HQ2 Update

Well, John Oliver got on the bandwagon too.

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Insanity in Property

                                                                      (Photo : Google Maps)

 

The world's costliest building it has become. Yesterday, "The Center" in Hong Kong - a 73 storey landmark was sold for $ 5bn. Yes, FIVE BILLION US DOLLARS. For a single building. No you are not hallucinating. It really did happen.

The Centre was a jewel in the portfolio of Li Ka-Shing. If you don't know who he is, well, he was, and probably is, Mr Hong Kong.  One of the richest men in the world. For long he has symbolised money, power and all the glamour of Hong Kong.

This post is not about the old man. It's about insanity in property valuations. Yes land is scarce (anybody who has been to Hong Kong knows how scarce). And yes, it is demand and supply that sets prices.  And yes, it is a free market - nobody is compelled to buy or sell at any price. But even then, it is only right to pause and reflect on what such insane property valuations mean.

It means, most of the world's population cannot afford a house. Full stop.  This is one of the biggest problems in the developed world (ask any Brit how bad it is), and increasingly in the developing world. It simply drives up the cost of doing anything . In India for example, the tuition fees in a school are not for teachers - it is really to pay for the property. Ditto hospital costs. It is also the reason why you will never see a typical supermarket in the city of Mumbai .

Such ridiculous property valuations are one of the greatest causes of wealth inequality. The very few, who for historical reasons happened to inherit land, or buy property make wild fortunes at the expense of the large majority. After all any pricing is simply the value that society collectively places on  any dimension of life . Is anybody in the world seriously going to argue that property must be placed on a far higher pedestal than virtually anything else in life ?

Back to the $5 bn building. In case you have some difficulty comprehending what $5 bn is,  it will pay for 12 years of Honk Kong's spend on Child and Family Services or  6 years of the spending on the elderly, or 7 years of spending the on the disabled or 20 years of spending on youth or 2 years of the entire police budget or 4 years of the health budget ...... Shall I go on ?

Readers must know that this blogger is taking a grave risk by putting up this post. A reader, who is a dear friend has castigated me for becoming a raving loony leftist and has threatened to personally come and clobber me if I write one more example of becoming a "commie" in old age ! I will have to take precautions for my safety tomorrow !!

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Xi who must be obeyed (with apologies to The Economist)

The title of this post is directly stolen from The Economist which ran a cover story by this name a year or so ago. They themselves were punning the quote from here.

The much awaited China's People Congress ended today with the expected climax - the unveiling of the new Politburo Standing Committee ; the men who will run China for the next five years. More of this in just a little while. This ended a week of speechifying and staged events.

First, the two things that stood out during the days preceding the event today.  Xi Jinping opened the Congress with a speech lasting an incredible three and a half hours, reaching new heights of torture and boredom. It was a hugely self confident China strutting about as a world power, with Xi vigorously patting his own back. He outlined some of the directions for the next five years which were typically broad motherhoods, but gave some clues on where they are heading.

The most important outcome was the enshrining of "Xi Jinping Thought" in the Communist Party's Constitution. This is a peculiarly Chinese obsession. Their infatuation with obscure theories and doctrines knows no boundaries. "Mao Zedong Thought" was supposed to be the guiding doctrine of the Party - never mind that it is rubbish, the Party has long ditched many of that nonsense, etc etc. Then Deng Xiaoping "Practice" was enshrined into the Constitution after his death. At the end of their terms Jiang Zemin and Hu Jintao's "theories" were also included, but their names were not mentioned (such semantics are very important in China with those two acknowledging that they are a step behind the two taller and earlier leaders). Xi hasn't bothered with any such finesse. Halfway into his term he has enshrined his name and "Thought" - the implication being he is Mao's equivalent and even above Deng. A dangerous move almost Trumpesque is self aggrandisation. His "Thought" is mostly bland with lots of garbage , but who cares. These are political moves cloaked in ideology.

And then today, came the line of seven men who walked in, and that was how the world got to know about the new Standing Committee. Readers of this blog may recall that this blogger made a prediction in this post a month or so ago. I got one thing wrong - that Li Keqiang the Premier would be dropped and that Wang Qishan, Xi's right hand man would stay on beyond retirement age and would become the Premier. That didn't happen. The powerful Wang retired and Li has stayed on as the Premier. I predicted a 5 man Standing Committee reduced from 7 (that didn't happen) but also named the potential seven man Committee if it stayed at that number. I got that dead right, including the order of seniority - after Xi and Li came Li Zhanshu, Wang Yang, Wang Huning, Zhao Leji & Hang Zheng. I got real lucky !

Here is my take on the implications of what happened over the last week

- Xi is all powerful. That we knew of course.
- Xi has decided to not break all traditions and to preserve some of the norms and continuity. Hence the  retirement of Wang Qishan and the continuance of Li Keqiang.
- No successor to Xi has been named, as expected. This leaves Xi's options open. He can stay on as a power centre either formally or informally after his term ends in 5 years.
- The two possible successors Hu Chunhua and Chen Min'er are on trial. They have to earn the right to succeed over the next 5 years. But even after, they will probably have to be subservient to Xi.
- The Party is going to tighten the hold on China even more. Forget any liberalism, tolerance and such other "esoteric" concepts.
- China will be aggressive in world politics. The world simply has to learnt to adjust to that. America will be the county most affected. It will be on the losing end more often than not.
- Zhao Leji will be the new Wang Qishan. He will continue the anti corruption drive and Xi's political opponents will continue to be targeted.
- China is entering into dangerous territory of authoritarianism.  Chinese history shows  how much the entire country loses when such autocratic tyrants take charge - recent examples of Ci Xi and Mao are enough to illustrate this danger. There is every risk of Xi going the same way - generating sycophants, staying on too long, getting drunk on power and doing stupid things.
- The Deng Xiaoping era is finally over (that it lasted 25 years after his death is amazing by itself). Most of the safeguards he tried to institutionalize are slipping. The wisdom of Deng is being frittered away. In many ways, he is the loser from what has happened. China will learn to its cost, the implications of ignoring its wisest man in recent history.

Life returns back to normal in China. This blogger will not blog about Chinese politics for the foreseeable future. A parting thought however - watch out for Hu Chunhua, Chen Min'er, Zhao Leji, and of course, above all, Xi.

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Wooing HQ2 ? Yuk !

If you are an American, here's a a nice issue to distract you from your fixation about you know who and direct your attention to a different issue you can get all worked up about.

Witness each city falling over each other and doing the most stupid of things to land HQ2. Tucson Arizona, where one of the readers of this blog lives ,  uprooted a 21ft cactus and tried to deliver it to HQ1. The mayor of Kansas City actually bought one thousand items from the company in HQ1 and wrote a review of each one of them. Mayors of cities are looking silly in videos that they have made asking Alexa where HQ2 is going to come up and Alexa answering of course, the city they are mayors of. Shall I go on ?

If you are wondering what all this hullaballoo is  about, this is all to do with attracting Amazon's second head office. Amazon is based in Seattle (this is HQ1). They want to create a HQ2 somewhere else. And why are cities willing to stand in a line and kiss Bezos' ass (cue the nod to the awful American version of the Queen's English !). Because he is promising to invest $5 bn and create 50,000 jobs. How did they come to this magic figure of investment ? Because he says the average salary of the jobs created would be $100,000. 

The antics of Tucson and Kansas City are harmless on their own. HQ2 won't come there anyway. The real danger is the big cities offering tax breaks to Amazon. Without a doubt this will happen.

This is a terrible idea. Cities and states that do sweetheart deals to tempt businesses into moving are doing an appalling act of profligacy.  This is worse than a bribe.  Think about it - this is a perfect way of taking money from the poor (remember indirect taxes are not progressive and a fair amount of the state revenues in the US come from indirect taxes) and giving it to somebody who does not deserve or need the money. One city does this , and the next city will do the same for another company.  And before you say Bingo, everybody has been given a dole.

The right way to attract companies is to do the boring things - create infrastructure, make a talent pool available by vigorous education and training, attract outsiders by making it a great place to come and live, have a favourable business atmosphere in the form of ease of doing business and reasonable tax rates.  That is when companies will come and stay on. That's why New York in Finance and the West Coast Cities in technology are what they are.  Not because they gave tax breaks.

If you are an American, you should vigorously protest against your city doing a sweetheart deal with Amazon.  

For Indians, who can look at all this with an amused smile; we have of course been long guilty of doing such deals with companies. But I want you to get agitated in a different angle. The capital of the IT industry in the country did all the right things 30 years back - great place to live in, pleasant weather, abundance of talent, a cosmopolitan place for people to come, etc etc. It did not give a tax break. And yet every IT company worth it's salt came.

And then this city let it all go to seed and become the appalling wreck of a city that it is today.  This is the best way to drive every company out. No member of the Homo Sapiens species will ever come to this place again. Instead the entire population has mutated into Pithecanthropus Erectus, which being extinct, is delighted to be able to come back into existence even if condemned to living in a hellhole ! How does this blogger know of such a mutation ? Because he has mutated himself !

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Ramamritham falls in love

Who is the person I hate the most ? No; not that one, whom I frankly don't care about . He is half the planet away and troubling other folks; not me. My visceral hate is reserved for somebody much closer home. The "dotard" called Ramamritham. Allow me an unhinged rant please; I badly need it !

You see, the problem is that Ramamritham has fallen head over heels in insane love. We all know how crazy he is even when supposedly normal. Now that his brain circuits have been singed with love, he has become a monster. The delectable damsel who has swept this idiot off his rockers is called Aadhaar.

For the benefit of the one American reader who claims to be ignorant about India (no; not the lady - she is an expert !), Aadhaar is the national ID that every resident of India is supposed to get.

The government introduced Aadhaar some 5 years ago ostensibly as a way to identify individuals to whom subsidies could be paid directly and thereby minimise leakages.  The government gave pious assurances (including to the Supreme Court) that Aadhaar was not compulsory or mandatory and it would never make it so.

I think the government framed this with good intentions, but had not factored that the old toothless fart, Ramamritham, would fall in love with this.  They say love makes you irrational, and if anybody needed any further proof of this, look at what this apology to the human race is doing.

He first made Aadhaar mandatory for buying gas cylinders. Then he made it mandatory to operate any bank account. Then he made it mandatory to file a  tax return.  But where he has gone completely bonkers is that he has now made it mandatory for a mobile connection !! And where it truly descends into madness is that its not just an Aadhaar number that this clown wants. He wants a fingerprint match for every mobile owner !! No; I am not joking. He wants to fingerprint you before you have a mobile phone.

Consider the logistics. There are 1.2 billion people in India. Perhaps some 800 million own a mobile phone. And we being the argumentative Indians we are,  don't possess just one connection . Almost everybody has two SIM cards. And this is what Ramamritham wants us to do.

1. Go physically to a store of the mobile company (they usually have one store for a million users)

2. Stand in a queue ; you can imagine the length of the queue yourself

3. Give your mobile number and Aadhaar number to whoever is behind the counter

4. You will get a one time password on your phone

5. Give this number to the flunkey

6. He will enter some 10 fields into a computer system that has been ordained by Ramamritham.

7. You then place your thumb on a fingerprint reader

8. If it goes through (and that's a big IF - see below), then the flunkey does some more fiddling with the system

9. You then place your thumb a second time (Ramamritham wants to make absolutely sure)

10. If it again goes through, then say four different prayers and then go home

11. You'll get a SMS saying that your request has been registered and that you will get a confirmation in 24/48 hours

12. If you get a SMS after 24/48 hours, you should follow the instructions there and type Y or N or don't do anything

13. If you fail in any of these steps, go to Step 1

Note : The big IF arises because , this being India, any sensible store has bought a cheap Chinese fingerprint reader and it is impregnated with the smudges of the half a million people who have tried to bestow their affections on it.  Therefore your fingerprint is rarely read on the first attempt. If you fail in three attempts, your Aadhaar gets locked and if you want to unlock it then you have to undergo some contortions not dissimilar to what a certain Mr Scaramucci suggested a Mr Bannon was in the habit of doing.

800 million Indians have to do this twice ( not just once, for you see everyone has two SIM cards). If you are stretcher bound, you still have to do this. Nobody else can do it for you because you have to press your damn thumb on that damn machine in the store. If you don't do this by February, be prepared to just not have a mobile phone. Cost estimates for the whole nation to cater to Ramamritham's love affair have been pegged at Rs 1000 crores.

I have lived in the most obsessed country in the world which wants to control every single bit of information you have access to - China. This is the country that has blocked Twitter, Facebook, YouTube, WhatsApp, ............ This is the country that employs a million people to read every tweet and delete those that it doesn't like. Even in that country, buying a SIM card was as simple as going to a corner shop and just buying it. No paper, no forms, no crap. It takes all of 2 minutes. And I am now supposed to be living in a liberal democracy called India. And I have to do all of what I have outlined in this post, simply to have the privilege of talking to a friend.

Unfortunately this is not the worst of it. The other day, I had to receive a payment from some company. They demanded my Aadhaar. Very soon, if I have to pee, I am sure I will have to validate my Aadhaar.

Readers are invited to design the most creative torture that can be inflicted on Ramamritham. And to the good American referred to earlier in the post. Let's do an exchange. I'll gladly take your dear leader in exchange for Ramamritham !!

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A French soap opera is about to unfold

The world's richest woman just died. If you didn't know this, please stop focusing on the tweets and turn your attention to more weighty matters of the world.

Liliane Bettencourt passed away four days ago at the age of 94. She was the heiress to the founder of L'Oréal, the world's largest cosmetic company; the only child of Eugène Schueller who founded L'Oréal in 1907. She herself worked in the company from the age of 15 and rose to become its deputy Chairperson.

The future of L'Oréal is now in play. And therein lies a story that could give a beating to any soap opera on television.

In 1974, fearing that France would nationalise the company, Bettencourt did a deal with Nestle wherein she offloaded about half her holding in exchange for shares in Nestle. Since then Nestle and Bettencourt have had one of the longest tangos in business history. Nestle, a food company, with no presence at all in cosmetics, had a 30% stake in the world's largest cosmetics company (now down to 23%). But in an agreement with Bettencourt, Nestle remained a sleeping partner and promised not to acquire any more shares or to bid for Bettencourt's own shares as long as she was alive. Presumably Nestle had thought that she would not live so long. But they kept their word and until now have not interfered at all in the business just pocketing the dividends and biding their time. So much so that very few outside the business world probably even know that Nestle is a major shareholder in L'Oréal.

In the meantime Bettencourt's life over the last decade has been another soap opera all by itself. Sometime in 2007, at the  ripe age of 84, she took a fancy to her photographer and started to bestow gifts to him worth over €1 billion. Her daughter filed a complaint with the police that her photographer was taking advantage of her weakened psychological stake to amass a personal fortune. She and her daughter had an extremely public spat with each accusing the other of having gone mad. The courts finally made Bettencourt's grandson as her overseer and the fortune was vested with her daughter and her two grandsons. But everything was in a state of limbo as long as she was alive.

Cue the events in Nestle. Nestle , for long, has waited patiently to consummate what was really a delayed acquisition. Both the last two Chairmen of Nestle sit on the L'Oréal Board. They were probably waiting for the death of Bettencourt to acquire L'Oréal . But alas they now have an activist shareholder in Dan Loeb who has a fair stake in Nestle and is pushing it to do the opposite - sell the stake in L'Oréal and return the money to shareholders. So there is no saying what Nestle will ultimately do - acquire L'Oréal or divest !

There are other big fish circling. Given how cheap debt is , there are enough and more funds of various stripes, including probably the notorious 3G Capital and their close friend Warren Buffet, who are getting all excited. Also interested would be two giants in the cosmetics field - Unilever and Procter & Gamble, who have long eyed Nestle's stake with envy and made noises about what a Foods company is doing with a stake in a Cosmetics company.

Complicating this will be nationalism, for after all L'Oréal is (very) French. Would Macron be willing to let a French institution fall into the hands of the ugly Americans ? If he interfered, the tweeter in chief would surely have something to say !!

And what will Françoise Bettencourt Meyers, Liliane's daughter and the two grandchildren to whom the 30% stake in L'Oréal passes, do ?  Would they act in concert. Or would they go their own ways ? Would they buy ? Or sell ?

Every investment banker is drooling and shivering with anticipation. It is fair to assume that no first class seats are available on all flights to and from Paris, London, New York and Lausanne !

Watch this space. The knives will be out on 18th March when the six months period after Bettencourt's death ends and  all agreements expire.    Bettencourt's life was colourful to say the least - marrying a Nazi sympathiser, losing money with Bernie Madoff,  a strange affair with her photographer, being declared mentally incompetent, accused of giving cash stuffed envelopes to Nicolas Sarkozy,  having numerous Swiss bank accounts ...... But even by those standards, what will follow in the fight for L'Oréal will be, to put it mildly, interesting.

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China's new lineup

Anybody who predicts what the next Standing Committee and the Politburo will be is almost certain to be wrong ! This is why most newspaper columnists are content with naming possible candidates and leaving it at that. This blogger does not care if he is proved wrong or even as a fool. There are no consequences to getting it dead wrong. So here's my prediction what's going to happen !

There are only two near certainties in this political game. One is that Xi Jinping will continue as Secretary of the Communist Party, Chairman of the Central Military Commission and as the President. The second is that Zhang Dejiang, Yu Zengsheng, Liu Yunshan and Zhang Gaoli will retire from the Standing Committee . Everything else is up for grabs.

Two of the key moves that is the subject of much speculation is what will happen to Li Keqiang the current Premier (most views are that he will stay on as Premier) and that of Wang Qishan (Xi's ally in the anti corruption drive, but who is crossing the informal retirement age of 68).

My guess is that Li Keqiang will be pushed out and Wang Qishan will replace him as the Premier. This is not considered likely today and if it happens, will be radical and  unexpected. If it indeed does happen, it will indicate that Xi has taken total control of the Party. My reasoning is that Li has been a disappointment as  Premier  with his management of the economy, his key job. He will also carry the can for the stock market troubles of 2015. Li belongs to the Youth League faction which has been systematically defanged. There is precedence in China of the Premier being replaced - Li Peng giving way to Zhu Rongji in 1998. Wang Qishan , as we have seen in earlier posts, is the de facto No 2 in China today.  He is an expert on the economy and if he were to be appointed Premier, he will be Xi's trusted lieutenant in the soft landing of the economy that is a big imperative for China. This will mean Xi is bending the retirement rule - something I am guessing he will do as a strawman for his own options 5 years from now when he will face this retirement rule himself.

I think Li Zhanshu is a shoo in for the Standing Committee. He is currently the Director of the General Office of the Party and is a right hand man of Xi.  Stacking the Standing Committee with his people will be a primary objective of Xi.

There is a good chance that Wang Yang, currently Vice Premier will be elevated to the Standing Committee. He is not a Xi loyalist  and was potentially a candidate for the Standing Committee  even the last time around. He is however efficient and strong and has quelled his reformer (read political) instincts. He has kept his head low over the last five years and for sheer ability is likely to rise.

Another likely name is Wang Huning. He is currently the head of the central policy research office. A  non controversial choice who doesn't belong to any faction. A theoretician whom Xi seems to rely on and is often seen on Xi's overseas trips as an important adviser.

If Xi is in total control of the Party and has not needed to cut any deals, then this is the likely Standing Committee - cut down to five members . Xi Jinping, Wang Qishan, Li Zhanshu, Wang Yang and Wang Huning.

If Xi however decides to stay with a seven member standing committee, then the two additional names, would be as my guess, Zhao Leji and Han Zheng. Both are "senior" but not powerful and therefore likely to simply make up the numbers and duly nod their heads to anything Xi says.

If my prediction is even 75% right, then it is clear that Xi is all powerful. None of these members can be a potential successor to Xi and it will also indicate that Xi is preparing to stay on after 2022 as he hasn't groomed a successor unlike what his predecessors Jiang Zemin and Hu Jintao did.

 Just as important as who gets in, is who doesn't get in. The disappointed persons would be

- Li Keqiang, the current Premier. He would be the biggest casualty if he were to fall. If he doesn't get dropped, Xi is just being cautious not to make too many changes. Li's power will continue to wane and he will, at best be a bureaucrat continuing to run the economy. Real decisions will  made by Xi.

- Hu Chunhua, the current party chief of Guangdong. He is of the next generation and had been touted as a potential successor to Xi even five years ago. He has recently been making noises pledging loyalty to Xi.  His elevation to the Standing Committee will mean he is the clear front runner next time around. His non inclusion will be a strong signal that Xi intends to stay on even after 2022.

- Chen Min'er, current party chief of Chongqing. He was just brought in there to replace the disgraced Sun Zhengcai, a potential successor to Xi who fell in a power struggle. Chen is a staunch Xi loyalist. Its unlikely that he would be nominated, but if he were, it would be a clear signal that he would take over from Xi at least nominally in 2022, while Xi holds real power from the backroom.

A team like the one I have predicted will mean the following for China

- Xi Jinping is all powerful. He will start to acquire Mao like cult status. It is only hoped that he wouldn't unleash horrors on the country as Mao did.

- The Party will become even more ruthless in suppressing dissent. Personal freedoms will be even more curtailed and censorship will worsen.

- The economy will be managed efficiently. Economic troubles will come but they will be managed as best as could be.

- On foreign policy China will become increasingly belligerent and muscular.  They will be difficult to deal with diplomatically and might pick up fights with other countries. The current US administration will constantly lose on anything they pick up with China.

- The anti corruption drive and the defanging of political opponents will intensify. Xi might however face a challenge when Jiang Zemin dies. Major political activity tends to happen when somebody important dies.  The two major upheavals in China happened in 1976 after Zhou Enlai died and more famously in 1989 when Hu Yaobang died which led to the Tiananmen incidents. Jiang is nowhere near as liked as Zhou or Hu were, but it may be a trigger for old timers and those who had lost out in the Xi era to maybe flex their muscles.

- Xi will stay on post 2022 and will be the main power for at least another decade. He will install one of his men as the General Secretary, but will stay on as the Chairman of the CMC and wield real power. He may even be appointed Chairman of the Party, a post that was abolished after Mao.

How wrong I am would be revealed in the days after October 18th when the line of 5 or 7, which I alluded to in the first sentence of this series of posts will walk in and be introduced.  Even if I am 50% right, I will lay claim to being a "Zhōng guó tōng" (China expert) !

Enough of politics. This blog will go back to plodding on business and economic matters. It will return briefly to China and politics when the actual line up is announced in end October.

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China's Issues

Every country faces challenges and China is no exception. But by global yardsticks, China's issues are less critical than what most other countries face.  It is after all the one country in the world which does not face a serious growth challenge (at least as of now).  China is however such a large country that even a seemingly minor issue is of gigantic scale and one that will affect the whole world. This is why everybody in the world ought to take a much greater interest in this country.

This post is a compendium of social, political, economic and moral issues that China faces at this point of time, in no particular order

Maintaining GDP Growth : The "contract" between the Communist Party and the people is a simple one - Economic growth for political control. When economic growth falters, this contract will be put under strain. There are a number of challenges to maintaining economic growth and some of them are articulated below. You can't grow endlessly at 8%+. The inflexion point has come.

Quantum of Debt  : China's debt to GDP ratio is galloping and is now above 300%. Much of the growth over the last decade has been debt fuelled. Growth will seriously falter if debt is cut. That's why the elusive "soft landing" is proving so difficult for China. Just for comparison, India's debt to GDP %, which I often cry about is "only" 130%. The United States, of course is a leader at 350% !

Income inequality : Every country faces this problem, but China faces it as bad as the US. The Gini coefficient, a measure of income inequality is 0.42 (higher the number, greater the inequality). The US is 0.46. India is 0.35. China is starting to have first world problems

Ageing population : Because of the one child policy that was rigidly enforced until recently, China is rapidly ageing. It will be the first country in history to have an ageing problem before it got rich (remember, on a per capita basis, China is still middling). With a poor social security network, who is going to pay for the aged and take care of them in a decade or two. China has the peculiar problem of one grandchild for four grandparents.

Corruption : We have spoken of it in previous posts. It is a serious problem.

Environment : China faces an acute environmental problem. The government is actively tackling it, but the problem is a huge one and one that was allowed to build up to crisis levels over decades. China also faces an acute water problem (worse than India's). There aren't easy solutions. Much of the north is virtually a desert, but with teeming populations.

Restive provinces : The one thing China is absolutely terrible at is integrating people who are culturally different. 93% of China is a homogeneous Han (those who talk about diversity in China have no clue what diversity really means - come to India).  The two largest provinces Tibet and Xinjiang are restive and brutally suppressed

Rising nationalism : Very few Chinese would recognise this as an issue, but it really is. Anti foreigner sentiment is high - its easy for a large number of Chinese to be fanatically against a nation if whipped into a frenzy of perceived slights. The Chinese government is increasingly bullying in its approach - Japan (Senkaku), entire East Asia (Nine dash line), India (Doklam and Arunachal). The average citizen who only has access to government propaganda gets whipped into dangerous nationalism. The Chinese would do well to ponder over this - why do they have so few friends ?

A moral vacuum : To an outsider, this might seem to be a strange issue, but many Chinese would immediately relate to it. Firstly during the Cultural Revolution and then in the breakneck speed of economic growth, its ancient culture, beliefs and traditions have gone. Today money is the predominant (only) religion.  In other countries, religious and  social organisations provide a balance to the materialism. In China they do not exist, or if they rise, are brutally exterminated by the government (see what happened to Falun Gong). So many Chinese wonder - after money what? And they may then turn their attention to demanding a level of freedom not in consonance with what the party is comfortable with.

And so this is the real major issue that China has faced since the mid 1980s and continues to face now. What is the balance between economic freedom and growth and political and other freedoms. The first flare up came when Zhou Enlai died in 1976. The second major flare up came during the Tiananmen incident in 1989. Since then there has been an uneasy truce, but one which has never gone away. Some day it will rear its head again. How China confronts it, and who is in power in China to confront it, will have tremendous consequences for the world. 

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Politics and the average Chinese

The man in the street simply does not care ! At least politically !!

In a country of 1.2 billion, such a sweeping  statement is an outrageous generalisation. But it is broadly true. The average Chinese does not care because (a) what is the real choice (b) she has very little access to information that is even remotely political in nature and (c) she doesn't seem to be hugely interested anyway

And this is despite a startling fact; the country with the maximum number of protests from citizens is actually China ! On any given day, there are probably 800 odd protests happening throughout China. If there is such vigorous activity, how come the assertion that the average Joe (Mrs Li) doesn't care ?

Two sweeping statements can be made about the average Chinese's views (a) she believes (and it does not matter where or who she is) that the local government is utterly corrupt and inefficient

and (b) she believes that the central leaders in Beijing are extremely efficient, working hard for the country, are the best humans on earth and if only they knew of their specific problem, it would be instantly fixed.

All the protests are predominantly on local issues, and mostly against land grabs by local officials. It is therefore mainly economic in nature, not political. There are simply no political protests of any sort.

A major issue in China is that public opinion is greatly hampered because of virtually no access to true political information. The following is the information environment in which the average Chinese lives

- There are no independent newspapers at all. Foreign newspapers are mostly not available.

- There is only government TV . No foreign channels, except in top end hotels. Even those are censored - can you believe that CNN's broadcast to China is routed through a Chinese government controlled satellite !

- All films are subject to censorship. Foreign films are severely limited in number and if you have anything remotely political in your film, fat chance of being cleared. Ditto books. Ditto music. Pirated DVDs are freely available but then the market is mostly for sexually explicit stuff rather than political content.

- The Great Firewall of China, behind which the internet sits in a parallel universe, is one of the most remarkable operations of all. The Hall of Fame of sites that are completely banned and inaccessible from China includes Facebook, Twitter, YouTube, Google plus, Maps, Docs, Picasa, Dropbox, Flickr, ..... I can keep going. Every one of these have local equivalents which are of course severely censored by the authorities

- The Chinese are avid users of social media, but only on domestic providers. These are hugely monitored by armies of machines, men and software. Every offending post is deleted . If you realise that there are half a billion internet users in China and they are as active as anybody in online activities, you can imagine the scale at which censorship takes place.

Consequently, the average Chinese is poorly informed on political matters and therefore has limited and not fully informed views. In any social gathering in the West (even more so in India), the conversation will turn political. Not so in China.  Mao has been glorified as "70% right" - very few of the younger generation know anything about the horrors of the Great Leap Forward and the Cultural Revolution. The Tiananmen incidents of 1989 have been airbrushed from history - when I lived in China I was amazed that my colleagues knew virtually nothing about what happened.

The sum total of all this is that public opinion in China is less intense and formed than in virtually any other country. Therefore the Party and the government are under less pressure than anywhere else. You see, the true check on any government in any country is not judiciary , or the constitutional checks and balances - it is really public opinion  represented by the media. In China, that check does not exist. The Chinese have made a pact with the Party - give us continuous economic advancement and we won't care about the politics. Thus far, that pact has held good.

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Who's who in Chinese politics

Xi Jinping, the current Chinese leader is easily the most powerful leader that China has had ever since Deng Xiaoping faded away in the early 90s. But in order to understand his power, we have to go back a bit in time in modern Chinese history.

Mao was a tyrant and supremely powerful in China and until his death, he was simply the sole power centre. But that degree of concentration of power resulted in chaos in China - the Great Leap Forward and the Cultural Revolution being two big disasters. When he died, the elders decided that no single person should ever be allowed to accumulate such power. Deng Xiaoping became the preeminent leader, but there was a rival power centre in Chen Yun and to a lesser extent in Li Xiannian. Multiple purges later,  Jiang Zemin was appointed the Secretary of the Communist Party immediately after the infamous Tiananmen incident in 1989.

Jiang accumulated a fair degree of power, but was never all powerful. He led the party out of the post Tiananmen crisis and then earned his own notoriety by the brutal suppression, and virtual extermination, of  Falun Gong - a cult loosely based on mysticism, but which was feared by the Party as a political movement. By the norms set by Deng, which he followed and reinforced,  he stepped down after some 12 years as the Secretary of the Party and handed over to Hu Jintao, who was handpicked by Deng himself before his death. However, Jiang continued to remain the Chairman of the Central Military Commission and therefore in his first term Hu really did not have much power and had to constantly "handle" Jiang. Jiang continues to remain a power centre and is the leader of the Shanghai faction. However he is getting old (he's past 90) and his power is fading, helped along by Xi's efforts to undermine this faction.

Hu Jintao is a colourless and plodding leader, who even while he was the Secretary of the Party, was never a charismatic leader. His hold on power was weaker. When he handed over the reins to Xi Jinping, he quit all his formal roles. He leads the Youth League, another faction, but is not a powerful leader.

Xi Jinping comes from a group called the "princelings" - their fathers were revolutionary leaders in the Mao era and their positions, at least to some measure, is owed to their parentage. When Xi took over, he swiftly started to consolidate his power with a massive anti corruption drive, the likes of which China has never seen.

Ostensibly Xi was tackling one of the greatest scourges of China - corruption. The scale of corruption in China is simply unbelievable. Nowhere has mankind seen anything like this. It is all pervasive . I won't say anything more - I still wish to travel to China !! Let me just say that whatever you think is the level of corruption in China, the reality is probably tenfold worse. It is an existential threat to the Party.  Therefore tackling corruption was a popular thing to do.

But the anti corruption drive was also a big consolidation of power by Xi. It was positioned as catching "tigers and flies" - both the small fry as well as the really powerful.  Unsurprisingly, the people targeted the most were political opponents. More than 100,000 flies have been indicted, but more importantly so have nearly 200 tigers. This includes some 100 senior people in the military including two former Vice Chairmen of the Central Military Commission (the equivalent would be Defence Secretary and the Joint Chiefs of Staff in the US military being purged). The biggest tiger of all who was jailed is clearly Zhou Yongkang, a past member of the Standing Committee. Such a thing is simply not done in Chinese politics - the upper echelon of the Communist Party was thought untouchable.

Xi's main ally who has carried out the anti corruption drive is Wang Qishan, a current member of the Standing Committee and 6th in the formal order of seniority. But clearly the real no 2 in China is Wang Qishan. He is a star economic leader in China - having held a number of economic portfolios in the past. But for the last 5 years he has been Xi's enforcer in the anti corruption drive. Crucially he is 69 and by the tenets of the unofficial retirement policy, he should retire in October. All the rumours swirling around China are that Xi will keep him. 

The formal No 2 is the Premier Li Keqiang. His job is to run the economy and the general consensus is that he has not been successful. His power base is small and he belongs to the Youth League faction of Hu Jintao. In fact at the time of Xi's succession it was rumoured that Hu actually wanted Li to succeed him and not Xi. Li is only 62 and can continue as Premier for one more term.  This blogger has a view (wild guess) as to what might happen to both Wang Qishan and Li Keqiang and he will boldly articulate a prediction in a subsequent post !

Two other names need mention. When Xi and Li were appointed, there was also speculation as to who would succeed them in 10 years time (the next generation of leaders). Two names were mentioned - Hu Chunhua and Sun Zhengcai. Both were included in the politburo last time around and given important positions. Just two months ago, Sun Zhengcai was summarily replaced and an anti corruption investigation started against him. Clearly he lost out in a power struggle.

How do the Chinese themselves view all this ? You may be surprised ! Watch out for the next post.

PS - Chinese names are not easy to pronounce to Western tongues. Here is an approximation

Mao Zedong - Mao Tze Dhong

Deng Xiaoping - Dhung Hsiao Ping

Jiang Zemin - Jiang Tze Min

Hu Jintao - As written

Xi Jinping - Hsi Jin Ping

Li Keqiang - Li Khe Chiang

Wang Qishan - Waang Chi Shaan

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This blog turns to politics

On October 18th, or immediately thereafter, a small line of people will walk in  into the Great Hall of the People in Tiananmen Square. That will be the new Standing Committee headed by Xi Jinping. And at that time the world shall know what has happened to the "elections" in China. The stunning fact is that very few people in the world seem to even know about one of the most momentous events in world politics. Very little has been written about it in the world press and almost nothing has made it to TV. Not even the significant Beidaihe retreat that happened in August.

All this at a time when many people in the world seem addicted to the nonsense that a certain person spews sitting on his toilet seat.  The lack of interest in what is happening in China is, to this blogger, unbelievable. Perhaps unfamiliarity is the reason. And hence this blogger is breaking his vow to keep this blog completely apolitical and is launching into a series of posts on what is happening in China.

I begin with a small primer on the current Chinese political system. The Communist Party of China (CPC) is the apex body in China. The government is subservient to the Party. Even the People's Liberation Army is not the army of China; its the army of the Party. Therefore what happens in the Party is of prime (only) importance in the politics of China.

The apex decision making body in the CPC is the Politburo, currently consisting of 25 members. Consider it as the Cabinet. From amongst these, an elite group forms the Standing Committee of the Politburo. Currently it has 7 members. This is the all powerful body.

When Mao Zedong established the Party, and for as long as he ruled China, all these institutions were irrelevant. Mao was the sole power centre. But when he died and the dangers of concentrating so much power in one man became apparent, the party elders led by Deng Xiaoping, established some rules and norms  for the politics of the future. Thus far they have been adhered to. They are

The principle of retirement . The unofficial term is "qishang baxia" or "Seven up; Eight down". The unwritten rule is that if you reach 68 at the CPC Congress meeting  which is held once every five years (think of it as election year), you step down and retire. 5 of the 7 members of the Standing Committee  and 11 of the 25 members of the Politburo have crossed 68.

• The General Secretary and the Premier usually serve for two terms - 10 years - and then stand down. The current incumbents are finishing their first term and can therefore continue for one more term.

• An all powerful single power centre , a la Mao, was never allowed to happen post his death. Even Deng was not all powerful - he had an equivalent power centre in Chen Yun. Factions  abound ; the Shanghai faction, the Youth League, etc. These factions and their powerful overlords jockey for power behind closed doors. Retired leaders don't keep quiet - they exercise power by placing their underlings on these bodies.
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• The norm in China is for leadership changes to happen with great turmoil, purges and the like. Only two peaceful transitions have ever happened - the handover from Jiang Zemin to Hu Jintao and from Hu Jintao to Xi Jinping. Even the transition from Hu Jintao saw the dramatic fall and subsequent imprisonment of Bo Xilai.
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• There are three powerful positions in China - The President of China (a mere titular position), the Secretary of the Communist Party (the real powerful position) and the chairmanship of the Central Military Commission that governs the armed forces. Currently all these three positions are held by  Xi Jinping. That was the case with Jiang Zemin and Hu Jintao as well, but in the Deng era, he was simply the Chairman of the CMC and the other positions were held by his chosen people. A fourth, and less powerful position is that of the Premier - currently held by Li Keqiang and is the No 2 position in China.
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• Every year in the summer, the power brokers in China retire to a coastal town called Beidaihe , where all the skullduggery, bargaining and negotiations happen. Each faction tries to get its people on to the Politburo and the Standing Committee. Usually most of the big decisions are made here on the beach behind thick closed doors. This is the real "election" in China. The Beidaihe meeting happened last month and this blogger is mystified that not only have there been very little leaks, there has been scant reporting in the press as well. Next to the US elections, this is the most important political activity in the world. And we don't hear even a squeak.
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• In the last two peaceful transitions, at the end of the first of the two terms of the incumbent leaders, the top of the subsequent generation is usually nominated to the Standing Committee. This gives the clue as to who would subsequently take over as leaders. If the past 20 years is a guide, then this should happen in the current change and the successor to Xi Jinping who would take over 5 years from now, would at least be indicated. But as we would see in subsequent posts, there is a good chance that this won't happen.
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In the next post, we will assess the current political landscape and who are the power brokers in China.

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Letting go

When your child is born, it is probably the greatest moment of your life. It's your child. It is the creation of you and your partner. It's a new life created out of the blue. And only because of you.

You then slog your butt off to raise the child. You shower it with love and affection. In the first years of the child's life, you don't have a single night's sound sleep. You worry about your child every minute. You take joy in every smile and gurgle. You get terrified if the child were to as much sneeze.

As the child grows up, you continue to sweat over it. You work hard to earn money to provide for the child. You are willing to sacrifice anything to ensure a top quality education. You try and impart your values. You even discipline the child when she does something wrong. You have every possible aspiration for the child - she will be famous, she will be wealthy, she will excel; above all she will be happy. You even transfer your own aspirations, which you were not able to achieve, on to her.

All too soon, the child grows up. She is now a teenager. She has her own wishes. She does not want to ask your permission for everything. She perhaps listens to music that you cannot even understand how it could be called such. She wants to stay out late. You want to impose your will on her, because in your eyes, she's still the baby and you want to protect her. She rebels. You argue. 

And then, in the blink of an eye, she is an adult. She leaves home; first to study somewhere else and then to work and be independent. You have a lump in the throat. 

What do you do as a parent ? You have to let go.

What if she wants to marry somebody from a different world and the polar opposite of what you determine to be a "good man". You have to let her go and warmly and enthusiastically embrace both of them.

What if she takes up a profession (maybe singing in a night club). It's against all your values. But you have to let her go. Wish her every success.

What if she takes up something unpleasant. Like, say, smoking. You can certainly give her a hug and say quietly that this isn't good for her health. But is she going to listen ? No way. You have to let her be.  Yes, you can worry inside your heart. But that's all you should do.

You came from a very middle class family where you lived frugally and never bought anything for yourself. She decides to blow her first salary on 25 designer dresses. She flaunts bling. Yes, the neckline is too low. Do you chide her ? Of course not. You let her be.

The worst thing you can ever ever do, is to bitch about her to all and sundry and say what a disappointment she has turned out to be.  You will gain absolutely nothing from it. You will only demean yourself in the eyes of everybody else. And she is not going to be one inch different.

For you see, its her life. The values you tried to drill into her are all very much there. She just sees life very differently from you. That doesn't mean she doesn't love you. It doesn't mean that she is "bad". She is just she. The angel she always was, is, and will be. Let her be.

I know its not easy. But its a mark of your greatness, if you can let her go. It does not negate the immense effort and everything you have done for her.

Mr Murthy; I am talking to you.

For those readers who are not following Indian business news every day, this post was prompted by this news.

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Job losses in India too ?

My good friend who goes by the moniker of Vaingluory, at least on my travel blog, messaged me drawing attention to this story .  The opinion piece from a headhunter is titled 'Expect 100,000 to 200,000 Jobs to be Lost Every Year For The Next Three Years' .

There is a lot of hyperbole in this - I don't think India is going to lose jobs at that rate. Certainly not from the IT industry . But there is an undercurrent of truth , and there is a chill wind coming.

In the last 10-15 years, India, especially in the IT and BPO sectors has seen a pace of job creation that has been unmatched in its history. The impact this has had on people's lives is very visible in India's cities. In any other country, these job numbers would have been a spectacular miracle that would have transformed the country. India has a huge population and hence this is only a small wave in the ocean.

The young have come to believe that this scorching pace is the natural order of things and that anybody can get a job for the asking. Of course, this can't last for ever. The IT industry has matured and the rate of job growth has slowed down. That is only to be expected.  The days of "Tresspassers will be recruited" are long gone ! Companies are not recruiting in the same numbers. They are asking some underperformers to leave. Some have to cut their costs and so some layoffs have happened too. I do not see any evidence that there is going to be a large shrinkage of jobs ; there will be a much slower rate of growth and there will be some layoffs. But the overall numbers is not going to shrink in a short span of time.

But some global trends are inevitable and they will have a big impact. The most important of them is automation. This is an inexorable trend and will affect all industries including IT. This is going to be the single largest impact on jobs. It's a global problem without any easy answers.

The second problem in India, is agriculture. Agriculture has always been the sponge - the vast majority of the Indian population is employed (more accurately underemployed) here.  This sector is increasingly becoming financially strained, for reasons that are peculiar to India . Small land holdings, a major water crisis, inability to make significant profits, and the extent of risks for which there are no commensurate rewards. All these make agriculture likely to shed jobs on a scale that will be gargantuan. This has profound consequences for India. Manufacturing or services simply cannot absorb this load and even if they could, there is a massive skill gap for agricultural workers to migrate to other sectors.

India has one big advantage - an already strong services sector which will keep growing. This has the capacity to absorb skilled manpower. Touch any area and India has actually a huge potential for job creation. Judges, policemen, health care workers, retail industry workers, logistics industry workers, even professions like carpenters, plumbers, electricians - everywhere we have a shortage of qualified people even today.  Jobs will keep getting created in each of these trades. Many of them will be self employed . Many of them  may be in the government ; for example if we have to have a policemen to population ratio that is even remotely comparable to other countries, we will need to add millions of policemen. Ditto judges. Ditto nurses. 

The issue is skills. India has a young population that is extremely keen on education and willing to work hard. It lacks a real effective skill building initiative. The National Skills Development Corporation, if it really does its job, can transform India.

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Beggars in Nigeria will start paying tax !

So says the Finance Minister of Nigeria. Beggars will have to pay taxes. Apparently some beggars are earning millions in Nigeria. Perhaps its fair enough that Mrs Adeosun , the Finance Minster said “proceeds from begging are taxable. You are supposed to pay taxes even if your means of income is begging”.

Nigeria is a notoriously corrupt country and tax evasion is blatant and has been elevated to a fine art.  Hence the startling "fact" that beggars are earning millions. Nigeria should, by all rights, should be a very prosperous country. It has oil wealth and is a net oil exporter. It has a  young , bright and growing population.  It has a decent education system and some of the ablest people in the African continent. It is a large economy - second largest after South Africa.  And yet, it is a huge underperformer economically. 

Periodically the Nigerian government tries to tackle corruption and the also shore up the country's finances. Bolstering tax revenue by cracking down on rampant tax evasion keeps getting tried periodically, but with not much success. The latest is the Voluntary Assets and Income Declaration Scheme ( with the unfortunate acronym - VAIDS) . Good luck for the latest attempt.

India suffers from similar evasion, with its own home grown quirks. Agricultural income is not taxed , but much of what is claimed as agricultural income has nothing to do with farming. Similarly the tax entity called Hindu Undivided Family is nothing but an institutionalised way to manage taxes.  The irony that "Undivided" and "Family" cannot be put adjacent to each other when it comes to money matters is completely lost on Ramamritham !

The United States being the leader of the world in all matters offers a rich variety of such dodges in the law. Walt Disney in Florida and other big landowners collectively dodged $950 m in  taxes by renting a few cows to graze on their large land holdings and thereby qualified as agricultural land inviting lower taxes. And since two of my usual commenters are from the great state of Oregon, they may wish to declare that two of their limbs are useless and thereby earn a tax credit of $50 !

Back to begging. Actually no country exempts the proceeds of begging from taxation. If your earnings from begging exceed the minimum threshold, you have to pay tax on it anywhere in the world. Mrs Adeosun was only stating an universal truth ! Beggars of the world, beware !!

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Right problem ; Wrong solution

The extreme left , as this blogger is wont to repeat ad nauseam, is as bad as the extreme right. The champions of the hard left - Bernie Sanders in the US and  Jeremy Corbyn in the UK have one policy in common that is a good example of this. Free college for everybody. 

They also have another thing in common which is often the case with the left's policies. Right problem. Wrong solution.

First the right problem. Its a complete disgrace that in a developed country, a young person starts working life under a mountain of debt.  Outstanding student debt is now £100bn  in the UK,  and a ridiculous $1.3 trillion in the US. And just to give you a perspective on the latter statistic, its $ 600 m higher than the total credit card debt in the US. You start life with a mountain of debt, and not a ready prospect of a good job. Great. If I was to be born again and had a choice of where to be born, I wouldn't choose either the US or the UK on that statistic alone.

The left deserves great credit for highlighting this problem. Successive governments of all stripes and colours (pun intended) deserve censure for ignoring the problem and allowing it to build to these  levels. A society, and a nation, that spurns its young does not deserve  to be called "civilised".

But, as is often the case, the left's solution is dead wrong. Their prescription is for college to be made free and the costs to be picked up by the government.  Fantastic. Will they never learn that tax tax tax and spend spend spend does not work - for free advice apply to Hugo Chavez, Fidel Castro, et al. 

This blogger suggests three solutions instead.

First cut costs. Why is college education so expensive ? In the US, a ridiculous amount of cost is spent on college sports, fancy living quarters and everything that has nothing to do with education. My good friend Sriram has blogged extensively and is far more knowledgeable on this subject.  In the UK, the average Vice Chancellor earns £300,000.  And gets payoffs for leaving the job, which would make any corporate fat cat proud.  Wield an axe on any cost that does not strictly have to do with education. Get the professional cost cutters from industry and let them loose on the education sector and within 3 years they'll cut costs down.

Secondly, what about parental responsibility. I am not at all clear why parents in these countries do not pick up a large portion of these costs. In Asia, education costs are largely picked up by parents. That's their legacy and gift to their offspring. If you are not prepared to start your child off well in life, you don't deserve to have a child. Period. And anyway what sort of an argument is it that you will not pay for your offspring's education, but somebody else (the tax payer) should. And don't tell me the parents cannot afford it - they have 15 odd years from the child's birth to plan savings. Save $ 5 every day and you won't have to worry about student debt.

Thirdly make college education truly global. Allow students from anywhere in the world to study anywhere else - allow free movement of students. There are superb universities in China and India for example, where you can get high quality education at a fraction of the cost in the US or the UK. Just like industry has truly globalised with activity automatically moving to the lowest cost location, so be it with education. Yes, I know this is an utopian dream and will never happen, but at least I can articulate it in my own blog (and no doubt face a volley of criticism in the comments !). Just to make it very clear, I am only advocating free movement for education; not permanent immigration.

The hard left may not ascend in the US, despite how many ever have felt the Bern. But there is a real chance that Jeremy Corbyn might become the Prime Minister of the UK. In that case their national anthem of "God save the queen" could perhaps be amended to God save the UK !

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The pox on Ramamritham (for the nth time)

Regular readers of this blog know that this blogger rather likes railing against Ramamritham. Ever so often, there has to be a post yelling at this cursed individual.

This time it is on the Department of telecom (DoT) which is a pesky nuisance that purports to regulate every aspect of  our phones and how we talk to others. Along with the child it spawned TRAI - The Telecom Regulatory Authority of India, they have been busy over the last decade framing rules and procedures for everything on earth. Did you know that every phone company has to publish its prices and tariffs in a prescribed format  ? If you have seen that format, you'll know that you need a PhD in mathematics to understand it.

One result is that you have to go armed with lots of paper and proof for something as simple as getting a SIM Card. In control obsessed China, I just went to a corner shop and bought a SIM. It took me 2 minutes to do so. In India, you submit an ID proof and an address proof (of course Raramritham has written rules on which documents will be accepted for either of those proofs), then wait a while as the SIM is "activated", then you call up a number and revalidate the proofs you have submitted ........

The latest antics of Ramamritham that has got my goat is that he has ruled that all phones henceforth sold in India must have GPS. His logic ? The safety and security of women is "of utmost importance"  says this blessed specimen. If she is in danger, we can trace her whereabouts through the GPS signal !!

Really ?? Is it the business of Ramamritham to be legislating such nonsense ?  If he was really concerned about women's safety, he would be improving police coverage,  improving response time to complaints, ensuring more policewomen in the force, ensuring that cases are brought to speedy trial,  having a helpline where somebody actually answers the phone, etc etc. No. That's all too difficult to do. Instead he can indulge in his favourite activity - write a rule.

Never mind that if a woman wanted GPS on her phone to reassure her of security, she can simply go and get such a phone. No. It has to be legislated.

India has an installed base of 400 million phones that are euphemistically called "feature phones". Translation - they do not have feature such as GPS ! The cost of a phone is likely to increase by Rs 400 if GPS has to be featured in all phones.  That of course, does not bother Ramamritham.

When the industry protested, in true style Ramamritham replies - " It is reiterated that all mobile handset makers should adhere , blah blah, to implementation of GPS facility in all mobile phones sold in India from January 1 , 2018. The representation (sic) in this regard will not be entertained in future " . Beautiful.

Can all scientists stop their work on space exploration, finding a cure for cancer, sequencing the DNA, etc etc and instead concentrate single mindedly on the eradication of Ramamritham please !

PS : Ramamritham is a fictional name invented by the blogger to typify the useless, pedantic, petty and painful bureaucrat !

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Turn the world vegetarian

Humans love eating meat. Vegetarians and vegans (this blogger is a vegetarian) don't stand a chance. In quite a few countries in the world, you simply have to starve if you are a vegetarian.  In many others, your only ordering choice in a restaurant is likely to be an apology of a salad, that could more appropriately be fed to a cow !

Any chance that you can turn the human race into vegetarians ? Well, at least one company thinks so. The aptly named Impossible Foods based in California (where else)  would like to try. An interesting Q&A with the founder that I read in the Guardian, prompted this post.

The logic for turning the human race vegan is impeccable. The largest environmental impact that humans have created is from rearing animals for food - cows being the primary culprit. The resources utilised - water, land, etc - per pound of meat is also the largest. The absolutely atrocious conditions in which we rear and kill farm animals has to be a permanent blot on the human species (pig farmers in Iowa - are you listening ?) And if the population of farm animals decreases, there is a better chance of wildlife prospering,  as one of the chief causes of habitat loss is grazing. 

Of course, this is not going to happen. Go back to the first sentence of this post. 

I however have this feeling, totally unsubstantiated by data, that this might be a long term trend. Technology in food production is on the cusp of a revolution. After all humans don't eat meat because they like to kill animals. They eat it because they love the taste. If, and when, plant based foods are engineered to taste like meat, there is every chance that people will start to switch. Especially if it is cheaper.  And then, slowly, the ethical side of it will start to play a part. If you can satisfy your nutrition and the craving for taste without killing, why wouldn't you do it. After all, if many of the meat eaters actually saw how their meat was being produced, a good proportion will turn vegetarians immediately !

But this is not going to happen in a hurry. Impossible Foods is just a fad and, this being California, fads are always welcome. But good luck to them. I might even come out of retirement and open the India branch - at least it will get me into the good books of the awful gau rakshaks !

But one day, in the distant future, maybe 100 generations later, our descendants will look upon with horror at "prehistoric man" for killing and eating animals. And maybe somebody will read my post from the archeological archives and pronounce me as a prescient wise man !

By the way, the photo is that of a veggie burger .

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Companies don't make investment decisions based on tax rates

If you cut tax rates, will companies invest more ? This is almost a religious belief in a certain party in a certain country in the world. Is it justified  ?

The answer, in my opinion, is mostly No.

Companies make investment decisions based on markets, sales projections, competitive advantage, margin potential, scalability and the like.  These are extremely complex business variables and occupy 90% of the time and effort that goes into a business decision.

The tax line is one of the last lines in the cash flows of an investment proposal. It is certainly important, but hardly a determiner of whether the investment goes ahead or not.

There are a few instances when the tax rate indeed becomes a determining variable in the decision. For example, in India, there have been many instances where the government, in an effort to stimulate an underdeveloped part of the country has allowed zero income tax rates for operations located in those areas. In such a case, the tax rate becomes a determiner of the location of the investment; not the investment per se. Nobody puts up a factory just because the tax rate is zero. They put up a factory because the business opportunity is compelling. Having decided to invest, they may choose to locate it in a low tax zone.

The other instance when a tax rate becomes a determiner of investment is if the tax rate is ridiculously high.  For example if the marginal tax rate is 90%, nobody will invest even if the business opportunity is compelling (M. Melenchon's supporters, are you listening ?). But if you cut the tax rate from 35% to 15% , it's a nice bonus, but it will not add one dollar of investment which otherwise would not have been made.

Further, companies make investments based on a 7 or 9 year time horizon. If one President cuts tax rates this year, what stops the next President from increasing it 3 years from now. So its almost inconceivable that a company which would otherwise have not made the investment, will rush to now make it because of the tax cut.

The argument that a major tax cut on companies, will spur investment growth is mostly flawed. It will however have the following consequences

It will improve corporate profits (for after all tax is a cost) and therefore both the investible surplus and/or dividends in the hands of shareholders. It will increase the wealth in the hands of those who are shareholders. They may spend it which will have a beneficial impact on the economy.

It will correspondingly increase the deficit that the government runs, and therefore the nation's borrowings. That will push the cost of borrowing and inflation.

But will it also increase tax revenues and therefore make the measure revenue neutral. Mostly No. But there is one big exception in the US, which will be the subject matter of the next post.

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Fear of Flying

In the normal world of business, companies are supposed to treat their customers with kids gloves. And customers are supposed to be very partial to the brands that they buy. It's all supposed to be a love love relationship .

Not so in the airline industry. Customers absolutely loath airlines. The act of flying is considered by most flyers, especially the regular ones, as next only to root canal surgery.  And airlines (mostly) hate their customers. They are little more than cattle, in their eyes. And everybody associated with the act of flying hates everybody else. The security folk are hated by all. Most airports in the world are glorified cattle pens. And yet the industry is booming. The rash of incidents being reported from the US will simply pass over. The hate hate relationship is alive and kicking and will simply continue thriving.

Why is this so ?  Two reasons primarily, in my view

- One, there is no option but to fly.
- Two,  customers care for nothing else but price. All the talk of wanting service is humbug.

We all moan about how seats have become cramped, food has disappeared altogether, everything costs extra , security lines are impossible, etc etc. And yet , if there was a flight that costed $1, but required you to stand on one leg throughout the flight, we'll cheerfully take it. And therein lies the problem.

Take India and the case of New Delhi . I had the misfortune of flying from there a couple of days ago and hence this post.

There are two domestic terminals in Delhi. One is swank, large, with lots of space, small security lines and can compare favourably with the best in the world. The three airlines that use this as the base are very good, serve complimentary food, are generally on time and don't charge ridiculous extras. The other terminal is a disgrace - crowded worse than a train station, no place to even sit, and  a close approximation of a pig pen. The airlines that are based here charge extra for everything, offer no complimentary food and bus you to the plane worse than a Mumbai local. But this lot are generally cheaper than the other lot by say Rs 500; maybe Rs 1000. Absolutely no prizes for guessing which one the passengers prefer.

We really should stop complaining about how airlines treat us. Until we are prepared to open our wallets a little more.

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Corporate Fluff

Lucy Kellaway of the Financial Times is one of my favourite columnists. One of her specialities is to roast companies that spew out meaningless bullshit in their communications and press releases. She even hands out annual Golden Flannel Awards for the worst corporate gobbledygook.

She's at her best today canning Mondelez (The Oreos to Cadbury company). The company's marketing head quit and this is what they had to say about finding a successor

" Our search for a successor will focus on finding a digital-first, disruptive and innovative leader who can build on Dana’s legacy and mobilise breakthrough marketing in a rapidly changing global consumer landscape"

Every word is a cliché and the sentence says absolutely nothing other than mouth inanities. Does it make you any wiser who they are going to hire ?

She has , over the years, mocked at meaningless drivel, quoting such outstanding examples as these

From Burberry - "In the wholesale channel, Burberry exited doors not aligned with brand status and invested in presentation through both enhanced assortments and dedicated, customised real estate in key doors"

Or this from E Bay - "We are passionate about harnessing our platform to empower millions of people by levelling the playing field for them"

Have you stopped to think about the nonsense that is shovelled each day. Infosys is doing an "orderly ramp down of about 3000 people", ie sacking them.  Citibank was "optimising the customer footprint across geographies " ie, er firing people. What about grandiose words for mundane things .  Speedo's swimming cap is a "hair management solution", another's aluminium doors are "entrance solutions" and Siemen's healthcare business is "Healthineers".

We ourselves mouth such fluff often - We want to touch base . We are moving forward. We are solutioning for a client. We are mitigating risks by risk management. We are at a "workshop" where somebody is droning through 200 slides and the rest are supposedly paying attention. We are tele commuting.

How about some good old plain English for a change. Something the Queen would approve of. Declare the next week as a fluff free week. Speak in simple English. If you cannot, try Gurmukhi ! A language where fundamentally jargon and flowery language is impossible.

A passing note to American readers. I know the English language is strange to you, but you may want to try and learn it !!

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The flying car

Did you see the news item about a flying car, revealed by Kitty Hawk, a Silicon Valley startup funded by Google's founder, Larry Page ? If you didn't , watch the video below

I now petition Kitty Hawk that the best place in the world to launch it first would be in Bangalore. Everybody knows that a basic version of this already exists in the wonderful city's roads , for after all, a two wheeler can come from all 360 degrees to dent your car even  today. But passing over that lightly, let's examine how and why this would be a major hit in Bangalore

Everybody who works in the world famous Ecospace building would buy it immediately. Ecospace is the world's first building where traffic jams are inside the building area and not outside. Average mean time currently for exiting from parking and coming to the gate is 45 mts. With a flying car, the coder will simply jump out of his office window in it and zoom away.  Similarly coders in cubby holes in every other monstrosity - Maanyata, ITPL, Bagmane in that order - are enough to ensure that Kitty Hawk's order book for the next 10 years is filled up.

Two wheeler riders of Bangalore migrating to the flying car are likely to be confused initially as they are genetically programmed only to ride on the pavement or ride on the wrong side of the road. They will need some significant retraining to take to this new vehicle. Two wheeler riders are also currently used to taking the wife and both kids along with them. It is unclear from the prototype of the flying car as to where the two kids can be placed. Perhaps they can be made to hang from the wings. There is no safety worry -  in Bangalore, even babies are trained from birth on how to hang on while on a two wheeler

The world famous cab drivers of Bangalore will be the world's best drivers on this car, as they have considerable practice in ducking and weaving and zooming. So the maneuvers required of a flying car come to them naturally. They will also be doing a massive public service. As they are used to constant honking, they will take this practice to the air and thereby drive off all the pigeons who currently infest every apartment building.

One of the greatest features of this car appears to be that it can instantly stop and hover in a particular spot. This will be very useful to BMTC drivers who like to stop in the middle of the road in an instant, if the fancy hits them.

There is one problem however. In Bangalore, every type of a cable - be it electricity, TV or internet cable dangles about 2 mtrs above every public space. Kitty Hawk will have to design the car such that it can take off and land passing through the 1 nanometer space available between the cables. In this they will be greatly aided by the dodging powers of the legendary cab driver of Bangalore.

We have one of the most proactive governments in the world in Bangalore. They will instantly build KR Puram, Silk Board and Graphite junctions in the air so that Bangaloreans on flying cars would not be deprived of the unique experiences to be had at the aforementioned places.  They will also ensure that enough airpockets are released into the atmosphere so that Bangaloreans will not get sick from a smooth ride - their bodies having being conditioned to the soothing effects of pot holes.

Another design suggestion for Kitty Hawk would be to provide a glass panel whereby owners can paint or affix stickers saying Bhuvaneswari , Parthiban and Rajasekhar (please note that these will be written in Kannada and therefore will require some additional lateral space)

Drivers will have to adjust their perception of tree branches. Today, the sight of a tree branch on the road means a vehicle has broken down and a twig and some leaves have been lodged in a crack to warn others of this fact. From the flying car, a branch and leaves may be safely taken to be on a living tree.

I am not sure of the impact these cars will have on the traffic cops of Bangalore. Perhaps they can climb trees and tow away the flying cars that have been parked on every branch - the ex two wheeler driver being an expert at parking his vehicle on any vacant area in any terrain.

What I am not clear is  how two drivers who have banged each other will fight. Current practice, which is almost a holy covenant is that you stop right there, get out and hurl the choicest abuse on the other guy.  You cannot move even 1 mtr from the spot (ie move to the side of the road) before fighting).  How this will be done mid air in the future scenario requires deep thought.

All in all, Kitty Hawk must simply relocate to Bangalore and start here. In any case the CEO is probably Arvindkatakshan Ramasubramaniam, who originally went from here. Welcome home, Sir !

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