Monday, 27 February 2012

Useless Research

The world of academics baffles me. I consider myself reasonably aware of business issues and yet I can't make any sense of most of the research publications that come out on business. Actually I can't make any sense of even the title - let alone the contents. I challenge you to figure out "Tabu Search for the Single Row Facility Layout Problem in FMS using a 3-opt Neighborhood" or " On the Blowout Preventer Testing Problem: An Approach to Checking for Leakage in BOP Networks". Yes, I know, I am a bit dense, but still ........

So it was with delight that I discovered the Ig Nobel Prize - given annually to what is euphemistically called "Improbable Research". 2011winners were

PHYSIOLOGY PRIZE : Anna Wilkinson (of the UK), Natalie Sebanz (of THE NETHERLANDS, HUNGARY, and AUSTRIA), Isabella Mandl (of AUSTRIA) and Ludwig Huber (of AUSTRIA) for their study "No Evidence of Contagious Yawning in the Red-Footed Tortoise."

CHEMISTRY PRIZE : Makoto Imai, Naoki Urushihata, Hideki Tanemura, Yukinobu Tajima, Hideaki Goto, Koichiro Mizoguchi and Junichi Murakami of JAPAN, for determining the ideal density of airborne wasabi (pungent horseradish) to awaken sleeping people in case of a fire or other emergency, and for applying this knowledge to invent the wasabi alarm.

MEDICINE PRIZE : Mirjam Tuk (of THE NETHERLANDS and the UK), Debra Trampe (of THE NETHERLANDS) and Luk Warlop (of BELGIUM). and jointly to Matthew Lewis, Peter Snyder and Robert Feldman (of the USA), Robert Pietrzak, David Darby, and Paul Maruff (of AUSTRALIA) for demonstrating that people make better decisions about some kinds of things — but worse decisions about other kinds of things‚ when they have a strong urge to urinate.

PSYCHOLOGY PRIZE : Karl Halvor Teigen of the University of Oslo, NORWAY, for trying to understand why, in everyday life, people sigh.

LITERATURE PRIZE : John Perry of Stanford University, USA, for his Theory of Structured Procrastination, which says: To be a high achiever, always work on something important, using it as a way to avoid doing something that's even more important. 

BIOLOGY PRIZE : Darryl Gwynne (of CANADA and AUSTRALIA and the UK and the USA) and David Rentz (of AUSTRALIA and the USA) for discovering that a certain kind of beetle mates with a certain kind of Australian beer bottle

PHYSICS PRIZE : Philippe Perrin, Cyril Perrot, Dominique Deviterne and Bruno Ragaru (of FRANCE), and Herman Kingma (of THE NETHERLANDS), for determining why discus throwers become dizzy, and why hammer throwers don't.

PEACE PRIZE : Arturas Zuokas, the mayor of Vilnius, LITHUANIA, for demonstrating that the problem of illegally parked luxury cars can be solved by running them over with an armored tank.

There is a Distinguished Academic amongts the "legions" of readers of this blog. Perhaps she would like to offer a rebuttal !!

Monday, 20 February 2012

Why do smart people do stupid things

There's something about the corporate world that makes smart and decent people do incredibly stupid things. Maybe its the anonymity of being part of a company. Maybe its the pressure generated to perform. Maybe its the brutal focus on the ends and not the means. Don't know what .

Why else would some British honcho in Sony decide to raise the price of Whitney Houston's albums on her tragic death. There was surely going to be a memorial upsurge in sales of her records. But what sort of a decision is that to raise the prices then ? Predictably there was a huge outcry; Sony had to back down and I'm sure the guy who did it has egg on his face.

Similar is the decision by some Starbucks Manager near the World Trade Centre to raise the prices of water on that fateful day in 2001. Or the decision by the Chairmen of the auto giants to fly by private jet to Washington to plead with Congress for a bailout. Or the insistence by Jack Welch to award himself retirement benefits that included an apartment in New York and free food and wine - chicken&^%$ in comparison to his personal wealth.

Why does this happen. Unfortunately  corporate environments seem to be dangerous grounds where a decent person's normal human values have every risk of being left at the door. Perhaps there is something dehumanising about the seemingly dog eat dog environment. Perhaps people are blinkered, or even blinded, by the single minded focus on the rat race.

There is a lesson for us all here. Every action we take must be viewed through the prism of two criteria - will we squirm with embarassment if the decision were to be dissected on Breakfast TV or come in the front page of the newspaper. And secondly would we squirm if we have to explain it in the barest detail to our mothers.

Sunday, 12 February 2012


Miracles do happen. They do, rarely in real life, but a little more often in sport. One such miracle has happened in the city of New York. Or should I say, to the city of New York. All of New York has been infected with "Linsanity".

One of the, if not THE most famous entertainment and sporting arenas in the world is MSG - Madison Square Gardens in the heart of Manhattan. The home of the New York Knicks - one of the most famous basketball teams in the world. Professional basketball - the NBA - is an extremely competitive  sport in the US. It is filled with superstars - like Kobe Bryant, LeBron James, Dwight Howard who earn zillions every year and have supersize egos. Thousands and thousands aspire to join the NBA each year - barely 50 or 60 make it.

The New York Knicks are a famous but perennially disappointing team. They have achieved precious little in recent years. A year ago they paid huge sums of money to acquire two superstars - Amare Stoudamire and Carmelo Anthony. Nothing changed - they continued to perform poorly this year. Until a week ago, that is.

Both the superstars were unavailable and a few other players were injured too. The coach , out of desperation, turned to an unknown rookie, who wasn't even with the team, but just happened to be around. Enter Jeremy Lin, an American of Taiwanese origin. Nobody had even heard of him before.

All that changed in an instant. He simply took over the Knicks team as a playmaker and the team has won 5 games on the trot. Each game, Lin has scored 20+ points. Against Lakers and Kobe Bryant on Friday, Lin scorched the court with 38 points. Their two superstars are not playing, but the Knicks are winning. Sellout crowds are greeting them everywhere. They are chanting LIN LIN at deafening volumes. They had to print Lin T shirts literally overnight and you can't get them anywhere for they are all sold out. The media has gone completely ga ga. In seven days he's the hottest property in the NBA. Such things simply don't happen in real life and nobody can believe it.

Lin is a Harvard graduate no less. He's a clean god fearing humble fellow - no outrageous tattoos all over his body. He seems rooted to the ground and hasn't gone insane with the media circus. He's become an icon for Asian Americans. He credits the success to teammates and not to himself. Everybody in New York has gone completely crazy, bowled over by "Linsanity".

He may flare and soar even higher. He may burn out. Who cares. Jeremy Lin has already proved that miracles do happen.

PS - 2011 salaries
Amare Stoudamire - $ 18.2 million
Carmelo Anthony - $ 18.5 million
Jeremy Lin - $ 762,000 (signed one week ago)

Sunday, 5 February 2012

The tale of two events

Two completely unconnected , and perhaps insignificant, events in Bangalore provide the fodder for this Sunday's post. Both were unadvertised, and both were free in the sense there were no tickets. But the contrast could not be bigger

Today I went to a short Carnatic recital by Ranjani and Gayatri who are renowned singers in this genre. Carnatic music is enjoying a revival after it had gone comatose some 15 years ago. The recital was in Chowdiah Hall , Bangalore's only decent theatre hall. To my amazement, the hall was full; some 1000 people came to hear the duo sing. Granted the audience  mostly had white hair (or no hair) , but still ......  . Ranjani and Gayatri sing very well , they tandem together beautifully. Even if you don't have a taste for this genre, try listening to this piece from them. Lovely music. But even then, the packed hall stunned me.

A week ago, the National Badminton Championships were held at Bangalore. India is near world class in badminton. China, Indonesia etc are a class apart, but India nowadays features in the first division. Saina Nehwal was not taking part, but there was enough class on display. This year saw the emergence of the highly promising talent in 16 year old PV Sindhu who won the women's title. She is already near 6 feet and has a lovely game which will improve with age. In two years time, the prospect of Saina and Sindhu representing India in the Uber Cup makes you want to drool in anticipation. But back to the Nationals. Total audience - 50 ; of whom 49 were parents or friends of the players. Yours truly was probably the only unconnected  fan.

Getting a crowd in India should be no big deal - after all there are a lot of people in India. Chowdiah Hall fills up for any type of concert; any genre of music. Rock or Hindi film concerts have to be held open air in Palace Grounds to accommodate maybe 10,000 people. And there were 50 people to watch the badminton Nationals.

Now you know why India produces soulful music - Hindustani, Carnatic or Film. Now you also know why India wins nothing in sport.

Friday, 3 February 2012

Face the music

A terrible decision for the company and its founder. A great decision for everybody else. Welcome to the crazy world of private equity.

Facebook needs an IPO like a hole in the head. It doesn't need the money. The only possible use it has for it is to pay off some tax liabilities being triggered by doing an IPO. Most of the money is going to be invested in US government bonds - impeccable logic of raising expensive equity and investing in bonds that yield nothing. The business itself is a cash spewing machine - it doesn't need more cash. On the contrary it doesn't know what to do with th cash already being generated. Actually the risk when too much cash is sloshing around is that the Board will go and make a stupid headline grabbing acquisition.

Mark Zuckerberg doesn't want to do an IPO either. He doesn't need the "valuation" to prove to everybody that he is rich. He's going to lose every autonomy he had in running the business - now he has to pander to the quarterly whims of so called experts called analysts. Being listed is like a curse - the number of regulatory and legal constraints the company will have is enough to make you lose your senses. An independent Board of eminent personalities will sit in judgement over everything Zuckerberg wants to do. Two quarters of missing forecasts and they will have to sack him. Companies that need capital have no other option but to eventually list. The slight problem is that Facebook does not need any more capital.

Its the current shareholders, minus Zuckerberg, who want an IPO badly. They want to encash the fortune they are sitting on. The likes of Aegis Capital, Goldman Sachs, etc. The employees with stock options want to become millionaires. They love the IPO too. The investment bankers who are handling the IPO are beside themselves with excitement - the prospect of fat fees of unimaginable proportions makes you drool doesn't it. Especially when they need to do no work ; after all the shares are going to be bought up even if a donkey handled the issue. The "market" loves it - it will provide employment to a clutch of useless analysts who will write learned treatises on the company without having a clue about it. Day traders will buy and sell everyday, speculating and punting like crazy. We, the wonderful public, can now learn all about its innards and criticise its decisions.

Mark Zuckerberg knows all this. But he probably had no choice - his shareholders must have pushed him and after holding off for so long, had to eventually give in. Facebook can go only one way now - down. What a waste.

PS : Full disclosure - This blogger does not like Facebook. He does not go there.

Wednesday, 1 February 2012

Lie Down Mr Goodwin

Arise Sir Fred, the Queen of England said in 2004 after tapping the kneeling Fred Goodwin lightly on the shoulder with her sword. This archaic ceremony is the conferring of knighthood by the Queen of England. If you are a citizen of the UK or one of its dominions then you can call yourself  "Sir".

Fred Goodwin was the CEO of the Royal Bank of Scotland in its boom years. An unknown, middling bank in Scotland (where's that for Gods sake), he took it to become one of the largest banks in the world. First the acquisition of Natwest, a big British bank much bigger than RBS. And then the mega takeover of ABN Amro, just as the financial crisis was unfolding. The bank was growing wildly through mega acquisitions and was cheered on by all and sundry - the shareholders, the market and even the government, including Gordon Brown, the then Prime Minister of the UK. Hence the knighthood. Sir Fred could do no wrong.

Of course the party couldn't last. It came crashing down with the financial crisis. Sir Fred was axed after the bank reported a loss of £24 bn - the largest in UK corporate history. The UK government had to inject £45 bn to bail out RBS. The public was baying for his blood. He compunded his misery by trying to keep his £16m pension pot - for the years of service he had rendered. Public outcry forced him to give up part of this, although that's an unfair step - if you have to give up your accumulated PF because of a mistake you made, how unfair would it be for you.

Now the UK government has decided to withdraw his knighthood. This is very rarely done. He has for company, Anthony Blunt (a spy), Nicoale Ceausescu, the notorious dictator of Romania and Robert Mugabe, the tyrant of Zimbabwe who were all knighted and the knighthood subsequently withdrawn when it was realised what scoundrels they were. Fred Goodwin is however no scoundrel. The withdrawal was the result of a baying mob (otherwise called the British tabloid press) just wanting to inflict its own brand of punishment.

Fred Goodwin wasn't the first, and certainly won't be the last, to mistime a huge acquisition (ABN Amro) and get killed in the process. He made a bad misjudgement of the extent of the financial crisis - after all who didn't. But he did no crime. He hasn't even been charged, let alone convicted of any wrong doing. If business misjudgement was a crime, each one of us is a criminal. At that time, the shareholders of RBS enthusiastically supported his every move. There are many others who have been conferred knighthoods and were equally in the mess of the financial crisis.

The British are justifiably famous for their sense of honour and fair play. In this instance however, that noble quality seems to have deserted them. Punishing Sir Fred, with Mr Goodwin isn't cricket, old chaps !

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