and cricket enthusiast. What struck me apart from the fresh smelling straight-off-the-press, duly authographed tome titled 'India after Gandhi' was the passion of the man and the eloquence with which he presented his case to an audience from different nationalities.
I say he was passionate because I was sitting right in the first row (part reason being that I didnt get a seat at the back, but was grateful later to my twist of fate) and I could literally see the twinkle in the eye and feel the energy with which Prof Guha made his points. I say he was eloquent because he made an assortment of foreigners who had come to celebrate India's economic success realise that they should be instead celebrating India's political success.
Reading his book over the weekend I realised why the man was charged up. It's because India is such an antithesis, its baffling to logic to understand its existence today; and once you get to that line of thought even more baffling to realise that almost a billion people get up every morning and go about their business taking it for granted that India still chugs on regardless of its diversity.
Coming back to the talk at the fabulous Lalitha Mahal in Mysore, Prof Guha went on to explain that inspite of these diversities, and given the odds at any given point in time, its nothing short of a miracle that we have continued to exist as a single democratic sovereign entity. There have been attempts to rule India with an iron fist. Fortunately that hasn't been the case and the secret lies in our diversity. A list of reasons were presented, which according to the Professor is the glue that binds us together. I remember just three. One, our Constitution, which empowers every Indian adult with equal electoral rights. Two, the separation of important guardians of the Constitution like the Judiciary and the Election Commission from the Government and finally the game of cricket. Prof Guha's book also throws light on the horrors of Partition; and the cunning and intrigue on either side of the Border. For someone like me who was born long after Independence, the account made for interesting reading.
Looking back, todays economic boom is largely a byproduct of our political success. Had we broken up after Independence into a clutter of princely states there would not be the large market that drives consumption. Had we not integrated, the resources of the East, the technology of the South, the enterprise of the West and the spirituality of the North would not create the unique dynamite that is India.
I left the lecture feeling extremely patriotic and proud to be Indian. At that moment I just celebrated the concept of India with some vintage cognac (and later on with an assortment of liquor shots!) and forgot all those things about India and Indians that sometimes bugged me, even better, I felt that I could understand why we are the way we are. 'India After Gandhi' is a must read.
I say he was passionate because I was sitting right in the first row (part reason being that I didnt get a seat at the back, but was grateful later to my twist of fate) and I could literally see the twinkle in the eye and feel the energy with which Prof Guha made his points. I say he was eloquent because he made an assortment of foreigners who had come to celebrate India's economic success realise that they should be instead celebrating India's political success.
Reading his book over the weekend I realised why the man was charged up. It's because India is such an antithesis, its baffling to logic to understand its existence today; and once you get to that line of thought even more baffling to realise that almost a billion people get up every morning and go about their business taking it for granted that India still chugs on regardless of its diversity.
Coming back to the talk at the fabulous Lalitha Mahal in Mysore, Prof Guha went on to explain that inspite of these diversities, and given the odds at any given point in time, its nothing short of a miracle that we have continued to exist as a single democratic sovereign entity. There have been attempts to rule India with an iron fist. Fortunately that hasn't been the case and the secret lies in our diversity. A list of reasons were presented, which according to the Professor is the glue that binds us together. I remember just three. One, our Constitution, which empowers every Indian adult with equal electoral rights. Two, the separation of important guardians of the Constitution like the Judiciary and the Election Commission from the Government and finally the game of cricket. Prof Guha's book also throws light on the horrors of Partition; and the cunning and intrigue on either side of the Border. For someone like me who was born long after Independence, the account made for interesting reading.
Looking back, todays economic boom is largely a byproduct of our political success. Had we broken up after Independence into a clutter of princely states there would not be the large market that drives consumption. Had we not integrated, the resources of the East, the technology of the South, the enterprise of the West and the spirituality of the North would not create the unique dynamite that is India.
I left the lecture feeling extremely patriotic and proud to be Indian. At that moment I just celebrated the concept of India with some vintage cognac (and later on with an assortment of liquor shots!) and forgot all those things about India and Indians that sometimes bugged me, even better, I felt that I could understand why we are the way we are. 'India After Gandhi' is a must read.
October 27, 2007
A $15 billion toy
In a fit of what seems to me to be utter desparation, Microsoft paid top dollar, $240 million to be precise, for 1.6% of a bit of code which enables jobless people who want to pass their time (not being judgemental here, we need to do it at some point of the day!) fill up gigabytes on the web. The entity in question is Facebook which has become a rage for the range of creative ways to network socially. I spend some time on it every now and then too. But if I knew that what I was fooling around with was a $15 billion toy, I would probably treat every word I typed like I was etching on a diamond. Spoilt brats we all are. Even so the techies at Silicon Valley who think that Moore's law applies to valuations as well.
To get a sense of why I'm so worked up lets do a little analysis here. (by the way $15 billion is Rs.60,000 crore). Bharat Petroleum is a respectable Indian company. Not the one always in the news but still walk the length and breadth of India and you will see petrol pumps, oil storage tanks the sizes of stadiums, refineries, trucks at airports ... in short a huge asset base which you and I can see. The market capitalisation of BPCL at the close of trading yesterday was Rs.13,000 odd crore. Ditto Hindustan Petroleum which at yesterday's close was worth Rs.8,000 odd crore. Siemens India, my previous employer, with concrete orders booked with extremely creditworthy clients over the next few years was worth Rs.29,000 odd crore. My point is that with tangible assets, orders, customers and employees these behemoths of Indian industry are collectively worth Rs.50,000 crore, a wee bit short Rs.10,000 crore or $2.5 billion than Facebook. Something tells me that Facebook might be worth more than the GDP of many
African countries.
African countries.
My valuations based on yesterdays clsoing market price maybe too simplistic. There is a lot more to cover and account for before I put a number to the companies I have mentioned. But even then you can't pay $240 mn for a wee 1.6% for software you cant see anticipating that an 'x' percentage of the world's population will register, see your ads, click on it and make a purchase. There are too many ifs and buts in Facebooks valuation which if you remember correctly was what caused the tech meltdown 7 years ago.
To be fair to Facebook, it could be the case that the deal is structured. Maybe a significant amount of that equity is mezzanine (which is not the same as the shares traded on the market). Part of it could be a corporate loan and it slipped the Microsoft spokesperson. It could be that the guy typing the Press Release missed the decimal point courtesy some-plants-who-shall-not-be-named. ($1.5 billion is also expensive but given that its the tech industry and they have a history of such fallacies, I'll understand.) Maybe the days to come will throw some more light on the transaction.
I never understood tech. Stood far away from it during my engineering days as well. I guess its an industry I'll never understand and this proves it. I'm much better off funding infrastructure projects, things I can see, touch and feel. I wonder what Warren Buffet would say though? It would be nice to hear him wishing Microsoft all the best!
October 15, 2007
Corporate Fraud!
Having spent some time on Marketing in a BSchool and after going through the jargon that marketeers seem to pull out of their hats as frequently as Emran Hashmi's onscreen escapades, I have come to believe that there is no better way to con people into paying more or using more than what they would want than to play some Marketing jazz.
Dilbert feels the same! Marketeers! What do you have to say? ;)
Courtesy: Economic Times
October 12, 2007
SEZ Update
43 days after I made a few suggestions (about people displaced by SEZ land sharing the profits with the developer) to resolve the SEZ controversy in India, it looks like someone is listening. The National Policy on Rehabilitation and Resettlement of 2007, provides for structured solutions to help those displaced by SEZs. Relevant portions of text are reproduced here (Source: rediff)
"The new policy seeks to make those entitled for compensation stakeholders in development by allowing them to take up to 20 per cent of the amount in the form of shares if the acquiring entity is authorised to issue these instruments."
"The policy discourages speculative transactions of land acquired for public purposes. As a relief for developers, 30 per cent land can be compulsorily acquired by states for the promoters while the rest has to be bought by them."
"Reliance Industries which is in process of acquiring land for its mega SEZs welcomed the policy. "The policy will boost the industrial development as it clearly defines the land acquisition rules," a Reliance spokesman said."
Which means that the inhabitants of land notified as SEZ land will be able to share in the upside, if any, from the land. That should make them feel much better, and less jealous (refer to the italiced note at the end of this post) of capitalistic developers.
My only concern being will these inhabitants understand the complex finance behind it all? How is this process made to look fair to all parties? How will the rabble-rousers in political circles, who thrive on conflict, look at their golden goose being neutralised, react? Watch this space ... pour in your thoughts if any.
"The new policy seeks to make those entitled for compensation stakeholders in development by allowing them to take up to 20 per cent of the amount in the form of shares if the acquiring entity is authorised to issue these instruments."
"The policy discourages speculative transactions of land acquired for public purposes. As a relief for developers, 30 per cent land can be compulsorily acquired by states for the promoters while the rest has to be bought by them."
"Reliance Industries which is in process of acquiring land for its mega SEZs welcomed the policy. "The policy will boost the industrial development as it clearly defines the land acquisition rules," a Reliance spokesman said."
Which means that the inhabitants of land notified as SEZ land will be able to share in the upside, if any, from the land. That should make them feel much better, and less jealous (refer to the italiced note at the end of this post) of capitalistic developers.
My only concern being will these inhabitants understand the complex finance behind it all? How is this process made to look fair to all parties? How will the rabble-rousers in political circles, who thrive on conflict, look at their golden goose being neutralised, react? Watch this space ... pour in your thoughts if any.
September 26, 2007
Over Optimism versus Reality
Are we an overly optimistic people? The Sensex is climbing new peaks like a sprightly mountain goat, gaining 1000 points in a week; the rupee trades at 39 to the dollar as we speak and in these merry times if you have a surname which is an anagram for 'infrastructure' you can raise a billion dollars no questions asked. Travel by the local trains (in the First Class ... the conversations in the Second Class are an assortment of desi rugby jokes) and you will hear the sophisticated executive types waxing eloquent on the Indian economy.
Not so says the Planning Commission. In an article which paints a grim picture by describing
the situation as 'pressing panic buttons' we are told that to keep the bubbly flowing we need lots of moolah, $40 bn to be exact, for the current 11th Five Year Plan. Various agencies have made estimates ranging from $350 bn to $500 bn for our infrastructure growth requirements. And with every passing year, prices going northwards, these estimates grow for every project that hasn't taken off yet.
Well there have been deals like this and almost every fund house worth its name has launched an infrastructure focused fund. Private Equity players across the world have also dedicated billions of dollars to the India story; but the action ends right there with the word 'dedicated'. Dedicated does not mean disbursal and disbursal does not happen because it is difficult to find good assets (read: projects) that will give returns which these money czars expect.
Projects that offer high returns like airport modernisation, supply chain logistics, telecoms, etc have been lapped up. What are left are the low return projects like power and roads and virgin territories like renewable fuels. There are a million projects waiting to be launched but investors are searching for the elusive asset that give returns in line with their expectations. Unfortunately, the money chasing these assets will cause valuations to sky-rocket and those who moved in first will make a quick buck. Those who followed and those who will follow may make money. Small investors, as is their wont, will rush in when the floodgates are about to open and will be blown away in the deluge. (Digression: The commies will then blame capitalism for the pains of the common man)
Does that mean the tragic end to our fairy tale economy. Definitely not. Infrastructure projects can be more attractive if they are not politicised. Power for example is more an election issue than an economy issue. Will politicians and bureaucrats ever realise? If they do then maybe the capital kings will loosen their purse strings. Maybe dedication will realise disbursement. Maybe this rant will be inconsequential.
Not so says the Planning Commission. In an article which paints a grim picture by describing
the situation as 'pressing panic buttons' we are told that to keep the bubbly flowing we need lots of moolah, $40 bn to be exact, for the current 11th Five Year Plan. Various agencies have made estimates ranging from $350 bn to $500 bn for our infrastructure growth requirements. And with every passing year, prices going northwards, these estimates grow for every project that hasn't taken off yet.
Well there have been deals like this and almost every fund house worth its name has launched an infrastructure focused fund. Private Equity players across the world have also dedicated billions of dollars to the India story; but the action ends right there with the word 'dedicated'. Dedicated does not mean disbursal and disbursal does not happen because it is difficult to find good assets (read: projects) that will give returns which these money czars expect.
Projects that offer high returns like airport modernisation, supply chain logistics, telecoms, etc have been lapped up. What are left are the low return projects like power and roads and virgin territories like renewable fuels. There are a million projects waiting to be launched but investors are searching for the elusive asset that give returns in line with their expectations. Unfortunately, the money chasing these assets will cause valuations to sky-rocket and those who moved in first will make a quick buck. Those who followed and those who will follow may make money. Small investors, as is their wont, will rush in when the floodgates are about to open and will be blown away in the deluge. (Digression: The commies will then blame capitalism for the pains of the common man)
Does that mean the tragic end to our fairy tale economy. Definitely not. Infrastructure projects can be more attractive if they are not politicised. Power for example is more an election issue than an economy issue. Will politicians and bureaucrats ever realise? If they do then maybe the capital kings will loosen their purse strings. Maybe dedication will realise disbursement. Maybe this rant will be inconsequential.
Subscribe to:
Posts (Atom)
