Deja Moo, Ear Job, Blamestorming and the The Office Life

Could not resist posting these!

• Al Desco - Describes any meal eaten at your desk (you have our sympathies if it's dinner).
• ALAP - As Late As Possible
• Blamestorming - Meeting to discuss a failure and find a scapegoat
• Deja moo - The nagging feeling that you've heard this B.S. before
• Enail - An email sent for the sole purpose of making a point in writing, usually at another person's expense. Most effective when cc'ed to as many senior people as possible
• Ear candy: Flattery
• Ear job: The act of passing on some juicy company gossip verbally, and in private. "I'm just running into a meeting, but I'll give you an ear job later."
• Facipulate - An unfortunate mix of 'facilitate' and 'manipulate', this contrived verb refers to influencing the course of a discussion by indirectly promoting particular lines of thought
• FUBAR- F***ed Up Beyond All Repair
• Head shunting - The secret hiring of a head hunter to persuade an ineffectual employee to take a position at another firm. Nicely eliminates the mess of having to fire someone

My favorite is Deja Moo. Perfectly describes what you feel while listening to the "experts" on business channels predicting whether the market is going to go up or down

These are a few samples from the new / interesting jargon at the office life

Tata Nano

It has been two years since it was unveiled and four months since it was launched, I have yet to see a Tata Nano being driven on road in the national capital region. All the talk about the "Peoples' Car" flooding, overwhelming and choking the traffic system seem to have to have come from some over imaginative, fear mongering journalist. It may still happen, but not any time soon.

The Tata Nano has been in production since July, and during that time, Tata Motors has reportedly sold over 7,500 copies of its 100 K car. The Indian automaker has plenty of potential customers for its inexpensive little econo-gem, but production capacity is another matter altogether. Tata is producing the Nano with existing plant floor capacity until its new, reported (as per autoblog.com) 250,000-unit/year factory comes online at the end of March 2010.

Tata is also considering licensing the Nano to other automakers, with or without Tata branding. Tata Vice Chairman Ravi Kant reportedly mentioned at an awards function that the company would allow micro-assembly sites to build their own Nano within India, adding, "We call it Nano, they don't have to."

With recent reports of the cars catching spontaneous fire and murmurs or poor build quality, I still have doubts on whether the Nano will be as big a hit as earlier imagined even if capacity constraints are removed.

Double Dip, Echo Bubble, Green Shoots, LUV

I do not know if I am a better investor after this recession, but have certainly learnt some new, fascinating term. The neo-recession dictionary includes the following

Double Dip Recession:
When gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth. A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession. (Investopedia)

Echo Bubble:
A post-bubble rally that becomes another, smaller bubble. (Investopedia)
People point to the rally that occurred after the market crash of 1929 as an example of an echo bubble. Just like its more-prominent predecessor, the smaller echo bubble eventually burst. Also, after the technology bubble that occurred at the turn of the 21st century--one of the biggest bubbles of all time--people believed that another echo bubble was on the way.

Green Shoots:
Green shoots is a term used colloquially to indicate signs of economic recovery during an economic downturn.

It was first used in this sense by Norman Lamont, the then Chancellor of the Exchequer of the United Kingdom, during the 1991 Recession.The phrase was used again by Baroness Vadera, former Business Minister of the UK in January, 2009 to refer to signs of economic recovery during the late-2000s recession, again to criticism from the media and opposition politicians. The U.S. media started to use the phrase to describe domestic economic conditions in February 2009 when the New York Times quoted Bruce Kasman, chief economist at JPMorgan Chase as saying, "It's too early to get excited, but I think there are a couple of green shoots that say we're not going down as heavily in the first quarter [of 2009] as we were in the fourth quarter [of 2008]." The Federal Reserve Chairman, Ben Bernanke, made the first public use of the phrase by a Fed official in a March 15, 2009 interview with CBS 60 Minutes (Wikipedia)


LUV:
Luv hurts... Sir Martin Sorrell has warned of a 'LUV-shaped recession'.
The boss of ad giant WPP, which includes JWT and Ogilvy and Mather, as well as Finsbury PR and TNS market research, is saying the recession is L-shaped in the UK and Western Europe, U-shaped in the US, and V-shaped in Asia and the BRIC countries.

HSBC Credit Cards

HSBC has fallen to new lows in terms of customer service and ethics. In the last three months my brother and I have separately cancelled our HSBC Platinum Credit Cards. We were good loyal customers with excellent payment record. But HSBC would simply not honor any commitment, fraudulently kept charging membership fees and other charges after promising that the there would be none, again and again. The experience was horrible.

It is a myth that foriegn banks in India offer better customer service and HSBC has been the worst. Its is time these banks were taken to task by RBI and other authorities

Twitter - Tharoor

The Tharoor-Twitter bug seems to have firmly bitten India. I don't mean it in a negative way. The (debatable) negative publicity for Tharoor has done huge service to popularize twitter in India amongst geeks/non-geeks. Corporate honchos, Bollywood celebrities (including fake ones) along with everyone else (OK..I don't mean every one of the one billion Indians, I just meant everyone...including the 'Cattle Class' including yours truly), now seems to have a twitter account or is at least making an effort to know what this is all about.

Things haven't turned out too badly for Tharoor himself. I mean how many people knew him or cared about the fact that he once came close to getting the top UN job before Twitter happened. Seems like the urban youth in India feel deeply connected to Tharoor, like no one else. His twitter account currently has over 350 thousand followers (and counting). That's HUGE!!

Admitted that, Ashton Kutcher (the famousque Hollywood celeb) has over 3 Million followers (He beat CNN- the news network in a fiercely fought race to be the first with One Million followers on Twitter), remember this is India we are talking about, and even though we have the largest number of young people only a small fraction use the Internet.

They say imitation is the best form of flattery. Tharoor even had an impersonator at http://twitter.com/ShashiTharoorMP . That and the fact that the impersonator's account has been suspended by Twitter (within hours of someone noticing it and compaining about it) speaks volumes about his online influence. Way to go ST.

Mobile Blogging

Whoa! this is my first blog post from my E71 handset. Not every thing works, but its not too shabby! Meanwhile, KS decided to come out and issue a clarification on the issue of cutoffs for IIT-JEE saying revising it was the sole perogative of the IITs themselves. Kudos to the minister for not dragging his feet orver this.

Cutoffs for IIT-JEE to be raised?

IIT JEE cutoffs could be raised. Minister for HRD, Kapil Sibal announced yesterday that, he would like to see 80 -85% marks in Class 12 board exams as minimum cutoffs for eligibility to appear in IIT-JEE. The reason given for this is to stem the huge (and ever increasing) importance of tuition centers, that have become a necessary evil in the process of gaining admission to the prestigious engineering institutions. While this is desirable, I am not sure if the suggested move would have the intended impact. On the flip side, it is very likely that the following effect would be dominant.

This would lead to increase in stress levels that students have to bear as there would be two hurdles that they have to cross, instead of one. This is certainly not desirable. The minister's earlier decisions on making class 10 exams optional and moving to a grading system, aimed at reducing the stress that students have to face.

There are other problems. If the cutoffs are imposed, the system would have to find a way to normalize cut off scores across multiple boards. (though the Minister in the past has indicated a need to move to a single board). Then, there are other questions like ensuring uniform standard of marking scores, especially in subjective questions, what would be the cutoffs for the reserved categories etc adding to the complexity. We need to simplify not overly complicate the system.

Overall, however, the direction is good. The positive intent for reforms is visible. This is a huge positive for the education sector in India. This does not mean that India is ready for 'For-profit' education yet, which seems to be the only way to transform education in the country. But, we hope that steady pace of reforms would continue. This would ensure the human capital is available to fuel India's continuous growth and prosperity.

IPL spoiling team India?

There is a debate happening on whether the Indian Premier Leargue (IPL) money is ruining the Indian cricket team. The thought is absurd. The fact that the Indian team did not do well in the Champions Trophy does not mean that IPL is ruining team India or for that matter to even reach a conclusion that the Indian team is ruined.

After all, the Indian team was only recently (albeit for a brief period) ranked the the number one team in the world. I do not remember a time when Indian team was ranked at number one (Pre IPL) so one could argue that the actual case should be made in reverse. Although coincidence dows not imply correlation.

What do you think?

The trouble with regulating bonuses

President Obama called Wall Street’s outsize pay packages “shameful,” especially for companies in need of federal bailouts. Such pay, he said, is “exactly the kind of disregard for the costs and consequences of their actions that brought about this crisis — a culture of narrow self-interest and short-term gain at the expense of everything else.”

We have seen harsh calls around the world, even in countries such as India.

Rather than restricting pay and bonuses which is against the spirit of free markets and creates distortions, it is much more desirable to tie bonuses to long term performance. But it has side effects too.

The ‘Collosseum’ really for this debate has been the Wall Street, where the ‘Gladiators’ aka Investment banks have been slugging it out. Now, for ages these I Banks have reared these big bullies, the smartest people from B Schools, who demand to get paid a cut of the money earned by them. But this instant ‘Nirvana’ also led to the problem of Agency Costs, given the fact that there is huge churn, to and fro in these banks. You could make investment decisions based on the money earned in the same year, get paid a cut of the profits and not worry if the same investment led to an even bigger loss the following year, as you had already encashed and left the organization for greener pastures or even if you stayed put there is no negative bonus. Having deferred bonuses obviously would help to solve this problem.

However, I guess the non desirable side effect is visible too. For example how would you make sure that you get paid in case you are asked to leave next year or even if you decide to jump ship to another job? Would the unpaid bonus unfairly hold you back?

There are solutions like keeping the deferred bonus amount in escrow, but they increase administrative costs and complexity. I don't think anyone really understands what the fallout of such a plan would be. Another CDO, CMO in the making perhaps

We should perhaps have rating agencies to rate such plans :)

Bharti MTN Deal Analysis

The Bharti MTN deal has fallen through. While there was a lot of analysis and news reporting (often breaking) on why the deal broke down, there has been a clear lack of analysis in the media on the merits of the deal, other than the fact that this would have be India's largest M&A transaction.

Intuitively, it seems strange that you would want to acquire the largest player in the territory. Clearly, Bharti did not have the appetite to do an all cash deal. Now the largest player can only grow so much on the already large scale that it has, so how would Bharti have added value. It would, in my opinion have been much better to acquire a smaller player with licences to operate in large number of regions and build on top of it. That the market rewarded the Bharti stock with a nice gap up opening on stock closure seems to suggest that this perception was right. I guess no one would know now as to what would have been the outcome if the deal had gone through.

One fear I have is that Bharti can see growth slowing down in India (due to high base, increased competition) and therefore it wanted to use its high valued currency (read stock) to purchase assets that were relatively trading at fair (if not cheap) value. This is the only reason I can think of as to why Bharti would want to acquire / merge with MTN. There don't seem to be any cost synergies (Its not as if you could share infrastructure, towers!! across continents)

It would'nt have given Bharti greater bargaining power with vendors. You know it is not a small player anyways. Perhaps in the future, media (at least business media) can actually do some financial analysis and ask relevant questions rather than just giving in to the hype.

Equity Research

Recently, I came across a report on the Education sector in India, by a leading brokerage house. This was by far the best report in terms of data collection effort and presentation style that I have seen in recent months. Just under the skin of this report, it is clearly a very successful effort to create interest in the Education Sector in India and especially in the largest education company in India, by market cap. The conclusions derived in this report have this goal in mind.

Sample this. It says Educomp’s business is mapped to the most attractive segments in Education. (Educomp, for those who do not know already is opening its own ‘for profit schools’. Schools as we know have to be necessarily not for profit bodies. However they have devised a clever structure to pull all profits out of schools.

The report puts the K-12 market segment size at $20 Billion. It is easy to get blinded by this, unless you look deeper in the report. According to the report, the private schools market is as follows
1. Unaided Premium = 15000 schools , monthly fee average Rs1250 = 6.7 Billion dollars pa
2. Unaided standard = 29400 schools, monthly fee Rs 750 = 7.9 Billion dollars pa
3. Aided = 30660 schools, monthly fee average Rs 450 pa = 4.9 billion dollars pa
Total of $ 20 billion. Therefore the K-12 schools initiative by Educomp is mapped to the most attractive segment. Really ??

Now consider the following: Assume that I sell liquor. Total sales in the country of liquor are Rs 100 Cr So, I can say my market is 100 Cr. Really ? What if, I all I manufactured was a foreign brand liquor at Rs 3000 per bottle. Would my target market still be Rs 100. It is more like 1% of the above

Now Educomp charges, Rs 3000 – Rs 4000 as tuition fee for these schools. Clearly it is a subset of 1 as above. And, 200% away from average. Even with best case distribution, it is not likely to be more than 10% of these ‘Premuim’ schools (In normal distribution, if std error equals half mean and fee 2.5x mean this would be less than 1%). So even if there are 10% schools with fee > 3000, it implies that they are playing in the market of $2 Billion.

At one percent, it would be $200 million market

Anyways, $2 billion vs. $20 billion is nearly not as attractive, is it?

• Consider the following
• Building a school is capital intensive. More so for Premium Schools.
• For ‘For Profit schools’, land is not exactly going to come cheap in the form of subsidized land from the government.
• On top of this, there is also a regulatory risk. Nowhere, in the world is School education allowed to be run by ‘for profit’ enterprises.
• Educomp’s schools are in India. Given Indian sensitivity to education and the jumpy unpredictable regulation track record in India, what if, one fine day an overzealous regulator wakes up and dictates that this is all illegal. They would not be able to close down the school and liquidate their investment.
• The one billion dollars includes the Scindia and Doon schools of the world which have decades of heritage and brand name going for them.

The report either ignores or brushes these issues aside. I don’t blame the writers. The brokerage (as all brokerages) does not get paid for research. The research department is only designed to get investors to buy in, even if it means buying it at 20 times LTM revenue, and then to sell. Churn is what keeps them going. Soon enough, the very same brokers would be pointing these out and asking you to sell, if you haven’t already. You may have made your profit or suffered 50% loss. But the brokerage house would have made their money both ways for executing your trades.

Delhiites should change behaviour before Commonwealth Games

So says the home minister. Of course we need to be more caring, follow the rules, cross roads only at the zebra crossing, not jump red lights, use the over bridge to cross the road, no jay walking.

Wait a minute, what over bridges should we use, where there are none, what bus shelter should commuters wait patiently when there are none, what non-working red lights should we not jump.

How is it that when the same delhiites travel abroad they respect all the rules. Is it the air that makes them obey the rules. No!. Its not even fear of the law that makes them, we do so because the infrastructure exists.

Infrastructure affects people's behavior. Take for example honking. delhiites honk. In fact some might even say we love to honk and despise us for the same. But it is the cramped infrastructure that made us develop this habit. I've lived in both phoenix and in new york. Can you guess where people are like us delhiites.

In phoenix, you hardly hear anyone honk. in fact it is considered rude to honk. Whereas in NY, honking is a way of life because of constant traffic

So dear home minister, please improve the infrastructer and we (collectively) shall improve our behavior

National Skills Registry

Nasscom's skills and resume verification initiative is back as 'National Skill Registry'. Albeit in a diluted avatar (yet, they are only verifying factual information), it claims that it would raise the brand equity of Indian IT (How it would achieve that is unknown). What Nasscom has done for the IT industry over the years is laudable, but this step just smells of some thing else

It says this initiative would save cost of repeated background checks (by getting employees to pay and that too all of them and make it mandatory), given it will stop people from faking their experience (what is the percentage of people who do??). But it also gives them a lot of leverage over IT employees and over IT companies (even though them may not realize it now)

And for this alone, I do not like it. As Spidey says "With great power, comes great responsibility" i hope the powers that be at nasscom use theirs responsibly. Some guy from Cognizant call it the NSR as the virtual social security number for organizations.

Anyways my company too has made it mandatory for all employees to register and charging Rs 331 from everyone. Arrrfgggg.

Bangalore or Buffalo

While the industry debates whether or not Obama’s new proposal on tax is going to hurt IT outsourcing to India it is missing the forest for the trees. For the first time in recent history we have the President of United States talking openly about populist measures and proposing steps for greater protectionism. Given that US has virtually nationalized its greatest bastions of capitalism and free markets(read financial institutions), this development indicates a dangerous trend not just of the IT outsourcing industry in India but also outsourced manufacturing in China and from other developed countries.

Given that the unemployment rate is at record levels and rising, this (current proposal) could perhaps merely be more visible steps or simply rhetoric to boost the government’s popularity, what we need to watch out for is follow on actions.

Padma Awards: Dhoni and Harbhajan Saga

Perhaps you may not agree with me, but the current anger by the Sports Minister on Dhoni and Harbhajan was uncalled for. The President may be the presiding deity for government officials, but is still a public servant. And therfore, that the two were unable to show up should not be held against them and is their perogative. Perhaps players's lack of respect for the awards is a reflection on what a sham and tamasha these awards have become over the ages.

The ministers who have made no real contribution to sports, or for that matter to any other thing, get to show their importance through angry (uncalled for) outbursts. They deserve to be snubbed. As for our sportsmen (and sportswomen) the award is only a recognition for their achievement and not the achievement themselves. Not being present on the award ceremony does not make their contribution less great.

Satyam acquired by TechM: Analysis

TechM emerged today as the highest bidder for Satyam. While this is puts TechM in a new league, the question that must be asked is the following

• Did TechM have an information advantage as there was one common member on the boards of both the companies? Now don't take me wrong, the information passed does not necessariy have to be explicit. Just the fact that the board member, who has a fudiciary responsibility to protect the interest of shareholders not stopped techM from bidding where it did means they had an advantage.
• Had it not been the case, would it not have made more sense for L&T to have bid higher since it already has a 12% stake in the company?

If this is the case then TechM got satyam for a bargain and perhaps this explains the jump in price in TechM's shares.
IBM which was rumored to be bidding for Satyam was clearly never going to be in the race. It had the least to gain. Why should an IT player such as IBM take only a financial risk of class action suites. It already has access to customers and to offshoring (remember it already has 50K+ employees in India). Same for Cognizant (it therefore withrew at the 11th hour). Wilbur Ross (a financial player) was only going to to be interested in partnership with a strategic player and at cheaper valuations. In normal times it could have leveraged and may have been able to offer higher valuations. Then again, these are not normal times.

Freidman vs Keynes

Milton Friedman, notes that, "There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income."

A certain Keynes may argue that the government is “.. Of the people, By the people and For the people”, spending people’s money or at least is supposed to be under a democratic system. Perhaps, it was this belief that led him to propose government intervention to prop up the economy.

So whether you believe in the ‘invisible hand’ of the market as proposed by Classicists or chose to follow the Keynesians, could ultimately depend on your view of the government’s sincerity

My 2 cents

1. Both the World Views (Weltanschauung) are flawed. They are joined at the hip by economics, which is based on the assumption of rational behavior of humans
2. I for one don’t want to take it too seriously for the following reasons

• I am not sure if humans are capable of being always rational
• Even if they are, how do you define rationality (Economics only measures rationality on one dimension aka money. Humans can be rational on many dimensions while appearing completely irrational on money)

While, both approaches can work wonderfully at various times (as seen in the past), the tremendous belief in their own worth (hubris) is their tragic flaw (hamartia) and ultimately causes reversal of fortunes (peripetia)

Perhaps, a mix of both approaches such as seen in India. Free (relatively) markets tempered with government oversight and occasional intervention may be the way forward

Technical Analysis

Recommend going long on NIFTY with a tight stop loss at 2750

A Grade Directors, B Grade Boards - Satyam Fiasco

Government has appointed 3 big names as independent directors to the new board of Satyam and promises to expand the board further. While the credentials of the three cannot be questioned, it is to be seen how they perform as a team. 

The previous board too had big names. People who are gurus in their own right. The likes of Palepu, M R Rao, Vinod Dham were truly 'A' Grade Directors. Raju for that matter did create India's fourth largest IT services company. However, as a team, it did turn out to be a 'B' Grade Board. Palepu infact was an expert on corporate governance. One of his course presentations begins with the title 'A Grade Directors, B Grade Boards'. Apparently its easier to preach then to perform. 

Anyways, what are the incentives for these new board members to perform? What about their existing organizations where there are already directors and conflict of interests? Only time would tell on how they perform. 

(A)Satyam Fiasco

The turn of events at Satyam has gone progressively from bad to worse over the last few weeks culminating in the confession letter from the Chairman, B Ramalingam Raju. The independent directors have already fallen like nine pins with half the board having resigned even before the 'suicide' note sent by Raju.

However, what baffles most is the claims made in the letter itself. Even more than the fact that he did defraud the investors, what was baffling is that how system (investor scrutiny, a reputed independent auditor and scores of professionals in the company, all sworn to ethics by their affiliation to the association to the body of chartered accounts.

Add to that the disbelief that the company itself was poorly managed and the claim that the company made just 3 percent operating margin on revenues of over 2000 crores (Rs 20 Billion) in Q2 of FY09 while even smaller companies made margins between 12-15 percent. The larger ones infact make close to 30 percent margins.

So the fear is that Satyam actually made money (and cash) all these years and this has been siphoned off over the last few months or systematically over the years into either the the infra companies (Maytas infra and Maytas Properties)

The aborted Maytas deal was the first botched step to cover the tracks. The letter seems like a last ditch attempt to save the rest of the family (read the Raju sons) from ruin and from the law catching up with them and possibly other friends (read accomplices) at Satyam.

He, infact may be counting on the laxity in law enforcement in the country. The cases go on for years while he roams free on bail.

That he has damanged his reputation is a sad fact that would have happened anyways. Its unfortunate that he resorted to this. After all he is the man behind creating India's fourth largest IT services company.

The equity analysts have withdrawn their coverage on Satyam as they the accounts that they rely on now have no credibility

Banks have stopped relying on certificates issued by PWC. Even for other organizations. If the circle of Trust, the very basis of the finance has been broken we could all face anarchy.