THIS TOO SHALL PASS....

what an year it has been...it truly drove home the point the little prayer tries to make - give me the strength to change what I can and to accept what I cant...as one of my friends said : Macro eco is the luck factor you cant change in your life and if you are from the finance field, all I can say mates is the moral of that story we should remember all times - "THIS TOO SHALL PASS"

But to create a personal note, this year probably has driven home a lot of points in life, the highs of closing large deals, agony of things falling away, best laid plans coming to a naught, the insignificant feeling and the lack of control on lots of things but yes, as the year comes to a close, as I told a few people, for the first time, clarity has occurred in career life : Simple truth realized : acquire skill sets, make great friends, deleverage, build capital, enjoy the journey while moving closer to the ultimate goal of starting out by self....I dont have an idea, but the scare of being on own in the unknown without trappings of an organisation behind self is gone...yes the map is not the terrain but yeah hopeful this surrogate pain will show way...

Personally I always told myself : one day I shall create an organisation which will provide employment to 10000 people - 50000 lives touched - but starting small (driven home by the humility felt in this mayhem) I think I should try to change atleast 1 life : My favorite cause has been education and I have been regularly donating money, Come new year : let me see if I can do more...

When I was 25, the goals I set myself as Prof Ramc would call : ghosts to set at rest by 35 : Tick off basic assets accretion, Investible surplus of 1 cr, work for self, be a role model to atleast 1 person : all slightly superfluous goals but on way for 1, nowhere close to 2, clearing mental cobwebs for 3 and not started on 4...so 5.75 more years....looks like i stand a decent chance :)

and more easy events to tick over the next 18 months:
1. See the pyramids
2. Get involved in the community - will probably assist some school build some assets - a library maybe - I hopefully know enough people who will buy me books :)
3. Plant a tree - a small anecdote about this...when this thought came to my mind, my mind immediately did a ROTI - Return On Time Invested- i realized I had sold my soul to the banker in me - A tree is to me my version of being able to think about someone else other than me...being able to measure growth in cms/ inches in a year and not seconds/ days - my penance in patience
4. Get back to playing chess - a game which I stopped playing since it brings back very painful fond memories
5. Scan all the photos in my home : memories are too precious to be let to the mercy of the elements

So ask me how I did a year from now...

Till then, its just another BRN ( big round number!!) 2008, hope there is peace, joy and happiness all around..

observations from Europe

I did a whirlwind trip of Europe on work, screwup by Lufthansa meant I spent time in Paris, Munich, Brussels & Frankfurt instead of heading straight to Brussels, a place i have spent time in the past and have come to love. Brussels to me is the bangalore equivalent of Europe ( or should it be vice versa?) multi cultural, close to larger cities but with a distinct lovable personality of its own....

Its been 6 long years since I spent my last stint in Europe, so some changes I noticed...

1. There are beggars on the streets : I stomped around Europe last time and none of the main cities seemed to have them, some in Paris, but that was also very rare. This time, it was in your face, people at corners, reminded me of what a foreigner might face in India, women with kids, kids chasing you and youngsters with no apparent reason to be begging....what changed? Was astonished and my local contacts, they blame it on the new nations in EU, the slowdown and illegal migration but yes they too seem to notice the change

2. Understanding the demographic dividend - a lot of research reports talk of the youth and the push that will give India as a nation. Any public place in India will have screaming kids and across age groups, then you see youngsters on the verge of marriage and you know this engine is going strong for a few decades atleast....I roamed around in the streets of Brussels and the large other airports and only place I saw kids was Terminal C of Frankfurt and you guessed it right , thats where planes to India were departing from. Else, the concern of a greying economy, the strong social safety system and its future working, its impact on business, the world view that will emanate from Europe will be very interesting to watch

3. Investment in infrastructure : a constant thing you will hear from foreigners is the construction which seemed to be going on in China and India.... but what surprised me was the amount of construction I saw in Brussels, ofcourse, neighbourhoods looked vacant, the airport terminal too big for the number of passengers but the constant spending on upgradation, not general maintenance mind you, is so huge, I came back even more convinced we India need to do more. Our public planning systems are letting us down and our politicians doing us a disservice in planning public spending. The private sector is also not too behind, take the Bangalore Metro as a example, I have lost count of when they shut down half of MG road in Bangalore and Navayuga is taking all the time in world to even build the basic pillars....the full fledged metro is far away....no accountability is killing all of us....

4. Spoilt by Taj : I have in the past spent a lot of time at Taj palace, Mansingh road, Delhi and trust me they have spoilt me. I stayed at the Airport Sheraton in Brussels and while I have no complaints, the small touches by Taj, the personal warmth simply make every stay that much more comfortable. I am sure if they can get it right, the hospitality industry from India can rule the world.

5. The growing irritation about Muslims : The one thing I thought very highly of Europe was the sense of fairplay and their ability to recognise another culture and work with it. To a level, I think Europe is ahead in terms of such refinement but this time, the number of people who spoke to me of growing disenchantment with the local muslim populace was surprising...as one person said, I am ready to accept their practices, but are they ready to accept me? I used to think the ghettoisation of muslim communities was a very India specific phenomena due to our peculiar vote bank politics, but seems its a larger issue... I am not sure of the causality, but the clash of civilizations seems a larger issue and on the ground far widespread...

6. Queue control : a minor issue, I was standing in the queue at Brussels and when someone tried to barge in the lady manning the counter just stood up and asked the person to join the queue....that simple act increased the sanctity of the queue, in India the person at the counter somehow doesnt think its his job to manage this part of the equation and leads to situations. We Indians due to our scarcity mentality have a disrepute for being able to stand in a queue but I think the other part of the equation is also required.

Bottomline, I had my doubts about India slowing down and all the fear mongering in the media about our economic prospects, but I came back more convinced that India, if we help ourselves, politicians willing, bureaucracy moving its wide bum (I would be happy if the last 2 dont add anything as long as they dont screw up) we will move forward....

Death of a tradition?

Typically a language is not a standalone entity. It coexists with a culture, a way of life and comes bundled with folk tales, proverbs, folk songs, literature, slang, mythology. There is also the script, the grammar, pronunciation which are the building blocks of a language but I am not going to talk about them here. I am more concerned with the first few things I referred to. Ofcourse there do exist languages which might not have all the elements, but I am concerned about every single one of them

Supposedly we have 6912 active languages today ( Source: Ethnologue) and more on the verge of extinction every day. So everytime a language is lost we lose each of the elements I named. There are scholars and researchers about loss of languages and their preservation and efforts are on, but I feel every stone in the foundation is important…. Ok that was a long preface to what I wanted to say

I have friends from Bengal and the joy that arrives (and the sluggishness if I may say so) in their lives with the arrival of Puja is to be seen to be believed. Navratri or Dasara is a celebrated widely in India and the pandal culture of Bengal, the dandiya culture of Gujarat, the ram lila in parts of North India are all distinct forms of celebrating the same sentiment - victory of good over evil and worshipping the feminine form of 'shakti' ( although I am itching to deviate here and talk of how this is derided by certain cultures as 'pagan" I Desist). Karnataka has a very distinct form of celebrating Dasara - days of pooja - I remember Saraswati pooja, where my books got all the attention, to Ayudh Pooja, the day when we as kids got together and cleaned the vehicles and worshipped every form of tool , to vijay dashami a simple pooja to seek blessings - a part that never was practiced in my own home but have seen is the "Doll arrangement". It is a unique form of depicting mythology, themes from the texts and anything considered worthwhile….. As a kid although I have seen such arrangements I never appreciated it.

This time, I kept thinking, it’s a part of our tradition as Kannadigas (maybe a sweeping generalization, not sure if the practice is so prevalent in North Karnataka or in other Dravidian states) but I don’t see the sensitivity to this dying aspect of a festival. Also I kept wondering how and why is it that we don’t have such things on a grand scale in the form of pandals like we celebrate Ganesh festival or why didn’t it evolve into the Pandal culture of Bengal - Giving it a public form might bring back this practice of our culture which served a interesting purpose of being educational while fun.

As an aside, the practice of "doll arrangement" is associated with some wonderful songs in Kannada movies, so if it doesn’t revive very soon, those movie clips will be the only record of this bit of culture….hope it doesn’t come to that

Chit funds - basics

I did a post once -of-p2p.html and keep getting queries about chit funds... so here goes a post which captures the basics of chit funds. (Disclaimer : I claim to be no expert in this and is purely based on my participation in them a few years ago)

A chit fund is a purely Indian invention of accessing money. To that extent I have in the past compared it to peer-to-peer lending. A few people come together, pool a fixed sum of money for a fixed period regularly and every month based on the need, the money is taken by a member. Lets work with an example : Chit A is for 12 months of 1000 each, so the pool available is 12000 (a small technicality, if there are 24 people in the group then 2 chits will be available that month and so on). So all people pay the money to either a designated person or to the chit fund or operator, and then people who require that money bid for it. So if I were to say bid for Rs 1000, then I will get 12000-1000. I now keep paying my 1000 monthly. What happens to the 1000 I paid? - usually a small portion of it goes to the chit fund/operator as charges. The rest are divided amongst the group in either of 2 forms - as a cash payout or as a deduction from the next payment due. Also there is a variation where there is something called a double chit, which is essentially all the bid amount is collected and is available to the group to bid, so that the time period for which you pay the chit is reduced.

What determines the bid amount - multiple factors but most basic is the cost of carry and the demand for money from amongst the group of members. So the bid amounts are usually higher in the initial stages and keep falling, in large chits mostly towards the end bidding does not happen and base bids are fixed. Also most chit have a reserve price and a minimum tick. The demand and supply works differently - if a group consists of mostly businessmen who are looking at short term funding the rates tend to be higher compared to group of housewives - basic concept of benchmark rates and the return that people can get on the money that they took out of the chit. People ask me why shouldnt they just go start a recurring deposit in a bank - both inculcate the same regular saving habit. Simple answer - power of compounding and higher return. Typically if the group you belong to is of people who bid higher then the return on your investment is high and a RD pays you interest in the end, a chit fund is immediate.

But the fundamental laws of finance - risk and return correlation run true here - higher bids mean people are desperate for that cash, which in turn means strained finances (not an issue if it is a temporary cash flow problem) but if it is long term - one runs the risk of default. Also the other problem is of chit fund operators absconding with the money. so the due diligence that you should carry out is check on the operator first and then your group members before you start. Dont bid unless you need the money and have a good use in mind which will pay you more than what you paid them.

The industry is now regulated, so check if the chit is registered and then step into it. Stick to the biggies, there might be safety in numbers. Avoid mom-pop setup unless you trust those guys with your kids.

so it serves them right?

A lot of my friends speak to me about the current market mayhem and the feeling they seem to have is it is wrong for tax payers money to be used to bail out the excesses of a few 'rich spoilt bankers - let them fry in hell'. yes I am one of that creed of bankers, those arrogant self professed 'masters of universe' as Thomas Wolfe put it.... but hear me out...

what did these bankers do which has brought the great market to its knees? a simple concept called leveraging....using 26 bn dollars as in the case of Lehman to create a balance sheet of ~400 Bn...thats the beauty of the system and this is not the forum to explain what was happening...

Just that, remember when these same bankers were driving up prices of that corner plot (directly by investing or indirectly by giving money to that builder to build his land bank) we didnt hear too many cribs from people who flipped that apartment they bought during construction for a 50% return in 12 months....or when these banks needed backend support on research and spawned a few 100 of KPO's in India creating jobs or giving those great IT companies large amount of business....remember financial services probably has the largest trickle down effect after pure manufacturing in terms of ancillary jobs created.... so lots of wealth was created...

and where did this wealth come from : the main investors in all this were supposed to be hedge funds and sophisticated investors who knew what they were getting into (different point that I dont think anyone knew what the heck was happening) and ofcourse those pension funds - again with well paid fund managers...so hopefully some wealth got shifted in this process..... a lot of it got destroyed but was it all created by this swell of financial engineering....

so dust to dust is what has happened....and as it is said great fortunes are made in the ruins of financial markets and realized in bull runs....so keep investing.... dont listen to the experts on TV, do your research or else just buy an index fund...and while you are it, spare a thought to all those people who lost jobs, lost pots of money....a fool and his money part ways, but it still hurts to be a fool...

and yes, when we were back in school, Lehman, Bear, Merrill were the ones we dreamt about....great institutions having been through 100+ years seen the great depression, the meltdown, the dot com crash....gone...RIP

What governments jobs do.... a positive side effect...

Most kids in India today would'nt want to be caught in a government job (when I say a government job here, please read it as quasi government, public sector undertakings, nationalized banks and such) but a small thought crossed my mind the other day. Our generation, the post liberalization, middle class generation is aiming higher, dreaming big and trying to reach out we should realize that a major part of this is due to our education ( oh yes, there are cribs there too, but still the base is education). Our education irrespective of public/ private schools etc was mainly possible due to the stability of earnings offered by these government created jobs in our parents generation... combined with the middle class interest in education and the quest for a stable 'service sector job' parents skipped meals, gave up promotions, stuck to lower paying jobs just to keep their kids education intact. Basic necessities like books, food, private tutions, cycles/ bikes to school were all financed by the salary of these government sector anchored jobs. The government created a large working middle class which created our generation of 'aspiring to beat the world to reclaim our spot under the sun' generation.

So it is quite understandable that even today a government job is something to clamour for. The fight for reservations, the huge army of clerks, peons, sweepers, gardeners that have been created will hopefully push more and more people out of the 'safe zone' of a government job. Ofcourse there is the whole side income which a government job creates, the sense of power, the 'mai baap, ji hukum' sense…. The perks of being government, but yes the government has served some purpose.

It takes a generation of stable job to take a family out of poverty to middle class ( not withstanding 'acts of god' like medical emergencies, loss of wealth due to bad habits, low financial education that leads to low capital creation, etc) and probably takes a generation of entrepreneurship to lift a family to the 'rich category' - the disconnect I see in my own case and many of my friends is we have gone through the former phase, but have very little clue of how to do the latter - we lack role models in close circles, capital large enough to allow the freedom of a large gestation period and maybe the ability to take a risk and bite the bullet….


But yes, the above view probably helps me think, the taxes I pay is doing something to the country since a large part of it is being used to pay this army of government employees…. Since I don’t see the roads, don’t have enough power, lack basic infrastructure or a social security system being created…… yes it’s a sorry view to take, but atleast I get less frustrated !!!

Follow up on "The Pygmy Effect"

(Reader Warning : Long post ahead - this is in reply to Aditis comment on my last post - Pygmy effect)

Hey Aditi, welcome back was afraid I had lost a reader, and thanks for taking time out to comment, and apologies for not having replied back on the previous ones….

Here goes : Why pick on the family owned entities : I don’t think I have too much of a hope for the government entities… they served a purpose in the planned economy stage and are probably tied down due to vicious cycle of their own (some of them are fantastic organisations mind you - there is a nice theory on their second level contribution to the economy - subject of my next post), you have highlighted a few reasons and there are many more… I am a born capitalist when it comes to matters related to capital finding its own way and demand being addressed (my socialistic tendencies are there but as one of my well known Profs told me "if u think you are best suited to earn money then do that damn thing, leave social upliftment to the ones more qualified to do it, if money is all u can contribute so be it!!!". There is a role for a regulator but mostly the I love the concept of a market, make it competitive, let labour and capital flow freely and then magic happens

But the decision to analyse the family owned firms is (my guess here on the number) probably 80% of the enterprises in India are family owned or controlled and unless they are able to come out of the cocoon of treating the business as an extension of family and self, ( don’t know your background, but in corporate law, what I am saying is similar to the divorce of management and ownership or what we call the lifting of corporate veil but more on a financial and operational control part is what I want) the companies will not grow…. Why do I want them to grow : multiple reasons - industrial cycle follows a predictable pattern : unorganized sector - few organized - many organized - large companies/ small unorganized - niche warriors with large companies - multiple smaller but larger than stage 3 companies. In the past when you had tariff barriers, information asymmetry, no 'global supply chain', the market and the competition was largely local and we could get away. But since we are opening up and largely the world trade is becoming freer, this phenomena is both an opportunity and a risk…. If you are not large, you might be the largest organised player in India but in the global industry cycle you are already in 4th stage and risk getting wiped out and even if I assume we will be able to graduate to the next stage and occupy niches, there is lot to be done……..

Size gives a different swagger to your moves, opens up your mind (makes you reckless also!!), allows you to see at an opportunity differently, allows you to setup systems, attract professionals, attract capital, beat down the bank which will offer you PLR when you are a 30 cr company and will offer you PLR -300 bips when you 300 and then allows you name your terms when you are 1000 and will restructure loans to suit you when you are 3000 ( don’t believe me, check the CDR packages doled out in this country in the last downshift we saw - case study a few steel companies, oil companies). Economics 101 teaches us about Scale and Scope economies - a critical mass sets off a chain reaction - talent attracts talent, money attracts money, opportunities attract opportunities

And on the other note, why are professionals important : a entrepreneur serves a purpose in the birth and evolution of an organization, his/her intolerance to status quo and creativity gives birth to a business, his hunger for more gives fillip to grow and his/her 'animal instincts' (its an economic term :) ) keep the economy growing when both fiscal and monetary policy are screwed up…. So by definition, they come with vision…. Some prodding is required to enhance its coverage and scope, this is the void advisors (pseudo, proxy, quacks, intelligent, experienced, effective, gyan giving - various forms of consultants!!) come in…. A professional on the other hand is by definition mostly attuned to a systems mindset - setup/ follow/ break systems mode….not a radical free thinker…. The fear of failure for most professionals is what he feared when he gave his last entrance exam but for an entrepreneur it is that order which if it did not materialize would have meant 30 employees going without salary and his precious wealth vanishing…. The reactions are different in the face of adversity and the capability to visualize is different. I once was presenting to a very successful entrepreneur and told him they will need 800 cr to meet his vision, he said 'Why not' but it had taken me 15 days to convince his whole management team to even persuade them to let me present this to him :)

And on the visionary note : they are far and few I agree…… but there are levels in visionary behaviour I think - like sports which starts are second division to olympics/world cup level - you need to define the level you want to operate…. My advise is "everyone jump 3 steps on the vision, atleast then we will have a few more nationally important entities (and Olympic gold!!) . 'Cutting corners' is by definition an dangerous area, but one of the IAS officers I worked with used to say, "only thing which is atleast light shade of grey is the word illegal, both immoral and unethical are new shades which can be called 'invisible grey' " - So in this I will go by what my B-school taught me - don’t do that thing which you don’t want your mother to read in the next days newspaper - my sole test :) else we are all prisoners of choice - the master piece 'Bhagvad gita' was born out of doubt and the problem of choices to be made.

And lastly, is profit a byproduct of vision or can that be the vision? Yes it can be your vision, but I would say it’s a gulli cricket level vision, if you defined your vision as "I will make 100 cr profit in year 2010" (unless you are making 1 today). A business in my mind, a tool/ a purpose/ a calling of a higher order that cannot be just confined to profits, but profit is an essential ingredient and probably not the end result, its just one of the many measures…..

And on a lighter note, yes maybe a tinge of disappointment, I keep telling my friends if my grandfather had been a land grabber or even a normal bribe seeking government employee rather than the well respected but not well paid writer he was, I would also have been employing people like myself rather than peddling my wares to the corporate world :) so yes, ovarian lottery worked in a different form in my case…..now its left to the rich/influential father in law to do the trick - hope I atleast get a consolation prize there :) !!

The pygmy effect

Indian companies by global standards are small in size.... in terms of turnover, balance sheet and scale of operations. This has roots in history to the planned experiment with socialism, the licence raj which curtailed growth in its own way, the romantic notion of self sufficiency through small scale industries, the fabled piece of legislation the Monopolies Restrictive Trade Practices Act. But these would be immediate identifiable causes, slightly offbeat would be the late arrival of industrialization to India but during the rule under colonialism which anyways had perverse intentions to not let Indian companies grow large. I also think of two reasons why probably Indian entities never grew too big...

1. Lack of capital formation : India was and is still a rural driven agrarian economy. In such cases capital formation is closely linked to the productivity of the land, which in Indias case is led by the monsoons. Monsoon failure meant subsistence. Also the water tight compartments of castes around professions meant that the rich trading community and the artisan community were different, so while India gave birth to financing systems like Hundis, chit funds and micro entreprenuership, modern notions of shared ownership did not take off. Even when the modern company form took root , we had the relic which a lot of people wouldnt have heard of called the controller of capital issues.... so lack of capital meant, companies remained small...... financing expansion through internal accruals which anyways were suppressed to pay lower tax or thorough bank debt which came at phenomenal costs. Add the Indian aversion to debt and its a potent cocktail of capital deficiency which would kill large scale global ambitions.

2. The 200 cr barrier - The Indian entrepreneur is hands on (I have great respect for them - more about it in a later post) and likes to be in control. So usually the organization is an extension of his/her personality. Also since most Indian promoters never diversify their personal balance sheets from that of the company, maintaining control becomes essential to ensure safety of personal wealth and family standard of living (again a perverse tax incentive means a posh bungalow, a swanky super car and the summer getaway are all financed by the company as a perk!!). A very easy way of exercising control is through filling up the company with family members - bottomline your ability to procreate is the barrier to growth and since blood is thicker than water, professionals never succeed in such companies, so every small decision ends up with papaji/lalaji/chairman/ founder or whoever is the head.....growth gets squeezed. I usually ask a question to ascertain if this is a problem with companies when i first start working with them - do you know which debtors you wrote off last year? if the answer is names of debtors i have an issue, if the answer is something like we had a review / we have a policy - then yes, systems have taken over.... and why do i call it the 200 cr barrier - most Indian companies cant seem to get out of this vicious cycle and get stuck around that number - if you broke through that, then according to me you have built a middle management which runs the company.....All you then need is a visionary!!!

If Indian companies have to dominate the world stage, grow large and enhance their reach globally, I think somewhere they will need to address these 2 issues.

(and before you start commenting - I know there are well run professional companies in India - L&T et al, but if you remove the family conglomerates, I can count such companies with ease....)

Miss you....

You shall see the world through my eyes as I saw it through yours long ago….

There is no self made man, every single instance shapes him… you shaped 18 years of it.

You always knew more than I did but never were afraid to learn from me.

You never let me win the game of chess or play those spinning cricket balls just because I was a bad loser, but you taught me to win.

You never were happy when I came second but were the proudest man in the room when I stood eighth when I was eighteen.

You had less then than what you gave us but more happy when our faces lit up with smile.

You always knew where I hid but never found me at once.

I was scared of your temper but saw it only once and that changed my character forever. I saw when you hurt at my mistakes but was hurt more to never do it.

I learnt to dream, push harder, aim higher but never once forgot the right way so that I would lose sleep

You pushed me harder; to challenge myself but to trust my abilities… risk what is mine, to not fear the unknown. To dream higher but never from a weak foundation

My love for water, the outdoors, the stock market and books I know where I got from….

My love for family, my respect for elders but the courage to call a spade a spade, my empathy for those in need – values I learnt at home…

I was a friend before I realized I was a son and when I realized I was a son I lost a friend, this is to my father, who left us 10 years ago, to what I hope is a better place, since with even those small things missing, it was still heaven here…

In the land of the color challenged...

when we were small kids we used to play this game of colors.... one person was out of the group, and would name a color and people who had that color could walk over to the other side, more like a free passage, those who didn't would then try to reach the other side without getting caught, if you did then you are out..... I used to consistently get out....becoz... now i know, i didn't know what color was being referred to....

move forward by a few years, I get stumped when people call out colors and say things like ecru or beige or algae green.... I feel lost.... for some reason I am color challenged... not color blind mind you, just challenged and i suspect its more in being able to name them.... for me its the primary colors and maybe some standard other colors and then its light or dark..... i cant identify parrot green vs. algae green or brown vs. beige. ecru or milky white to curd white or elephant grey vs ash grey or jet black vs. clear black ( i don't even know they exist, so how can i recognise them?)....

I am not color blind mind you, I am what you can call color ignorant :)

So the next time you meet someone who talks about colours in two shades, light or dark, and
is slightly confused with any other color than blue.... you have met me or one of my kind.... please show some kindness and talk our language...

save me from the serial killers....

There has been an explosion of daily sitcoms in Indian television, family fights, saas-bahu serials, corporate wars but mainly woman characters, adultery - every possible theme running across years beams into households captivating the imagination of the women viewers and the men too (although the latter will not be caught dead discussing about it!!!) - but give me a break.... I come home tired wanting to watch something which can be fun, informative (yeah even after 10-12 hours of just business related thinking at work, I still watch CNBC and NDTV profit, so sue me!!) but the TV is taken over at 8:30 and till 10 PM , mostly the time I would have reached home or just before dinner am subject to this torture........

Don't mistake me, its not that I have anything against these, each has his/ her own poison, but this is literally my poison!!!! I cant see wailing women, overacting, conniving acting as though they will bring the world down and pseudo commentaries about what is happening in our society thru this nonsense.....

aarrrggghhh the family that dines together stays together they say...... if this nonsense doesn't end soon, either my dinner time will be very late in the night or the family doesn't dine together.....

Ektaaa kappooor (or whatever her the latest form of name her spelling has morphed into) and all your ilk , I curse you solitary confinement with 1500 days of continuous crap you are dishing out....

Some questions...

I kind of like the philosophy Hinduism propounds ( don't ask me what it is, there are just too many, so pick up something that suits you!!!) - not that I am religious - am more as someone once told me, karmic than dharmic - but I find it interesting that a single religion can allow thoughts where you can consider yourself one with God ( Advaitha - literally meaning 'not double'), dwaitha (literally meaning - two different ) and vishistadvaitha ( a form of advaitha - where thought goes that while in human form humans and God are different, once you reach God, you become same) - most religions I have basic knowledge of do not allow such wide spectrum of thoughts ( mind you : I am probably a novice in this region , so please feel free to correct me , will be really glad to learn more here). But then what gets my goat and given the fact that these thoughts have been with us for maybe 1500 years, why did we treat a section of our society so badly? I am a Brahmin, so while I can understand the power that might have resided in the caste due to knowledge, what I fail to understand is when we could be so tolerant to religious thoughts ( remember : belief based persecution is what is most prevalent in human history) , how is it that we failed to uplift the sections of society we left behind?

Even assuming there was no higher intention, someone should have moved these sections just for the power...why did it not happen at all? Interestingly, as a caste, while maybe Brahmins excelled in knowledge and maybe that allowed them to adapt to changing conditions sooner, my guess would be that most Brahmins would be the working middle class even today...so it was not money that drove the so called 'upper caste' to this...

I am all for affirmative action, maybe even reservation, maybe priority over natural resources as our beloved 'toothless' prime minister wants us to believe... but correcting a mistake does not mean you make the same mistake...

Update on BIAL

I had an earlier post on BIAL and had noted how somehow the airport had not lived upto the expectations of many. Now that I have made a few more trips, I am beginning to see the airport come into its own... I read somewhere them claiming that a passenger will alight and be out in 20 mins... i actually timed it yesterday and i was out in 12... it helped that we used the aerobridge and and being a platinum on Jet my luggage gets priority, but yes it was impressive... in 20 Min's I was out of the airport, into a taxi and halfway to the trumpet changeover....

The toilets issue still remains, not sure what they can do about it, the check in counters is a mystery to me.... They seem to have ~65 (or was it ~50) counters, but I end up spending more time in a queue than the old airport, not sure what is happening here.... Traditional queuing theory suggests that single queues with multiple counters are more effective than multiple queues, and that has been put into practice here, but still it doesn't seem to work.... hmm I need to look at this tomorrow when I travel again..

The seating area is woefully short I think, we Indians are not too used to forming a single file line , usually 2 lines get formed, and close to the boarding counters, there is a vague formation of chairs obstructing the line formation...... somewhere I think the commercial area to seating area is sub optimal.... The number of options to eat is large, but the work flow is not well thought out of, for E.g : people collect their coffee etc outside the cafe near Gate 1 and that impacts the boarding at Gate 1 , near gate 3 there is this vague obstruction of a small bill board which impacts the movement of people ( its bang in the middle of no where!!!)

And dudes - where are the charging points for laptops ?

But bottomline, the airport seems to be improving in leaps and bounds every time I travel, hopefully, we will have one to boast of....

Bengaluru International Airport Limited - BIAL - a shame

I have traveled from the BIAL twice now and I am so thoroughly disappointed with what is the result of a >15 year wait, i think the citizens of bangalore have been cheated by government apathy, profiteering private enterprise who give a damn to the customers comfort.....here are my observations....

Good ones first :

1. The road with all the media outcry is looking good.... there is still some work left in patches but it is in place. I live in south bangalore and its about 63 kms from where I live, so it seems like a mini picnic - it took me an hour to travel this distance, not in peak traffic ofcourse, that might take sometime more
2. The look is that of a international airport.... suvarnabhumi, brussels , dubai - they look swank- this with the glass and open light looks so
3. Unlike the old HAL airport, there is some space here.... but my concern is has someone thought of future - why didnt we think of a multi level parking in one shot?
   
4. The aerobridges look cool
   

Now the cribs :

1. They have very few toilets and hello , the whole damn place is water logged.... this is a new structure damn it, why cant we have a few more toilets......
   
2. Who the hell is globe ground ? - BIAL says lufthansa has a stake and they are global partners who will provide international level ground handling - my foot - my flight landed at 12:30 yesterday night - after been delayed by an hour and then we waited for 20 mins in the plane since globe ground guys could not align the step ladder with the plane door - it took them 6 attempts. 4 guys were just pulling it back and trying to align it..... hello whatever happened to those tractors or vans which used to pull these around. Then we got down to find 2 buses for a plane full of people. Kingfisher, with its plush couches in buses has set the bar too high and here the same people were forced to pack people in as sardines. And then the heights they brought in Tempo travellers..... and then the driver gets confused and drops us off at a gate which is locked.....so here we have 4 elderly people, a lady with a bawling baby and another couple with 2 sleepy kids with other weary business travelers who probably have clocked a 18 hour day trying to catch someones attention to get the door opened.... and then trudge for 100 mts to sneak into another door... Look at what has happened - since one of the service providers messed up kingfisher and BIAL both ended up with a bad name.
   
3. Business travelers need charging points for both a laptop and phone - hello people when u built a new airport, didnt any of those bright consultants tell you about this? holy cow.... AAI does better these days
4. They have 10 gates which is good... but then hello you cant have me run around gate to gate trying to check where my flight is boarding - what happened to those tv screens which gave departure information? they have i think 2 or was it three....
5. At 1:15 in the night, we tried getting out of the parking lot and they have one counter which is being run manually - so I was stuck behind 14 vehicles - 10 mins wasted.... can someone plz think of the value of my time at 1:30 in the morning?
   

There are lots more..... since I do like 2 flights a week, I will keep posting...Hopefully for my city, they will get their act better.....

Sad part, everyone who has come back from hyderbad says the airport is magnificent.... so here we lose out again. Congrats GMR, pity a Siemens , L&T, Zurich airport cant get it right!!!

some random notes...

The 60k cr payout to the farmers led me on the same stuff I am sure you have read ad nauseum in the business press - how this will kill our banking system, about moral hazard, about how farmers will need to pay bribes to access this, how the ailing co-operative banking system will be dealt another death knell and all that. But then I also said ' if I can feel happy about the 40k tax I will save next year, and this is not life or death for me, unlike for some of those farmers I have no right to be sitting in a cozy room and spouting such crap. But I am still asking, why isnt the systemic issues not being addressed, why is there no market? when will we the middlemen who although are serving the cause of market makers are taking too high a toll on the system, about 80% of the credit in the system is unorganised - why not address it.... some questions I will not answer. For a country that votes, has a voice will we never demand these ? Will we need another 6 decades to redeem our villages....

Markets go up and down - its been a fortnight of pain for the markets - I am yet to read any report which tells people to start a SIP in a decent mutual fund and if the so called India story is intact to ride out this period of pain and volatility. If you can pick stocks, go ahead. nothing beats this time.

For what could have been - still think of those names we thought of

Some things I have been thinking of writing havent got around to - comparison of the in flight entertainment of Kingfisher and Jet, investment in public transport system, why the hell should I pay toll for roads, user development fee for airport when I pay tax - where in mighty hell is it going and so much more.....

Parting shot : to realise the value of time : everytime you are getting pained, are feel rushed... hold your breath and count down the seconds with the help of a timer in your watch or cell phone - see if you can hold it for more than a minute..... you will realise how long one minute is.... make use of it, dont rush....

So which market will I focus on…

In my last avatar as a consultant, I have done typical market entry strategy studies for industries as varied as diamond jewellery, motor cycles, auto components and trucking. One question which you would invariably grapple with and try to answer was should I enter this product/service market, if so which geography/customer segment and in what order….

Assuming that the answer to the first question was a yes, the next was to answer the geography/segment and that used to be the toughest in my mind. Markets invariably tend to follow the pareto principle, where a few large clusters (either geographical or customers) will aggregate to most of the demand. So the normal response is to hit the largest market first. I used to look at this and wonder is it the right strategy, since in my mind it always used to be the most competitive also. So my question was, when you are entering a market where rapid growth can allow you a good toehold, should you get into a headon fight? The obvious answers entrepreneurs would throw at me was, dude we will get in, wean away some share from every player or from the weakest player and voila - I have got sales since a small share in a large market might still be in absolute numbers large. I had two problems with this

• If you are so good and have a marketing team which can pull off this approach, why not go to the second rung markets and develop them and improve your hold? Why get into a competitive war, which invariably leads to pressure on margins – higher ad budgets, higher discounts…
• Execution – its very easy to say I will gain market share, but rarely do we see huge swings in market shares, how viable is it to glean away marketshare from players in a stealth mode? If it is so easy, why the heck are you not exposed to it also?

I never could convince the managements that they need to look at the second set of cities/ markets ( Salem, Nagpur, vizag…) instead of heading into Mumbai, Delhi, Kolkata, Bangalore by default…Very rarely can you come up with strategies which can make use of longtail based strategies with a low cost delivery model, or a bottom of pyramid strategy which then makes it geography independent in a country like India since the proportion of urban and rural poor is a huge number.

Yes, I heard the same stories, small town customers shop from larger towns, disposable incomes are low, market size low, people are not aware, I am a luxury/ top rung product/brand blah blah blah…but I have come to believe it’s the failure of the operational machinery and the marketing machinery which might truly not know how to work with these markets.

The reason why I got thinking about this is also very interesting in my mind. Indian IT companies are going through a trying period – slow down in the largest market, currency appreciation, cost inflation, benign tax structure change etc. And I was looking at our arm chair business analysts writing about the shift towards Europe to create headroom. Interesting today most of the large IT companies have similar sales mix – 60% US, 25-30% Europe, 10-15% Japan/Rest of Asia /Australia. I said hey, I have seen this before, the pattern is the same, domestic/ export doesn’t matter managements finally always move to the largest market, will follow herd strategy and move in the same cycle, very few take the other path to grow.

So I ask myself for the IT companies– isn’t there a market in the gulf countries? Why isn’t anyone focusing on South America? What about the African countries? Why not Vietnam? I agree these markets will not be ready to accept the Indian tag, might be lower on realization, might be difficult terrain to operate due to language issues – but did large competitive organizations get built following a standard recipe?

Doing this needs a different enabler structure in the organization – a HR which can manage issues which will arise, an operations team which can manage widely different operating models, a front end which sells very differently, a strategy setup which can identify these opportunities and can build sustainable advantage around such ‘discovered markets’. Competing on price, incremental changes are far easier and failure on building the eco system forces to follow the set path.

Maybe, I should run this test and see if investors reward different behavior ? and what time the market takes to accept a company is different and the results are sustainable….

My view on Indian Manuacturing and why you should invest there....

My basic degree is in commerce, professional training in Company law and my post graduation in management..... so its surprising I have spent so much time in manufacturing plants... I might have been a good engineer, I will never get to know, but I still love the look and feel of a manufacturing setup....

Most people who track the stock markets and keep track of that beast called the IIP will notice that the Decemeber number is lower, the last quarter has seen some slowing in the corporate earnings and I have started to hear how maybe the earnings growth will come down from the mighty numbers that drove the stock market frenzy to a large extent... But wait I have a theory about this....

A few quarters ago when the media and the so called protectors of "common man" were in a frenzy about inflation and the big daddies in the government were saying how some of this is supply led and how monetary measures would be ineffective, what they were saying was, we were heading up a capacity constraint in most of the agriculture related and manufacturing related sectors. So what was being done - the government/ RBI took measures to cool down the economy ( about which I have huge issues about how they went about it, but thats for a different post) , but what were industries upto during this phase? My guess (and here I am risking to make a statement without much analysis on data) is that corporates are building capacity. Manufacturing capacity is lumpy, takes time to come on tap and usually comes with a lag.... people who have analysed cyclical industries will see patterns of boom and bust driven by a cycle of - system inventory going down - capacity shortage - huge capacity addition - system inventory going up - price war - bam Bust ! - something similar is happening in India, capacity is coming up. But unlike the cyclicality, i think the Indian manufacturing industry will use this to improve their margins...How?

Most Indian manufacturing units are small compared to global standards, and although the best part of the last decade has been the improvement in efficiency , most of it I believe are work practice led efficiency gains, not technology led. So you had relatively small units with high shop floor efficiency driving profit improvement. Now the scale of operations for Indian units is changing, so people driven partly by tax breaks, are moving to places like Baddi, Rudrapur, Haridwar etc and setting up larger units and invariably with better technology. So the next wave of improvement is set to be driven by technology led efficiency ( and the assumption here is that the efficiency gains from work practice led improvement will not be lost ). Larger better technology led factories with scale economies slightly offset by additional logistics costs will keep the manufacturing margins high. So I would suggest look closely at those schedules in the Balance sheet and profit and loss, see Q-o-Q profitability improvement, remove seasonality and bet on Indian manufacturing for the next 3-5 years. ( Red Flag : Keep away from industries like Two wheelers, paper - where I think the segment might not be viable due to market dynamics for sometime). And you know what is the hidden zing you might get from all this - a one time bonanza since most Indian manufacturing is on the outskirts of cities (Peenya in Bangalore, Ambattur in chennai?, Mumbai) where land from the smaller factories will be freed up since manufacturing will become difficult to carry on since they will become closer and closer to prime residential areas.... so they will setup SPV/ spinoff companies, develop this real estate and push more of the production to the larger factories.

There is still one more wave after this where efficiency will come into play and that is the logistics improvement in factory gate - to intermediate distribution- to last mile distribution. Efficiency in terms of road infrastructure, de-bottlenecking out check posts ( remove the damn things you guys!!!!), warehousing, professional distributors etc. But these require fiscal measures and process improvement in this country..... and with what I think is the most inefficient goverment in the last decade at helm I dont see anything happening.

So bottomline - spend time on research, buy good Indian manufacturing companies and make some money.


There is an SEZ angle, outbound M&A angle and domestic market development angle to all this.... that might be part II to this post....

Happy new year

Dear readers,

Wish you and your loved ones a very happy new year. May this period bring joy, happiness and put you closer to what you seek in life.

I know a lot of you are regular, I dont know who you are or what specifically I write you like, but keep visiting. When I started to write about 6 months ago, I barely had a hit in few days, now a days I clock about 3-4 a day. Some of you comment and others mail me. I thank you.

I have been very tied up with my new job, so have come down to one post in a week, so here is my new year resolution - I will try to post atleast 6 times in a month.

Thanks for all the support, do write to me or leave a comment.