Desicritics Category: BizTech: Companies

WorkExp.Com Goes Offline - The Whisper Board for Bad News

Aaman Lamba — Sat, 7 Mar 2009 00:17:55 EST

People have an innate need to share information about things that are important to them in their every day lives. There is also an insatiable curiosity about one's jobs, friends, and family. This explains, in part, why the most heavily trafficked stories online are often the kind that deal with sensational topics. While Dr. Vijay Mallya might be the flavor du jour, a more persistent trend these days is the state of the economy, and more specifically, jobs. Job losses are rising globally, engendering a rising sense of uncertainty.

The need to know, in part, if one's job was relatively safe, is typically fulfilled by asking around. As the saying goes, "If your neighbor loses his job, it's a recession. If you lose your job, it's a depression." The Internet helps drive the dissemination of the state of affairs, and one website, WorkExp, found itself dealing with a surge in traffic from nervous Indians. The site was originally set up with the objective of sharing work experiences, equally positive and negative, but as with the bear market, trafficking in bad news soon overwhelmed the slim sliver of good news. Everything from layoffs to bad managers became grist for the mill, and the site became a must-check site. It even found itself being blocked in various company networks, understandably so, from the perspective of the HR departments as nothing was spared by the anonymous commenters/posters. It became a safety valve, in part, for the stressed employee, serving to reinforce, negatively, his feelings about his company. The Alexa Rank, a poor enough measure as it might be, indicates an occasional surge of attention, such as when the Satyam fiasco broke out.

As leading HR blogger, Gautam Ghosh, put it when he encountered the site:

Today I came across WorkExp , which is primarily a blog consisting of submitted posts by Indian techies about their organizations.

So as a HR person are you ready for the flipside and downside of this kind of transparency. Yes, it'll be messy and not easy to deal with. But this is going to be the new pub where people will share stories, only difference being it will be archived and search-able for posterity.

Unfortunately, this transparency or the 'pub culture' appears to have been contrary to the owner's expectations. They took all content offline, promising a redesign, and declaring they were disappointed with the negativity that had violated the site's founding principles. They posted the following:

This site was started with a view of helping people learn and share experiences, but sadly in its current state it has been reduced to a board where only stones are thrown. Except for one from CTS & one from Bharthi Airtel, NOONE shared their positive experiences :( Which was indeed very sad for the editorial team back here! We are re-designing this site and will be back soon!

But Guys! As much as it is your right to complain and share your bad experience it is also your responsibility in a way to tell what good your company has done for you!

We are over for now! But not out yet!

The retirement of the site will no doubt lead to the disappointment of many vicarious thrill-seekers, but the stance of the editors is to be commended, as they put principles before traffic. Even so, they could have gone with the flow, and become the Yelp.com for the job-hungry. Perhaps a clone will spring up soon enough, one that will satisfy the need to crib about your manager, your company, your work experiences.

America's Foolish CEOs: Medco's Dave Snow Gets The First Award

Ashoka Chakra — Mon, 2 Mar 2009 09:45:46 EST

With the global economy heading south thanks to the tsunami that originated in the USA, many blame capitalism or globalization for all the economic travails. I think it has a lot to do with poor policies and oversight, individual greed, and last, but not the least, stupid CEOs running corporate America.

In the 2001 – 2003 recession, we came across lots of incompetent and/or ethically challenged CEOs and Chairpersons. They include illustrious names such as Ken Lay of Enron (dead of a heart attack before he could be tried) and Bernie Sanders of MCI (in jail for fraud).

This recession has bought to light a new crop. A fascinating list of politicians, celebrities, and CEOs can be found at Time. To this august list, I now nominate Dave Snow of Medco.

For those who do not know what Medco is, it is one of the largest drug re-distributors. To keep it simple, it buys drugs from pharmaceutical companies and sells it to retail chains such as Rite Aid. It profits from being a middleman.

Dave Snow recently wrote in a blog in the Wall Street Journal about his ideas and his interview was published on Jan 16, 2009. To quote from the WSJ:

Snow said the time has come for doctors to follow set protocols on how to treat patients, and to be paid based on whether they do it. Basically, ‘If X, then do Y,’ and ‘If Y, then do Z,’ sort of stuff. Snow concedes the public doesn’t trust the private sector to come up with these kinds of rules. So he wants some smart folks to get together in an “apolitical” body like the Fed, and do it themselves. “I’m fine with this big, national board creating this standard,” Snow says.

It is obvious that Snow has no clue how medicine is practiced. Patients and their disease do not read textbooks and come with single, well-defined problems. The permutations and combinations of problems are literally endless. For example, a patient with a headache could have a bullet in his head (true, happened to a patient of mine) or a tumor (alas, also true) or anything in between. If the patient has other issues such as weight problems, hypertension, etc, the possibilities are infinite with no set formula that can be designed. How would Snow handle so many permutations and combinations? Does he plan to install an IBM supercomputer in each physician’s office? Good for IBM and outsourcing for India, but it won’t help patients much. As this financial crisis has shown, mathematical quant formulas fail in complex environments, and a patient is about as complex a microenvironment as possible.

In addition, Snow wants the government to step in with an “apolitical” body like the Fed. Maybe the ‘body’ would also be just as adept in handling doctor’s offices as the Fed has been in handling the economy? I can see a diabetic suffering from hyperglycemia for 5 years, followed by hypoglycemia (just like interest rates) at which point the unfortunate individual would be pushing weeds.

It is obvious to any person with a scintilla of sense that Snow’s ideas are nonsensical. I have only one question. How do people like this become CEOs?

Butchermania

Dr Bhaskar Dasgupta — Thu, 19 Feb 2009 10:38:12 EST

It was an invite to attend a luncheon of the Worshipful Company of Information Technologists. But this time, the luncheon was at the Worshipful Company of Butchers. A beautiful place. Unfortunately, I had to take a call in the middle so I was shown into an office.

Here’s the back of a leather backed chair with the logo emblazoned on it.

Here’s me during the call, with the laptop open. Can you see the chair? Beautiful handiwork.

The luncheon was held in the Great Hall.

Can you see the table plan? pretty complicated. I was sitting half way up the middle table on the left. Then, after the call, I hot footed it back to the lunch. The food was absolutely delicious. The Angus Beef was so smooth, I think it has to be rated to be one of the best steaks I have eaten in London. But to be expected, if you dont get good beef in the Butcher’s hall, where else would you get it?

I took a sneaky picture of the main window as I was leaving. Can you see the stained glass showing the butchers on the bottom? The top window shows the various animals which are used in the trade, like sheep, lambs, cattle, etc. It was full of grandees and thus felt a bit embarrassed in clicking away…

But outside the hall, down the stairs and the hall has the most amazing dioramas. This was showing a butchers diorama, with cuts of beef, pork and lamb hanging.

I am afraid this photograph did not come out quite right, but shows some kind of a letter of patent relating to the fact that the Princess Royal became some kind of member.

Turning my head, there was another diorama with a huge cleaver on the top.

Took a close-up of the note. There are two flags, first the flag of New Zealand and then the flag of the United Kingdom, some kind of an association, I guess, established in 1809. It says:

“This chopper was used by Mr. Edward Jeffreys at Buckinghamd Palace to cut up the first New Zealand Lamb carcasse shipped to the United Kingdom in the S.S.Dunedin and presented to Her Majesty Queen Victoria in May 1882”

Pretty neat, no? to capture all this history? I know this is not big news or a big historical event, but it actually is very big news once you think about it. This lamb trade has impacted the history, economy, and culture of New Zealand for more than 100 years. And this cleaver was there when the trade was born.

Another diorama with the tools of the trade.

Here’s the Hall.

And here’s the Smithfield Market where you would get the butcher’s with their stalls.

And on the way, saw this, the Kinky Barber, who gives you a beer with every haircut! :) As long as you dont worry about the type of haircut, you should be happy with the beer :).

But lets take a side trip, its the history which interested me. The history of this company goes back to 975AD. Now that’s impressive and goes deep back into the hoary mists of time. When we eat a steak or a chop, do we know that there is this level of history of professional attention paid to how to deal with meat? I did not. This company is deeply involved with the meat industry, it deals with a variety of industry issues ranging from hides to food hygiene, etc.

It is a fine art, this bit about dealing with meat. You simply cannot kill an animal and hack it about. Oh! no. You have to know the physiology of animals and there is a whole terminology around which cuts of beef comes from where?

I was taught how to carve meat by my ma, she used to hunt in her childhood with my grandfather. So dealing with poultry, goat and beef was very interesting. It was almost like surgery. Which you should not find surprising, after all, for quite a long period of time, barbers and butchers used to be the surgeons of those ages. Anyway, it was quite interesting to sit there looking around at the crests, the stained windows, and know one was sitting amongst the ghosts of butchers past for a thousand years. The next time one see’s a big juicy medium rare sirloin steak on the plate, one would know that there is quite a strong possibility that the way it was prepared had some links of some sort to the Worshipful Company of Butchers.

The full slide show here.

Technorati Tags: London,History,Buildings,Animals

Frankenstein or Frankincense Crops?

Dr Bhaskar Dasgupta — Tue, 17 Feb 2009 08:23:01 EST

Here is a quite interesting story about GM foods. Personally speaking, I like the idea of having more GM food around the world. Just because the prices are falling a bit, does not mean that the pressure for more food has gone away. The middle classes of the world are demanding higher quality food, meat and the lot. They still need to be fed and watered. Given the lack of additional farm land, water, the only thing to do is to improve productivity of the existing cropland. GM foods provides one with a way to do this. Here are some interesting quotes:

The International Service for the Acquisition of Agri-Biotech Applications (ISAAA) said the global area of GM crops increased from 114m ha in 2007 to 125m ha in 2008, producing a harvest worth $7.5bn. The number of farmers planting GM crops rose from 12m in 22 countries to 13.3m in 25 countries.
Clive James, ISAAA chairman, said the most significant development last year was the first commercial planting of biotech crops in two African countries: maize in Egypt and cotton in Burkina Faso. Both crops contain “Bt genes” from bacteria, which kill insect pests. In 2007 South Africa had been the only country on the continent with GM plants (cotton, maize and soya).

Look at some of the benefits:

Of the cumulative economic gains of $44bn over 10 years of growing GM crops, the report attributed 44 per cent to yield increases and 56 per cent to reduced production costs, including the use of 359,000 tonnes less pesticide.

Now isn't that just peachy? Good stuff to read that not only you increase productivity, but production costs are reduced and less pesticide is used therefore reducing pollution as well. Yes, there are quite a lot of issues in this relating to the sale of patented seeds, potential for gene mutation, and the lot, but I think the risks are well worth it. Here is a good report from Friends of the Earth as a counterpoint to this argument. Anyway, I really dont want to get into a head banging argument about this.

One thing which is quite interesting is that if you increase the usage of GM foods, then the sustainability size factor of farms reduces as well. What do I mean by this? Well, in vast swathes of the world, you will see that the actual plot sizes are tiny. Plus with more and more children, the plots of land become smaller and smaller down every generation, till the end where the land is practically too small to support even one family and poverty increases dramatically. But with increase in crop productivity, less production costs, the level at which land sizes are no longer sustainable or able to support even one family increases. So for countries like India and China, this is good news indeed.

But beyond that, countries are now getting desperate for food security. Here’s a great example of what South Korea is planning to do in Madagascar. I quote:

South Korea's Daewoo Logistics this week announced that it had negotiated a 99-year lease on some 3.2 million acres of farmland on the dirt-poor tropical island of Madagascar…….Daewoo plans to put about three quarters of it under corn. The remainder will be used to produce palm oil — a key commodity for the global biofuels market. A Daewoo manager, Hong Jong-wan, told the Financial Times that the crops would "ensure our food security" and would use "totally undeveloped land which had been left untouched."

Here is another example of how Saudi Arabia is doing the same in Pakistan. I quote:

To this end, the Saudis, the Emiratis, and the Bahrainis have been in talks with Egypt, Pakistan, Ukraine, Sudan, Turkey, Yemen, South Africa, the Philippines and Thailand to buy up or rent arable land and expand agricultural production in these countries.

This is actually good, I dont have an issue with this. This is pushing investments in poorer countries and combined with new types of crops, the food situation in the world will get a desperately needed fillip. So instead of these crops being Frankenstein type of horror for the world, I suspect they will more be frankincense.

Technorati Tags: agriculture, India, Egypt

Is China a Threat to Indian IT Outsourcing?

itonion — Sun, 8 Feb 2009 00:46:48 EST

Amidst the buzz in the Indian IT industry, articles have started to prop on whether India is a safe destination for outsourcing. The next obvious question is whether China will use the current situation to grab a piece out of the outsourcing deals. McKinsey has reported that China has an opportunity to grow its outsourcing industry at this juncture. It cites the reason that, in this economic crisis, many companies in the world are now looking to cut the costs by outsourcing their IT operations and China can benefit from this move. Along with this opportunity, the recent happenings in the Indian IT industry can be a bonus for China.

But, can China really pull deals that are being outsourced to India? Where exactly does it stand in IT Outsourcing? As of today, the Chinese IT sector is relying heavily on projects from the booming manufacturing industries in China and also from neighboring Japan. Since China's manufacturing sector (the heart of its economy) has slowed down due to less demand for exports, the government has identified the outsourcing industry as the next engine and has vowed to pull foreign money to China through outsourcing. Also, it has planned to improve the small-sized companies to grow from their current proposition by awarding them projects and by building cities and towns dedicated to the outsourcing industry. But when it comes to projects from US and Europe, Chinese companies were working on low-end applications and testing projects. When Western companies released products, Chinese companies were asked to test them before the deployment.

Now, things are changing. Companies have started working on mid-size application development projects which is very essential for developing domain knowledge and for getting bigger deals. Today, many of these development projects come to China from Japan and Korea. Also, if things improve, China can be a good alternative to companies that wants to de-risk their outsourcing strategy. Earlier today, SAP North Asia chairman joined Neusoft, the biggest Chinese outsourcing company. He is expected to oversee the International business. Neusoft on its website has called graduates and professionals to undergo its SAP training program. The Chinese companies are desperate on getting multinational deals to prove their expertise. All they need now is one success story in a complex enterprise project, which will trigger the next wave in their IT industry.

Now, as a competitor to India, China has a long way to travel to catch up on deals that are currently awarded to Indian companies. Having understood the booming manufacturing sector in China, Indian companies like TCS, Infosys, Satyam have setup shop in china to pull projects from the Chinese Industries. Some Indian companies even bought small sized Chinese companies, to understand the market and to merge themselves into the Chinese culture. These companies serve as threatening competitors to the home grown companies. Also, though Chinese companies get projects from the Western clients, the development work is more of product development (like networks, embedded systems etc..). For example, the biggest outsourcing company Neusoft, according to its website, offers IT services on Network support, back office, data center and asset management. But, to thrive with an Indian competitor, the companies should get projects that are executed in the in-house IT department of their clients. These kind of ADM(Application, development and Maintenance) projects generate money and also help in acquiring further development projects. They also help to gain knowledge in that particular business.

Another important factor where China has both advantage and disadvantage is 'cost' The per hour rate offered by Chinese is less than India's rate, about 30% less. But there are a lot of hidden costs which includes communication issues (More time, more rate), knowledge transfer time, data security protection and regulatory issues. These issues demand a completely new strategy for the companies to kick start their outsourcing plans.

The key issue in the Chinese IT industry today is the number of skilled professionals with good experience. Although, the number of computer graduates is more than India, the experienced professionals are far less and that prevents them from acquiring the big pie. Chinese companies are badly in need of senior project managers and they are looking outside China to recruit or poach them. More than 80% of the IT professionals in China have less than 5 yrs of experience ( 42% with less than 2 yrs). This was the situation in India, a few years ago. But as the market grows, maybe in another 10 years China will compete heavily with he Indian clients. At the same time, India would have produced more experienced professionals with higher domain (Finance, Retail, Telecom etc..) and architecture experience. But you cannot compare the China's current stage with India's early years. Indians' entrepreneurial approach helped to create thousands of small software companies, which later helped to produce skilled professionals. Also, the Y2K problem definitely served as a break point. Though, the Chinese are growing steadily, the backing of Chinese government is so strong that it can be a great trigger. Working under the multiple government projects in various domains will definitely improve their skill level.

If the Chinese companies grow at the current rate, there are more probable chances of India and China collaborating in the future. There are two main reasons:

1) Indian IT professionals' knowledge and global experience will be a great asset. Not using it will be a great mistake or it cannot be ignored

2) Indian companies' presence in China.

Today, Indian companies like Infosys and TCS have a good reputation in Chinese markets. For example, the website www.seecoco.com is a hub for the IT pros in China. Here they discuss about their company, Salary etc. Already, Infosys is third in the satisfaction survey and even Satyam is ranked among the top 10. Here,it should be noted that, Indian companies are now only in the investment stage. In future, you can see a great level of cultural mixture in these companies.

Considering the Pros and Cons, China cannot be definitely ignored in the outsourcing industry. So is India. We will see India gaining domain and execution expertise over the years and China growing on technical side. So, it is not India or China. It is India and China. After all, the Dragon and the Elephant can never fight against each other.

Innovation - That Strange Mythical Animal

Dr Bhaskar Dasgupta — Sat, 7 Feb 2009 05:16:13 EST

It was an interesting email that I got from Google Alerts. I have an alert setup for “innovation” as a keyword. The interesting thing is that I get the most interesting and curious hits on that keyword. As it so happens, on the same email, I got referred to a Businessweek article on innovation and another article on how Nortel could not save itself from bankruptcy despite investing heavily in innovation.

Innovation is a tough thing. What exactly is it? Something to do with new things? OK, lets run with it for now. But everybody and his dog wants to be known as innovative. Nothing wrong with it at all. But just like every buzz word, it needs to be treated carefully. People can get into all this innovation business too much and then forget about the basics of business. The two articles given above are interesting examples of this phenomena.

My son has been on World of Warcraft for the past 4 years now and has a good little business running there. So I have a fair idea of what is happening there. He has also managed to rope in my little princess as a magic maid, so that promises to be a good story one day. Anyway, I do appreciate the points made in the article about how WoW has managed to incorporate basic principles of innovation into its game so that it is doing brilliantly. I quote some of the main principles that the authors quote as lessons from the game:

Reduce barriers to entry and to early advancement
Provide clear and rich metrics to assess performance
Keep raising the bar
Don't neglect intrinsic motivations
Provide opportunities to develop tacit knowledge, but do not neglect broader knowledge exchange
Create opportunities for teams to self-organize around challenging performance targets
Encourage frequent and rigorous performance feedback
Create an environment that rewards new dispositions

But I have a bit of an issue here, and that is that the principles seems to be driven from the story and then generalised. To put it in another way, if I had to pick up these principles and plonk it into any other business, i can, very easily, but does that mean that my old business has suddenly become innovative? Or that innovation starts gushing from each pore? No, obviously not. None of these principles are wrong at all. But at end of the day, people have to keep a a laser eye out on the main business of selling profitably.

Which brings us to the second example, that of Nortel. Nortel did everything that these principles said should be done. It turned its attention to new products, it brought in imaginative thinkers, changed its investment policy, new products were gushing out, strategy was changed, people were let go and new people hired, and so on and so forth. But does this mean that they did wrong? No, just that their basic idea of migrating the firm into a new world of web 2.0 was simply not good enough. It just bombed. As a matter of fact, you could point towards its debt load but then again, they already had $2.6 billion in cash. That again was not enough to save it from going under provided its products were good enough to provide a good cashflow. Which it didn't.

Depending upon which product category you refer to, innovative products have a very high failure rate, ranging from 40% to 90% (as reported in the HBR – June 2006 edition). When you are talking about such a high failure rate, to maintain innovative capability is paramount. You have to dust yourself off and keep on working. In a recent research paper where innovation was studied with respect to Sun, what is normally held to be an innovative company. After one of their products bombed, the researchers coin what is called as Innovation Trauma. This manifests itself by disillusionment, cynicism and contagious demotivation.

So what do you do to improve matters? The researchers suggest that individuals who were championing and pushing innovative products should be given time to disengage from their previous work. Second, they need to conduct post-mortems on the failure to find out why that happened and if they can learn from the results. Third, this postmortem is best if its done collaboratively by the original team or a team of some sort, an innovation anonymous, if you will. Fourth, seed the failure aspects into a new project so that the old failure is uplifted by the excitement of the new project while the new project is calibrated downwards by the caution of the old failed project. Expectations management.

So what do you do? Here’s something that we are trying to do. The British Political system is pushing heavily on the idea that Britain has to become an innovative idea. Pretty good stuff, but how do you deal with innovation? I have recently been invited to join a group on Innovation which will assist in coming up with strategies to improve the UK innovation footprint. It is not easy. Actually, anybody can come up with a good idea. Ideas are dime a dozen, but to get from the idea stage to a company which is stand alone, has some cash in the bank, has a good order book with some good client companies, ah!, now that’s the holy grail.

So what we are hoping to do is to provide that bit of a helping hand from the corporate and government sides. If a small firm does have a good idea, we will get together and try to do two things, (1) try to assist in framing the new idea as something that is innovative in terms of resolving a business problem and (2) try to assist by championing it inside our firms. Obviously no money and all that stuff, but in my experience, innovators fall in love with the idea rather than how it will resolve the problem.

They forget that we are in business to sell (anything, potatoes, widgets, credit cards, etc.) to somebody who can pay for it. Do not want to go into detail, but the idea has to be something that somebody is willing to push his hands into his back pocket and put out money. So despite having great ideas, if you forget the basic elements of selling and making products that will sell, all those innovative ideas will be useless.

Technorati Tags: innovation

Nations Turn to Barter To Secure Food

Dr Bhaskar Dasgupta — Fri, 6 Feb 2009 10:52:33 EST

A curious situation is emanating in the world of international intra-governmental trade. I quote:

Countries struggling to secure credit have resorted to barter and secretive government-to-government deals to buy food, with some contracts worth hundreds of millions of dollars. In a striking example of how the global financial crisis and high food prices have strained the finances of poor and middle-income nations, countries including Russia, Malaysia, Vietnam and Morocco say they have signed or are discussing inter-government and barter deals to import commodities from rice to vegetable oil. The revival of these trade practices, used rarely in the last 20 years and usually by nations subject to international embargoes and the old communist bloc, is a result of the countries’ failure to secure trade financing as bank lending has dried up.

But before you think that this is too strange, it is not, this is quite common. Take a look at this deal. In return for up to 600k barrels of oil per day to the UK, the UK promised to provide a ton of aircraft and other defence benefits to the Saudi Arabian Government.

Here is another example. The Venezuelan government promised to give oil to London (to use in running its buses), in return for London providing free consultancy and advice on policing, tourism, transport, housing and waste disposal. But you have to remember this, when barter deals are not denominated in currencies, the chances of getting a corrupt hand in the till is massively increased because you simply cannot compare (or mark to market if you will) with international prices. In this particular case, the people who lost out were the people of Venezuela who were not able to get the money that they could have earned in return for some dubious advice on those aspects. In the interests of transparency, its best to sell the oil and buy services clearly and transparently. But then, politics trumped and a bad deal signed.

Same thing happened with the Al Yamamah deal, it is absolutely a stinker for corruption and something that I have complained bitterly about before. Deals like that have corrupted this country and have made us a laughing stock. Why barter? Just lay the costs out in public, its not like anybody else will complain, would they?

Another example of corrupt, trade distorting and silly deals were the oil for sugar deals signed between Russia and Cuba. Here is a great overview of this spectacular failure. I quote:

The fall of the Berlin Wall in November 1989 and the breakup of the Soviet Union in December 1991 became the precursors for the collapse of the Cuban economy, central to which were the Soviet oil-for- sugar swaps over the preceding three decades. At its
zenith, this barter arrangement provided the financial basis for Cuba to sustain the agricultural inputs necessary to produce sufficiently large annual harvests to permit significant sugar export levels and oil re-ex-port revenues. At its nadir, the systemic failure in the oil-for-sugar arrangement created shortages through- out the Cuban economy including fuel, fertilizers, herbicides, and spare parts for farming equipment
and sugar mills. Over the past decade, this is marked by the simultaneous downward spiral of Cuba's oil imports along with its sugar exports. Cuba's historic energy dependence and limited oil resources coupled with the sudden disruption of the oil-for-sugar barter arrangement severely impacted the Cuban economy
from which it has yet to fully recover.

Here is another example of an African Country, Uganda, starting to face issues with its barter deals. Here is a good overview of the Barter Trade and how it is changing. While private firms are better suited at doing barter trade, I am certainly not in favour of having barter trade done by Governments. Also, these barter trades crystallise the generally bad subsidy scheme. You pay tons of money to your farmers to grow stuff that nobody wants to buy, so you then do a barter trade with a country who does need that stuff, and you underprice your agricultural stuff. Which means that the international trade in that agricultural commodity is distorted as one market has its price driven down. See here for an example of what India is trying to do with Russia relating to its wheat crop. Here’s another example of the domestic sugar lobby moaning about its bad economics and trying to resolve it using another bad economic barter deal. See how much they demand subsidies and help and all that? All classic signs of people who cannot compete in the open market and thus want to suck on the taxpayer’s tit.

The costs relating to corruption, lack of transparency, lack of built in productivity agreements, and so on and so forth means that these agreements are generally bad in the long run. Going for bartering further lets the governments off from taking necessary decisions. For example, the fact that governments are not getting sufficient financing is neither here nor there, there are international funding agencies (government owned, such as IMF, or Import Export Banks etc.) who can provide funding, but because going to these agencies would mean exposing their bad economic policies, they tend to hide their faults by pitching barter as a way of doing trade. Bad, bad bad.

Technorati Tags: trade, agriculture, economics, subsidies

Will The Satyam Probe be Fair?

Ashish — Wed, 28 Jan 2009 03:43:44 EST

The scandal about Satyam just refuses to die down. There are so many questions that remain open, and there is the major feeling that even though the Central Government took quick action once B Ramalinga Raju had come out with his confessional statement, the state Government of Andhra Pradesh is not being so open. Before Raju had made his statement, the Chief Minister, Rajshekhar Reddy had made a statement to the effect that the aborted merger was over, and people should get on with their lives. No reassurance about watching out for a company that was the star of Andhra Pradesh and employed 50,000 people. And just a few days after the Chief Minister dismissed all warnings, the Satyam Chief went ahead and wrote his confessional note. And after this, the Chief Minister had nothing to say.

Now, there are so many open questions that it seems that there are so many mysteries to resolve, and the former Satyam Chief is sitting in jail, with some police investigators getting access to him. For some arcane reason, SEBI investigators are unable to get access to Raju, currently in jail (The Andhra High Court has refused SEBI the permission to do so even though a huge amount of investor money went down the drain).

- How many employees does Satyam have ? There are multiple reports about whether it has 53,000 employees or it has a lower number of employees with contradicting statements from the board and from the public prosecutor
- How did Raju divert money away from Satyam to the extent that a software company that has a large margin is very low on money ?
- What are the exact details of the Andhra Government support to Maytas (a company also run by Raju and his family) ? It has a huge amount of Government contracts that are now in jeopardy. In fact, the contract for the Metro was so controversial that the head of Delhi Metro (Mr. Sreedharan) stepped away as a consultant with a talk about this being an unfair contract (and the Andhra Government threatened him with a defamation lawsuit).
- Why has the investigation into this huge fraud case not yet handed over to a central agency with the ability to do a financial and criminal investigation both ?
- Will the money that has been diverted away from Satyam ever be recovered ?
- What was the level of interaction between Raju and the Congress Government of Y Rajsekhar Reddy ?
- What was the exact role of the auditors given that they appear to be grossly incompetent, and maybe involved in a criminal conspiracy ?

There are so many other questions, and yet there are no good answers. The investigation is continuing, but already questions are emerging about whether this is a fair investigation, or whether this is an attempt to try and protect Raju. For a scandal that is India's largest and casts a negative impression on the overall positive India story, the investigations needs to be time-bound and very thorough.

Ramalinga Raju's Satyam Crimes, Self-Interest, & Moral Paralysis

K. M. — Sun, 11 Jan 2009 20:19:14 EST

About a couple of weeks back, I had a very interesting conversation with a friend (and former classmate). The conversation started off with him telling another friend that “a day will come when you will look for a meaning, a larger purpose in your job/life”. I inquired what he meant by a larger purpose and the conversation moved to self-interest and sacrifice. By the end of the discussion his position was that sacrifice should not be the guiding principle in normal life but that it might be necessary in certain (rare) situations. I claimed that pro-sacrifice and anti-selfishness principles are the dominant ethical principles today, to the exclusion of everything else and this has severe consequences in our lives, as these principles provide no guidance (at best) in normal life and actually create an undeserved sense of guilt if accepted. He responded that he did not believe that the pro-sacrifice ethical principles had many far reaching consequences. Since we were running out of time at this point, I said that I would provide evidence for my claim. Here is the first piece of evidence. This post seeks to show how prevalent the “selfishness is evil” theme is in the culture at large.

In its leading front page article on Friday, The Times of India asks

Did Raju Pick Lesser Of 2 Crimes?
He Said He Inflated Figures, But Did He Divert Money?

… Raju said that in the second quarter (July-Sept) of 2008, Satyam showed an operating margin of Rs 649 crore (which was 24% of revenue) when it was actually only Rs 61 crore (that’s 3% of revenue). This, he indicated, was part of a fudging exercise over years to inflate profits—presumably to keep the stock price up and the magic of Satyam alive.

Essentially, what Raju confessed to was creative accounting—showing cash where none was generated and therefore did not exist. But, as he kept emphasizing, he did not profit personally from it. Still a crime, but not top of the pops in order of heinousness.
…
It’s a crime to show money in the books where none existed, which is what Raju said he did. But it’s a worse crime to divert money that actually did exist.

Note the assertion that Raju’s crime would be less heinous if he did not profit personally from it. I do not know if this is true as per the Indian penal code. It is the moral angle that is more interesting. Consider the two possibilities.

1) What Raju wrote is true - that Satyam really was making very small profits (compared to the IT industry norms) and Raju inflated the books to keep the company going.

2) Satyam was making normal profits and Raju siphoned them off.

In both cases, Raju betrayed the responsibility he had as the company founder and board chairman. In both cases, he defrauded the shareholders. The difference in the two cases is that the motive in the first case is somewhat less personal than the second. So what does the Times’ assertion mean? It could mean one of two things:

a) Self-interest (personal profit in this case) is bad in itself.

b) Self-interest is amoral (neither good nor bad) but concern with other people’s interests (a larger purpose) is good.

I am sure that the pragmatist Times would hold that there is nothing wrong with personal profit if it is obtained by honest means. Its position on the issue (if it ever took the trouble of taking a definite position at all) would essentially be something like:

Selfishness is (regrettably) part of human nature and it is impractical to oppose it consistently. However it needs to be restrained in favor of a larger purpose (the common good).

So the Times assertion essentially means b. Now consider what that implies. It implies that the supposed “larger purpose” (keeping Satyam going in this case) can be a mitigating factor in the moral judgment of Raju’s actions. If things had gone a little differently and Raju had said that he fudged accounts after considering the delicate position of the global economy, the troubles his employees would face if Satyam were to shut down etc, etc…, the Times would find it difficult to take a unequivocal moral stand. After all it routinely justifies and calls for fudging the national accounts - by imposing fuel prices, interest rates, lending rates, printing money and a host of other such actions - on precisely such grounds.

Holding self-interest as amoral results in moral paralysis. One can no longer say that fraud is wrong irrespective of the motives behind it. All that is needed to justify it is some sufficiently “larger” purpose. And since everyone has a different “larger” purpose, a different “shared” vision for how other people should live - purposes such as Maharashtra for Marathis or India for Hindus or universal health care or universal education or the rule of Islam or saving the planet - anything goes.

Satyam Board Dissolved, Peer Review Audit Of Nifty Stocks Ordered

Aaman Lamba — Fri, 9 Jan 2009 11:21:08 EST

The implosion of a good company gathered pace today when the Indian government announced the dissolution of the rump board that existed following the resignations of the independent directors and the Chairman and Managing Director of Satyam Computers. Acting through the Company Law Board, the government effectively nationalized the company and announced it would constitute a new 10-member board of independent directors within seven days consisting of "people of repute and dignity". Soon after, ex-Chairman Ramlinga Raju surrendered before the Andhra Pradesh police, after being untraceable for two days.

The material losses that appear to have been sustained by shareholders and the doubt over the accuracy of the auditing performed by Pricewaterhouse Coopers moved the SEBI chairman to announce that they would be asking all Nifty companies and other selected ones to submit their working books to a different auditor for a peer review. This unprecendented step might expose additional skeletons in the closet of various companies, but will go a long way in demonstrating the assertiveness and efficacy of India's regulators and government bodies.

Continuing with its penchant for rumor and provocative news reportage, the mainstream media floated a report today about Satyam announcing a two month hiatus of pay for its employees. This was rapidly debunked by employees, who indicated this was a misrepresentation of an internal employee discussion about sacrificing some pay, up to two months worth, to save the company they had built together.

Additional ambiguity was sought to be created in the misreading of the Infosys announcement that it would not poach employees or clients from the beleaguered Satyam into a statement that the employees were somehow un-employable.

The Indian government is dealing with a welter of issues all at once, and appears to be rising to the challenge, ending the petroleum officers' strike, besides superceding the Satyam board. This new economic order, with an assertive government acting fast and a big broom sweeping clean the excesses of the past, is a refreshing change, and might see an uptick in world perception about India's lethargic State.

The world economic situation continued to worsen, with United States job losses rising to 524,000, with an annualized drop of 7.2%, the highest since the end of World War II.

As the year progresses, it is already evident that this will be a year of many surprises, and things will only get darker before any glimmer of hope is seen. The rejuvenated expansion of the State might help stem the rising tide of economic fear, but this might come at the cost of free markets, which have their own way of working things out.