Archive for the ‘Globalization’ Category

Pride in nationality – A speech for my daughter

October 3, 2010

Pride is an emotion that relates to an overwhelming sense of personal glory and achievement. But if I had secured my nationality by birth – something in which I neither had any choice nor a conscious role to play, should I be feeling proud or is it just my good fortune? Guess it’s the latter. So for the time being, I shall just stop at being grateful to my parents for that ovarian lottery I got. I shall save my pride for that future moment in my life, when I truly feel I’ve done my bit to advance the cause of my motherland, in whatever little way I possibly could. To me, that should bring a sense of glory and personal achievement and that, I guess will make me feel proud to be an Indian.

So what’s that big future moment that I’m talking of…?

I shall get off the block with my sense of awareness. How well do I know my country, its people, their inadequacies and insecurities..? When I think of my country, honestly my direct perception is limited to the few people around my home, my school and a few places I’ve visited in the past. The rest of my knowledge about our country is from what I’ve gleaned from a profit obsessed media (for which everything is `breaking news’) or what I’ve inferred from reports by someone else. And then I also need to look inwards and size up my natural strengths and recognize my limitations. Identify domains where I can be of good use, to bring about a “real” difference to as many as I could within a finite time frame.

The great deeds done by our great leaders like Mahatma Gandhi, Jawaharlal Nehru, Rani Lakshmi Bhai and so many others have given us a great history. But it’s the future that we have to be concerned with. I gather, our primary responsibility is to address the futuristic issues of how to live in an integrated world, a global village that overlooks all geographic boundaries and cultural inhibitions. We must preserve our culture by all means, but not to the extent of getting fanatical about it and refusing to acknowledge the benefits of adopting the proven best practices from others.

So I look across the world. I feel sad as we still find place amongst the countries of the “Third World”. I realize my big moment is around the corner, only if we could move up a few notches quickly and get listing under the “First World”… How did the first world countries get there…? Reasons are not far to seek. They had the right mix of individual enterprise, backed by government support, propelled by enormous political will. Of the three, Individual enterprise is something that is within our control. I take stock and look up our population data. India, has a population exceeding 1.1 billion, of which 60% are below 40 years. Stacked against most other countries where an ageing population constitutes the majority, we clearly enjoy a demographic dividend. It presents a perfect foil for us to demonstrate our individual enterprise and leverage the relative economic boom that we are currently witnessing, especially at a time when the most other developed nations are struggling to get rid of the adverse effect of the recent meltdown.

I am hopeful. The ball is rolling. CEOs of some of the Fortune-500 companies already are Indians. Indra Nooyi of Pepsico, Vikram Pandit of Citigroup, Shantanu Narayan of Adobe Systems, Lakshmi Mittal of Arcelor-Mittal, Ramani Iyer of Harford Financial to name a few. I can see the effect rubbing off on our enterprising young minds as many IIT and IIM graduates are starting up ventures on their own, brushing aside seven figure salaries offered by top global corporations. Now what remains is the government support to their initiatives like the Israelis do and get it propelled by political will. If that happens while I am still around, I shall be happiest to stand corrected and say “I am not just lucky to be Indian, I sure am proud about it.”

Busting the Beijing myth – It’s China after all!

February 11, 2010

William Fung, Li & Fung’s managing director of Li & Fung Ltd., a century-old Hong Kong–based sourcing company which manages a 40-economy sourcing network, calls his company’s recent record “flat-world success”. Excerpts from his interview –

“The existing measurements of trade are very much antiquated. When the president of the United States says, “We’re running a trade deficit with China,” he’s working off an erroneous base for measurement. The way we determine a product’s country of origin is based on something called “major transformation,” rather than value-added processes. If the major transformation is final assembly, and that occurs in China, the product will be said to be made in China and exported back to the U.S. — even if most of the value of that product is actually manufactured in the United States. In other words, under that system of measurement, the country that gets credit for making the item may not be the one that gets the majority of the economic benefits.

For example, look at a laptop today. Chances are that the monitor is made in Taiwan, the memory is from some plant in Penang, the assembly might be in China, but “Intel Inside” is the most expensive component. Because it’s assembled in China, they slap “Made in China” on it, and it becomes part of the U.S. trade deficit with China.”

I’ve often wondered why Chinese consumers make do with quality that sucks. The fact if one were to believe Mr.Fung goes like this.

“In China, there has always been a dichotomy between the industry that supplies the domestic markets and the industry that supplies exports, world-class products. If you were setting up a world-class factory in China, for example, you could set it up tax-free, but you couldn’t do so if it were for domestic products. Also, the export sector has been whipped into shape by companies like ours and customers around the world who demand compliance with rules or standards involving technology, speed of response, quality, health and safety, the environment, and other issues. The domestic side is not faced with the same compliance issues. So the hundreds of thousands of factories supplying the domestic market are generally of lower quality…. The big thing in China that will provide its next growth is to satisfy the local consumer by merging these two sectors…. Chinese consumers are like any other consumers; they just want the best product their money can buy, whether it’s from India or China or anyplace else.”

On its artificially depreciated currency –

“Everyone thinks China is such a juggernaut, but it has a serious weakness, one that reminds me of Japan in the 1970s and ’80s: a lot of production capacity, but no raw materials. China has some cotton but is still importing a lot from Pakistan and the United States. It has almost no wood. All the metals are imported. The only energy source China has in abundance is coal, which is highly polluting. China is very vulnerable, because it is subject to worldwide fluctuations in the prices of raw materials.”

“When the RMB [renminbi] appreciated [in 2005–07], China fell into a fairly uncompetitive situation. Now, China believes that it can be competitive if its industrial base, especially for exported goods, moves away from the high-cost coastal regions and into the interior. Until that happens, China is unlikely to let the renminbi appreciate, because doing so would put the country in a position of being vulnerable to changes in materials prices.”

Well, it may not be the complete picture. I can think of Chinese military might that’s quite formidable. No country would settle for cheap ammo for its armed forces. So it’s not all bad quality after all. But Mr. Fung’s contention seems plausible. I whisper “Trust, but verify”. It’s China, after all…!!!

Who will buy my salad shooters now?

March 9, 2009

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Who will stand in for the American consumer?

 

So we know it’s not so easy to swap the all-gorging American consumer with somebody else. Nobody has that kinda’ appetite!  Tom Friedman in his NYT Op-Ed column puts it beautifully –

 

“Let’s today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”

 

We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese …

 

We can’t do this anymore.“

 

But then enterprise has to produce and serve to consumers.  How will the new bunch be?  Who could guzzle stuff like an American consumer?  To whom will you sell your salad shooters anyway?

 

The earth could’ve stopped spinning

December 26, 2008

Oh, for the year that was… Battered global economy, foreclosed homes, Oil prices that soared and crashed, currency values that swung high and low – ah, the Madoff Scam that ended the year with a flourish.  If I had the magic powers, I would have put the spinning earth on pause mode and have time stand still so that 2008 comes after a long enough pause to forewarn the world of the economic crisis that awaited it.  And till we all had time to get out of our portfolio stocks 🙂

So what does that leave us with? Some bitter lessons. Will we miss the automatic deference accorded to titans of investment banking? The senior executives of banks used to command great respect; it is now clear that many of them did not deserve it.

The Anglo-Saxon capitalist model has been sorely tested in the past 12 months. Governments have been forced to prop up the banks and tempted to erect scaffolding around industrial titans. We may come to miss some of the dynamism and inventiveness of unfettered capitalism, but we will not miss glib free-market fundamentalism.

The ground is now clear for a safe touch down of Keynesian prophecies.  The first lesson – Never analyze the economy like you do a business. For a company, it makes sense to cut costs. If the world tries to do so, it will merely shrink demand. An individual may not spend all his income. But the world must do so.

Next lesson – Never treat the economy as a morality tale. It’s a technical challenge. In the 1930s, two opposing ideological visions were on offer: the Austrian; and the socialist. The Austrians – Ludwig von Mises and Friedrich von Hayek – argued that a purging of the excesses of the 1920s was required. Socialists argued that socialism needed to replace failed capitalism outright. These views were grounded in alternative secular religions: the former in the view that individual self-seeking behavior guaranteed a stable economic order; the latter in the idea that the identical motivation could lead only to exploitation, instability and crisis.  We can’t predict which is right.  But we can certainly believe neither is.

We bid a hearty farewell to the lack of discrimination that characterizes the height of a boom. When even conscientious investors are happy to hand their money over to a man with inexplicable returns, a peculiar business model and whose name is pronounced “Made-off”, something is awry.

Finally, we are pleased that it looks like the end of a casually unsympathetic attitude towards society’s walking wounded. When even the highest in the financial land have been forced to seek assistance from the great mass of ordinary taxpayers, a humbler approach from all of us must be in order.  So usher in 2009; only if you remember the lessons…

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Life in a crestfallen world

September 19, 2008

In the early 1960s, a Broadway musical called “Stop the World, I Want to Get Off” was all the rage. But you hear the sentiment of that title a lot these days.  Opinion polls show that Americans are both weary with and wary of the rest of the world. It’s as if they wish it would all just go away.

The increasing signs of anti-globalism sentiment are unsurprising given that the typical American got nothing out of the last economic expansion. Adjusted for inflation, the median wage is lower than it was in 2000, and jobs are less secure. Americans want to cast blame, and unfortunately, it’s always easiest to blame foreigners-the people who trade with them, and migrate to their country. This could be a large problem in the future. When isolationism last flourished there in the 1930s, it hurt the economy, and if it comes to dominate their thinking in the aftermath of financial crisis, it will hurt them again.

Globalization means freer markets and more political freedom worldwide; multinationals are businesses, large or small, that have operations in more than one country; and illegal aliens are people who want a better life so much that they are willing literally to risk everything for a chance at the worst jobs that developed economies offer. All three are major contributors to western prosperity, productivity and standard of living.

Even now, someone somewhere is penning The End of Capitalism. Experience tells us snappy book titles should be treated with caution. The global financial system will never be the same again. But just as history survived the collapse of communism, so the market economy will weather the demise of Bear Stearns, Lehman, Merrill Lynch and HBOS.  Wise after the calamity, central bankers, market regulators and the rest are already saying what are needed are tighter rules, closer oversight and a premium on sobriety. The rest of us may ask why it has taken so long for these guardians of the system to stir from their complacency. Doubtless we will be told in turn that this is no time for recriminations. The people who presided over this mess must now be trusted to save the global financial system from their past mistakes.  The fiendishly complex products that seemed for a time to define a new financial capitalism will be seen for what they properly are: instruments of deception as much as of innovative genius.

How much good all of this will do is an open question. To the interested observer, it looks that the big mistakes of recent years have not been so much about the absence of regulation, but a failure to act. The central bankers and the regulators were simply asleep on the job – something they will never admit while inventing jargons like `toxic instruments’ that wreaked havoc!

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When you gotta’ spend, spend. Don’t save…

February 21, 2008

It’s budget time again for us.  Content starved news channels and half baked analysts will run riot for days together over this non-event.  Industry associations and business bodies will hold lectures and seminars to enjoy their annual few hours of fame. Few days later, there could be noise of rollbacks and the dust will settle. Man on the street will still be worse off.  Hardly does he care either.

What is certain is we’ll hear more of the `D’ word again – Deficit. It riles me no end to think we are in perennial deficit mode while our neighbor lends money to the Americans to spend and consume.  Where are we missing out? 

The Atlantic figured it out here. 

“China has a high savings rate describes the situation without explaining it. Why should the Communist Party of China countenance a policy that takes so much wealth from the world’s poor, in their own country, and gives it to the United States? To add to the mystery, why should China be content to put so many of its holdings into dollars, knowing that the dollar is virtually guaranteed to keep losing value against the RMB? And how long can its people tolerate being denied so much of their earnings, when they and their country need so much?  

The Chinese government did not explicitly set out to tighten the belt on its population while offering cheap money to American homeowners. But the fact that it does results directly from explicit choices it has made—two in particular. Both arise from crucial controls the government maintains over an economy that in many other ways has become wide open. The situation may be easiest to explain by following a U.S. dollar on its journey from a customer’s hand in America to a factory in China and back again to the T-note auction in the United States.”

When you gotta spend, spend… Don’t save !

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Get a load of “The New Normal”

November 26, 2007

Roger McNamee of PE firm Elevation Partners and the author of the book “The New Normal is quite vocal about change. 

He says, “The New Normal” is the era of the individual. In companies large and small, each person now matters more than ever before. The Internet has finally made it easy to launch and grow a real business. For entrepreneurs and managers, the global economy opens previously untapped sources of supply and demand, cost savings and innovation. Individual investors now have access to tools and knowledge that were, until recently, restricted to professionals.

The individual will have more power than ever as employees and consumers. Independent contractors and will be far more in demand as well as service organizations designed fill a niche for larger ones. Anyone who has strong specialized skills will have far more leverage in the company. China and India will be a powerful, if not dominant, force in the global economy. The stock market will be influenced more by individual investors.

“Forget about the Next Big Thing,” he says. “The New Normal isn’t where you wait for the next boom. It’s about the rest of your life.”  Getting things right the first time is more important than getting things done quickly.”

That’s the opposite of the late-’90s mantra, “Fail faster to succeed sooner.”  I like that. 

I say “with you, Roger… My business is built on those assumptions. You’d better be right, Mr.McNamee…” 

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The India magic

October 16, 2007

At a time when the Indian market is agog to know what a ‘world-class’ Vodafone (previously Hutch India) will bring to the Indian mobile phone market, Vodafone is bringing back Hutch India’s world-class practices to Europe. “I’m putting plane loads of managers on flights to India, and I’m telling them ‘go get me the secret of their low-cost business model.’ When we did the deal, we only thought about what we would bring to the business; now we find there’s so much more we can learn from them,” says Mr Arun Sarin, CEO, Vodafone.

Read more on what Sarin thinks Europe can gain from India here 

No wonder top Indian talent refuses to latch on to overseas postings, leaving only the deadwood to settle down abroad, silently suffering all kinds of racial profiling at the airports and treated like pests and vermin at work.  End of the day, they earn in currencies that’s not even worth the paper they are printed on as are the health of those economies. After all, only the dumbest will leave this blessed land where Chanakya that wrote Arthasasthra was born… 

I’ve always imagined, for an Indian living abroad, it’s like doing time feeding off a breakfast menu that announces the arrival of horribly sick someone – milk and cereals / bread and eggs /croissants / strawberries and cream / fish and chips (all horrible combos) when you have here gastronomic delights like steaming Idlis, lip-smacking chutney(s) and delicious sambar followed by filter coffee for breakfast….!!!!  

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It’s just the beginning

September 22, 2007

Young middle-class Indians are the happiest people of all and much more satisfied with all aspects of their lives compared to other nationalities, according to a new global survey by Swedish research and consulting firm Kairos Future. The priorities of Indian youth — work, good career and a position with high status, are reflected in their values such as endurance and entrepreneurship.

“Indian youth are also strikingly more optimistic about its future and also about the future of society. The general picture in other countries is that young people tend to be personal optimists but societal pessimists,” according to Kairos Future Group CEO and founder Mats Lindgren. “Indians are focused on their careers and are much more status-oriented than youth in Europe,”  he adds. 

While I say cheers to that, it got me a bit worried too. If that happiness signals contention, I’d rather they be unhappy. We are nowhere near the level of self development that we are capable of achieving with our potential.  Still if young India is content and happy, then I think it is not quite awake to its opportunities and true potential. We could be ignorant, but we can’t afford to be naïve.  My exposure to the developed world and its youth tells me that young India has miles to go.  Be it in its outlook towards life, politics, sense of achievement and creative disruption, we have a lot to learn from others. Young India will have to push (and pull) itself harder and stretch its aspiration levels. There’s no reason to feel comfortable and lax. We’ve got to clean up a lot of mess and in that we’ve an uphill task.  We’ve to educate ourselves about a lot other things than just academics and uplift our poor masses into the mainstream. The hardest task is in presenting the yoke of our population as our strength, a potent, rich market that doesn’t under-consume. If we could achieve that, it will attract large global enterprise to our hinterlands and will create jobs by thousands.  Remember, best way to get rich is by helping others get richer.

We should learn systems approach and intense work culture from Japanese, execution skills from Chinese, attention to detail from Germans, Entrepreneurship and innovation culture from Americans. These are but a few that I’ve had the first hand feel of, but I’m sure there could be other virtues from elsewhere that I may not be exposed.  But please don’t get tempted to absorb the decadent culture of teenage binge drinking, drugs and other bad habits that destroy the health and character of many a youngster in places like England and Italy. That also explains diminishing presence of these once great nations in the rank list of global achievers.  While I think of Lenovo, Google, VMware, SAP and closer home Educomp, Financial Technologies and Suzlon, I can’t think of a single billion $ company that sprouted in the last decade from the UK and Italy. 

So be smart and pick your cherries.  Avoid the rot.  Never rest easy, not for a second.   All the very best.

The ping pong people

September 17, 2007

William Pesek of Bloomberg makes his point while he says an economy’s biggest export should never be its people.

He goes that nations get smug with large scale “remittances” from abroad that it stops exploring new avenues to attract “investments inward” that creates jobs and opportunities locally. He has got a lot of data to back, with enough of Bloomberg survey results thrown in. 

I finished reading it and had my own questions. Has Pesek been hired by USIS to fuel a debate in the media? Locking down borders is not easy; fueling debates in media, gathering public opinion are…

Most people go on their own. It’s not an economy that drives them away; its lack of depth does. It’s after all a function of demand and supply, isn’t it? You go because someone out there could use you.

What’s wrong with a government that feeds on “remittance inwards” kitty to build its future as long as it lasts?   

[Disclosure : I am not a pro-migration guy]

I think Illegal immigration happens because legal immigration is tough. Not all illegal immigrants harbor ill will. Most of them leave home because they see brighter opportunities elsewhere. Instead of rewarding that acts of enterprise and using the flock to bridge the demand supply gap, nations limit and restrict people traffic by imposing legal restrictions and by making stupid laws. 

Capable students getting Harvard admissions, despite willing to pay full fees, cannot make it because they don’t get Visa – now, isn’t that ridiculous?  Yes, immigrants both legal and illegal will compete for jobs with locals in developed destinations, but then local employers and consumers benefit too; from reduced wages and prices. The immigrants also become consumers and an already vibrant market is further expanded.

When they fly back and forth, the local airlines in the home country orders hundreds of airplanes from Airbus (France) and Boeing (US) creating more jobs there – who benefits?  

Why, it didn’t occur to you Mr.Pesek?  Come on… You can do better.

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