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 !!!
Sunday, September 7, 2008
Wednesday, September 3, 2008
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 :) !!
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 :) !!
Tuesday, August 19, 2008
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....)
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....)
Wednesday, July 30, 2008
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…
Saturday, July 19, 2008
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...
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...
Thursday, July 17, 2008
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....
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....
Sunday, July 6, 2008
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...
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...
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