Sachin 800

People have been dropped from the Indian side for all kinds of reasons, but it will be a first to see someone dropped for denying Sachin a century. Thankfully, Dhoni has been suspended so Dinesh Karthik will escape. If he was another batsman, you never know.

In any case, it is weird that we still tout Sachin as our best batsman. There was a time when he was a unique combination of aggression, style and consistency. Is he still our best though? Shot for shot and inning for inning, we have far better players. When Sehwag is in the mood, Sachin starts to look like Dravid. When runs flow from Laxman's bat, Sachin's strokes look manufactured. And there is no doubt who the "wall" is. Well yes, he blends in these qualities better than others, and produces good knocks from time to time. But I have my reservations about him being the best.

For one, I am deeply disappointed at his inability to lead the team. Such absurd shirking of responsibility would be tolerated only in our government services where one joins as a clerk and can retire as one, albeit hardworking, if one chooses to. That is precisely the allegory that comes to my mind when I watch Sachin play. A focused, hard working, dedicated and determined worker ant. He cant play like a Sehwag or Yuvraj because he is supposedly mature and responsible. But apparently not mature or responsible enough to lead the team. So all we get out of Sachin are some consistent innings, and its a shame that we dont have the talent to replace him.

Not to discount his feats and accomplishments, but what's the point of keeping him around, if he is serving no higher purpose, simply being a batsman building records, blocking the place of a youngster who can be groomed for the future. And even then, threatening the place of others for denying him a damn record! He is like our good old Maruti 800. A reliable and elegant alternative to the Ambassadors and Padminis when he broke out on the scene. And he remains so. But would you be caught dead driving a 800 today?

The state of unity

Raj Thackeray must be rolling on the floor laughing. Congress, which lambasted him until a few weeks ago for his divisive tactics, has gone ahead to announce the creation of Telengana. Worse yet, it had no clue of the simmering discontent within its own ranks, and the issue has become a comedy circus now. If anything, Raj stands vindicated. His actions may be condemnable, but his reasoning that one state cannot subsidize corruption and underdevelopment in other states merits consideration. The independent states movement is simply a corollary of this observation - that one part of the state cannot receive all the development and focus at the cost of others.

I was born and raised in Hyderabad, so I can definitely say that Telegana is the poorer of the three areas that form AP - the other two being coastal Andhra and Rayalaseema. The coastal Andhra is definitely richer in natural resources with fertile plains and rivers whereas Rayalaseema is traditionally wealthy and also has the temple town of Tirupati helping its economy. The Telengana area is part of the Deccan Plateau with mostly barren lands except for some cotton farming. By some freak chance, Hyderabad was made the capital of AP, else this area would have been written off totally. Of course, now, the demand for a separate state is purely a political manoeuver. And it has sparked demands for a bunch of other states. How long before we end up with 500 odd princely states we started with...

The paradox of sport stars

The recent Tiger Woods incident has highlighted a painful fact that great sportsmen are not necessarily great men. If anything, most of the guys at the top are terrible people.

Of the thousands that play tennis at a pro level, only one wins the Wimbledon. A nation of billion plus is represented by only 11 men at the national level. Getting to the top in sports requires talent, hard work, and a bit of luck. Talent and luck are to some extent predetermined, so the only thing a budding athlete can put in hard work and loads of them. And hard work is not simply hours of practice, but also developing a killer instinct to win, and at any cost. They develop a fiercely competitive spirit and seize on the slightest of opportunities. Even after reaching the top, these traits are required to stay there. The more physical a sport is, the more ruthless one needs to get. I am certain soccer players have the worst character record among top athletes. Even on the field, they resort to blatant cheating, be it diving for penalties or the use of hand. And until this recent incident, I thought golfers had the best one.

We, of course, are enamored by their successes and equate them to role models. But it is simply unfair to expect that they will smoothly metamorphose from ruthless animals to stellar human beings. Of course there are certain exceptions who readily come to mind. But they are just that - exceptions, who are born with incredible talent and put in an extraordinary amount of hard work. They only needed to remain focused, not become ruthless, to get to where they are. But the majority has had to scrounge for opportunities and capitalize on them at any cost. It is the survival of the fittest and the fittest are not necessarily the best.

Party Crashing

A couple showed up uninvited at the recent White House reception of PM Singh. However, the husband has claimed they were certainly invited and it is the organizers who goofed up. Whatever the case, one can be certain that the truth will be unraveled in no time and the offenders will be appropriately punished. The law and order system is extremely efficient in the US. To cite an example, a few months ago, a Denver family caused a national scare when they thought their 8-year old son accidentally flew off in a hot air balloon. It turned out to be a hoax, and the couple have now pleaded guilty, and admitted to the pulling off a publicity stunt.

The rest of the world, however, is having a good laugh at the Secret Service's expense though. Questions are being raised about their ability to protect the first family. It is unfortunate that the right actions end up evoking the wrong questions. What if the secret service never found out? Or chose not to make it public? That's one of the great American traits - the ability to own up responsibility. I am willing to bet that our Presidential and Prime Ministerial gatherings routinely have gatecrashers that our security doesnt know about.

Value creation v/s redistribution

Why do firms exist? There are two broad views. The capitalistic view pushed by the US until recently insists that a firm must create value to its shareholders. The European view, however, is that a firm must create value to its stakeholders, which includes employees, investors, customers, society etc. The difference between the two shows up when value is not “created” but simply “redistributed”. Typically, value creation, implies an improvement in status quo. Where such value is tangible, its creation is by way of making things or processes faster, better or cheaper. But where the said value is intangible, its creation is determined by the perception of customers or consumers.

When a bank implements an IT system that speeds up its processes, it definitely creates value. Employees work better, customers transact faster, and risks of improper or fraudulent transactions are reduced. Or a power plant for that matter so long as it does not disturb the natural ecosystem.

On the other hand, let’s take expressways, which reduce travel time, thus creating value for commuters. But we overlook the loss incurred by fuel pumps because of increased fuel efficiency, auto mechanics because cars are on the road for fewer hours, hotels because people reach their destination much faster and need to stop for the night, roadside eateries, which are not allowed on expressways, and even if there is one, commuters might give it a skip and so on. This is a case of value redistribution – from fuel pumps, hotels, restaurants, to commuters. This is also the case with IT outsourcing. In these cases, the first definition comes up as myopic, focusing solely on the firm and its shareholders with total disregard to other players. And sooner or later, such cases will inevitably lead to agitation and outcry.

Recently, the WSJ reported how Mumbai’s black-and-yellow cabbies resorted to physical protests and violence against fleet operators such as Meru. Meru offers incredible value to a certain class of commuters, by simply not screwing up. People don’t pay more for the air-conditioning, but for such basic manners as courtesy and promptness. Nonetheless, it is a case of value redistribution, and is bound to rankle the sentiments of certain groups. Not that I support the case of taximen. Rather, I am appalled at their stupidity for I don’t know what else it can be. The unique prepaid system in our country doesn’t benefit anyone. Passengers pay nearly 50% more than the normal rate and I am quite certain the cabbies get paid less than the regular fare. It is only the middlemen who make money. But how did we get here? Simply because our cabbies refused to be honest. I can pardon them for lack of polish and manners for it is a matter of upbringing, and even the burgeoning middle class is woefully short on this. But there can be no excuses for dishonesty, and unless they are willing to see this, no amount of agitations and protests will help.

What's in a game?

Soccer is easily the most popular sport in the world, both in terms of players and viewership. And possibly the only sport today that has remained indifferent to technological advances, because success continues to be determined by such elementary considerations as physical stamina, skill and teamwork. The sheer thrills and rushes of adrenalin offered by the game are unmatched. Fortunately or not, soccer is no longer a game but a national obsession as highlighted by the events following the world cup qualifier between Ireland and France.

After a 1-1 draw, France managed to scrape through in extra time with a golden goal set up by Thierry Henry, one of the game’s leading strikers. However, Henry used his arm to control the ball, which went unnoticed by the referee. The Irish were devastated, and to lose because of a refereeing error was too much to digest. The team protested the result and wanted a replay, which is understandable. What came as a surprise was the call for a replay from the Irish Prime Minister himself! And he even brought up the matter with Mr. Sarkozy on the sidelines of an EU meeting!! Now, Irish fans are protesting outside the French embassy.

My point is beyond how to deal with refereeing errors and the dying element of “sportsman spirit”. I find it incredible that an entire nation can take the result of a game so seriously. We have seen it happen in India too every time Sachin gets out on a dubious LBW decision, and more so if we go on to lose the game, which is often the case. Why are we unable to see these events as part of the game and move on? After all, India losing matches has no direct impact on our lives. If anything, we will stop following cricket and put our time to better use. Technically, even players should not bother much for they are rarely paid on the basis on the result (unless in a tournament or in a qualifier such as this where they lose out on games). But in a bilateral series such as the Ind-SL one currently underway, how does the result matter?

The answer probably lies in the structure of our brain, which has three components: the reptilian brain, limbic brain and neocortex. The reptilian brain is instinctive and reacts immediately to stimuli without thinking, which makes reflexes possible. On the flip side, it also leads us to automatically react without thinking, and probably explains the current Irish rage. We get attached to our team and become one with it. So when the team loses, we lose. But before we can step back and analyze, our reptilian brain has perceived this as a threat and forced us to respond. Once you make a move based on gut, it is nearly impossible to let things go and reconcile with reality. Instead, we end up with rationalizing and justifying our stance.

The trick, of course, is to suppress the reptilian instincts and let the limbic brain and neocortex take over. The limbic brain processes emotions whereas the neocortex is responsible for reasoning and thinking. Apparently, studies show that our neocortex is severely underutilized. There are ways to address this, some of which I learned in the MCC and AMCC courses at IIM-A, but more on that later.

Child Prodigies

Sachin recently completed 20 years in international cricket. He made his debut at the age of 16. Is it fair to subject a minor to the demands of international cricket? In his first Test series, he was hit by a Waqar bouncer on the nose. Thankfully, it wasn't serious, but if it was? Were his parents careless?

The other day I watched a news item on CNN IBN that showed a 9-year kid in Tamilnadu driving a car at speeds of 100 kmph. The incident took place sometime back, but only recently came to the attention of child rights activists, who vociferously and vehemently condemned the episode. It was sort of funny because the parents had spoken to the media after the incident and were proud of their child. Those clips were now being played with a child psychologist yelling her heart out on why such stunts are detrimental to the growth of kids.

For a moment, I was taken aback by the incident. The anchor wondered why parents were so enamored by records and went to such dangerous lengths. But full marks to the channel for presenting an alternative view. A certain gentleman named Hussaini, himself a stuntman, came on the show. Without beating around the bush, he said the act was justified if proper precautions and safety measures were taken. For good measure, he added that if we are not adventurous, we would never know the limits of human endurance. For example, how can we say that kids are not fit to drive? They are super comfortable with computers, then why not cars? Finally, and most logically, he pointed out that this was no different from teaching kids to swim at the age of 5 or enrolling them in tennis classes, which do have the risk of a child getting seriously injured.

In a few minutes, I took an about turn. Pushing children into music and sports as early as 3 is not only acceptable but is thought of as necessary if they have to get anywhere in life. Schoolkids are overloaded with study materials and tuitions in preparation for IITs. All of us has seen at least one kid that has lived up to the saying, "All work and no play makes Jack a dull boy." Can we wait until kids grow up and make their own choices? This is what happens in other developed countries where people try all sorts of things before even getting a college degree. But then we have too many hands chasing too little opportunities so to not do anything about a child's career appears unfair as well. I guess the line between guiding children towards their passions and thrusting our passions on them is thin. Very thin.

Buridan's Ass

I didnt know that donkeys had any analytical skills until I heard about Buridan's ass, which refers to a philosophical paradox. It states that a donkey placed exactly between two stacks of hay of equal size and quality will continuously evaluate its options and ultimately starve to death. That reminds me of computers running into infinite loops, but it also happens to us on several occasions. Only, we use the more acceptable euphemism of analysis paralysis. Now, more than ever, we are susceptible to this lunacy.

Every time I go shopping, I feel like an ass myself. The men's section usually spans an entire floor, and it sounds mighty stupid to pick up the first shirt I like without checking what else is out there. But by the time I have surveyed the entire section, I am only more confused. And its too late now to simply pick up my first choice because choice is always relative and never absolute. So I am running 2x2 matrices in my head comparing looks, price, brands and what not. And a clear winner is extremely rare. In the best case, I am too confused to choose so I drop everything and walk out of the store. Worst case, I pick up something as a compromise and then keep second guessing my choice until I reach home.

The proliferation of shopping malls and supermarkets has made matters worse. Not only do we have more choices for what we need (toothpaste, soap etc), we are also introduced to newer stuff that we dont need. So the process of buying has become inefficient and, more often than not, we buy stuff only to regret later. I remember the days when grocery shopping simply meant going to the neighborhood kirana store with a list of items - toothpaste, refined oil etc. Brands were mentioned sometimes, not out of loyalty but convenience, for a brand name always represented the category - Sunsilk meant shampoo and Surf meant detergent. Neither did the storeowner have the shelf space to stock multiple brands nor was the consumer adventurous enough to try something new. But the best part was the efficiency - it took hardly 10 minutes to buy provisions for the month despite having to manually add up the purchases. Sometimes, I had to wait an additional 5 or 10 minutes because of the rush, and that felt like an eternity. Now, I dont even blink after spending 5 hours at a Big Bazaar.

Domestic Terrorism

The recent shooting rampage in Texas by an army psychiatrist has complicated matters for the US. It was a simple open and shut case if the gunman was a Hispanic, European or a South East Asian. But he turned out to be a Muslim. Even then, had he refrained from taking the name of Allah, as some reports suggest, the matter could be conveniently sidelined. But the combination of these two facts poses a question that cannot be avoided: Was the Texas firing an act of terrorism? Apparently, there is now evidence that the gunman was in contact with an individual sympathetic to Al Qaeda. That may not mean much, but it is hard to ignore that the US Army, supposedly the mightiest in the world, has just been shown to be vulnerable.

Now this is precisely the problem India has faced since Independence. A small minority of our population has perpetrated terror attacks on our soil. Inevitably, they owe allegiance to Pakistan and happen to be Muslims. To separate the criminals from the innocent majority is no mean feat, and we have failed horribly. And as support, the US has offered nothing more than platitudes such as India being an important ally in the war against terror. The US had no idea how difficult it is to tackle domestic terrorism. Until now.

When you are attacked by foreign forces, the enemy is clear (not necessarily easy) and you can kindle the spirit of unity and patriotism and get into a war. But when attacked internally, you dont know who the enemy is. Where do you start?

It will be interesting to see what the US does now. I doubt if they will let this pass as a one-off incident. But then there is no way the US can create two classes of citizens based on religion - that will be a slap on the face of American values. Neither can it afford to assume that all US citizens are beyond doubt. The current case of David Headley is an example. Even pulling up Asians for additional security checks post-9/11 caused a huge backlash against "racial profiling".

One thing is certain. Whatever measures are adopted, we wont know the complete details. The American intelligence agencies are good at these things.

The Utility of Probability

We intuitively understand probability, but its application is incredibly complex. For the record, probability is defined as the likelihood of an event occurring, expressed in % terms. Textbook explanations talk of rolling a dice and predicting the chance of getting a 6. These are benign experiments with results of little consequence. But when probability is applied to real events, interesting, if slightly unnerving, possibilities emerge.

Let’s take power cuts as an example. In most Indian metros, we are used to 24-hour power, but there is always a probability of grid failures that will cause a blackout. I don’t think even power equipment manufacturers provide 100% uptime guarantee, although the probability of failure is extremely low. So if we didn’t have any grid failures in the last five years, the probability of such failure increases with each additional day. Yet, the way we look at it, if something hasn’t failed in the last five years, it probably won’t in the future.

This paradox is explained to an extent by the framing of the situation. Underlying every probability data is the assumption of a very large number of observations. We think five years is large enough, when apparently it is not, as is seen from the recent crisis. If property prices are rising over the last few years, it is probably time for a correction, but we believe otherwise. However, we do grasp probability pretty well in other areas. For example, when a batsman hits a century, we expect that he will soon get out. We know scores above 150 are very rare. (Why so many batsmen get out between 100 and 150 is another question altogether.) In a game of cricket, with a definite start and end, we can easily imagine possibilities and compute probabilities. But in life, defining a start and end period is easier said than done.

We shouldn’t feel too sorry for the theory itself is weirdly structured. It says, for example, that the probability of getting heads or tails when tossing a “fair coin” is 50% when the experiment is repeated a large number of times. So if I take a random coin, what’s the probability of heads? This dilemma is beautifully captured in one of my favorite Jay Leno punch lines, “George Bush’s popularity rating hit a low of 25%, which means, now only one in four people support his presidency. So when the President is having dinner with his wife and two daughters, he is the only one that thinks he is doing a good job.” The second statement logically flows from the first one, but one can immediately see the fallacy. So if autism affects 1 in 10 children, we know there is no way to rule out our kid by gathering a group of 10 children. The statistic is chilling, but it has no practical utility, which leads us to believe that our child is not the “1”, resulting in complacency and complications.

So what to do with probability data? One could argue that we should strive to minimize the probability of adverse events (or failures). For example, the probability of traffic snarls can be minimized through electronic monitoring of traffic patterns and adjusting the timing of signals or diverting traffic through alternate routes. This will work, and brilliantly so, but here’s the problem. Once these things work on a consistent basis, we assume that they will never fail. So when they do fail for whatever reason, we are caught unawares. And my uneducated opinion is that as we keep minimizing the probability of failure, the magnitude of failure goes on increasing. If the traffic signals were coordinated and centrally controlled, a break down will result in unmanageable chaos. And with every day such a system works brilliantly, the probability of failure, infinitesimal as it may be, keeps mounting. But a high probability doesn’t mean the event will occur:)

The Consequences of Drunk Driving

We have seen several cases of negligent or drunk drivers losing control of their vehicles and running over pedestrians. In some cases, such as the recent one in Noida, the consequences are fatal. The outrage against the offenders is understandable, but the saddening outcomes prevent us from making an objective assessment.

First, one would say hit-and-runs must be punished severely for it shows utter disregard to the life of a fellow human being. But if you drive on Indian roads, you very well know the fate that awaits you should you stop to check on the victim. A mob quickly gathers and you are the target of all their pent up frustration. In several cases, mob assaults have caused deaths too. Can one really blame the driver for fleeing the crime scene?

On the question of negligent and drunk driving, there is no dispute that such offenders must be severely punished. But the most stringent penalty for such an offence is probably to revoke their driver’s license and levy a huge monetary fine, and possibly a few days in prison. Were the offence of rash/drunk driving committed in the day during heavy traffic, it could be argued that the driver put lives of fellow commuters at risk, and a more stringent penalty is required – possibly charging with intent to murder or something like that. But during the night, when the roads are deserted, is rash driving so bad? It is understandable that the victims and their survivors, and even the general public, will be in no mood to consider this. A life has been lost, and that implies the offender must be tried for murder.

Of course, the law makes a difference between murder and manslaughter. Murder implies premeditated killing whereas manslaughter denotes no prior intent. But even a manslaughter charge is harsh from the offenders’ perspective. You are returning from a late-night party with a nice buzz when you see a deserted patch of road and decide to let it go. The worst you expect is to crash against the pavement. Imagine your shock when you hit the pavement only to realize you have just crushed three people sleeping there.

My point is that harsh punishments in individual cases won’t change anything beyond providing emotional relief to the victims and survivors. The underlying risk of recurrence remains. The solution must be to create a strong disincentive against rash and drunk driving. And there must be an equally strong disincentive against squatting/occupying pavements and roadsides. I realize both are easier said than done, but the risks are worrisome if not addressed. If you drive on a regular basis, you know the feeling when you watch pedestrians crossing the road with no regard to the oncoming traffic.

LCDs and DTH

Flat screen LCD TVs are probably the most sought after gadget today. But their ads are beyond my comprehension. What's the point of showing attributes of clarity, fidelity etc on regular TVs? The Samsung ad, for example, shows a football game is immaculate detail - the emotion on the players' faces, sweat trickling off their bodies, the giant-sized football. Well, if I can see all this clearly in my 21", what's the point of getting an LCD TV?

Same goes for DTH ads that purpotedly claim to have better quality. I think Airtel has Saif watching a football game - half the screen is blurred to represent regular cable and other is bright to represent Airtel signal!! I feel insulted watching these ads. The BIG TV ad is much better. A wife is talking about the husband's excitement at purchasing an LCD TV followed by his disappointment when he saw much better picture quality at his friend's place. Apparently, BIG TV makes the difference, but in doing so the message conveyed is also that you only need such a connection if you have an LCD TV. Chances are, if you have an LCD TV, you are on DTH already and the switching costs are not negligible.

Sun DTH has found the right formula in my mind - the price. When one has to switch from a Rs. 300/mo cable connection, the biggest resistance is in the cost. Yes, there is a segment that wouldnt mind paying a premium for better quality, but I doubt if there is such a perceptible difference between the providers there. Tata is even smarter. They only advertise Tata SKY+ which is the premium offering that comes with a DVR. The ads are exciting but most people would balk at the high price. Oh no problem, sir, we have a cheaper option without the DVR. Bingo!

Blue Ocean Strategy for FM Channels

The launch of FM channels has put radio entertainment back on the map. So much so that phone makers were forced to bundle FM radio with the instrument and the move has helped broaden the reach and appeal of FM. In a city like Mumbai, where the average commute time is more than an hour (one way), FM has become the staple form of entertainment for commuters.

It is, but natural, that FM players are vying to attract the most number of listeners during rush hours so they can jack up advertising rates. Which is why they have their marquee RJs hosting shows, and extensive brand building to raise their profile. But such differentiation ceases to matter when everyone follows the same strategy. Trying to get better RJs or changing the tone of these shows can hardly be termed innovation. This is a typical example of trying to compete with what’s called “Red Ocean Strategy”.

When markets get competitive, one should step back and assess the situation afresh. What pulls listeners to an FM station? In my mind, the top three factors are: good music, more music/fewer ads, and interesting/funny RJs. The first and third are pretty much standard so the way to break out is the second option. (Am not saying all RJs are good, just that they are equally bad.)

The solution is simple. Eliminate RJs. That will allow more time for ads because time that was earlier split three-ways (music, RJ and ads) is now split two-ways. You may choose to slip in an occasional interview to keep listeners curious. Otherwise, listening to one star or the other everyday has become a boring thing. This is “Blue Ocean Strategy”. The only potential hiccup here is if FMs have to pay royalties based on the number of times a song is played, in which case the expense will shoot up. Can that be offset by the savings in RJs’ pay is something that needs to be worked out.

I must confess this is not my original thought. Jack FM in Los Angeles plays rock 24x7, has no RJs, doesn’t take any requests, but has some self-deprecating and condescending recorded messages that play between songs. (“Broadcasting from a dumpy little building in beautiful downtown Culver City”), and is a popular station out there.

Per-second Pricing

Continuing on the topic of pricing ploys...

Tata has managed to steal the thunder from Airtel and Reliance by adding more subscribers for the second month in a row – and by a wide margin too. It introduced pay-per-call on Indicom to let users talk as much as they want by paying a fixed price. Then, of course, DoCoMo let users pay per-second for calls and per-character for SMS. Has it paid a price in the process? TRAI is making noises about having all players move to per-second billing, and expectedly, the operators are upset. I think they should celebrate.

The data on the left is from Bharti’s Quarterly report. The average tariff is almost 1p/sec, which is what the new scheme offers too. The right side shows my calculations to determine revenue loss by offering per-second billing.

I am assuming the average call duration is 120 sec and that 30 secs are wasted every call – the call is terminated at 1 min 30 sec, but we get charged for 2 min. In this scenario, ARPU lost is about 23%, and that is a big drop.

However, I think people who opt for this scheme, or even subscribers to whom the scheme is made available (should other operators follow suit), will make additional calls. For two reasons. First, of course, is the genuine need to make those short calls to let someone know you are late etc. Right now, one might hesitate because the 5 second call will end up costing you 60p.

Second, and more interesting, is the need to make short calls so you can “realize” the savings. At least initially, when one has per-second billing and everyone else is on per-minute tariff. The temptation to “demonstrate” savings should not be undermined. In a group, if one has to make a call, it is the per-second guy that will go first to show everyone that he pays only for what he uses. I mean there is no point in going for per-second billing and then not reaping its benefits. So you make a 30-sec call, show everyone that only 30p has been deducted, and feel happy that you saved 30p.

Assuming these additional calls last an average of 15 seconds, calculating the # of new calls to make up for lost ARPU comes to about 14 calls per day. Should such a call last 30 sec, it only requires an addition 7 calls a day. I think that’s a small enough number. Also, notice that the difference in the ARPUs without considering additional usage is about Rs. 60, so I doubt if people are desperate to save that amount. Rather, most consumers would like to make sure the Rs. 300 they spend every month goes the extra mile. So my take is that usage will drastically increase with ARPUs increasingly slightly or staying constant.

Is that hard to believe? Why do we spend Re. 1 sending an SMS when a call is only 60p?

Pricing Ploys

My dilemma in the previous post is not as far fetched as it seems. We are victims to such mind games everyday. For starters, we have come to subconsciously relate price with quality. I remember reading somewhere that in Japan, it is cool to show off the price tags on clothes even as you are wearing them.

The price-quality association is the least malign of the tricks. There are much more subtle ones out there. If you are looking to subscribe for the WSJ, you get three options: online only, print only and online + print. The pricing is such that the price for online + print and print are virtually the same. One would think its a really dumb move that would kill its print subscriptions, but apparently, this has increased the total number of subscriptions - of course, with most people going for the online + print deal.

One also routinely seen in magazine offers at almost 50% less than the cover price if you subscribe for a year. They are essentially hoping that the temptation to save so much money almost always overpowers any questions on the utility of such a subscription. And it does work in certain segments.

And, of course, if you are part of middle-class India, you know how our system of haggling works. The vendor almost always quotes a price that is three times what he is expecting. As a buyer, you are sort of aware that he is overcharging, but you dont know by how much. So you start with a price that is 1/2 what you are really willing to pay. Often the deal will conclude with you paying a little less that your max price and you will walk away satisfied. The vendor would have made a neat margin and is happy too. But as buyers, we will never know exactly how much we overpaid.

In some cases, pricing is simply gaming buyers, but in others, it is directly related to the value perceived by the buyer. Couple of days back, a bridge collapsed on the railway line in Mumbai thus disrupting and delaying all long-distance rail traffic. Airlines promptly jacked up their fares with a one-way Chennai-Mumbai ticket starting at 12K!! Clearly, anyone desperate enough to reach Mumbai will pay that.

P.S: Having got a return trip for half that fare, I think I should stop complaining now:))

Mental Accounting

I spent the Diwali weekend in Chennai. I decided to make the trip only a week in advance, and was frantically searching every damn website for the cheapest fare, but found nothing below 10K return. Out of sheer luck, I stumbled upon Indian Airlines, which was offering a return trip for 5K. I couldn’t believe my eyes and booked my tickets without a second thought. In the rush to save money, I booked my return for Sunday night despite Monday being a holiday. By the time I realized this and wanted to make the change, the fares had gone up by 3K so I let it be.

inThe magnitude of the fare sunk in only when I saw the credit card statement. 5K is not a small amount. Of course, it's hard to deny that the deal was a sweet one "under the circumstances”. So I set about analyzing what the circumstances were. First, how badly did I want to be in Chennai? My mom had gone there a week ago and would be there during Diwali. Most of my extended family lives there, and I had not visited them for more than a year. Neither did I have any alternate plans of celebrating Diwali in Mumbai. So, yes, I wanted to go badly. But I think there is another factor that tipped my decision in favor of going.

I came across the expensive fares first. I saw 10K, thought the airlines were crazy, and decided it was best to spend some money on beer and the weekend in bed. But when I saw a fare half that number, the temptation to save 5K was overpowering. Would I have made the trip had the fare been 5K uniformly across airlines? Or even if the going fare was, say 7K, and I was getting it for 5K. Maybe not. The incentive to save 2K is not as irresistible. To give you an example, I shopped at Pantaloons this weekend. At checkout, the sales guy asked me to enrol into their rewards program. I had to pay Rs. 100 to get into the club, and would be immediately rewarded with a gift voucher for Rs. 200. Without hesitation, I declined the offer.

What's my point? I am trying to analyze the trip financially. Did I spend 5K - a loss, save 5K - profit, or spent 5K to save 5K – net net? (In the second case, I think I definitely saved Rs. 100 by not going for the card.)

The business of business...

Continuing with thoughts on business models...

To exist, businesses must deliver value to its customers - this is different from the debate on creating value for shareholders vs stakeholders. Preferably, value must be tangible, but in some cases, it is notional. The industry that best demonstrates value creation is IT. Just imagine the time and effort wasted on mundane tasks everyday if we didn't have Windows and Microsoft Office.

Of course, value creation is not as obvious in all cases. Entertainment and television, for example. Some people would argue that television is turning us into morons and is actually value destroying. Yet, the industry is exploding. This is a case of notional value, where people are ready to lap up any and every form of entertainment. It can be risky to bet on such models because they fundamentally rely on exploiting consumer preferences. Very similar to what the fashion industry does. The value created is not by clothing people but rather by making people feel that their clothes are better than others. This is also the business model of our local quack, palmist and other fortune tellers – they all make the consumer feel better.

The ability to deliver notional value on top of real value is the holy grail of a successful business. Which means, not only is the product good, but you also take pride in ownership. The ipod and iphone are perfect examples. World-class products enhanced by the “Apple” brand. Even here, the relative magnitude of the tangible and notional values matter. So long as the tangible value is much larger than the notional one, the business is stable. Microsoft, for example, probably has a negative notional value, but is yet a profitable business because it offers unmatched tangible value. On the other hand, FMCG products do have some tangible value, but rely heavy on notional value. I doubt if any of us can differentiate between two shampoos in a blind test.

The simplest way to check whether a business adds value is to ask if it helps people do stuff “faster, better and cheaper”. Ideally, all three aspects must be addressed but sometimes addressing even two is okay.

I mint?

Great ideas sound exactly like foolish ones - until they work that is. That's my favorite Scott Adams' quote.

The thought occurred to me when I saw the ad for imint on the back of a bus. It is a rewards system where you earn points every time you spend, which can be later redeemed for gifts or vouchers. Nothing radical about the concept itself. Credit cards have been doing this for a long time now. But here's what puzzled me. Is there an opportunity for a third-party to make a business out of it?

I dont know for a fact how imint works, but my guess is they have consolidated the rewards system of some retailers and cards so that the customer is able to get points for all transactions in a single "currency". So no more 100 points with ICICI, 250 points with HP, 50 points with Jet with none of them sufficient by themselves to do anything. Now, we get 450 imint points that is good enough to get a mug or something.

I guess imint adds some value thru the economies of scale it gets by consolidating the rewards system. So that explains why ICICI, HP and Air India have hopped on. Their points now make some sense to customers. But how would imint get new customers? For instance, why would HDFC or Jet sign on? Its destructive to both HDFC and ICICI because their customers wont see any difference in using either card, thus resulting in mutual cannibalization. In fact, I wont be surprised if ICICI has an deal that prevents imint from signing on competing financial institutions.

So how can imint grow? Well, by encouraging customers to spend more. That I think, personally, is a friggin stupid model to run a business.

Front Page

There was a time when the front page of a newspaper was a precious piece of real estate. Only the most important of the important news would find mention, and even then, the story would be cut short and continued elsewhere for it was unwise to waste so much space on a single story. (The exception being the Hindu, which always has complete stories.)

Although I dont have first-hand experience, I think there was a time when the front page determined newspaper sales. Especially during high profile murder trials or controversies, people would buy the paper after glancing at the headlines. Also shown in innumerable movies where paperboys at busy signals are carrying tabloids screaming with the latest headlines.

Well, all that would be history soon. Our newspapers have realized how precious these front pages are - literally. The front page has dumped news in favor of ads. I believe every single major newspaper now comes a "wrapper" with ads on both the front and back. The trend started with tabloids such as Mid day and Mumbai mirror but even TOI and HT have adopted this. I wonder how long before our dailies go the magazine way where ads dominate and content has a token presence.

Power Landing

Mythili Bhusnurmath recently wrote a piece on our inability to wait until the plane comes to a complete halt before turning on our mobiles. But its not just the mobile phones we are after. Barely a second after the plane touches down, and before it has even started to taxi, seat belts are popped open, mobile phones turned on, overhead compartments opened, and a beeline is made for the exit. Were it not for the locked doors, the adventurous might not even wait for the stairs and consider making the 10-foot jump. Such abject disregard for rules and safety is unheard of in any other country and makes one wonder why someone spending a couple of hours twiddling thumbs in the air would suddenly get so excited and active to save a few minutes at most. After all, our flights are usually off by more than a few minutes.

Here's the point: It's not those few minutes that people are after. It is the resultant delay that could be in hours if those few minutes are not well utilized.

Let me explain. We live in India where power laws surface even in the most mundane of instances.“Power laws” is a term used to indicate a non-linear, usually exponential, relationship between two variables. Let’s say it takes you an hour to drive from home to work. If you start at 7, you reach at 8, start at 8, you reach at 9 and so on. If you plot your start time on X axis and arrival time on Y axis, you will see a diagonal straight line that indicates a linear relationship. But let’s say, if you start at 7, it takes you an hour, but if you leave at 8, it takes an hour and 30 minutes. At 9, it takes two hours and so on. Now, if you plot these, you will get an exponential curve. The point being, if you are 5 minutes late in getting off the plane, it might take you an hour longer to reach your home or workplace.

What does a typical domestic traveler do on arrival? Pick up the baggage and head for the exit. Now, in the US and other countries, there is a clearly marked lane with several cabs waiting. One simply gets into a cab and zips off. Here, though, we have the prepaid taxi counter - a monopoly that cares a damn for travelers. They are in no hurry to get people out fast and are often seen engaged in shouting contests with cab drivers. So if you are late by even a minute, you see 10 people ahead of you in the line at the counter. That also means 10 opportunities for things to go wrong. Someone does not know the exact name of the locality so the guy at the counter denies a cab and an argument ensues. Someone isnt carrying change - another argument. The 2 minute delay in getting off the aircraft has already snowballed into a 20 minute delay in getting out of the airport.

There's more. The roads leading out of the airport arent broad enough so the traffic is typically crawling. During peak hours, traffic starts piling up and a smart cabbie tries to save 30 seconds by cutting across a lane and creates a mess that takes 30 minutes to clear. Your misery just keeps compounding...

Am not saying that the precious headstart of a minute or two will ensure you will reach your destination in time. There will be several other traps along the way that are impossible to avoid. Just that getting out of the airport quickly is the only aspect under your control and it would seem foolish not to use it. I am willing to bet that the moment our airport facilities and services ensure that we can get out of the airport without hassles, people will be much more relaxed. In fact, I think we are much more relaxed when arriving at new Blr or Hyd airports that are much less congested.

Gandhi Jayanti

Why is Gandhi Jayanti a public holiday? Shashi Tharoor thinks the Mahatma would have wanted us to work this day, for he advocated work to be worship. But Mr. Tharoor, we are so busy worshipping work the rest of the year that Mahatma's birthday provides the perfect opportunity to step back and reflect on whether our work is worth worshipping at all. Of course, most of us end up spending the day in the bed, in front of a TV, or in a movie theater, but it is not our fault entirely. The essential ingredient for such reflections has been denied to us on the day when we need it the most. Not everyone has the option to stock up liquor ahead of time or consume it in their homes. In any case, given the levels of corruption in our government offices, the holiday at least minimizes underhand dealings on Mahatma's birthday.

I am not quite sure why Gandhi is revered today. Whether his ideals still hold is questionable (and will need a separate post), but why cling on to something that happened 70 years ago? He gave us freedom, you say? Sure, thank you Mr. Gandhi. But it is time to move on. Why do I have to thank this man every time I breathe?

Granted that it is in the human nature to hold on to events and people because it gives us identity. But it is also what prevents us from breaking the shackles of the past. Drawing an analogy from the business world, organizations routinely shake up the top management when growth stalls. In fact, leaders are chosen based on whether their management style fits the need of the hour - aggressive managers for growth and conservative ones during bad times . Why then are we singing paeans of non-violence and truth when our neighbors are needling our buttocks with nuclear missiles?

Marathi Manoos

I thoroughly enjoyed watching Raj Thackeray interviewed by Arnab Goswami last Sunday. Delighted, in fact, for it provided the rare occasion where Arnab was lost for words, and resembled a castrated cat. Part of the problem, I guess, was that Raj chose to respond in Marathi. It's kinda obvious, but I missed the beginning so maybe Raj offered a particular explanation for not answering in English. And it wasn’t clear whether Arnab understood Marathi or if they ended up using an interpreter, which explains his constipated questioning. (I am ruling out the possibility that Raj doesn't know English.)

Raj, though, was perfectly composed and his answers, while uncompromising, were logical and rational. He basically pointed out that all states have a responsibility to their residents, and Maharashtra in general, and Mumbai in particular, shouldn’t have to bear the brunt of poor governance elsewhere. He also begged to differ from the popular opinion that Mumbai is a commercial and financial hub becauseof its migrant population. Rather, he noted, that because Mumbai had all the characteristics to be such a hub, that people flocked in. On the question of preferential treatment for Marathis, he simply pointed to agitations in Tamil Nadu and Karnataka, where representation for localites has always been an issue. In Bangalore, for example, I recall a recent push by the local film industry to ban screening of Tamil and Telugu films because Kannada films have no viewers! On Chhat puja, he was enraged that, except in Mumbai, the event is not organized at such a scale anywhere else. I think he gave the example of Maldives that has a significant immigrant population.

His analysis of the situation is spot on. The root cause, of course, is the asynchronous pace of development, which also explains the urban-rural (India-Bharat) divide to an extent. But Raj neither has the ability nor the inclination to attack the root so he is simply going after the symptom. One can only question his approach rhetorically and ask, were the tables reversed, then would he, a migrant, accept being subjected to such discrimination by natives? Same goes for the migrants too – would they, as natives, watch in silence when their cities and towns start filling up with migrants?

Paths of Glory

Wanted a break from serious reading so picked up Jeffrey Archer's Paths of Glory last week. It is an engrossing account of Goerge Leigh Mallory's attempt to conquer Mt. Everest in the 1920s. Dont let that turn you off for this book is as good as any of Archer's thrillers.

My only experience with rock climbing is going up an artificial 20-ft mobile rock in an offsite during my MBA program. I managed to climb up, but was so tired when I got there that I let the safety wires bring me down. Agreed, I am not the epitome of fitness, but the experience did give me some idea of how tough it is to climb mountains. So to even think of climbing the Everest in the 1920s sounds like sheer madness. The use of oxygen was considered "cheating" at that time and the only cover from the -40 degree temperature was multiple layers of clothing. Which sound like minor inconveniences when you consider that no one had done it before so one had no clue of what route to take and what the conditions will be like.

Archer is in good form despite the dry nature of the subject and refrains from launching into monologues on mountaineering. In some ways, this is a romantic novel where the protagonist happens to be a mountaineer.

If you have never heard of George Mallory, I recommend reading this book first before googling him. Even if you do happen to know about his life and times, this is still worth a read.

Scarcity in Abundance

I was baffled the first time I came across a STOP sign in the US. Thankfully, it was before I started driving there. I saw vehicles approach the sign from all directions, stop for a moment or two, and proceed without any commotion or confusion. I tried my best to crack the code, but gave up, and asked an American colleague. She gave me a ridiculous look and said, well, whoever approaches the STOP sign first, gets to go first. #@$@##@!!

Of course, STOP signs will never work in our country, but even signals are under pressure. On my way to work, I stopped at a red light, put on the hand brake and waited for the signal to turn green. Obviously, I was a novice. The professionals don’t believe in relaxing. Rather, they are on the lookout for the signal to turn green for the cross-traffic, judge how long it would remain so, and slowly start inching towards the intersection as it turns amber, such that by the time our signal turned green, they zip off a clean 5 seconds ahead of us. That’s an important 5 seconds though for they manage to reach the next signal ahead of the pack, and in front of the line.

I am quite certain I have indulged in similar acts of desperation, either on the road or elsewhere, so I don’t consider myself any different. But what drives our behavior? I believe it is the deep sense of insecurity embedded in our national psyche. Generations have grown up in misery and scarcity where life was a zero-sum game. You won only if your neighbor lost. Although the situation has considerably improved, these fears have not been fully alleviated.

This is aptly summed up by Shashi Kapoor in the movie, Deewar. The scene shows Shashi Kapoor being interviewed for a manager position. The interviewers like him and offer him the job when a young lad barges in. He apologizes for the delay and explains that he had to walk as he was out of money for the bus fare. The interviewers turn him away because the job has already been offered. Unable to see the young lad in misery, Shashi Kapoor rejects the job citing poor pay. The job goes to the lad, who recognizes this gesture and is extremely grateful. Shashi Kapoor simply suggests that “Yeh zindagi ek third class ka dibba hain dost. Main baith jaata, tho tum khade ho jaate.”

Austerity and Keynesian Economics

I am not the best articulator of economic concepts but this is too tempting to let go. The government has decided to cut costs. MPs and ministers are being asked to fly economy and use state guest houses.

This move is an economic disaster, especially when we are yet to fully recover from the recession. The GDP of a nation can be expressed as a sum of consumption, investment, government spending and net exports:

Z = C + I + G + NX

Roughly, GDP is the total value of goods and services produced by an economy. Now, for the economy to be in equilibrium, production must equal consumption. Therefore, GDP equals aggregate demand, which equals aggregate supply.

According to Keynes, the aggregate supply drives the GDP of an economy in the long run. That is, the resources available with a nation, both natural resources and people, will eventually determine what a country can produce, and therefore, what is available for consumption. In the short run, however, it is the aggregate demand that rules. When demand goes up, supply levels will adjust upwards to meet this increase.

Now, looking at the above equation, one way to increase GDP growth is to increase consumption, which means put more money in people's hands so they can spend. This is precisely the logic behind stimulus packages. But what's the guarantee that I will spend the money? As it is, the economy is gloomy, so I might rather put it in a bank deposit. To make that option unattractive, central banks cut interest rates, so you either spend or invest your money, both of which will boost the economy as can be seen in the above equation.

Government spending is much more effective in getting economies out of recession. Every rupee spent by the government has a multiplier effect, because it creates demand, which fuels more demand and so on. Tax cuts work in a similar manner. When people have more disposable income, well, they dispose it off in some way, which boosts consumption again.

So the present government's decision to embark on an austerity drive is an economic blunder. If ministers do not stay in hotels, the hospitality industry will suffer a slump. Hotels will have to make some cut backs that will result in people losing jobs and their vendors such as catering and laundry guys losing business. When these people have less money to spend, they will cut back on festival purchases such as apparel, which is the boom season for the retail industry. So now the retail industry will get into a slump and so on.

Of course, these effects would kick in only if the government stopped "spending". I doubt if our government was ever prompt in paying for its services, and has probably accumulated several years of unpaid dues so we shouldn't worry too much.

Anyway, with solid corruption, money will still be flowing freely in the black economy that will at some point trickle into the mainstream and boost demand. I can't remember right now, but I believe at least one well-known economist actually made the point that the underground economy plays the role of a stimulus package.

Farce India

Force India's fortunes have undergone a dramatic turnaround in the last two races, and our media has spared no effort to shove this piece of trivia onto our face. I fail to understand why this is a matter of notional, let alone national, importance.

The team has been part of the F1 scene for years under various names. The owners, unhappy with its performance, found a sucker in Mr. Mallya. Ever the publicity seeker, he promptly made much noise and named it Force India, which actually reminds of the old Air India joke. We all know how well his decision to start an airline as a marketing campaign for liquor brands is working out. What makes us think he will do any better with an F1 team? Anyway, except for Mr. Mallya, nothing in the team is remotely Indian. Not the engine, not the crew and definitely not the drivers. Mr. Mallya is not even the full owner although he has pulled off the brilliant gimmick of attaching our nation's name to the team.

So, it irks me to no end when he makes statements such as "Force India carries the hopes of a billion people." The words that come to my mind are too strong to mention here. I doubt if any self-respecting F1 fan is actually cheering for Force India. The ones doing the cheering are either in the media or are people just content with "India" and some variation of "victory" being used in the same sentence. (I shouldn't blame the second group for those are indeed rare occasions.)

Far from protesting the embarrassing reference to our country – until recently, the drivers were finishing in double digit positions and were engaged in duel to not finish last - we have found cause for celebration.

Plane drivers

Are the pilots right?

Unions are a pain for any management, but to fire pilots for starting a union sounded extreme. Apparently, it was set off because the relations between management and pilots soured when Jet wanted to cut back on pilot pay.

However, I wasnt too comfortable with the idea of going on a pseudo strike and causing inconvenience to the general public let alone losses to Jet. But I was simply stunned when I learned that pilots make as much as 10L per month. Yes, per month. Some might make less but nothing below 3-5L. I heard Naresh Goyal on TV say that people making that kind of money shouldnt be exploiting rules intended for blue-collared workers. And that sounded logical. (Let me get this out of the way. I did feel pangs of jealousy on hearing the size of the pay packet.)

So the point is, do employees with six-figure salaries really need unions?  Such people have high intellect and specialized skill sets that cannot be easily replaced. That also means they have plenty of employment options. Their thought process is broad enough to consider the possibility of job loss and save for the rainy day (which bluecollared workers may not or even cannot). But airlines is an oligopoly, and one that is not doing too well. As it is, you have no  more than 5-6 airlines in our country with the majority of them losing money. While airlines may not be able to join hands publicly, they can still work behind the scenes to keep salaries down. A couple of years ago, our own IT companies agreed not to poach from one another, and have repeatedly stated that rising employee salaries are a concern.  Whether such moves amount to collusion or cooperation is a matter of debate.

I think the pilots are right in forming a union to maintain the power balance, but in the process have shown that they are no more than simple plane drivers. That is, they are no different from a railway motorman or a crane operator  who will find himself at sea should he be let go. It is not a skillset that can be transferred to a different industry.

Karan’s coup

Karan Thapar has to be one of the most obnoxious TV interviewers anywhere in the world. He symbolizes all things wrong with our media. Yet, he did pull a coup of sorts the other day when he got Jet Airways ED, Saroj Datta on his show with Capt. Sam Thomas (one of the pilots initially sacked) on the phone. And in his thankfully inimitable style, Karan did all the talking, skillfully twisting the meaning of their words here, and shamelessly putting words into their mouths there.

I was stunned that the two parties so adamant on sticking to their positions chose to talk on his show rather than have a direct discussion. I guess once these matters are public, neither wants to extend a hand and be seen as weak.

I was more surprised that Sam Thomas chose to participate. The pilots are walking a thin line by going on mass sick leave. No one believes they are sick, unless they mean "sick" in a perverted way. And given the inconvenience caused, the public is not going to be too merciful. So to appear on a TV show and state that the agitation will continue and we are being discriminated against only offers evidence to the obvious - that the mass sickness is indeed a strike. The pilots have numbers on their side and it might save them from any severe consequences, but to be so brazen shows a sense of pride, which they say comes before a fall.

The problem with airlines...

Pilots declare strike. Management threatens. Pilots go on mass sick leave. Management sends doctors to their homes. Had it not inconvenienced so many travelers, this was just the kind of comic relief to lighten up these gloomy days of recession.

Today's strike aside, most airlines worldwide are headed for a disaster. I think the problem is lack of creativity. Airlines is a boring industry in every aspect. They are highly capital intensive and are subject to several regulations due to safety concerns. Consequently, they are "boxed" within a certain framework with very little room for creativity. Take the safety instructions by the crew before takeoff for example. (It is only Southwest that has managed to break out and the results are there to see.)

Even the names are boring. Jet Airways, Spice Jet, Indigo, Go Air. One would be pardoned for concluding that the law requires airlines to include either Jet or Go in their names. Even worldwide, the names are surprisingly drab. Except for Virgin which has gone to the other extreme, and following in its footsteps, our own Kingfisher.

Contrast it with how IT firms are named. Apple, Sun, Oracle, Google, Adobe etc. Except for Microsoft, no one felt the need to announce what business they are in, let alone where they are from. Whereas for airlines the preferred choice is the nationality of the airline followed by "airlines".

The only way the airlines can come out of their perpetual slump is by hiring a software CEO.

Cold Steel

I had heard great things about the book. Still, I was reluctant to spend money on something whose climax is well-known. Given that both cos were Europe-based, government intervention and interference was expected and references to Mittal's racial background could not be ruled out. I presumed the book would follow some kind of a timeline leading upto the finale, but beyond that I had no idea what it offered or why it got such great reviews. So I picked it up with a pinch of salt.

Right from page 1, it sucked me in. I forced myself to put it away so I could get some sleep at nights. The writing was plain and for the most part didnt get in the way of the narrative. The events that unfolded were so intriguing they needed no literary embellishment. Although at times the authors did provide some arbit literary twists. I also found it difficult to remember all the characters given that there were so many of them. And their European names didnt help. The book is little biased towards the Mittal camp, both in terms of coverage as well as characterizations. Maybe the Mittals happily cooperated for the book whereas the erstwhile Arcelor execs werent too forthcoming.

But the big question I have is on the neutrality of the book, or the lack thereof. Right from the time Lakshmi Mittal first wanted to talk to Guy Dolle (Arcelor's CEO at the time) about collaboration, Dolle was shown as a snob whereas Mittal was depicted as a victim of persecution. This, despite the fact that Mittal's team for this bid consisted of the best in the business. I would think Mittal's success is as attributable to the caliber of his team and their clout as it is to his personal humility during the course of the battle. Reading the book, you cant help but get the feeling that it was mostly Mittal's humility that clinched the deal whereas his character flaws are conveniently glossed over. It is quite possible that things did go down this way. Just that it reada bit like a fairy tale.

It would seem the Mittal's PR team has a done a great job not only during the bid but also in managing the aftermath, of which the book is one. In any case, this is a definite must read if only for the visceral thrills on offer.

Back from Jaipur...

Fell in love with the city at first sight. The new part of the city is well laid out with broad roads and tree lined avenues. The old city is of course rich with history and tradition and the walls are colored in what I thought was a shade of saffron. (Dont quite know how it got construed as pink.)

Had only about 4 hours to spare so it was whirlwind sight seeing. The city palace was very impressive. Clearly, the emperors of this part of our country were well ahead of their times (Maybe they all were). It had trophies from winning polo competitions as far back as 1920s. The arms and weapons collection was breathtaking. Daggers with jade and crystal hilts! Reminded me of Mahabharat and Tipu Sultan serials. I couldnt help wondering how tough wars of those days must have been.

The weather was warm and sultry and the traffic a bit unorganized but other than that no complaints at all.

Saved by our incompetence

The jury is still out on why we missed the financial crisis. Some popular reasons include the strong culture of domestic savings, rural demand, YV Reddy's supposed foresight and so on. But there is one cause that is completely overlooked, our own incompetence.

A simple analysis of bike and car accidents should reveal that the cause is often a foolish driver. He was drunk, speeding, trying to cut lanes, racing with another driver etc. What goes unnoticed is that the people enticed into doing these things are competent as well. I mean, do you see cars used by driving schools ever involved in an accident. Yes, the teacher can control them, but considering that you have all the beginners driving, these cars must be the most accident prone. Yet it rarely happens because learners hardly drive faster than 20kmph.

The Americans really pushed the envelope of their financial system. But only because they were thoroughly familiar with its intricacies in the first place. Most of our bankers are still grappling with our financial system, thanks to the public sector legacy. Our capital markets are not well developed and the general public is still skeptical about the term "investment".

In a sense, the US went into the Olympics and made a mess whereas we never qualified. But hey, at least, we are not losers!

Today’s news, Tomorrow’s history

Until last week, swine flu deaths were prominently reported on the front pages of leading national dailies. But now, they have been relegated to a mere statistic. Has swine flu suddenly become less dangerous? Is it no longer the epidemic it was made out to be?

Hardly, but our imagination has moved on. Even Jaswant Singh is so last week. Force India and Fisichella are in. And the debate on Pokhran II is brewing and will probably be the next big story. The aphorism that public memory is short sounds so true, and if anything, it seems to get shorter. But what is often overlooked is that memory can be easily rekindled, especially in the Internet age as is beautifully captured in a scene in the film, Notting Hill.

Julia Roberts, playing an American actress in the movie, ends up spending the night at Hugh Grant’s place. The next morning papparazzi show up and pics are snapped. Julia is all hyper about the situation, but Hugh asks her to chill for the public memory is remarkably short and this too shall pass. But Julia retorts that it will pass for him, but every time a journo wants to write something about her in the future, he will search the archives, come across this image, and make sure to print it. (Am trying to find the exact lines. Even IMDB doesnt have it.)

I guess my point is if you are in the news for the wrong reasons, the entire nation doesnt have to actively track your fortunes. It only takes one person to run into you several years after the incident and exclaim, “That was you? Wasn’t it?”

Today's news, Tomorrow's history

Until last week, swine flu deaths were prominently reported on the front pages of leading national dailies.  But now, they have been relegated to a mere statistic. Has swine flu suddenly become less dangerous? Is it no longer the epidemic it was made out to be?

Hardly, but our imagination has moved on. Even Jaswant Singh is so last week. Force India and Fisichella are in. And the debate on Pokhran II is brewing and will probably be the next big story. The aphorism that public memory is short sounds so true, and if anything, it seems to get shorter. But what is often overlooked is that memory can be easily rekindled, especially in the Internet age as is beautifully captured in a scene in the film, Notting Hill.

Julia Roberts, playing an American actress in the movie, ends up spending the night at Hugh Grant's place. The next morning papparazzi show up and pics are snapped. Julia is all hyper about the situation, but Hugh asks her to chill for the public memory is remarkably short and this too shall pass. But Julia retorts that it will pass for him, but every time a journo wants to write something about her in the future, he will search the archives, come across this image, and make sure to print it. (Am trying to find the exact lines. Even IMDB doesnt have it.)

I guess my point is if you are in the news for the wrong reasons, the entire nation doesnt have to actively track your fortunes. It only takes one person to run into you several years after the incident and exclaim, "That was you? Wasn't it?"

Back with a thud

Not too often, but every now and then, certain events make us proud. Wait, thats too strong. Lets say, we just stop feeling like total losers. The Pokhran tests, Chandrayaan, Bhuvan etc are some recent examples.

They may not mean much to the younger generation that grew up in the relative prosperity of the late 90s, for they already visualized us as an emerging superpower. But if you have grown up in the 80s and early 90s, and experienced the legendary Indian bureaucratic lethargy (or lethargic bureaucracy), such headlines do bring joy and emotion. You wonder if we are finally breaking away from our past. If we really can do more than write code and deal with angry Americans on telephones.

To be honest, our quality was never world class, for we were rooted is the strong tradition of good enough. When asked to choose any two from fast, good and cheap, we inevitably choose fast and cheap. Be it software or anywhere. Clients are amazed by our rapid fast turnaround of deliverables and appalled by their quality. It seems this is more pervasive than what I thought.

Chandrayaan was touted as India's "nano" space project, cheap but highly effective. The celebrations had hardly died down when some defects came to the fore and now the mission is officially dead. Even the celebrated Pokhran tests have come back to haunt us with a scientist claiming the yields were disastrous and others shouting it was "good enough". And Bhuvan is a nonstarter.

I believe these are not isolated incidents but a reflection of our ethos and pysche.

Sports Formula

The sports ministry has declined a request to bring F1 racing into India on the grounds that F1 is not a sport but rather a commercial entertainment initiative. The logic is impregnable.

The traditional argument to develop sports is that it promotes physical well-being and mental toughness. It is also purported to build character, but the conduct of today's athletes hardly supports this assertion. As for the F1 debate, the formula of the modern day sport has two elements: substance and form. In substance, racing cars cannot be compared to cricket, soccer, hockey or any other sport. Not only is it risky and life-threatening, but winning and losing depends as much on the vehicle as the driver. Yes, it does improve physical endurance and mental sharpness, but in its basest form, it is a thrill rather than a sport. As for the form, which is F1 or A1 racing, it is very close to how every major sport is played today.

Almost every sport has gone pro, meaning it is played for money rather than for pride or fun. Their popularity has more to do with the astronomical sums involved in contracts and sponsorships than anything else. Now, playing for money does not necessarily take away the virtues of sport, and I am definitely not advocating that sports should not be commercially viable. Neither should sportsmen be required to put national interest above individual interests. However, one must recognize that money transforms the nature of the game, and consequently, every sport today has elements of entertainment in it. Ah...those shades of grey.

From what I have read, it did not look like the ministry will have to make any investment. It only had to grant permission to franchise F1 in India. So I am not sure why the ministry rejected the proposal and said arbitrary things like the funds can be put to better use elsewhere. If indeed taxpayer money is involved, I am in complete support of the ministry's decision.

What pushed me to write on this was Karun Chadok's comment that even Olympics are an entertainment. It is true that Olympics are reduced to a form of entertainment in India, for we have systematically ensured that our athletes don't even get close to the medals. We end up watching what the rest of the world is doing. But to generalize that is foolish. To me, the Olympics capture the true spirit of sport, and provide the rare occasion to watch sport triumph over money.

Game Theory and Traffic Rules

Game theory attempts to explain our behavior in situations where the success of our choices are impacted by the choices of others. Price wars are the most common example. If Pepsi cuts prices, assuming elastic demand, sales will increase and so will profits. But if Coke follows suit, Pepsi's action will be neutralized such that both Coke and Pepsi end up with lower profits than what they would make if prices werent cut in the first place. So letting prices be is the best course of action for both, which is the conclusion they will eventually reach after the game is played multiple times.

I got thinking if this explains the problem with our traffic rules. When we all follow rules, then it gives those who break them an advantage. Let's say the rule is that we stick to our lanes regardless of traffic. Now, if the traffic is slow, someone can cut across lanes and weave through traffic, assured that everyone is driving in their lane. But once that happens, the rest will naturally feel cheated and start doing it too, and we end up with massive chaos.

I see two ways of addressing the problem. One is to remove the incentive for breaking rules, by imposing hefty and consistent fines, which is impossibly difficult to do in our country. The second is to let people play this "game" enough times until they realize that we are better off following the rules. It doesnt mean every single person has to experience chaos before sanity returns. Once enough people decide to follow rules, a critical mass is reached. You have - tada - a tipping point. You see people following rules, then more people follow rules and so on. The concept of social proof kicks in.

Its not as far-fetched as it sounds. I think it partly explains why Mumbai has better lane discipline and civic sense than other cities - people here have seen traffic chaos so many more times.

I think the unfortunate part is when everyone starts to follow the rules, some of us will be tempted to break them and get an unfair advantage. And when there is no system of fines or penalty, more people will start doing it creating another tipping point and the cycle continues...

Consultants as Traffic Police

Consultants are arguably the most hated bunch of professionals around. While the financial engineers have stolen that crown momentarily, it won't be long before the trophy is passed back. Not just because the crisis will be forgotten, but also because every minute, consultants are coming up with ludicrous recommendations. Ludicrous when you look at them with 20/20 hindsight that is.

Every manager worth his salt hates to employ a consultant for it is a tacit admission of his own incompetence. Yet, the consulting profession continues to thrive and remains the most sought after career option for management graduates. What gives?

I was crawling in Mumbai traffic when it hit me. In front of me was a Santro sandwiched between a truck and a BEST bus. Now truck and bus drivers believe in extreme precision. They will drive by within an inch of your vehicle without skipping a beat. In this case though, both of them were generous enough to spare a couple of inches, but the Santro guy got all worked up. He kept nervously peering over the bonnet and looking through the side windows to make sure he was okay. I, of course, clearly saw that he just had to maintain his line and he was fine. For a minute I was amused, but soon realized it happened to me as well. Several times, in fact. Sitting inside the car, I find it incredibly difficult to accurately estimate the space available around the vehicle be it when making a sharp turn or parking in a tight spot. And that is what happens to organizations as well. People within find it difficult to clearly see the external environment. And their calls might result in a traffic pile up, or worse, a crash. The former causes organizations to lose its direction and momentum while the later pretty much kills them.

Time for your friendly neighborhood consultant to step in. He is not a Santro expert – you are – but he knows enough about it to guide it out of traffic. Which is what consultants often do; they bring in simplicity and clarity. In other words, the value added by a consultant comes from his perspective and not so much his competence. If he is a good one from McK, he will know the shortest route to the expressway. In that sense, he is no different from a traffic policeman. Of course, the recommendations would fail if something else comes up on the suggested route - another traffic snarl, for example. Or you ignore his idea and stick to your route and by some freak chance the traffic clears up. And when that happens, organizations ensure consultants dont go unpunished.

I have taken artistic liberties to make the analogy work and sincerely apologize if it caused offense to traffic policemen.

Tailpiece: It is much more difficult to estimate navigate sharp turns if you are driving a big car like Accord or Corolla. That explains whylarge organizations react sluggishly to changes in environment.

Dogs and Culture

Came across this, well, interesting piece of news. Some guy in New Zealand barbecued his pet dog. Inevitably, the SPCA raised a hue and cry and came close to taking legal action, but realized there was no case because the dog was killed painlessly.  Usually such events only get a couple of lines, but this was a full-blown story with interesting details.

The incident took place in Auckland but the man originally came from Tonga, where dog meat is perfectly acceptable. Why was he so desperate as to eat his pet dog? Apparently, the wife was bored with it. So what better way than to make a meal of it! I dont know if they have a 911 number for SPCA over there, but they seem to have reacted pretty quickly. "The dog had been skinned and partially charred" when SPCA arrived!! Man, in our country, even an ambulance wouldnt reach in that time. Unfortunately for SPCA, it is legal in NZ to kill animals so long as they are killed swiftly and painlessly. The guy hit the dog on its head with a hammer to render it unconscious and then slit its throat - apparently the standard procedure of killing animals for meat.

The SPCA is disturbed that it is legal in NZ for people to kill and eat their own pets, and are pushing for a change. But here's the part that intrigued me. SPCA advised the man that it was not part of the "culture" to kill and eat pets. My guess is this Tonga region must have be home to natives or aborigines who were here before us (going by the fact that dog meat is still acceptable there). And now we have the gall to tell them what is culturally appropriate!!

http://tvnz.co.nz/national-news/no-charges-man-barbecued-dog-2919419

http://tvnz.co.nz/national-news/spca-calls-law-change-after-dog-bbq-2919922

Independence Patriotism and Stardom

We are supposedly proud of our Independence yet the celebrations are ridiculously formal, typically limited to the hoisting of our tricolor and distribution of sweets from the neighborhood halwai. Today's HT editorial says we should express ourselves more freely. Totally agree with that coz in the US, most people look at 4th of July as an occasion to meet family or go to Vegas rather than stick US flags on their shirts. Of course, its been more than 200 years for them now but only 60 for us, so maybe at a subconscious level we are a little afraid to celebrate. If we relaxed too much and let our guard down, maybe...you get the point.

Next is the question of patriotism. In the movie, "The Rock", Sean Connery surrenders after Ed Harris threatens to kill a tourist held as hostage. In the ensuing conversation, Connery says he thinks Harris is a friggin idiot. Harris quotes Thomas Jefferson about nurturing the roots of liberty from time to time with the blood of patriots and tyrants. Connery retorts with Oscar Wilde's "Patriotism is the virtue of the vicious". Harris strikes Connery behind the neck, who falls to his knees and follows up with "Thank you for making my point!" If it was a Bollywood movie, the hall would be drowned in whistles.

Is patriotism losing its relevance today? For that matter even independence. No country can claim to be totally independent of the rest of the world. Except Iran and North Korea maybe, but even they have some outside help. The great United States that proclaims itself to be land of the free and home of the brave is probably the least independent nation today. Why, even our economy is intimately linked to the fortunes of the US as the recent crisis has shown. So in days of globalization where interdependency and interconnectedness rule, independence is an illusion. Even governments get influenced when making policy choices.

Things are even murkier with patriotism, which was never clearly defined to begin with. Its not right to love and protect one's own faith, gender, community or even state against another, but it is miraculously right to defend one's nation against another. The definition and boundaries of patriotism have been conveniently morphed over time. Some freedom fighters and most kings are revered as valiant patriots although their actions amounted to nothing more than protecting their own little territory. If patriotism is the feeling that one's nation is the best among all, how different is it from terrorism? I am not denying the need to defend one's nation against terrorists and wars, but let us clearly identify it as a necessary evil than an inherent virtue.

Finally on SRK's detention at Newark. Applying my learnings from Taleb's FBR, someone being a celebrity doesnt rule out their possibility of being a terrorist. That he is popular doesnt mean he cannot be a criminal. Plus the fact that someone has not killed until today doesnt mean he wont ever. That's a black swan for you. Although in SRK's case, I have this funny feeling that the immigration officer's wife is a big fan of SRK and must have dragged him along to watch one of his inane movies. Wont blame him for the reaction! But our politicians are taking this incident more seriously than Kalam's frisking!!

Outliers and Hofstede

MBA is a great leveler. The heady excitement of macroeconomics, finance and marketing is tempered by the fatal boredom of HR and OB. And one topic that inevitably gets raised in HR and OB is the Hofstede’s Index.

Geert Hofstede, a Dutchman, profiled the behavior of people in various countries and concluded that cultural differences can be explained on a four-point scale: Power Distance, Individualism vs. Collectivism, Masculinity vs. Femininity and Uncertainty Avoidance. B-schools and academia adore such neat models and, next to Porter’s Five Forces, Hofstede’s Index has to be the most frequently used tool to explain away the failures of MNCs. It makes you sound intelligent and gets you points for class participation. Beyond that, it seemed useless. Until I read Outliers.

Gladwell’s latest book attempts to search beyond the obvious traits of successful people – that is intelligence, hard work and perseverance. They are important, he agrees, but claims there is a little something, called luck, which actually catapults them into a different league. Like his previous books, Outliers makes for interesting reading, but what made me sit up and take notice was his analysis of plane crashes.

Here is a chilling recount of the 1990 Colombian Avianca plane crash in New York. The aircraft is desperately running out of fuel, but has not been given permission to land. The captain asks the first engineer to contact ATC and tell them it’s an emergency. The first officer contacts ATC, and among other things, mentions they are running out of fuel. Planes are expected to be low on fuel as they reach the destination so ATC doesn’t give this much weight. But rather inexplicably, the first engineer doesn’t push.

The situation makes no sense, until one looks at it through Hofstede’s index. Colombia is a country with relatively high power distance, where people are more respectful of authority. Hence, no questions were asked. If the first engineer was an American, Gladwell claims, the conversation would have taken a different course. Reading this sent a chill down my spine, but it seems airlines world over have recognized such manifestations of cultural differences in everyday interactions, and have taken measures to train their pilots and crew.

Jai Hofstede!

Knowing your Audience

Read RGV's interview w/ TOI today. Apparently, he has given up trying to figure out what the audience wants. It seems the Indian audience is too diverse to create something that will satisfy everyone. He claims that people love or hate his films for different reasons. That there is no consistent feedback on why a certain film worked and why another didnt. So he has stopped worrying about what people want or think and decided to do his own thing - hoping that it might appeal to just enough people to recover his investment.

I agree with his observation but not necessarily the conclusion. RGV clearly understands that presentation and treatment are as  important, if not more, than the story and actors. Fault him for his ridiculous choice of actors and stories, but you cant criticize the technical standards of his movies. His problem, now, is that he is focusing  too much on the form while ignoring the substance. In fact, he  seems bent on proving that the audience will lap up anything that has slick editing, sound effects, and unexpected camera angles. And there's the rub.

His criteria of analyzing audience is off. He is trying to find a common pool of people who'll appreciate his directorial touches like  Bhiku Mhatre's death in Satya, Abhishek's character in Naach, Urmila's experience in Bhoot and what not.  And then he feels there are too many variables.  Naturally. He is losing the forest for the trees. He cant expect ordinary moviegoers to get each of these nuances. It worked fine in his younger days coz he was not as sophisticated . Think of it as a pyramid. The higher up you go, the fewer there are. The trick is to target the base with the vast majority of our moviegoers. They understand simpe human emotions like love, hatred, pride, envy, greed etc.  And so long as a movie has these ingredients served in a coherent manner, it will  find takers. Not to say the ones purely relying on treatment wont succeed - just that it is a much riskier bet.

A confession is in order. I am a die-hard RGV fan and firmly believe that even his worst film is much better than the best films of several "succesful" directors.

Consumer Insight

Carrying forward from the last post, there are two diametrically opposing views on this matter. One believes that consumers are really smart and will call your bluff the moment your product takes them for a ride. Examples include consumers dumping American made electronics and cars in favor of Japanese ones.

On the other hand, some believe that consumers are gullible and will willingly buy a golden noose only if you knew how to sell. Examples include Coke and credit cards. There was no "need" for cola. Someone made up with a drink and transformed it into a habit. If Fair and Lovely really worked, half of us in India would be swans now. Yet, the product continues to mint money for HUL, and has spawned a market for fairness creams.

How does one reconcile these two observations? The popular notion of succesful businesses is a neatly laid out set of numbers, projections and valuations, but any business is incomplete without the understanding of human psychology, which provides the most crucial insights. Mr Charles Revson, co-founder of Revlon famously said, “In our factory we make cosmetics. In the store we sell hope”. That's the key. What you are making and selling are often two different things.

Even in case of more mundane products like ball pens, consumers are buying expectations not products. And if the performance doesnt meet the expectations, well, you are screwed. And these expectations can stem from totally irrational notions. Chinese products are presumed cheap so its really tough for a Chinese manufacturer to sell premium products. In such situations, the solution is not in the 4Ps but rather in the other often neglected P - the Psychology of consumers.

Credit card fraud

Enough has been said about the less-than-clean practices of financial institutions that perpetuated the housing crisis. Mortgage lenders have been accused of predatory lending practices and selling home loans to people that could afford them in the first place. Yet, the people running the mother of all scams continue to mint money.

The business plan of the credit card business would sound hysterical if it werent true. Create a card that lets people spend money they dont have, then charge banks for issuing these cards and merchants for accepting them!! Sounds villainous, but you have to give it to the ingenuity of Visa and Mastercard. They have managed to drive the world's largest economy into a trillion dollars of debt. In some ways, the credit card culture can be blamed for the reckless nature of US homeowners in taking on loans they knew nothing about.

If the idea was just convenience, couldnt they have just created a card that lets people spend their own money? I realize I am giving the impression that the top guys at Visa and MasterCard went on a strategic retreat for a week and racked their brains to come up with this fraud, which is probably not the case. Most likely, the card started out with the noble cause of offering convenience, but we took it to a totally different level. Of course, the debit card is ubiquitous today and is outpacing credit cards, but thats only 'coz we have realized our folly.

Of superstitions and Traditions

FM radio is my only source of distraction during my commute to work and back. Something to keep me sane lest the traffic and the driving skills of fellow commuters drive me crazy. Yet, FM itself drives me crazy sometimes. We have 8 FM channels, so at any given point, the probability that one of them is playing a song I like is pretty good. Yet, it routinely happens that every channel is running an ad or their RJs are blabbering away to glory. And sometimes the trash spewed out by these RJs gets to my nerves.

Like today, for example, every RJ was extolling the virtues and traditions of Rakhi. Listeners can win gifts for calling in and sharing their memorable Rakhi experiences. Even celebrities were interviewed to throw light on this great tradition of bonding among siblings. Some RJs had tied Rakhis to government servants as a token of gratitude and love for keeping the city going. I don’t know the exact genesis of the ritual, or its symbolic meaning, but I am sure it is in the lines of the protective band on the brother’s wrist warding off evils, or even better, the sister taking on harm that was otherwise intended for the brother. This is undoubtedly a big event in many Indian families, and its fine to maintain that tradition.

But the same RJs were making mockery of the rituals we perform during an eclipse. That throwing away all food before the eclipse was blind faith. That asking pregnant women not to venture out was being superstitious. RJ after RJ was shunning these superstitions and proclaiming to be free of blind faith.

I wonder where tradition ends and superstition starts. Too much to expect the RJs to know this. If they had better IQs they wouldn’t be making a fool of themselves on radio.