Don't sack the CEO !

What would you say to a job that was one of the riskier jobs in the world – the chances of being sacked is high, and its very unlikely that you would survive 10 years. Not appealing, is it ? Welcome to the job titled the CEO.

In the UK, the FTSE 100 is the index that covers the top 100 listed companies. As the decade ended, only 16 of the CEOs who were there in 2000, were still there in 2010.

Heading that list is an illustrious name, Sir Martin Sorrell, the Chief of WPP, the global advertising agency. 25 years as CEO; he was the founder of the agency and still its head. And there are a few legends – Sir Terry Leahy, the boss of Tesco, Sir John Rose, the chief of Rolls Royce and only one lady – Marjorie Scardino, the head of Pearsons. But otherwise, most CEOs who were there in 2000 have got the boot.

The job of a Chief Executive, is obviously a crucial one in any company. The leader must stay for a reasonably long term, to be able to provide a meaningful direction for the company. Often the contribution of a CEO can only be seen in the longish term. An ideal tenure would be for 8 years or so.

But the capitalist system, as we have evolved it, is incredibly short term focused. Next quarter is all that seems to matter. Boards and shareholders expect instant performance from the CEOs, preferably in two quarters. If by three quarters the share price hasn’t doubled, then sack the CEO. The same story repeats with the new guy.

There must be something wrong with expectations if 84% of the CEOs fail to last the desired term. Sure, results are important, but how can the corporate sector be termed as successful if three quarters of the leaders aren’t considered to be doing their job.

Ok, the inference is a bit misleading. Some of the CEOs retired. Some of them might have done their stint, even if it didn’t coincide with the neat chronological span of the decade. And why 10 years - why not 7 or 8 ? But still, you get the drift.

There’s something that can be learnt from the survivors. More than half the survivors were founders. But even after they no longer owned the company and had very small holdings, they were still valuable to the company. And the professionals, all had long stints in the company before they became CEOs. Glamorous CEOs brought from the outside, have rarely survived long enough. There’s one company that has recently taken a fashion to only considering outsiders, on the presumption that every insider is a fossilized dinosaur. It might want to, sort of, look around it.

Its all a completely different story is Asia, usually. You have to carry the senile old man, kicking and protesting out of the door. That's almost as bad as the other extreme in the Anglo Saxon world. For once, a middle path seems most appealing.

A really dumb idea

It’s the end of the year and the holiday mood needs a light irreverent post. Its not a holiday around here, but since the rest of the world has caught holiday fever, we have “embraced” it as well.

Airlines are notorious for doing fairly dumb things – I think the rarified air in which they fly does some things to the brain cells. I had blogged about Ryanair’s idea of charging to use the toilets. But what All Nippon Airways (ANA) did in October takes the cake.

In October they ran an experiment. This was apparently an idea to reduce carbon emissions.

If you were to board an All Nippon Airways flight, this would be your experience.

As you queued up to board the flight, you would be met by a pleasant airline lady in uniform. Sayonara. Would you please go to the loo before you board the plane ? Its just over there. I’ll show you the way !!

In a brain dead piece of PR, ANA gave the following justification. The average human bladder capacity is apparently 15 oz. Apparently that totals to an extra weight of 63.7 kg (precisely calculated) for a planeload of 150 passengers. Carrying that extra weight means that much more CO2 emissions. ANA has estimated that it would save 5 tonnes of CO2 emissions per month by doing this. So this is a very green initiative and so must be tom tommed.

Can you even comprehend a company seriously trying something like this. ANA is not a tinpot airline. Its one of the top carriers in Asia and a global airline. And they go and do something as dumb as this.

Readers are invited to share their suggestions on how ANA could be even more green. We can then capsule this post with all the comments and send it to them.

Being an expat

What’s it like being a foreigner ? An expat living outside his or her home country ? I am an expat myself- an Indian living in China. Many readers of this blog are expats themselves. Most of us are expats because our jobs, or the jobs of our spouses, took us away from our native land.

The Economist has a beautiful article on “being foreign”. A superb and stimulating article I strongly recommend. My favourite “newspaper” is The Economist – the magazine calls itself a newspaper, in a quaint British tradition. OK, OK, I am nerdy; anybody who publicly admits to The Economist being his favourite magazine has to be the most “uncool” character in the world.

The article is so good that I offer it for your reading pleasure with no comment. What is your take ?

I’ll post my own view of being an expat later this week.

The fastest train in the world

China is a very competitive country. It likes to make a competition of everything it can win ! So its not surprising that last week it unveiled the “fastest train in the world”.

The train in question is the bullet train between Guangzhou and Wuhan. Guangzhou is where I live – the southern China city, known earlier as Canton and close to Hong Kong. You can be forgiven for not knowing anything about Wuhan. It’s a city in central China, mostly unknown to the rest of the world. Why is the fastest train in the world going there ? Well, its not going just there; the train is meant to be between Guangzhou and Beijing – Wuhan is about the midway point and this is the first phase of the line.

The train claims an average speed of 350 kmph. The earlier train journey between Guangzhou and Wuhan took some 10 hours. Now it takes 3.

This is all part of the massive investments in infrastructure that China is making. I had argued here that one of the obvious things India has to learn from China is the importance of infrastructure. China has further stepped up the infrastructure investment as part of the stimulus package. While most other countries have focused their stimulus on the short term – tax breaks, cash for clunkers, doles, etc, China has mostly focused on even more spending in infrastructure. Trains like the Guangzhou Wuhan link are going to spring up all over China over the next 5 years.

The Indian railways was, and is, one of the great organizations of the country. For a long time, it was the biggest railway network in the world. No longer. It has been rapidly overtaken by China and is going to be left far behind. For decades, Indian Railways has been starved of investments in tracks, high speed links, new trains. Instead the money has been wasted on subsidies, bloated lower level staff, and the like. Laloo Prasad brought efficiency and profitability back to the Railways and was sacked for his efforts as he had the temerity to stand against the Congress in the Lok Sabha elections.

Imagine if India replicated the Chinese achievements in the Railways. Madras to Bangalore would be an hour’s journey. Bombay to Delhi would be a 4 hour journey. Madras to Delhi, 6 hours. Bangalore to Bombay three and a half hours. The Bhopal Shatabdi, the fastest train in India has an average speed of 90 kmph. The Guangzhou Wuhan train’s average speed is 350 kmph.

I'm not able to post a photo of the Wuhan station, thanks to my Net Nanny, but just gaze at the photo here. Jaw dropping. We should bring Mamta and the entire Railway Ministry to China and make them travel on this train. Not the Railway Board – they know all this and in any case, they are one of the most efficient company Boards in the country. Maybe, just maybe, our netas and babus will realize the art of the possible, even in a poor country. Just let the top class Railway Board run it without interference. In 10 years, you and I will also have the privilege of commuting from Madras to Bangalore in an hour.

That will be the day.

Zaijian, Ni hao (Goodbye & Hello)

It is customary at this time of the year to look back and reminisce about the year gone by. This year, its also the end of the decade – the “noughties” as they are curiously called. The media, traditional and new, is dominated by the recounting of events of the past decade –the horror of September 11, the tsunami, the Sichuan earthquake, the wars in Iraq and Afghanistan, the wonder of the Beijing Olympics, the rise of China, the global financial crisis, and so on.

But take a step back, and by far, the greatest event of the decade gone by has been the unbelievable development of the Internet. Just picture the dawn of the new millennium. Google had just been started and most people still did not know of that term. Blogging was virtually unknown – the word blog itself had just been coined in mid 1999. More recent phenomena such as Twitter, Facebook and the like were not even on the horizon. Even e mail was not ubiquitous. Dinosaurs like AOL and Alta Vista ruled the world.

10 years on and the on line world has dramatically changed. If even a tech savvy Rip van Winkle has gone to sleep in December of 1999 and woken up today, he would be completely lost. Such has been the pace of change. That Chotu’s great grandmother can see and talk to her great grandson who is thousands of miles away, for free, is a miracle of immense proportions.

What amazes me is that as a society we have embraced this change so well. Disruptive change of this nature usually comes with cataclysmic implications on society. Large numbers of people are very slow to accept such changes – when the first railways were introduced in Britain long long ago, most people would not travel on it as they feared the health consequences of high speed travel (20 kmph. But today the online world is rapidly changing every month and even Chotu’s GGM adopts it gleefully.

What does the next decade hold for us online ? Only one thing is for sure – everybody who predicts what the change will be is going to be wrong. But at the end of the coming decade, we are surely going to marvel at the immense changes that have taken place. And probably reflect back on how unthinkably backward 2009 was !

We will, no doubt, plunge headlong into the changing online world. But change as it may, one thing I shall pray remains the same. The lovely community that we have come together as bloggers, le embrouille blogueur, Adesh, Zoobie, AJCL (still sticking to your old name), Savitha, Sri, The Thoughtful Train, Gils, Sandhya, Preeti, Reflections, Deepa, Dave, Priya, Rads (please come back) and all ye yeomen, I hope remains the same warm well knit online community. And perhaps some of the lovely people who comment here and are very much part of our wonderful community – Dada, Kiwibloke, J, Satish, Hansjoerg, Durga, VA, LG, Sabareesan, Mahesh, Kotla, Aashish, Exkalibur, et all, may become bloggers themselves.

Raising a toast to the wonderful friends who inhabit this space.

Happy New Year.

THE WIDENING RANGE OF REVENUE SOURCES IN NEWS ENTERPRISES

It is obvious that both the offline and online news providers are in the midst of substantial transformation and that the traditional means of funding operations are no longer as viable as in the past. This is disturbing to the industry because it has enjoyed several decades of unusual financially wealth and few in the organizations know how to find and generate new sources of revenue.

The financial uncertainty facing the industry is not unusual, however. We tend to forget that news has historically been unable to pay for itself and was subsidized by other activities. In the past newspapers and other news organizations engaged in a far larger range of commercial activities than then they do today and publishers had to be highly entrepreneurial and seek income from a wide variety of sources in order to survive.

The initial gathering and distribution of news was paid for by emperors, monarchs, and other rulers who needed information for state purposes. Later, wealthy international merchants hired correspondents to gather and relay news that might affect their businesses. When news became a commercial product, newspaper publishers subsidized the operations with profits from printing books, magazines, pamphlets, and advertising sheets, income for editors from shipping and postal employment, profits from operating book shops and travel agencies, and subsidies from communities and political and social organizations.

Today, however, news organizations are struggling to maintain themselves and develop digital operations by primarily focusing on the two revenue streams they have known in recent decades: subscriptions and advertising. Many people are being disappointed because those are failing to provide sufficient financial resources to sustain their operations.

The need to seek income from multiple sources is clear, but runs somewhat counter to the values of twentieth-century professional journalism, which denigrates commercial activity and thus engenders organizational resistance to new business initiatives. Continuing staff reductions and other budgetary cutbacks are eroding some internal opposition, but are rightfully leading to questions about how far one goes down the commercial road before news gives up its independence.

In both the online and offline news worlds, a wide variety of revenue generating activities are appearing—some based on traditional subscriber/single copy sales and advertising sales—but many others moving into new areas of monetization.

Many news organizations are increasing the range of advertising services provided to sell and create ads for their own media products, but also to provide clients services that can be used in competing products as well. New types of advertising offerings are being created to link across platforms, sponsorships of online and mobile news headlines are developing, video advertising is being offered online, and special “deals of the day” advertising spots are being offered.

Some organizations are increasing their product lines producing paid premium products and niche content for professional groups and persons with special interests; some are providing business service listings for a fee; others are creating a variety of non-news products; still others are operating additional business units creating paid events, running cafés, book and magazine shops, and providing training and education activities.

Sales of other products and services are being increasingly embraced through e-commerce (linking published reviews films, performances, and recordings to sites where customers can buy tickets, DVDs, CDs, etc.), creating and selling lists and databases of local businesses and consumers, producing special reports and books, selling photographs and photography services, and even selling items such as computers and appliances.

A growing number of news organizations are seekings subsidies though reader memberships and donations and grants from community and national foundations.

These are healthy developments because they increase the opportunities to create revenue that can fund news activities. Obviously, the abilities and willingness of different news enterprises to engage in the range activities vary widely, but the fact that they are appearing show that news organizations are beginning to adjust to the new environment and becoming more entrepreneurial than they have been for many decades.

What is needed now is not knee-jerk opposition to these efforts from news personnel, but thoughtful development of realistic principles and processes to minimize any negative effects of these new initiatives on news content so that trust and credibility are not diminished.

Holidays is a cultural thing

Today is Christmas day – virtually everywhere in the world, today is a holiday. And here I am , at my desk, pretending to be working. For its not a holiday in atheist China. Despite the best efforts of companies to tempt the Chinese into “Christmas shopping”, the day remains stubbornly irrelevant here.

I have a stream of people walking up to my desk today. They are all asking me to approve carrying forward their leave entitlements which they have not used up. Everybody knows that they will not use them up next year as well and will ask to carry it over again. This charade goes on every year. Much as I rail against them for not planning their leave properly, its not going to change. For the Chinese (and Indians) don’t like to go on holiday. They like to work.

Contrast this with Europe. In August, most of Europe, at least France, completely shuts down. And between Christmas and New Year, not a soul is seen anywhere near the office. So here we are, working in a global business, where the lights have gone out of the offices everywhere in the world, bar the solitary illumination seen in China.

It's not that one is wrong and the other is right. It just shows the cultural differences between Europe and Asia. Europeans prize their holidays highly. To them its 46 weeks of slogging to earn the 6 weeks off. Asians start to feel uncomfortable at the very thought of taking anything more than 2 weeks off. And a second holiday during the year will prompt snide remarks of being on perpetual holiday.

But this is time for holiday cheer. Whether you are at your desk in China or stuck on the Eurostar between the UK and France, here’s wishing you a Merry Christmas and the compliments of the season. Maybe you are having a white Christmas, as seems to be the case in most of the Northern Hemisphere. Or, you may be in Bondi beach in beach clothes soaking in the sun. Or you might be the classic NRI, on the once in two years trip “back home”. To you, may I quote from an unknown author - Let the spirit of love gently fill our hearts and homes. In this loveliest of seasons may you find many reasons for happiness.

Amen.

Pay a tax if you tan

The US healthcare bill that is doing the final rounds in the Senate today is a landmark piece of legislation, if passed. It has aroused intense emotions and divided America. But an obscure part of the bill, buried in the thousands of pages of legalese is illustrative of the way lobby and pressure groups have come to influence economic policy.

In the first draft of the bill, a tax was proposed on cosmetic procedures like Botox injections, breast implants, tummy tucks, etc. Part of the ingenuous ways of raising revenue to fund the massive healthcare costs. Inevitably, this tax proposal has come to be called as Bo-tax. Now the medical industry lobbied like crazy to get Bo-tax reversed. And they succeeded , at least in the latest draft doing the rounds. No comment on what persuasive powers they used.

However the government cannot forego any revenue at all, considering the huge costs the health care bill is likely to result in. They have therefore replaced the Bo-tax by a tax on tanning salons that use sunbeds.

Predictably there’s howls of outrage from the tanning industry lobby. They have caught on a great angle to protest on. Tanning salons are obviously used by only white people. Therefore they are claiming this tax is racist ! And since most of the clientele is women, they are calling it sexist as well !!

A spokesman for Harry Reid , the Senate Majority leader is reputed to have stated that the swap of Bo-tax with the Tan tax was “based on the more compelling health concerns with indoor tanning services”. The tanning industry association has shot back that ultraviolet light has at least some proven health benefits, while Botox has none.

So the lobbying goes on. If this is what is happening on an obscure side show, you can imagine the lobbying that is going on, on the main aspects of the bill. And for that matter every piece of legislation. No wonder Washington is full of lobbysists and pressure groups with a single agenda item – everybody is clamouring for his or her own cause and to hell with the rest of the world and the consequences.

Is this any way to determine economic policy ?

Who can you trust now ?

Conventional wisdom has been that a sovereign guarantee is the best form of security you can have when you lend money. You can be pretty much sure that your money is safe if you buy government debt. Doesn’t matter which government, if you leave aside rogue states like North Korea or Myanmar. Conventional wisdom that is.

That was before the financial crisis. As the crisis spread, Iceland was the first country to go virtually bankrupt. When that happened, it was viewed as an isolated instance of an insignificant country that didn’t matter.

Then came Dubai. Well technically, not Dubai the Emirate, but Dubai World, the company. But then in that part of the world, it’s the same thing. Didn’t people see it coming ? – virtually anybody who’s been to Dubai would know that it was a place gone financially crazy. Of course, everybody knew that. But then everybody expected that Abu Dhabi, the oil rich emirate would always stand by Dubai. That was the mistake. The really startling thing about the Dubai crisis, is that there’s stony silence from Abu Dhabi.

Lenders have woken up and are now no longer sure about government debt. The country under the spotlight is now Greece. This is serious, for Greece is in the Euro zone. For years Greece has had irresponsible governments. The commitment made to join the Euro was that. its deficit would be no more than 3% of GDP – instead Greece runs at above 12% of GDP. Lenders always assumed that since it was in the Euro area, “Europe” (read Germany) would bail them out if it came to a default. Now, after the Dubai experience, not so sure. Rating agencies have fallen over themselves to cut Greece’s credit rating. Interest rates have soared. Greece needs to borrow a large amount in the first half of 2010 just to keep the government going – pay salaries and all that. There’s now real uncertainty whether their debt issue would be taken up.

There’s a lesson here for India. Not just that India must rein in its deficit – that’s repeated ad nauseum and as long as there are a few responsible ministers and bureaucrats in the Central government, we are OK. The lesson is for the States.

Every State government in India is virtually bankrupt. It’s a crying shame that the richest state in India, Maharashtra, is the worst offender. Unlike the Centre, State governments are completely irresponsible and fall over each other to loot the Treasury. The quality of leadership in the States is abysmal, irrespective of which party is in power. Every single minister in every single state would flunk Economics 101.

State Governments survive by issuing debt. The RBI and the Central government exercise control by regulating this, but state governments are masters in resorting to brinksmanship. Nobody would buy state government debt, but for the fact that it is backed by the Central government. The guarantee of the Government of India still stands for something.

So here’s the thought. The Central Government must withdraw the sovereign guarantee for state government debts. Automatically state governments would be forced to become fiscally responsible. Actually the Centre doesn’t even need to do that. They just have to deny a rumour that they may withdraw the guarantee. That’s enough. The markets would do the rest !

IMPLICATIONS OF CHANGING DEFINITIONS OF MEDIA MARKETS

An important contemporary development is the shift of media market definitions from traditional platform-based definitions to functional definitions. This is occurring because media product platform definitions are losing their specificity and uniqueness due to digitalization and cross-platform distribution developments.

Newspapers are becoming news providers, delivering news and information via print, online, mobile, and other platforms; broadcasters are moving off the radio spectrum, exploiting not only other streaming and video-on-demand opportunities, but also text-based communication on web and mobile platforms.

Although functional definitions clarify what companies actually do, they obscure wide differences in audiences, business relations, and revenue sources on the different platforms and give some the mistaken impression that a functionally defined operation can be successful operating the same way across the different platform environments. The functional definition is also confusing some policy makers and regulators concerned with effects of cross-media activity, consolidation, and concentration who do not carefully sort out the different elements of product and geographic market definitions among the platforms.

From the business standpoint, the fundamental problem of the functional definitions is that it leads many content providers to believe they can simply repurpose existing content across platforms. They are happy to do so because the marginal cost is near zero, but they ignore the facts that it also commoditizes the content, that the content losses uniqueness, and that similar presentation may not be appropriate on other platforms. Consequently, the repurposed content can produce only a small marginal increase in revenue.

To ultimately be successful in functional markets, companies need to offer a good deal of new content and launch new products on the new platforms rather than merely reusing what is already there in the traditional ways. Leading cable channels, for example, early in their development relied on motion pictures and syndicated programs previously shown on network television, but soon realized that they needed original programming to attract better audiences and gain additional revenue. Financial newspapers have begun to get it right on the Internet, offering more content and tools than in their print editions and establishing specialized niche products for different types of industry and business readers.

We are all watching to see who among general content providers manages to get their functional approach to markets right using the Internet, Mobile, e-Readers, and other platforms.

MEDIA, INNOVATION, AND THE STATE

There is a growing chorus for governments to help established media transform themselves in the digital age. From the U.S. to the Netherlands, from the U.K. to France, governments are being asked to help both print and broadcast media innovate their products and services to help make them sustainable.

State support for innovation is not a new concept. Support of cooperate research initiatives involving the state, higher education institutions, and industries has been part of national science and industrial policies for many decades. There has been significant state support for innovation of agriculture/food products, electronics, advanced military equipment, information technology, and biomedical technology and products.

State support tends to work best in developing new technologies and industries and tends to focus support on advanced basic scholarly research through science and research funding organizations, creation and support for research parks and industrial development zones for applied research, and incentives and subsidies for commercial research and development.

Many governments also support efforts to transform established industries. These are typically designed to promote productivity and competitiveness as a means of preserving employment and the tax base. In the past there has been some support for technology transfer from electronics and information technology to existing industries and for retraining, facilities reconstruction, and entering new markets.

Trying to apply those kinds of research and transformation policies in media is challenging, however, because much of media activities tend to be non-industrial and are dependent on relatively rigid organizational structures and processes that are difficult to change. These factors are complicated by the facts that media engage in negligible research and development activities, have limited experience with product change and new product development, and tend to have limited links to higher education institutions.

It is clear that a growing number of managers in media industries understand the need for innovation because of the declining sustainability of current operations and because Internet, mobile, e-reader, and on-demand technologies are providing new opportunities. The real innovation challenges in established media, however, are not perceiving the need for change or being able to get needed technology, but organizational structures, processes, culture, and ways of thinking that limit willingness and ability to innovate. This is compounded because many managers are confused by the opportunities and don’t know what to do or how pursue innovation.

Today, the innovation challenge facing media—especially newspapers--is not mere modernization, but fundamentally reestablishing their media functions and forms. What is needed is a complete rethinking of what content is offered, where, when and how it is provided, what new products and services should be provided and what existing ones dropped, how content will differ and be superior to that of other providers, how to establish new and better relationships with consumers, how the activities are organized and what processes will be employed, what relationships need to be established with partners and intermediaries, and ultimately how the activities are funded.

The state’s ability to influence media innovation of this type is highly constrained. Governments worldwide have proven themselves ineffectual in running business enterprises and they have limited abilities to affect organizational structures, processes, culture, and thinking in existing firms. What governments can do, however, is to fund research that identifies threats, opportunities and best practices, provide education and training to promote innovation and help implement change, offer incentives or subsidies to cover transformation costs and support new initiatives, and help coordinate activities across industries.

These kinds of support will be helpful, but they will not be a panacea because the greatest impetus for and implementation of change and innovation must come from within companies. The support will only be helpful if companies are actually willing to innovate and change to support that innovation. The extent they are willing to do so remains to be seen.

In defence of business

The word business is nowadays accompanied by a metaphorical holding of the nose. Post the financial crisis, businessmen would probably rank just above bankers and below more traditional last placers like real estate agents, in the list of reputable professions. Readers of this blog would know that the author is a staunch defender of business and advocates the view that the profession is unfairly maligned. An earlier post had touched on this subject.

It was gratifying to read The Economist’s Schumpeter column, The Silence of Mammon, which argues that business people should stand up for themselves. The article recounts the two arguments it says proponents have put forth in defence of business – that many firms are devoted to good works and that businessmen have done more than any other institution to advance prosperity. It opines that these are not enough and puts forth three more arguments to counter the critics of business who have dominated the discussion on corporate morality – that business is a remarkable exercise in cooperation, that business is an exercise in creativity and that business helps maintain political pluralism. All excellent arguments, in an eminently readable article.

I wade into this debate with unbridled enthusiasm. I have little sympathy for those who taint businesses as immoral with a broad brush. At the cost of oversimplifying a complex matter, I set out a central theme in defence of business and industry.

I come from a poor country, India, and now live in another one, China . I have seen how degrading poverty is to humanity. And it is China that I want to present in defence of business. In 1981, 84% of China’s population of a billion plus was below the poverty line of $1.25 a day. In 2005, in the same China, the percentage of population below the same poverty line had decline to just 16% (source : World Bank working paper 5090). Yes SIXTEEN per cent. That equals to 700 million people who have climbed above the poverty line. We all know how this was done.

Show me any other way of pulling 700 million people out of poverty and I’ll abandon all defence of business.

No Christmas Business, But...

Hello Show Attenders,

Following a spectacular Holiday Spectacular show with THREE guests (Louis Katz, Amy Dresner and Chris Thayer), The Business will be dark for the Christmas holiday week. However, we will be back for a big New Years Eve Eve show on Wed Dec 30th 2009. No secrets revealed yet, but plans are in the works for some knockout guests.





...and as Jan crests on the horizon, The Business is proud to ba a part of SF Sketchfest 2010 on both Thur Jan 21st and Friday Jan 22nd. Still at the Dark Room, but joined by new guests and other great sketch groups. Check www.sfsketchfest.com for more details. These will be the only Business shows until February, so come by and get your Biz Fix.

THANKS FOR ALL THE SUPPORT IN 2009!

Sincerely,
The Businessmen

The low point

This week has been the low point in my infancy in the blogging world. A combination of traveling, ridiculous working hours and the difficulty of actually getting access to the internet when traveling overseas without paying up a complete fortune, has made this a barren week. No posts at all and unforgivable delays in responding to comments. Sorry.

There are, of course, periods in business life, which are like this. Low points. Much more serious than a blogging setback. When nothing seems to be going right. When self doubts creep in. When your boss rubs it in, instead of being supportive. Hence a post which might help in a small way, if you face such a situation.

Firstly , everybody goes through this, many times in a career. Even Jack Welch. Steve Jobs was once sacked from Apple ! The more successful guys have perhaps gone through it more often. So, if its of any comfort, we are in elite company.

Secondly, its only a job. This is often the most difficult of concepts to digest. ITS ONLY A JOB. Its not our life. The vast majority of us consider that it IS our life. Sure, we must give it our very best, We must give it our heads and perhaps our hearts, but never our soul.

Thirdly, it won’t look so bad tomorrow. It has often amazed me that what looks like a low point today, doesn’t seem all that low tomorrow. Our perspectives often react in an extreme to a given situation. Tomorrow is another day.

Fourthly, the sun will still rise in the east. Nothing is ever THAT important. In a few months, if not a few weeks, it will all be forgotten. Think back to the last time that it didn’t seem to be going so well in the office. Did it matter ? Of course it didn’t.

Fifthly, its not worth getting furious at the boss. He’s going through the same cocktail of emotions too. OK, he’s a bum. But is it worth expending all that energy on a bum ? He’ll go away tomorrow. There’ll be a new bloke to deal with.

If this sounds all cliché ridden, it is. File this away in a far corner of the mind. And on the low days, maybe, just maybe, it might help, just a teeny weeny bit.

I’ll leave you with a song that bears no relation to the post other than that it features the word low. Its wildly evocative of a lovely lovely land. Here it is …….

Its time to leave the village

You may have followed the travails of our city bred yuppie here and here. He survived the attentions of the peacock. He managed to escape being hitched. He got over the close association with bovine sex life. He even learnt to ignore the ever present gun. But , at last,  the time came for him to leave the village and go back to the city – back to normal business, back to the life he was used to.

The parting was really tough. There wasn’t a dry eye on the day of his departure. The hosts openly wept. They, and he, knew that they would never see each other again. For two months they had shared the same roof. Eaten the same food. They came from different worlds and yet had started to appreciate the other. It was now time to go their separate ways. But for both, their lives would never be the same again. He got his bags together. Said goodbye to the teary family gathered on the porch. There was mutual assurance that they would write to each other – on inland letters as was the norm then. But they both knew this would not happen. It was over.

On the long train ride back to the city, the yuppie reflected on the two months that he had spent. The good, the bad and the ugly. The good first. People make incredibly warm bonds in the unlikeliest of circumstances. The hosts had much of the simplicity that defines life in India. They shared whatever they had with their guest. They reached out openly to him. They were curious about the different life he came from, but they did not disparage it. They related to him with their hearts, not their heads.

But the ugly side of village life also needs telling. The appalling caste system is, alas, well and thriving in rural India. Untouchability in its starkest form is evident everywhere. Crime is omnipresent ; there is little of the rule of law – the gun is the king. The treatment of women is often barbaric. There is abject poverty. Poverty is demeaning to the soul. If ever there is anything that dehumanizes people, its poverty. Under the excuse of poverty, anything goes. It is so obvious that helping lift people out of poverty must be the number one priority for any state – in this there can be no better shining example than China.

As the train chugged on, the yuppie continued to ruminate. As in all things in life, there are two sides to everything. Some people glorify village life. Others disparage it. Each sees it through the lens he has fashioned. From behind his own lens, the yuppie concluded that his truth is that there is some good and a lot bad. But it was an experience indeed. Something he was not likely to forget in a hurry. For, after all, experience is the elixir of life.

The train chugged into the city station. He sighed deeply, and stepped forward into the world that was his, and the one he knew allright.

Is small scale more desirable than large scale ?

Why is the Government of India so fixated about small scale ? For some reason, the thinking seems to be that small scale is ethically more acceptable than large scale. This is nonsense – both economically and morally.

I am reacting to the news that the government is considering stipulating that public sector enterprises would be required to source 20% of their purchases from micro, small and medium enterprises. Never mind that such public enterprises have to compete on the open market against enterprises with no such restrictions. Never mind that public enterprises, funded with taxpayers money are supposed to be economic engines – not means of implementing a warped sense of social justice.

Small enterprises need no special support. Just as in every other facet of industry, there are the good and bad among them. The good don’t need any handouts. The bad deserve to die. In some areas, scale is an advantage and small scale, by definition is suboptimal. As a consumer, I have no desire to accept suboptimal costs. In some other areas smallness can be an advantage. Good , then compete on your strengths and may the best man win.

Small scale industry is not a saint. They violate laws too. Often laws relating to safety and labour are least observed in small industry. They do not deserve to be glorified.

The problem is that there is a ministry of micro, small and medium enterprises in the central government. If there is a ministry, there must be netas and babus. They have to find something to do to justify their existence. They therefore create such horrible policy. Without a doubt, detailed rules will be laid down as to what materials have to be sourced from them. PSUs will lobby saying some materials have to be excluded because they are not manufactured by the small scale industry. Small industry will lobby saying that some items have to be exclusively sourced from them. Before you know it, a 1000 page compendium will be published. Case law will be created. The babus can be in bliss.

Reminds me of an incident which P Chidambaram, the current Home Minister of India used to speak about. When he first took over the Commerce Ministry, long ago, he discovered the existence of an organization called the Controller of Imports and Exports. While he could understand why imports were thought to be controlled in the license permit era, he was completely at a loss as to why there was a Controller of Exports. When he asked the worthy official why this was so, he was treated to a lengthy presentation of why that function was absolutely important. The gobsmacked Chidambaram realized that the only way he could make things happen was to simply abolish the whole function.

I suggest that the Ministry of micro, small and medium enterprises be likewise abolished.

A great organisation

The house of the Tatas has been synonymous with values which are unique in the annals of business history. This post is about why they more than deserve their illustrious reputation.

This is from an e mail doing the rounds – these are apparently notes taken by Dilip Ranjekar , CEO of the Azim Premji Foundation. I haven’t requested permission from Dilip, or the persons who forwarded me this mail, to post this, but I am sure none would mind me spreading a story that ought to be told and will bring a lump to your throat. Here it is

Last evening, I had a dinner meeting with HNS in Goa

He narrated the 26th November 2008 terror attack on Taj Mumbai and there were some important points.

Terrorist entry

1. They entered from the Leopold Colaba hotel entrance and also from the northern entrance - spraying indiscriminate bullets on the Taj security personnel and guests in general.

2. Though Taj had a reasonable security - they were surely not equipped to deal with terrorists who were spraying 6 bullets per trigger.

3. The strategy of the terrorists was to throw chunks of RDX in an open area that will explode and burn - creating chaos so that the guests and staff run helter skelter so that the terrorists could kill them. The idea was to create maximum casualties.

4. There were several critical gatherings and functions happening in the hotel on that day - a Bohra wedding, global meet of Unilever CEOs and Board
members and 2 other corporate meetings were being held in the hotel - besides the usual crowd.

5. The firing and chaos began at about 8.30 p.m. and the staff including employees on casual and contract basis displayed exemplary presence of mind, courage and sacrifice to protect the guests who were in various halls and conference rooms.

Stories of Staff Heroics

1. A young lady guest relation executive with the HLL gathering stopped any of the members going out and volunteered 3 times to go out and get things when the situation outside the hall was very explosive and she could have been easily the target of the bullets

2. Thomas George a captain escorted 54 guests from a backdoor staircase and when he was going down last he was shot by the terrorists

3. There were 500 emails from various guests narrating heroics of the staff and thanking them for saving their lives

4. In a subsequent function, Ratan Tata broke down in full public view and sobbed saying - "the company belongs to these people". The wife of Thomas George who laid his life saving others said, she and the kids were proud of the man and that she did not know that for 25 years she lived
with a man who was so courageous and brave

5. The episode happened on 26th November, a significant part of the hotel was burnt down and destroyed - the hotel was re-opened on 21st December and all the employees of the hotel were paraded in front of the guests

6. It was clearly a saga of extra-ordinary heroics by ordinary people for their organisation and in a way for their country. The sense of duty and service was unprecedented

7. The young lady who protected and looked after the HLL guests was a management trainee and we often speak of juniority and seniority in the organisation. She had no instructions from any supervisor to do what she did

* She took just 3 minutes to rescue the entire team through the kitchen
* Cars were organised outside the hotel as per seniority of the members
* In the peak of the crisis, she stepped out and got things for the guests

8. People who exhibited courage included janitors, waiters, directors, artisans and captains - all levels of people

The Tata Gesture

1. All category of employees including those who had completed even 1 day as casuals were treated on duty during the time the hotel was closed

2. Relief and assistance to all those who were injured and killed.

3. The relief and assistance was extended to all those who died at the railway station, surroundings including the "Pav-Bhaji" vendor and the pan shop owners

4. During the time the hotel was closed, the salaries were sent by money order

5. A psychiatric cell was established in collaboration with Tata Institute of Social Sciences to counsel those who needed such help

6. The thoughts and anxieties going on people's mind was constantly tracked and where needed psychological help provided

7. Employee outreach centers were opened where all help, food, water, sanitation, first aid and counseling was provided. 1600 employees were covered by this facility

8. Every employee was assigned to one mentor and it was that person's responsibility to act as a "single window" clearance for any help that the person required

9. Ratan Tata personally visited the families of all the 80 employees who in some manner - either through injury or getting killed - were affected.

10. The dependents of the employees were flown from outside Mumbai to Mumbai and taken care off in terms of ensuring mental assurance and peace. They were all accommodated in Hotel President for 3 weeks

11. Ratan Tata himself asked the families and dependents - as to what they wanted him to do.

12. In a record time of 20 days, a new trust was created by the Tatas for the purpose of relief of employees.

13. What is unique is that even the other people, the railway employees, the police staff, the pedestrians who had nothing to do with Tatas were covered by compensation. Each one of them was provided subsistence allowance of Rs. 10K per month for all these people for 6 months.

14. A 4 year old granddaughter of a vendor got 4 bullets in her and only one was removed in the Government hospital. She was taken to the Bombay hospital and several lakhs were spent by the Tatas on her to fully treat her

15. New hand carts were provided to several vendors who lost their carts

16. Tata will take responsibility of life education of 46 children of the victims of the terror

17. This was the most trying period in the life of the organisation. Senior managers including Ratan Tata were visiting funeral to funeral over the 3 days that were most horrible

18. The settlement for every deceased member ranged from Rs. 36 to 85 lacs in addition to the following benefits:

* Full last salary for life for the family and dependents

* Complete responsibility of education of children and dependents -anywhere in the world

* Full Medical facility for the whole family and dependents for rest of their life

* All loans and advances were waived off - irrespective of the amount
* Counselor for life for each person

Epilogue

1. How was such passion created among the employees? How and why did they behave the way they did?

2. The organisation is clear that it is not something that someone can take credit for. It is not some training and development that created such behaviour. If someone suggests that - everyone laughs

3. It has to do with the DNA of the organisation, with the way Tata culture exists and above all with the situation that prevailed that time. The organisation has always been telling that customers and guests are #1 priority

4. The hotel business was started by Jamshedji Tata when he was insulted in one of the British hotels and not allowed to stay there.

5. He created several institutions which later became icons of progress, culture and modernity. IISc is one such institute. He was told by the rulers that time that he can acquire land for IISc to the extent he could fence the same. He could afford fencing only 400 acres.

6. When the HR function hesitatingly made a very rich proposal to Ratan - he said - do you think we are doing enough?

7. The whole approach was that the organisation would spend several hundred crore in re-building the property - why not spend equally on the employees who gave their life?


THIS is a great organization, full of great people.

Bhopal happens and nobody is prosecuted

This week marks the twenty fifth anniversary of the worst industrial disaster in history – the leak of the deadly methyl isocyanate from the Union Carbide plant in Bhopal. Thousands of people died and the horrors have been well documented.

This post focuses on one notable aspect of what happened after the disaster. Or rather what didn’t happen. Nobody has yet been prosecuted in a court of law for the accident. That’s right. After 25 years, there has not been a single criminal prosecution.

There is little doubt that safety systems in the plant were poorly designed, bypassed in actual operation and there was criminal negligence on safety. Those of us who have worked in factories know how elaborate safety systems are when handling extremely dangerous chemicals like methyl isocyanate. And yet multiple safety systems seem to have been routinely bypassed. Just glance at the Wikipedia article on the accident that details the number of safety systems that were reported to have been non operational at that time.

The government, NGO’s and all the shouters wanted to prosecute Warren Anderson, the then Chairman of Union Carbide globally. This is a classic manifestation of trying to go after a global name – the more senior the better to show that something is done. Flash of publicity. But is Warren Anderson really the culprit ? – was it he who bypassed multiple safety systems at the Bhopal plant ? Was he the one who designed the systems in the first place ? He should take moral responsibility, but he is not criminally responsible.

The real criminal responsibility lies with the plant management and the actual operators of the plant. The people who took short cuts. The people who gave lip service to the required safety procedures. The people who tried to cut costs by short circuiting what they saw as elaborate non essential procedures. The people who allowed stocks of MIC to build up because the final product was not selling, but didn’t think of the consequences. They are the people who should be prosecuted. If there were serious design deficiencies with the safety systems, then the design guys must also be prosecuted. By not doing so, we have not served the demands of justice. We have implicitly accepted that it is OK to bypass safety systems, even when the consequences are as disastrous as what happened. We have failed to award exemplary punishment to the people really responsible – and thereby deter similar people in other factories from taking shortcuts on safety.

In some ways, we should look at ourselves. We are cavalier about safety in our own homes. Don’t we overload a socket by drawing an extension box and plugging multiple devices to it ? Don’t we ignore earthing and plug a two pin plug where a three pin plug is required ? Don’t we get irritated by the fuse going off repeatedly and short the fuse box ? Do we even have a single fire extinguisher in our house ? This is the same lighthearted approach to safety that caused the Bhopal disaster. Pardon my sermonising like a snooty b%$#@, but this is one topic where I won't stop being a sanctimonious pest.

We would do ourselves a good turn by not taking safety lightly. By asking for a safety audit of our own homes. And then following the safety procedures without fail. Next time we plug a 2 pin plug into a three pin socket .........

A man of substance

Meet Sadashiv Chandrakanth Khodke. His life was turned upside down, exactly one year ago, when the despicable scum called terrorists attacked Mumbai. I heard his tale on a BBC podcast and it touched me – and it’s the subject of this Sunday’s non business post.

Sadashiv was a waiter in a restaurant, holding a steady job. His misfortune was that he was in VT station at exactly the wrong time. He was injured in the shooting and his life turned in an instant. He was taken to a hospital and operated upon to remove shrapnel lodged in his chest. The operation was successful, but he had to spend a long time in hospital and then in recuperation.

It is usual to blame the government for apathy when it comes to disaster victims. I actually think this is often a completely erroneous accusation. The government does do a lot – many a time its just that the scale of the tragedy is simply too big. In Sadashiv’s case, they did all they could. They didn’t charge him for the treatment. Even when he was in the hospital, the Railways and the Maharashtra Government came and gave him Rs 50,000 each in compensation. No red tape, no running around.

But then what happened is the real tragedy. One of his relatives, from whom he had borrowed money earlier, came to the hospital, while he was still there and took away the money that was due to him from the compensation amount. Consider for a moment, how crassly insensitive this was. Here was a man in a hospital bed recovering from being shot by a terrorist and what does his so called relative do ? Take away some of his money.

This is unfortunately not atypical behaviour. I have heard of appalling acts of callousness, motivated by money, even in the face of disasters. It makes you sometimes wonder whether humanity is a rare quality in human beings .

Sadashiv’s misery did not end there. He was in hospital for a month and was fit to go back to work only after six months. When he went back to his restaurant, he was told he had no job. In his absence, the restaurant owner had taken somebody else. Tough luck !

While I can understand the business logic of not being able to wait 6 months for somebody to come back, where is the heart of a businessman, however small he may be, who sacks a guy because he couldn’t come to work after being shot by a terrorist. Public opinion often criticizes the rich and successful businessmen. I submit that insensitivity is not the monopoly of big business. There are inhuman human beings across every spectrum of life.

Sadashiv is now running his own tea stall on the pavement somewhere in Mumbai. He has lost his home – so sleeps on the footpath like thousands of Mumbaikars. He is in debt. He is not able to send much money to his family back in the village.

But listen about Sadashiv on this brief BBC podcast. There doesn’t seem to be much bitterness. He lays his faith in God. He does not complain about his ill fortune. He says God saved him and is thankful for this blessing. He is working hard to earn a living. Its tough to make ends meet running a tea stall on the pavement. But he is giving it his best shot. He serves with a smile.

Sadashiv Chandrakanth Khodke – you are truly a human being to be admired. To my mind, you are the Businessman of the Year. If I ever get to find you on the streets of Mumbai, it shall be my privilege to be your customer and have a cup of tea from you. The fates dealt you a cruel blow on that day a year ago. I pray that they also deal you a kind hand in the future.

The world's most outrageous CEOs

The media loves to makes lists – the richest people in the world, the biggest companies in the world and so on. Forbes has compiled a rather unusual list – the 10 most outrageous CEOs of 2009.

Bernie Madoff would have been a slam dunk for the winner – but his place in the sun was last year – so he’s disqualified.

This year’s list is full of people who have been charged or indicted of fraud. Robert Moran sentenced for tax fraud at No 10, David Rubin indicted for fraud at No 9, Allen Stanford accused of misappropriation at No 8, Danny Pang accused of running a Ponzi Scheme at No 7, Thomas Peters on trial for fraud at No 5, Ramalinga Raju, in jail at No 4 and Raj Rajaratnam charged with insider trading at No 3.

Sandwiched between them are Ed Libby of AIG at No 5, for the retention bonuses he decided to pay the executives of the financial products divisions who brought ruin to the company in the first place and John Thain of Merill Lynch at No 3 who pushed through bonuses before the takeover by Bank of America.

But standing at the pinnacle is Lloyd Blankfein of Goldman Sachs – by any standards a superb CEO of a brilliant company. He should be at the top of the most outstanding business leaders in the world. And yet here he is at the top of Forbes’ “outrageous gallery” sharing the stage with some of the worst corporate fraudsters. His famous joke to the Sunday Times that bankers like himself were doing God’s work, must have propelled him to the winner's post.

Just goes to show that however brilliant you may be, however successful your company may be, you will be tried at the altar of public opinion. All the millions cannot buy you respect. Character and grace are still priceless. They cannot be achieved by just business success.

For more humbler mortals like me, who may not reach such lofty heights there is still a lesson to be learnt. For every act I do, however humble a job, it would be prudent to ask the question - if what I did was splashed on the front page of the newspapers, will I be lauded; or will I be crucified ?

Rupert Murdoch vs Google

In the blue corner is Rupert Murdoch, the media tycoon – Chairman of Newscorp, owner of The Times and the Sun in the UK and New York Times in the US, and the TV Channels Sky, Star and Fox News. In the red corner is Google – the titan of the on line world. The bout has begun.

In question is the issue of on line news – who owns it, who pays whom for it, etc etc. Now we are perfectly willing to pay a few rupees, or cents or yuan for a newspaper, but are absolutely not prepared to pay a penny for the same newspaper on line. Confess it – you haven’t read the newspaper today. Instead you browsed on line. I did too – at least my excuse is that the single English newspaper, where I live, is not worth reading! What’s yours ?

Murdoch says Google and such other news aggregators are freely linking to news content that his newspapers create and then get advertising revenue for it and to rub salt into the wounds, charge the papers for sending readers to it. They have news pages which attract readers by aggregating content, but they don’t pay the content creators for it. Kleptomaniacs, thunders Murdoch.

Google says the old man just doesn’t get it (of course not in those words). They say the on line world is a new world, traditional newspapers are dinosaurs, their business models are broken and that the on line world is comprised of “free” information and that’s the way it will be.

Now Murdoch has a point. Credible content that newspapers create cost money. They have to have reporters in every corner of the world, they have to edit pieces, etc etc. Contrast that against the writings in this blog, which costs nothing to create, but is usually unadulterated twaddle. So Murdoch says, his news is intellectual property and cannot be stolen by content aggregators.

He is therefore going to Microsoft , trying to negotiate an exclusive arrangement with Bing and simply exclude Google.

The problem is that newspapers are declining all over the world. In a few years, newspapers may go the way of Readers Digest – a quaint oddity for the geriatrics. Newspapers went online but have made it free – only the FT and the Wall Street Journal have managed to charge for it. So their revenues are in serious decline.

Its easy to brand Murdoch as an old foggy and that he doesn’t understand the online world. I don’t think that’s true – he’s a shrewd businessman who understands it all too well and is picking up a real fight . After all remember they said the same thing, at the peak of the dot com boom, about an old geezer called Warren Buffet.

The day when India was on top of the world

One of the greatest of days in Indian sport , to me THE greatest day in Indian sport, was the day in March , long ago, when India lifted the hockey World Cup in Kuala Lumpur. India beat Pakistan in the final to win the World Cup for the first, and alas thus far the only, time.

The greatest day was actually not the final win. By the day of the final, it seemed pre ordained that India would win. The day came on the semi finals, just a day earlier. India played Malaysia on their home soil It was on a rain sodden pitch early in the morning (those days they played hockey on natural turf). It was a classic, which will remain in the memory of every Indian sports fan who was around then. There was no TV , of course, so glued to the transistor radio, listening to Melville D’Mello and Jasdev Singh, we followed the match.

The Indian team was an all star team captained by the immortal Ajitpal Singh. I can still get the full team more or less right – Leslie Fernandez in goal, Surjit Singh and Michael Kindo the starting full backs, Virender Singh, Ajitpal Singh and Mohinder Singh the half backs and the forward line of Phillips, Ashok Kumar, Shivaji Pawar, Govinda and Harcharan Singh.

Malaysia were playing way out of their skin, in front of a partisan capacity crowd. They led 2-1 well into the second half. India was virtually camping in front of the Malaysian goal. But the equaliser eluded them. They forced penalty corner after penalty corner. Surjit Singh, who was usually brilliant in taking the corners, just could not score that day. His hits were being frantically saved, somehow. The commentators were besides themselves as corner after corner was taken. Govinda ne push kiya, Ajitpal ne roka aur Surjit ne hit kiya (in 1000 decibels) … lekin …. The goal would just not come.

I vividly recall the feeling of absolute gloom. Two years ago in the finals against the Netherlands, exactly the same thing had happened. India was sitting in front of the Dutch goal, but could not score the winner and ultimately lost in the tie breaker (heart breaker). Was it going to happen all over again ? Surely the fates wouldn’t be so unkind.

8 minutes to go. India made a substitution. They replaced Michael Kindo with Aslam Sher Khan. They continued to besiege the Malaysian goal. Got two more penalty corners. Surjit hit them hard and straight. And yet the goal would not come. 3 minutes to go. By then I had lost all hope and was in tears, with the transistor still glued to the ear. Melville D’Mello was commentating. Yet another penalty corner. This time Ajitpal signaled Aslam Sher Khan to step up. Surjit was having no luck today. Govinda went to the goal line to push. Ajitpal to stop and Aslam to hit. The push came, Ajitpal stopped it dead on top of the circle. Up stepped Aslam. Cracked it true and hard. GGOOOOAAALLLLL. Even the normally suave Melville D’Mello went berserk. India had equalized.

From then on it all seemed pre ordained. India duly got the winner in extra time. And in the finals against Pakistan the next day, it seemed inevitable that India would win. Even the Gods had decided that it was India’s turn this time. Ajitpal was majestic. Fittingly, Ashok Kumar, son of Dhyan Chand, the greatest hockey player of all time, got the winner.

India was on top of the world.

Flights of fancy

Of all the markets in the markets in the world, one of the most nonsensically regulated is the air travel market. Countries are still clinging on to the antiquated notion that somehow national interests are involved in the aviation sector and “national airlines”, however dinosaur like they may be, must be propped up.

This post is prompted by the news that Germany has asked Emirates to raise its business class fares for flights out of Germany. Emirates, faced with big fines, has been forced to raise its rates by some 20%.

Airlines flying in and out of Germany are policed by the unfortunately named Federal Office for Goods Transport. This august body has written to Emirates saying it was “not allowed to engage in price leadership" on routes out of Germany to non-EU countries. Apparently it was acting under a law used in cases where "public transport interests are being permanently damaged". Apparently European carriers can indulge in “price leadership”. Only non EU airlines should not. Have you heard of the R word ?

Can you believe that such words are being mouthed in the 21st century . Its easy to see behind the fig leaf. Lufthansa has simply arm twisted the authorities to prevent Emirates from undercutting it.

The most closed of markets in the world is the airline market. Who can fly where is governed by complex inter government agreements. Slots at airports are jingoistically protected. All sorts of tariffs are levied. Sick airlines are state supported. It’s a complete mess.

The EU is frankly one of the most blatant of cartels that exists. The EU has no business lecturing anybody on free trade. It is supposed to be the largest economy on earth, larger than the US. But then its not a nation – its just a cartel. And look at what it has done today. Supposedly democratic, it has taken a leaf straight out of Stalin’s notebook. Behind closed doors, some 20 odd people, in classic skulduggery, have chosen Herman van Rompuy as its President. Herman who ??

In the middle of it all is the poor consumer. Although you could argue that by definition an airline customer is not poor. But that’s no excuse for governments to conspire to screw him. Free the airline market around the world. And hey presto – fares will fall AND customer experience will improve. Heard of free trade and competition Mr van Rompuy?

Romance is in the air

This seems to be the season for whispering sweet nothings. K and C are engaged in a very public courtship as I blogged here – its progressing at such a snail’s pace that its probably more exciting to watch grass grow. K has threatened to abduct and carry away C, and C is saying “bah” as women are wont to do !

But there’s another rumour doing the rounds. Yesterday curious things happened with Colgate Palmolive’s share price. The speculation is that Reckitt Benckiser (makers of Dettol) and Colgate Palmolive (makers of, well, Colgate) are looking coyly at each other. It appears that Reckitt is sending strong signal that he/she is ready to marry. What is not clear is who the target of its affection is. Is it Colgate, or is it SSL (makers of Scholl and Durex) ?

If its Colgate, then its not clear who is the bride and who is the groom. For they are both roughly equal. It's supposed to be a marriage of equals. But then women’s lib has not yet reached the corporate world where the tradition of the man abducting the woman and running away with her is the usual norm. So who will pop the question and who’ll say Yes, is not clear.

It is also rumoured that Colgate does not really want to marry. But then its perhaps scared of that stodgy, old man (wheeze, wheeze) who’s much bigger, has a bigger fortune and is capable forcibly lifting her up and running away with her. So why not this strapping Reckitt, who at least is of the same age and has similar taste in music – both like P.Diddy rather than Harry Belafonte which the old man likes. You get the drift …

Why is romance in the air ? Consumer goods companies are struggling for growth. They are being ripped apart by retailers who sell their own brands for a lot less than these companies (after all somebody has to pay for all the ads they air). Then come the discounters who are refusing to stock their products at all. Consumers reeling from the recession are penny pinching. All told, general misery. So the hope is that by marrying they can share the costs (like having only one house, like sharing the same bed, …. because businessmen have to invent important sounding words, these are called synergies). And the stodgy companies who stayed in Europe and North America have belatedly realised that they are in the Old World and that the New World is in China, Brazil, India, Indonesia and the like. Since they are scared of venturing into such strange lands on their own, why not marry somebody who’s already there.

So will Reckitt or Colgate pop the question to each other ? Who can fathom the minds of people who are all dewy eyed (Sri, are you listening ?!). The papers will make interesting reading.

Is the consumer a king or a tyrant ?

“Remove baby before folding the stroller “ is a famous example of the American legal system gone crazy. It remained an object of mirth until it became all too real last week. For, Maclaren, a small privately held maker of baby strollers was faced with a massive crisis on a similar sort of a problem.

Maclaren’s strollers are actually of a reasonably high safety standard. However it appears that when the stroller is being unfolded, if a child sticks a finger into the hinge, its likely to chop off the finger tip. This is not a state secret that normal human beings are unaware of. Any parent, however dumb, is well aware that if a child sticks its finger into a hinge, it will get hurt. However there was no warning on Maclaren strollers that children must be kept away when opening it. And the product is "unsafe". So the company is responsible.

There were 12 instances of such an event happening. The company is now recalling 1 million strollers sold in the US – or atleast providing repair kits to the owners. Now 12 cases in a million is 0.001%. The probability of being struck by lightning is higher. But never mind, the company is a big bad evil monster and so mob lynching is perfectly acceptable.

Reams of newsprint (or should I say, bytes) are being written on this case. Media has used “amputations from strollers”, “child amputation” and the like to lampoon the company. A million words have been written about the company being slow to react, PR disaster, etc etc. I haven’t read one word to say that perhaps this is a overreaction and the consumer is also, just a teeny bit, at fault.

I can understand when there’s a defective or dangerous product – the company must be taken to task. The product must be recalled immediately; period. But this is just a normal stroller – sure its safety can be improved by providing a protective cover over the hinge. But , by itself, the product is not unsafe. Is it then right to force companies to recall millions of products sold over a long period of time ? Today there is no choice for companies. Immediate product recall, whether justified or not, is the only sensible option – else the PR disaster will be so big that the company may probably not survive.

That doesn’t make it right. Where is the notion of sensible consumer responsibility ? One consequence of this is the silly sort of warnings (like coffee is hot) that companies have to print to "inform" consumers. How about differentiating between genuinely defective or unsafe products and ones where usage with common sense is perfectly fine, but careless usage will create a problem. Does a product have to be designed for the average consumer , or the absolute lowest common denominator?

The consumer is the king. I know. But what if he turns into a tyrant ?

The continuing idyll of our yuppie

Our city bred yuppie has settled down into the village, mastered the art of managing without plumbing and has been proposed to. If you’ve missed this story of a couple of weeks ago, click here.

Statutory warning : This is a X rated post. Youngish readers and those with sensitive feelings please leave now !!

Of course the company has not put him here to bask in the adulation of the village belles. He’s supposed to do some work. Like organising a cattle camp.

My good friend Aashish, who comments often in this blog, observed that I seem to have a peculiar fascination for matters bovine – considering the number of times this venerable creature has appeared in what is ostensibly a business blog. I must confess that I hadn’t thought about it, and now that he has said it, am guilty as charged !

Now, in this part of the country, the buffalo is the family’s most prized possession. Therefore the cattle camp is the most important "village development” exercise that he can undertake. What our yuppie hasn’t realized as yet, is that the cattle camp is also the most blatant sex show on earth !!

There are only two objectives in a cattle camp. To castrate the bulls and impregnate the cows. Our yuppie is to participate whole heartedly in the process ; he realises belatedly that his ratings depend on his performance in this orgy, although of a different kind !

The bulls are being led away to one side of the camp. They are lined up one by one to be emasculated. One randy specimen has broken away – he charges vigorously to the cows shepherded on the other side, for the one last fling of his life. He’s promptly caught and brought back, only to be pushed to the head of the assembly line. The logic of this exercise is that bulls, when not motivated to oogle at a shapely cow, will instead work harder. Now, I wonder how come Hitler, Stalin, and the lot, did not consider this angle, when it came to the human race. Although, it must be said that right through history, many kings seems to have grasped this wisdom. Our yuppie’s face is beet red. He has “performed” , at best, an average job. There’s much tongue clicking amongst the wise and the elderly on city bred types who can’t even do a simple job properly.

The scene at the cows end is even more interesting. Humans have decided that its much better to impregnate cows artificially than allow matters to progress naturally; a curious logic considering the number of able bodied bulls at the other end of the field. On one hand you castrate eager bulls who are all too ready to do the job for free. On the other hand, you procure the elixir of life from an unknown stud, of mythical qualities, transport it in liquid nitrogen (global warming and all that), at the cost of an arm and a leg. Whoever said that there was native common sense in the villages ?

The process begins with determining which of the cows are “ready”. I shall pass lightly over this process in order not to offend readers’ sensibilities – suffice to say that the process involves shoving a whole arm up you know what, an act our yuppie is flatly refusing to do; job rating or no rating. The cow’s owner is looking on anxiously. If the verdict is a no, he has come in vain. If the verdict is a yes, he seems to experience the state of heightened euphoria, which is more usually associated with the performer in matters amatory.

The “no” cows have melted away. The “yes” cows are then helped along in their ostensible purpose in life – to bear calves and produce copious quantities of milk. Would our yuppie, at least participate in this – having baulked at the previous step in the process which has resulted in extreme hilarity amongst the onlookers. Knowing that his job is on the line, and with a face akin to an overripe tomato, our yuppie fetches the straws from the liquid nitrogen container and assists in the creation of life !

Evalauation time. The young man is given a C. He has avoided getting fired from his job. In the process , he has brought much merriment to the village folk and has added to the repertoire of folk tales in the village. Fair deal. But he is rather quiet these days.

When good politics was better than good economics

Yesterday was 9/11, written in the British way. It is as momentous a day as its American equivalent is tragic. For it was on this day, 20 years ago, that the Berlin wall collapsed. And Europe would never be the same again.

A trillion words are being written about the event and the celebration and the hoopla surrounding it. This blog is loath to add to that total, and in any case is not a political forum. Instead we will touch upon one of the most interesting aspects of the reunification at that time, the currency unification.

The word German reunification is actually a politically correct, but not factual, term – in reality it was an acquisition of East Germany by West Germany. When German reunification happened, the black market rate between the mighty Deutsche Mark and the Ostmark (East German Mark) was 1 to 5. The Ostmark would be abolished and instead the Deutshe Mark would be the currency of the new Germany. But then, at what rate do you convert the existing Ostmarks of East Germans ?

Economists fell over each other to proclaim that the exchange should happen at the fair value, which was the black market rate. They warned of huge inflation if it was converted at a rate better than the true rate. They also warned that if East German wages were reset in Deutsche Mark at anything other than the fair rate, East German industries, with their low productivity, would be outpriced, go out of business and result in high unemployment. Dire consequences were predicted by the economists.

The politicians however cared two hoots for the economists. Germany was in euphoria. It was one country, once again. The cold war was over. It was a momentous time. They grasped in a second that for the reunification to succeed, there must not be social upheaval in the East. They fixed the exchange rate as 1 Deutsche Mark to 1 Ostmark for upto 4000 marks and 1 to 2 thereafter.

Economists were outraged. Doomsday scenarios were predicted for Germany. East Germans were , as you would expect, mighty pleased. They embraced reunification wholeheartedly. West Germans were in fact giving a massive subsidy to East Germans. While there may have been some grumpiness at this, there wasn’t fierce resistance from them.

No doomsday scenario emerged. Inflation didn’t rocket up. Sure there was some pain and perhaps some prolonged impact on the German economy, but pick up it did. This was the best way to have handled the reunification – any other alternative might have been far worse. For once political logic triumphed over economic logic.

Look at Germany today. It is the engine of Europe, much as the British or the French might like to think otherwise. We go gaga over China, but even last year, the world’s largest exporter was Germany, not China. Despite all the chronicling of Germany’s economic woes, almost every country would give an arm and a leg to trade places with Germany.

But back to 1989. On that fateful day thousands of East Germans joyously crossed into the West. Amongst them was a 35 year old lady. Her name – Angela Merkel. Today she is the Chancellor of Germany. It probably wouldn’t have been possible, but for the fact that the politicians were right and the economists wrong.

Work Wife Balance

This weekend's irreverent post is a guest post in le embrouille blogueur's blog. I am flirting with deep danger by continuing to needle the fair ladies, but then, this Sunday is that sort of a Sunday. Ladies - this is all just for some idle fun ; don't take anything seriously ! Click here to read this post.

The taxman and Windows 7

If you are in India and wanted to buy a Windows 7 box, you could not do it legally. Never mind that Windows 7 was released globally about 2 weeks ago. Never mind that much of Windows 7 development happened in India. Why ? Because the babus (pedantic officer) at Customs wanted to tax the stuff twice !!

This is an example of the nonsensical complexity that abounds in India’s taxation law and the missionary zeal with which the babu wants to implement them – methinks the ultimate frustrated guy is the Indian babu and his only source of pleasure in life is from creating and implementing mind boggling complexity.

Take the Windows 7 situation. The product is the standard software box with a CD and a manual in it. Because it’s a box, it’s a physical product. Therefore customs duty on the “product” is to be levied. Then the box contains a CD which gives you a license to use the software. Giving the license to use is a “service”. So they want to again charge service tax on the same box. Tax the same stuff twice - once as a product and once as a servie. Only the warped mind of an Indian babu can come up with such logic. Boxed software sales in India have fallen by 40% as the boxes gather dust in the customs warehouse. Furious lobbying, intricate clarifications from the mandarins in Delhi, millions of manhours of intense activity and the boxes seem to be ready to leave the shipyard now.

Examples abound of such inanity. Many years ago, I knew of a case of a producer of jams. In one budget, the government decided that jams should be exempt from excise duty as an incentive to fruit farmers. The producer of jams heaved a sigh of relief. But the next day, the babus descended on the poor guy. They said that while manufacturing jam, he starts by dissolving sugar in water , the act of which was the “production” of sugar syrup. He doesn’t have to pay excise duty on jams, but would he please pay excise duty on sugar syrup. The producer protested that he wasn’t producing sugar syrup – he was just executing a step in the manufacture of jams. NO. The babus , with great glee, were “enforcing the law”. The producer asked that instead of dissolving sugar in water, if he first mixed the fruit pulp and then added sugar in the mix, would that be OK? Yes; that was absolutely fine to the babu. No “sugar syrup” was being “manufactured” and that was fine !!!

Needless complexity and zealotry in arcane interpretations bedevil our taxation system. One one hand it leads to misery for a guy who wants to follow the law. On the other hand, it provides myriad opportunities for corruption. We should simply exterminate the tax babu. Bring a common rate of taxation on everything. Make the damn thing simple . And then enforce it ruthlessly. If the system was simple, the rate of tax was reasonable, and the penalties for evasion harsh, most people will quietly pay their taxes. I am quite prepared for a special fund to be created out of my taxes to create an opulent bordello where we can banish the tax babus for them to get their kicks, and leave us poor folk in peace.

FAIL OFTEN. FAIL EARLY. FAIL CHEAP.

Rapidly evolving technologies and market adjustments have thrust media into states of nearly perpetual alteration that require agile and swift responses to gain benefits and defend the firm from outside forces.

Managers who have been used to stable environments and well conceived plans are often reticent to move to seize opportunities with quick and decisive action based on incomplete information and knowledge. The turbulent contemporary environment, however, require leaders to rapidly evaluate the potential of new communication opportunities and to take risks in a highly uncertain setting.

This is disturbing to managers who are used to employing well developed and elegant strategies that require significant investment and commitment. Declining to test opportunities until a clear roadmap is produced, however, takes away flexibility and the ability to rapidly change with contemporary developments.

While preserving the core activities of media businesses, managers need to simultaneously look for emerging opportunities that can be pursued, communities that can been served, and experiences that can be delivered. It is important to get in quick and inexpensively, to build on small successes, and to abandon initiatives if success proves elusive.

It is better to fail often, fail early, and fail cheap than to avoid risky moves, lose potentially rewarding opportunities, and forgo learning from innovative initiatives.

In the current tumultuous environment, failure has become a form of research and development. Try things; drop those that don't take you somewhere interesting; document what you learn from each unsuccessful initiative; move on to something new. What you learn from unsuccessful efforts is usually more important that what you from success.

The only real failure in the rapidly changing world of media is doing nothing and hoping things will get better on their own,

The right royal mess at GM Europe

Politicians should, in general, not meddle in business. A great illustration of this danger is the mess brewing in General Motors Europe.

Facts of the case are as follows. When GM was entering bankruptcy last year, the fate of GM Europe was in serious doubt. In any case GM Europe had too much of manufacturing capacity in Germany, the UK , Spain and Belgium. Even under normal circumstances a big restructuring was inevitable. Now there was serious threat of complete closure.

In waded the politicians. No less than the redoubtable Angela Merkel, Chancellor of Germany. She was coming up for an election. In Germany, auto workers are next only to God. No way was she allowing job losses amongst auto workers in Germany. So she forced an auction, put together a curious alliance of a Canadian spare parts manufacturer (Magna) and a Russian bank (Sberbank) to buy GM Europe. She then offered them $6.6 bn (yes 6.6 billion) and they had to commit no closures and job losses in Germany. Unsaid, but obvious, was – I don’t care what happens in Britain and Belgium – you can go and shut those. She forced a reluctant GM to agree to this ; at that time GM was weaving drunkenly on the ropes and in no position to even talk back to Merkel.

Now Britain, Belgium & Spain would not take this lying down. But they didn’t have the money to do anything about it. But a case is on in the European Union’s competition commission against the German plan. Merkel is no fool – she knows how to twist the Commission and get what she wants. So there the situation lay.

In waded the US of A. The US government has been overseeing the restructuring of GM. One of their demands has been for GM to produce greener and smaller cars. Now GM was doing a fair bit of development of such cars in Europe. If GM Europe went away, all that would be lost.

GM was also not too keen to sell GM Europe to Magna. They saw them, and especially the Russian connection, as competition and did not want all that technology to go to them for them to compete with GM in Russia where Chevrolet is doing pretty well. And how could they be a global company with no business in Europe ?

GM has got over its hangover now having come out of Chapter 11. It is now not mortally terrified of Merkel. So it said a couple of days back, that it was pulling out of the deal that she had forced on them.

There’s complete chaos. The Germans are absolutely furious (holy cow – plant closures in Germany and those b$%# Americans are backing out). The British are delighted (less job losses in the UK). The Russians are livid (not really sure why). The Americans are smug. GM is bracing for a huge fight. With all the politicians mucking about, what chance does GM Europe have ?

The "Ants" of China

China places an enormous value on education – both the society and the government are, rightly, obsessed with it. As a nation it has done a fantastic job of educating huge chunks of its population and providing them with job opportunities. But it’s a massive task and sometimes education and jobs are not always in tandem. This was brought out to me in vivid detail when I read the book review of Ants (Yizu), a book in Chinese by Lian Si, a post doctoral student in Beijing.

Considering the scale of the task, China has been immensely successful in educating its population. In fact, so successful, that it has become a problem. In 2009, China produced more than 6 million college graduates. That gives it the headache of creating 6 million additional jobs every year. Not factory worker jobs, but skilled jobs befitting university graduates. How on earth do you add 6 million jobs year after year ? Just for appreciating the scale, the entire outsourcing industry in India, an undoubted success story, employs only 2 million people. And China has to find work for 6 million graduates, every year.

Ants is the story of the educated who can either not get a job at all, or get only a low wage job. They find it impossible to live in the inner city in the great metropolises of China – Beijing, Shanghai or Guangzhou. They gravitate towards distant suburbs where the rents are affordable. Lian Si calls these localities “slums of intellectuals” and likens them to ant colonies in a positive sense. Ants are extremely diligent, hard working and smart. And they live in their own colonies

Lian Si lived among these ants as research for his book. He says they are mostly from the rural areas and were the product of China’s thrust into university enrollment. They went to college with a dream, but the real word has taught them a few lessons. In the last couple of years they have run bang into a saturated job market. After graduation, they neither have the money, nor the connections, so important in China. They therefore retreat to communal village living by creating “ant colonies”. They now live eight to a room and commute two hours one way to whatever work they can find. But they never give up and strive for a better future.

Chinese society is undergoing massive change today ; a change of such magnitude and speed that few societies in the world have seen. The ants, suggests Lian Si, will be a generation that will determine the future of China in the next 10 to 20 years.

A similar situation exists in India, of course, but I wrote about China because I stumbled on this book review. I wish I could read it, but alas, I fear I may never get around to learning to read Chinese. Echoing in my mind is a beautiful quote from Lian Si’s “ant friend” that perhaps sums up their attitude to life. “I don’t think I am a loser”, said his friend. “Its just that I haven’t succeeded as yet”.

If something is too good to be true, it is too good to be true

Since the beginning of the year, the prices of all sorts of risky assets – shares, oil, etc have increased by fantastic proportions. Take equity. In virtually any market in the world, you would have made returns of 50% plus, even if you are an idiot. Did somebody say we were in the midst of a huge crisis ? Here was massive money to be made, by just being there. Sounds too good to be true ?? As the old saying goes, when something is too good to be true, it usually is.

I read a very interesting article by Nouriel Roubini, the highly respected Professor from New York’s Stern School of Business, in today’s Financial Times. Its somewhat technical, although very readable. I commend even a layman to read this. At the risk of extreme oversimplification, I will paraphrase his argument as follows

- Interest rates are extremely low and will be maintained at very low levels by the US Fed to stimulate the economy
- The dollar is falling. Because it is falling, everybody is short selling the dollar.
- Short selling the dollar essentially means that you can borrow at negative rates of interest, as long as the dollar is falling .
- Invest this in any risky asset – say shares in Hong Kong. Prices of those shares will rise as demand for them increases.
- One month later (or whatever), sell the shares and make a tidy profit. Now these are worth much more in US$ terms as the US$ has fallen. Settle your short sale of the US$ and make a huge profit.
- Repeat step 1 to 5 again.

This is what Prof Roubini is arguing is happening. Of course, this cannot go on for ever. One day the dollar will not fall. Then like a herd on stampede , everybody will sell the risky assets and cover their short positions on the dollar. The bubble will truly burst.

That’s what usually happens to bubbles. When asset prices rise by 70% in 9 months, it is a bubble. The bigger it gets, the worse will be the explosion.

If you want any more evidence that Prof Roubini’s views must be taken seriously, read what he said

“In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions”

The date ? Sep 7, 2006.

Just because somebody was right once, it does not mean that he will be right again. But it would be completely foolish not to listen to him.