Sunday, 30 January 2011

Their names liveth forever more


If you visit any of the memorials to those who fell in the First World War, you'll find five simple words on most of them - "Their names liveth forever more". A tribute to those who made the ultimate sacrifice for the sake of their country.

Today is Martyr's Day in India, the day 63 years ago when Mahatma Gandhi was assassinated. Its a day when the nation is supposed to honour those who laid down their lives for it. Its by and large a forgotten date - just look at today's newspaper to see if there's any mention of it at all. Well , passage of time dims memories. After all the last real war that India fought was in 1971 - well before most readers of this blog were born.

Last year I posted this on this day. Today a few words on the greatest of the nation's martyrs - Mahatma Gandhi. Gandhi is largely a forgotten man in India today. A few platitudes and he is conveniently brushed aside as belonging to the ancient past. But we would do well to ponder on the legacy he left for all of us, if only we would, or could, grasp it.

Its not just that he led India's independence. Is not just that he waged war on the cursed caste system that inflicts Indian society. Its not just that he advocated the path of non violence. Its the primacy he placed on values in politics.

He unflailingly acted for what he believed was right. Both the means and the end had to be Right - Right with a capital R. Morals were supreme ; everything else was subordinate. If during any of his movements, there was any violence at all, he called it off. When India gained independence on the night of August 14th, he wasn't celebrating in Delhi - he was in Calcutta holding the peace between Hindus and Muslims single handedly in that city. He argued for handing over a proportion of India's wealth to Pakistan on partition - the stand that ultimately cost him his life.

Today's politics , world over, is a far cry from those of Gandhi. With the possible exception of Nelson Mandela, there isn't a single leader who comes close. Does it have to be so ??

Yes its about elections. Yes its about making money. Yes its about power. But after that what ? Most leaders crave for immortality. Their place in history. What better way to achieve that than to be of high character. Of being known to have done the right thing, no matter what. Of being truly a man of principles and values. And if you think you can't win elections that way, you are wrong. Either Gandhi or Mandela, in their days, would have won any election in any country hands down.

Back to Martyr's Day. Today is a day when we say a prayer for those who laid down their lives for the country. They are mostly forgotten, except by their loved ones. But its on their fallen shoulders that we stand today. May their names live forever more, in at least the collective conscience of the nation.

Friday, 28 January 2011

The Chinese wear Prada


Prada, the Italian fashion group, is reportedly going to seek a listing in the Hong Kong Stock Exchange. Nothing electric about this, except that you would have thought that they would list in Milan. European fashion houses are ,well, snootishly European. So the move to list in Hong Kong does raise eyebrows.

This is the magic of China. As even a casual visitor to China knows, every brand is ruthlessly copied and pirated on a big scale. You can easily buy any fashion brand, indistinguishable from the original, perhaps even made in the same factory as the original, at one hundredth the price. Despite this, every fashion house's fortunes these days are driven by demand in Asia, chiefly from China. The nouveau riche in China like to spend. And spend on outrageously priced brands which you can then flaunt. There's a certain pleasure into walking into a room of Prada wearers and knowing that everybody elses is a fake and yours is the real thing. Flaunt your original.

But if your main driver of growth is there, does it mean you have to list there ?? You can list anywhere in the world and still attract an international investor base. These days, investors are mainly institutional investors who invest in most of the major markets in the world. Even if you list in London, you could have an investor base that's entirely non British.

There is a symbolic angle to listing in Hong Kong. You can say that it reflects the growing importance of China to the company. But that's just pure show. It doesn't matter one inch in the actual operations of the company or the performance of its stock.

The move also reflects the growing attractiveness of Hong Kong as a financial centre. It always was a major financial hub. But it was dented a bit by the fears of what China might do to it. But 13+ years into Hong Kong becoming a part of China, the world is fully convinced that China does not intend to tinker with Hong Kong's economic apparatus at all - one of the wisest moves Deng Xiaoping and the leaders that followed have made. Hong Kong's markets are free, transparent and highly liquid as say New York or London is. And its also free from the regulatory heavy handedness of a Sarbanes Oxley. And its on the doorstep of mainland China. Presto. Hong Kong is soaring and competitors like Singapore are left by the wayside.

Its still a tiny trickle - the number of western companies seeking to list anew in Hong Kong. I don't think it will turn into a flood - I still can't see the practical benefits of listing in one place over another (other than avoiding onerous stuff like Sarbanes Oxley). What is more likely to happen is more and more companies making Hong Kong or Shanghai as their Asian base, or even their global base (as HSBC has done).

Fashion industry is all about show. You want to flaunt your wares. No wonder, Prada is enamoured by the symbolism of its move. As long as the Chinese don't take violent objection to the slightest hint that its the devil who wears Prada.

Sunday, 23 January 2011

HELLO, HELLO, I have landed


There are some ideal moments to observe humanity. From a sidewalk cafe in the heart of Paris on a warm summers day. From the stands at Eden Gardens, or Anfield, or Madison Square Gardens - pick your sport. Or in an Indian train. Another such classic place is when an aeroplane lands. Regular readers of this blog are aware of this blogger's fixation with air travel and this piece will come as no surprise, especially after this and this.

As soon as the wheels touch the ground, humanity inside the plane wakes up and warms up. He may have been snoring just a moment ago, but he's wide awake now and is starting to limber up. The hand goes to the pocket and out comes the mobile phone. Its discreetly switched on and is sort of kept hidden between the legs, lest the pretty stew frowns on him and tells him to switch off. However the music on start up or the various pings rather give him away - such auditory masterpieces emanating close to an unfortunate part of the anatomy is brushed aside as an occupational hazard.

It has often been said that the definition of an instant in time is the time gap between the lights turning green and the idiot behind you honking. I submit that this is an erroneous definition. The real instant in time is when the aircraft wheels come to a stop and the action starts.

The jumping jack is the first to react. Beating all world records on speed of reaction, he reaches up to open the overhead locker to retrieve his bag. Displaying rare weightlifting talent, he hefts his bag in a wild swing designed to clobber competition..

The sprinter is equally quick to react. You see, he has deposited his bag at the other end of the aircraft as he was beaten to all the space when he first boarded the plane. Determined not to be outdone again, he pushes, shoves, crunches toes, lets elbows fly to reach his desired objective. Research has indicated that there is an overwhelming gender bias in the sprinter category - the female of the species seems to be more in number in displaying this characteristic.

The yeller is next. He has switched on his mobile phone. He then yells Hello Hello in about 1200 decibels. Only to ask the party a the other end "How are you" in the same 1300 decibels. And then disclosing the absolutely vital piece of information that he has landed.

The yeller is now being rapidly replaced by the thumb twitcher. This is the lot that switches on the dreaded Blackberry and needs to reply to E Mails. Having gone cold Turkey during the 2 hour flight and not being able to read or send emails, he is in the cold sweat of the junkie who hasn't had his fix. He makes it up with furious jabs of the right thumb, thereby increasing his chances of being afflicted with the modern day affliction of arthritis of the right thumb.

You may have noticed that the yeller seems to be a species dying out. The thumb twitchers are taking over. Conservationists are encouraged to come to the defence of the former species - Medha Patkar , Arundhati Roy, et al; please note.

Most are now standing in the aisle designed only to accommodate the impossibly svelte stew ( except in Air India where the aforementioned adjective is not in the lexicon). Impossible human contortions of the human body were earlier thought to be the exclusive preserve of the peak hour Mumbai local train - we can now affirm that this is not true. For about 7 minutes the airline traveler is standing with the head at 74 deg, the torso at 14 deg, with the arms at angles not yet invented and standing on one toe.

Deplaning now starts. Travelers can begin practice the art of the rugby scrum . Our resident kiwibloke can even contribute the Haka to bring in the mood. If its a double aisle aircraft, lane switching happens furiously. Either way, the proceedings closely resemble the goings on in an Indian road. Down the steps and then into a bus.

The bus journey is equally revealing as a study of human behaviour. Our corporate hero climbs the bus and stand squarely at the entrance. Others try to practice their rugby tackling skills. The sight of a business class worthie who has been pampered by caviar and champagne and endless smiles from the svelte stew, now clinging on to dear life by the bootstraps on a jampacked airline bus is rather interesting. Especially since he is likely to be a thumb twitcher and is trying to get more of his fix at the same time.

As they all stream out of the bus and stream in to the loo, its time to reflect on the glories and wonders of man !!!



Sunday, 16 January 2011

I have the right to own a Glock semi automatic


In the aftermath of the tragedy at Tucson, Arizona, there has been a frenzy of chest beating in the United States as to whether the poisoned and inflamed political rhetoric that is now commonplace, was a contributor to the tragedy. It took The Economist to say that was the wrong question. The real issue, as The Economist argues, is the gun control laws in the US.

For those unfamiliar with the Tucson tragedy, a deranged man attempted to assassinate a Congresswoman, Gabrielle Giffords. Six people were killed, including a nine year old girl. A further thirteen were injured, including Ms Giffords, who is battling for her life in hospital.

Unfortunately, such incidents have become all too common in the United States. Even more unfortunately, many of them happen in school and university campuses. Wikipedia even has a depressing listing of such massacres here.

Guns are far too easy to get and own in the US. The right to bear arms is enshrined in the Second Amendment to the US constitution. Rights being (laudably) sacred in the US, there is a huge body of opinion, led by the National Rifle Association defending this right at all costs. In the very same town of Tucson, barely a week after the shootings, a previously scheduled gun show went on, in an appalling display of insensitivity.

But all rights are set in a context. The Second Amendment was passed when the US, was being formed - independent states were coming together to create a federal government in the late 18th century, Each of the states had a militia and were wary of creating a tyrannical federal army that might trample on them. The Second Amendement was a compromise hammered out at that time to address that concern. It reads "A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear Arms, shall not be infringed". Is this context remotely valid today ?

In this world, where a terrorist threat is just around the corner, is it becoming a safer place where everybody carries a gun ? There are as many guns as there are people in the US. The defence that the gun does not kill, the shooter does, does not hold water. Any one of the massacres would not have been so awful, but for the power of the increasingly sophisticated weaponry that is available these days. It is also true that the vast majority of gun owners in the US do not commit crimes - but it is the sheer availability that enables the minuscule minority to perpetrate such atrocities. Sensible societies trade in some degree of personal right for protecting the rest of them. The right of free speech therefore does not extend to yelling Fire Fire in a crowded theatre.

Societies that have stuck dogmatically to the wording of a law or a belief that is no longer contextually valid have only sunk into depravity. Consider the verbatim implementation of the Sharia Law, which may have been relevant at its time, but sounds positively barbaric now. Rigid belief in every word of the Bible, brings tragedy to cults like Jehovah's Witness.

The greatness of the United States is its ability to assimilate the best from every culture in the world. A country that is at the forefront of reason and progress. Such an America might like to ponder over this fact. In virtually no other country in the world would a citizen be lawfully permitted to own a Glock semi automatic, the gun that the madman used at Tucson.

Thursday, 13 January 2011

Please Sir, I want some more


Onions in India. Cabbage & pork in South Korea. Chilli Peppers in Indonesia. Frighteningly, wheat globally. Riots have already started in Algeria , and is sure to spread. Food price inflation is hitting the world again. Millions of children will echo Oliver Twist's begging in those immortal words which are the title of this post. Are we going to see a repeat of 2008 ?

This blogger is no expert on food economics. But the issue of food prices is close to his heart and he has posted on the awfulness of food price inflation here before. All inflation is bad, but food price inflation is especially awful. For it ceases to be an economic problem of supply and demand and becomes an issue of survival for half the world's population. It sparks a humanitarian crisis. And it will inevitably lead to unrest and riots. The world cannot afford inflation in the price of food. Certainly not the high double digit inflation that it is seeing.

The issue is a complex one. World food supply and demand is in a precarious balance. In the short run, any disruptions in supply, usually due to natural calamities leads, to a massive spike in prices. This year the wheat crop has failed in Russia and Australia. But the issue of enhancing supply is a longer term one. The gains due to scientific revolutions in crop breeding, use of fertilisers, and the like has started to taper off. No new breakthrough is coming.

The use of large cultivable land to grow bio fuels, especially in the United States is another contributor to pressures in supply. Cultivable land is finite. Any use for other than food growing, will result in lower food supplies.

On the demand side, there has been an inexorable rise, which is actually a good thing. A chief cause has been the economic development of China and India. Higher levels of nutritional requirements are a happy result of economic development and has led to continuous increase in demand. The same will happen in Sub Saharan Africa.

A third cause for inflation is the price of oil. Oil prices affect not only in food transportation, but also in price of fertilisers. Oil is a key input cost in the growing of food. And we know where oil price is - last at $93 a barrel.

A fourth cause is awful government policies. Because agriculture is an emotive subject, every government under the sun has an unbelievable maze of subsidies, freebies, giveaways that completely distort the economics of food production and consumption. And the immediate reaction to even a perceived shortage is a banning of exports - Russian ban on wheat exports are a direct cause of the rise in wheat prices. India and Pakistan are playing silly games with banning onion exports.

I am afraid food prices are going to be high for the foreseeable future. This is an inevitable equilibrium point, I believe. With high prices, will hopefully come more investment, more capacity creation, technological breakthroughs, etc etc . In other products this will happen quicker. Agriculture, because it is heavily distorted by government action, will see this much much slower. But even after this, the price levels will remain higher. This has profound implications for the world's poor - even today, hunger is not because of lack of food. Its because of lack of affordability.

Like every opinionated commentator, this blogger has his points of view on what ought to be done. It is the intention that this subject will feature repeatedly over the coming weeks. Meanwhile I invite you to ponder over the problem and share your ideas. I believe this is one of the most pressing problem facing the world today.

Sunday, 9 January 2011

The fountain of knowledge














The Ancient Library of Alexandria was one of the pinnacle achievements of human civilisation at the time of the birth of Christ. Knowledge is the cornerstone of human achievement and cataloging and storage of that knowledge is a singular feat . The library of Alexandria was, for that age and time, an unbelievable beacon of human endeavor. It is one of humankind's greatest tragedies that the library was burnt down by the Romans.

While libraries came and went since, the Encyclopedia Britannica arose as a store of much of the knowledge and wisdom that the human race accumulated. But, with the arrival of the internet, arose another phenomenon in that same illustrious league - Wikipedia.

Wikipedia is a singular human achievement, built cooperatively and freely, as a memorial to knowledge. That its free, that its ubiquitous, that it is accessible in so many languages, that it is constantly improved and bettered, is something that the wise men who built the library of Alexandria would entirely approve. I know that there are many who thumb their noses at Wikipedia. Amateurish, pop culture knowledge, full of errors, are all accusations I have heard. Sure, it isn't perfect. But as a direction to turn to for knowledge, its difficult to find anything remotely near.

Readers of this blog will know that this blogger is highly opinionated. Facebook and Twitter do not catch my fancy. But Wikipedia is a phenomenon that I humbly salute - it's one of the high points of human achievement on the internet.

A few years back, I was fortunate to be in Alexandria and to go to the modern library that has been built there in testimonial and commemoration of the great one that existed 2000 years ago. I was in awe as I entered its portals - I could almost hear the ghosts of Euclid, Archimedes, Heron, Eratosthenes, and all the other luminaries who studied in that library. Today , I am sure they would equally cheer and applaud the spirit of their successor, Wikipedia. It isn't in any place, it isn't inside any building, but in spirit, it carries on the great tradition that began all that long ago.

Happy Birthday young girl .


Wikipedia celebrates its tenth birthday this week.

Saturday, 8 January 2011

The problem of having too much money

Of course, there is no such thing as too much money. One man's dream is another man's basic necessity. But then sometimes there are those who don't know what to do with their money. The damn thing is burning a hole in the pocket (or the bank account, or wherever). They've already bought into houses, gold, shares, mutual funds, whatever. Now what ?

They invent instruments like catastrophe bonds. I read about them with my jaw dropping - hadn't known that such esoteric stuff existed. Well compared to other even more esoteric species of investments, this might more resemble "plain vanilla". That only underscores my point.

Insurance companies issue these catastrophe bonds. They carry a higher rate of interest and investors invest in them. The condition is that the investor loses his investment if the catastrophe occurs. So he is essentially betting that the catastrophe does not occur. For the insurance company, this is a form of reinsurance. If the catastrophe occurs, they have to pay out to those they insured, but don't have to pay out to these bond holders. Thus they reduce their risks.

For investors , their attraction is the higher rate of interest, but more importantly diversification of their portfolio. These bonds do not move in tandem with say equity markets or housing markets. They move in tandem to catastrophic events occurring or not occurring. Looks good, but .....

Look at what the investor is betting against. That another Katrina will not hit Florida or Louisiana this year. Or that an earthquake will not happen in Sichuan. Or that there won't be a flood in Bihar. Actually, these are bad examples. The market, at least for the moment, is mostly for disasters in the US. But why on earth would you want to take risks like that ??

I have long been disturbed by the societal implications of what is happening in the financial markets. Because the possibility of riches are huge, the best brains in the world go into finance. They innovate like crazy - compared to what happens there, an Apple or Google are midgets. They take incredible risks in the pursuit of even more money. They conjure up extremely complex and fiendish instruments that very few even understand, let alone operate meaningfully.

Its says something about a society that its greatest minds and greatest achievements are in the field of high finance. I am not convinced that its the most glorious claim to fame. I, for one, will steer clear of catastrophe bonds. Of course, that's merely an academic statement - there's the small problem of not having that kind of money !!

Tuesday, 4 January 2011

Dot Com Mania II


Is Facebook really worth $50 bn ?? Yes, billion that is, not million. Or are we seeing the second incarnation of the mindless hype that we saw at the dawn of the century which made the word dot com a household name ? Judge for yourself.

What happened yesterday was that Facebook raised the first tranche of $500m funding from Goldman Sachs and a Russian investor. Goldman Sachs is putting $375m of its own money . Extrapolation is always a dangerous thing, but if you take the licence of using the same valuation per share to determine the value of Facebook as a whole, it somewhere close to $50 bn. Facebook is not a listed company; so we should be careful. But still such a stratospheric valuation ??

Facebook's revenues are reputed to be some $ 2 bn. This all seems to be old style internet ads - very few media companies have succeeded in that space. Google is different - its advertising model is such that a fair proportion of the searches actually lead to a commercial transaction. Clicks through to Gils on Facebook may yield captivating information on this incomparable blogger and such attendant pleasures, but are unlikely to yield even a dime !

So why this valuation ? I suspect another avatar of the dot com mania that gripped the world in its first edition. Great businesses are built on great ideas alright. But they also need boring stuff like profit and loss statements. They need resilience (regular readers will note this flavour of the month). They need robustness. They need sustainability. Then stratospheric valuations are justified.

It would be fairly obvious by now that this blogger is not a fan of Facebook. The only reason he enters its portals is to play an occasional game of Scramble. He is completely unable to fathom the joy of posting his mugshot or boring mundane everyday activities for the world to see. Readers might deduce from this admission that he's a bit of an old foggy.

Well, he's in elite company. Warren Buffet was called an old foggy in Dot Com Mania I !

Sunday, 2 January 2011

Life Continuity Plan


Every business worth its salt touts a Business Continuity Plan; with that dreaded acronym BCP. In many companies its mostly a piece of paper; not worth what its written on. But in some companies its taken to an obsessive level - elaborate design and repeated testing. The thought leads me to muse on whether a Life Continuity Plan is worth considering for a society or even individuals. It might sound like a morbid thought, especially as the New Year cheer has still not died down, but it isn't.

Take societies. Its "life chain"has been optimised so much that there is little slack for things going wrong. One truckers strike is enough to make most goods vanish from stores - happens in India repeatedly. The power grid in most countries is bursting at its seams ; just needs one major breakdown and there will be a fair amount of chaos - remember California of a few years ago. Natural disasters, even minor ones, cause mayhem - recall the Icelandic volcano of last year. And witness the looting and crime that happens when there's even a minor break down in law and order. When petrol pumps (or gas stations) dry up, as they easily can, imagine the consequences.

Yes, life does go on, when such things happen. Does it ?? Life doesn't go on, at least in any normal fashion, for those caught in the middle of it. Anybody in Haiti would appreciate this thought.

What about us individuals ? How many of us can face a disaster, god forbid, if it were to happen to us ? Have we written a will ? Have we insured our stuff ? Do we know what we will do if we lost our job ? Of course, such things happen to others, not to us. May it never happen to us. But just in case .......

I know this not a post keeping with the mood of the new year. But then good times are always the best of times to plan for a rainy day. I believe societies and individuals, must have a "life continuity plan". One that foresees disasters and plans for coping with them. Efficiency is all fine; but a highly underrated word is resilience.

Individuals, and societies, must build resilience into their fabric. Only then can we enjoy the true fruits of efficiency.

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