Archive for February, 2009

Funeral’s better than life support

February 23, 2009

I’ve often wondered why don’t they funnel stimulus funds to Greenfield projects than resuscitating the dying gorillas.  My argument – it’s lot more productive because it saves time (no wounds to heal) and money (no clean-up cost, no claims from the past). It saves jobs as well because trained workers can be re-hired at lower wages because of their huge supply.

But I needed an ally before I could air my views. Today I found one in Tom Friedman.  Excerpts –

“Bailing out the losers is not how we got rich as a country, and it is not how we’ll get out of this crisis…When it comes to helping companies, precious public money should focus on start-ups, not bailouts…If we are going to be spending billions of taxpayer dollars, it can’t only be on office-decorating bankers, over-leveraged home speculators and auto executives who year after year spent more energy resisting changes and lobbying Washington than leading change and beating Toyota…Our motto should be, “Start-ups, not bailouts: nurture the next Google, don’t nurse the old G.M.’s.

Our country is still bursting with innovators looking for capital. So, let’s make sure all the losers clamoring for help don’t drown out the potential winners who could lift us out of this. Some of our best companies, such as Intel, were started in recessions, when necessity makes innovators even more inventive and risk-takers even more daring.…they will drive innovation in all these areas — and move wind and solar technology down the cost-volume learning curve so they can compete against fossil fuels and become export industries at the “ChinIndia price,” that is the price at which they can scale in China and India.

That is how taxpayer money should be used to stimulate: limited financing, for a limited time, targeted on an industry bristling with new technology start-ups that, with a little push from Uncle Sam, won’t just survive this crisis but help us thrive when it is over. We need, and the world needs, an America that is thriving not just surviving.

Thank you Mr.Friedman. You nailed it – well, almost !

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The middle class watch

February 17, 2009

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In recessionary times like this, one can never figure the ways of the middle class consumer right, except that (s)he is extremely value conscious and so on.  Yet for most businesses that harp on “high volume, low margin” model, it is the principle catchment category given the sheer size.

Neither rich nor poor, it stands out by its sheer variety in terms of background, profession and income levels.  With that change their aspirations and lifestyles.  This is precisely what lures foreign investors (both portfolio and strategic) and businesses such as high street retail to capitalize from emerging markets like India and China.  Here’s the Economist version.

In essence, the middle class mind works like a radar, picking up on signals from near and far, tending more towards free market and democracy.  They are not entirely risk averse and they are not afraid of breaching barriers to entry.  Closer home we have Narayana Murthy of Infosys and Kishor Biyani of Future Group to lean on. These value-for-money attitudes transform countries and economies. With its aspirations and capacity for delayed gratification, the middle class is more likely to invest in education and other sources of human capital, which are vital to prosperity. For years, policymakers have tied economic success to the rich (“trickle-down economics”) and to the poor (“inclusive growth”). But it is the middle class that is the real motor of economic growth.

Now the middle class is at risk as globalization goes into reverse they may well be hit harder than the rich or poor. They’ve learned to borrow and enjoy life and so are hurt by the credit crunch. They have houses and shares, so their wealth is diminished by falling asset prices. That’s roughly 2.5 billion sharing that plight and one never knows how their minds will work when their hopes are dashed.

May be, they could survive a downturn in the short term. But a prolonged crash might well undo much of the progress the developing world has lately made towards democracy and political stability. It is hard to imagine the stakes being higher.

It pays to track the direction of the middle class thought process.  If you are an entrepreneur, that’s a critical segment you can’t afford to ignore.  That’s where you should focus your business intelligence resources now that you’ve pretty much nothing else to do as people walk more on the road than into your store 😉

The famous Japanese enterprise

February 5, 2009

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In Japan, the Railway rules. Every working day a vast ganglia of 45 bullet, main and suburban-overground lines, with another 13 underground, channels 4.1m swipe card-carrying commuters into Tokyo’s central wards alone, with clean and exceptional precision. Shinjuku station alone disgorges 900,000 passengers each morning, sucking them in again in the evening, some of the men (and they are mostly men) by now inebriated, before dumping them in their distant bedroom towns.

Every year 2,000-plus train Chikan, or perverts, are arrested for groping women and schoolgirls—the vast majority during the morning rush hour, causing minor delays. For years, females just put up with the indignity of groping, either out of embarrassment or out of fear that their claim would not be taken seriously. But habits are now changing, and women will hold up the offender’s hand and shout “Chikan!”. Several lines also have women-only carriages for peak hours. A few men’s lives have been broken because of false accusations.

The only thing that can be said with confidence is that Japan has found original ways to make money out of people’s sexual predilections. Little more than a stone’s throw from the huge Shibuya station is the “Shibuya Pink Girl’s Club”, which on its varied menu offers a Chikan densha, or pervert train.

The “groper’s course” starts at ¥12,000 ($130), where the connoisseur picks out from the menu the girl of his choice, dressed either as a schoolgirl or office receptionist. This girl then beckons him through the window of a mock-up train carriage, which not only broadcasts station announcements, but even shakes and rattles. For the next 45 minutes the connoisseur is under no risk of arrest as he gropes to gay abandon—before joining the slumberers on one of the last real trains home.

This is it. The Japanese creativity never misses an opportunity 🙂

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Why not Implicit Minimum Return for investors?

February 2, 2009

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Implicit minimum bonus? (to use an expression that Basab Pradhan acknowledges if not defends) Huh, that sounds like a boy thing. Mine’s bigger than yours sort of `entitlement’…Why do CEOs need extravagant perks even when they are firing staff and pleading for taxpayer bailouts? Can it be shrugged off as weird DNA makeup?

It takes arrogance and narcissism to become leader of a Fortune 500 company. Those same traits, however, have become their undoing during the deepest recession in decades.

How about the `ticket items’ mortgages, kids’ schools etc. of the staff that get fired by the dour suits that mess up business strategies?  I think their sense of `entitlements’  should be perched a few notches higher because they likely don’t have much `retained earnings’ (excesses of yesteryears) to fall back on while they sit at home after having lost their jobs.

 

And then, why not Implicit Minimum Return for investors?  How many C-level executives will brave that diligence?

 

That’s a tangent the Wall Street “High Performers” never recognize.  It suits them not to.  It kind of gets wired into their DNA.  But you can never blame the suits’ instincts alone for being so haughty. When they arrive at that position, they have all kinds of toadies toasting them what geniuses they are, and then of course they begin to feel their lifelong feelings of self-importance have been confirmed. There begins the grand ride of delusion, taking credit for pure serendipity (or ancestral good karma) driven good years propelled by overall good sentiment, supported by acquiescent or similarly deluding credit rating agencies stamping away `AAA’ even on toilet paper coming out of a certain Bear Stearns masking their near absent appraisal criteria and redundant evaluation metrics.

 

For such muck up, the Wall Street suits express no sense of remorse to the investors/other stakeholders they wronged but have the gumption to stand up and claim Implicit Minimum Bonus.  Well the show can go on until some day soon a bunch of harried bondholders will suddenly get physically generous and allow their thighs to be used as ear muffs for the Wall Street bonus claimant.