Desicritics Category: BizTech: Entrepreneurship

Changing The Mindset - From Scientists To Entrepreneurs

Ashoka Chakra — Mon, 9 Mar 2009 22:33:52 EDT

There are many reasons for the United States' dominance in science. Freedom to operate, (relative) lack of seniority and sycophancy, and availability of funds are among them. Another reason the US has been in the forefront of technological innovation is that it allows scientists to be entrepreneurs. Take a look at the cluster of innovative companies coming out of Universities in California and Massachusetts and you get the picture. Companies span the gamut of fields, ranging from software to biotechnology. In most countries, this dual role is frowned upon, if not forbidden outright.

Such was the case in India as well. For example, in 2001, Swami Manohar and three colleagues at the Indian Institute of Science (IISc) in Bangalore invented the Simputer, a simple and cheap hand-held computer. However, being employees of a public entity, they could not commercialize their invention. So Manohar and colleagues left and founded their own company, which was in turn bought out by Geodesic. If they had been in the US, they would have had many options including being on the SAB or even a senior executive of the company while still retaining their academic post.

Indian scientists will now have a similar choice. On 24 February, the Department of Scientific and Industrial Research issued regulations that permits researchers at government-funded institutions to hold equity stakes in scientific enterprises and spinoff companies.

Approximately 400,000 scientists, about three-quarters of the scientific work force, are employed at public institutions. By bringing India in line with the United States and other Western nations, the new rules should create an attractive environment for talented faculty. The new rules also permit research institutes to hold equity stakes in commercial enterprises. To facilitate this process, the government will encourage the lateral mobility of researchers between institutes and industry. This would also be good of institutions who could reap tremendous financial rewards from successful spin-offs.

So a talented scientist who comes up with a novel idea won't have to play office politics or be sycophantic to his/her boss any more. They can keep their position and at the same time, start a company.

In this instance, it is good that India is following America's lead.

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

Bimaru States In India

Dr Bhaskar Dasgupta — Wed, 21 Jan 2009 04:53:38 EST

States and regions also become sick besides companies and human beings. When they become sick, you get a doctor, then you dose the patient with some foul smelling medicine, and then you get better, and to stay better, you keep on doing good healthy things so that you do not fall ill. But then, there are some fellows who will smoke, drink, eat fatty foods, then get a heart attack, and then continue on with being a bad old egg.

But what's with Bimaru in the title? It is a play on words, the word itself stands for 4 Indian states, Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. When you select those letters together, they mean sick (Bimar in Hindi means sick). And yes, Sir, they are sick in terms of almost every socio-economic indicator that is going.

Obviously, the reasons are multifarious, but mainly is because of the venality of the politicians of all stripes. Corruption is rife, illiteracy rampant, health is poor, economics horrible, generally a sad old reflection of what India's missed opportunities are. What makes it even worse is that these are poor states in a poor country, but other states have done much better. I realise that somebody has to come bottom, but when we are talking about poverty levels which are at or below starvation levels, then being at the bottom has severe implications for rest of the country. It does not also help that these states are some of the most populous in the country.

One would expect that every state would be hell bent in trying to improve its investment climate so that jobs are produced and better quality of life is achieved. But no, most of the leaders of these states are too busy being corrupt and feathering their own nests. By and large, they are a venal lot, seriously. And having had experience of living, studying, working, running firms in these states, I can personally say that the situation isnt improving fast. For entrepreneurs, it is tough, really tough. When you have borrowed money from your father's General Provident Fund (pension fund), and have invested in the anticipation that you will provide sufficient returns so that your old man is not left on the street, the last thing you need is your own government and its officials being like vultures, bent on capturing your hard earned money. Well, perhaps it is too much to expect, but what exactly are the problems facing entrepreneurs?

The World Bank recently released a paper comparing the investment climate in 16 Indian states for which they had data. Here's their main graphic which shows the investment climate in the 16 states.

So what did the author evaluate to make up the index? This is what I mean by saying that the issues with these states are simple but implementation needs just simple hard work. Nothing magical, just keep on plugging away at it. Here are some of the factors relating to infrastructure: Hours of power outages last year, Hours of telephone outages last year, Percentage of sales lost in transit, percentage of sales lost due to power outages, Days of inventories kept for main input (proxy for quality of transportation). What about inputs? Excess labor, Cost of finance: value of collateral required to obtain a loan, Proximity to raw materials (share of inputs bought by domestic sources) Proximity to domestic customers, Share of firms using new technology, Trade credit: share of sales sold on credit, Trade credit: share of inputs bought on credit.

Finally institutions make a huge amount of difference to the investment climate and the authors included security cost, losses due to theft , Manager time spent dealing with regulations, Days spent with officials to deal with regulations, consistent interpretation of rules, Tax evasion (% of sales not declared), Days to obtain a telephone connection, Days to obtain a electric connection, Days to obtain a construction permit, Bribes to "get things done", Share of firms reporting officials request gifts etc. etc.

While one can only exhort the states at the top to do much better, but its the stogy lump of undigested mass of states at the bottom which is the issue. Not only do the good state's get their tax revenues diverted to support these Bimaru states, the diversion of tax revenues is then not invested in productive matters. So, all in all, these are giant holes where a significant proportion of productive wealth generated by India disappears.

The concluding paragraph from the author is particular important but would not be particularly surprising.

The analysis of 46 investment climate variables shows that power, transportation, corruption, tax regulations and theft
remain the major bottlenecks policymakers need to address in order to improve the business environment in India.

Same old, same old. Long way to go, my friends, long way to go.

Technorati Tags: Corruption,Public Sector,Development,Economics,India,World Bank

Action Sociology: Human Rights with Sanitation

Somik Raha — Sat, 27 Dec 2008 16:34:43 EST

Ever since independence (and from a long time before that), people in India have been appalled with the abuse of the caste system, especially the poor treatment meted out to "untouchables." As usual, well-meaning people think they can change attitudes by passing laws. And so, India has The Protection of Civil Rights Act, 1955, which punishes the preaching and practice of untouchability. Needless to say, the act made little difference on the ground in terms of changing people's attitudes.

There is no dearth of angry activism on this issue in India and outside, and as is the nature of all angry activism, the message is so loud that people close their ears and ignore it. Meanwhile, India's politicians are more interested in maintaining the status quo and milking caste divisions for votes instead of working for the welfare of the "untouchables." In this hopeless scenario, one man is running a silent revolution with a lot of success.

This is the story of Bindeshwar Pathak, whose life transformed as a young man in the 60s, when he was told by the General Secretary of a Gandhian organization that it was Gandhi's unfinished work to remove the profession of manual scavenging from India and liberate the untouchables. The General Secretary told the young Pathak that he had to finish Gandhi's mission and added, "I see light in you." The young man had no clue what this meant, but he read a few books published by the WHO on sanitation, and decided to live in a scavenger's colony for two months to understand them and their problems. People thought he was crazy. He survived, and came back with an understanding that was different from any social activist in this field.

He felt that the discrimination of the untouchables was due to technical reasons. The untouchables, or manual scavengers of toilets, were considered dirty as they dealt with human excreta while cleaning "bucket toilets." Human excreta would be pulled out of such toilets into buckets and then, scavengers would carry buckets on their heads to a location for disposal. If there could be an alternate toilet designed to be self-cleaning, then it would be cheaper for the consumer as they wouldn't need to hire people to clean it. It would also eliminate the need for the scavenging profession.

Pathak started "Sulabh" (which means "easy") to address this. He came up with the two-pit pour-flush toilet which would work in the Indian context. One pit would be in use at a time. Once the pit was full, it would would be closed and the other would be in operation. Over a year, the first pit's contents would turn into manure and could be used as fertilizer in the field. Thus, there would be no need to scavenge and clean these toilets. Sulabh's toilet product turned out to be a great hit, with over a million pieces already sold. Sulabh then channeled their profits toward retraining the untouchables to enter mainstream society - as cooks, beauticians, electricians, etc. Today, Sulabh has a whole array of toilet products to suit your budget.

Pathak also felt strongly about the problem of open defecation. Unlike those who faulted the "Indian civic sense," he recognized that the problem was that we didn't have enough public toilets. This is also a question of human dignity, especially for women, as they would suppress the call of nature the whole day and only go very early in the morning or in the night. Even so, such trips would make them a target of sexual predators, snakebites, diseases due to defecating in unhygienic environs, etc., not to speak of the health problems that come from suppressing the call of nature the entire day. Again, this was a technical problem waiting to be solved. So, he started the first public toilet in (hold your breath) Arrah, Bihar, a state where people would rather travel on top of trains than buy tickets. Pathak believed people would pay for a clean toilet experience, and he was proved right. The people of Bihar paid and sustained the public toilets. Today, Sulabh has built over 5000 public toilets all over India, including the largest toilet in the world at Shirdi for pilgrims.

Not only do these toilets generate local employment, they also collect raw material for Sulabh's energy innovation - bio-gas and electricity production. You have to see it with your own eyes - yes, your excreta can now be used to produce cooking gas and electricity.

Pathakji also understood that he needed to help the children of the scavengers get the same opportunity as others. Sulabh uses its profits to run a school where children of the scavengers get free education, books and uniforms. They also eat together with children of other communities, and learn Sanskrit, a language they were earlier denied access to. The children in this school are taught all religions so they can celebrate all of India's traditions.

And the story does not end here. Sulabh also has a toilet museum which is now on the tourist maps of New Delhi. They have expanded to eco-sanitation projects that help with pisciculture, among other things. Throughout these projects, Pathakji continued his education to go on for a Phd and a D.Litt, and has coined a new term, "Action Sociology," which he advocates as a way to solve social problems.

Behind all of these efforts is a deep-rooted spirituality. Pathakji's day begins with the entire Sulabh community praying (they sing a universal prayer) and filling their hearts with positive vibrations. When I interviewed him, not once did I sense anger against society for discrimination of the untouchables. At the same time, there was no acceptance of the injustice. Like Krishnammal and Sandhya, and in a completely unique manner, Pathakji has transcended anger and hatred to make a difference, a big difference, through social entrepreneurship. He is indeed a bright light in India who has illuminated our conscience and given us great hope for the future.

You can meet him by going to the Palam Vihar (New Delhi) office of Sulabh International Social Service Organization (although he travels often, he is generally accessible). You can also meet the other heroes of Sulabh and see their toilet museum and a demonstration of bio-gas and electricity from human excreta in the same complex. There are several volunteering and internship opportunities with this organization, if you have the time.

And if you can't visit them, here is a film I made on Sulabh in 2006. I recommend watching it in full-screen mode (press the TV icon) and using headphones.

In case the full screen feature does not work below, you can watch it directly on Blip TV.

Errata: the film says Sulabh has built over 500 toilets, when in fact, the number is ab

Ending Coercive Land Acquisition - Creating Options

Somik Raha — Sun, 9 Nov 2008 05:37:45 EST

The reaction by India's industrial titans to the Singur crisis has been unanimous. Big guns like Mukesh Ambani, Narayana Murthy, Azim Premji and others have supported the Tatas and warned that the state would become a desert for investment if the Tatas had to leave, which is now a reality. Even the Prince of Calcutta, Sourav Ganguly, has supported the Tatas. Mamta Banerjee seemed to be the lone voice in support of the farmers whose land had been acquired forcefully without adequate compensation. People have called her stupid and an enemy of the state. Her own party supporters have voiced their disagreement with her opposition. In this backdrop, I am going to take on the perilous task of finding logic in her stubborn stance and also to suggest a long term solution for the future. I ask the reader to bear with me and let me explain my position.

Not our problem alone

Land acquisition issues are by no means limited to India. In the United States, there exists a law called "Eminent Domain," which in plain speak says that Uncle Sam can throw you out of your property if it sees a public good that requires the use of your land. Imagine this: a Civil Engineer (from a reputed university) contracted by the government to come up with the most optimal road plan figures out that such a road would need to pass through your grandmother’s house. The authorities send her a notice that she will be paid a certain amount, which would probably be a little lower than the market price. She refuses. Even after the compensation is hiked some more, she refuses. The authorities invoke Eminent Domain and send the cops to throw her out. As the cops arrive, the poor old lady holds on to whatever she can to prevent being dragged away, all the while crying out that this is where she has all her memories, this is where she lived with her husband until he passed away, and this is where she wants to die. She wants to be left alone. But that cannot be allowed, and the official tells her, "Ma'am, you don’t understand. The most optimal road goes through your house, and therefore, for public good, we must have it." And her cries go in vain (unless civil rights groups get into the game and sue the government for doing this). This story plays out in every society in the world (see box 1, box 2).

People all over the world are generally nice and compassionate, and most people feel bad about a story like this, but they ask desperately, "What alternative do we have for building YOUR-FAVORITE-PUBLIC-GOOD?" There is an alternative that ought to be taught in high schools for its utter simplicity. It has to be understood that the only legal power of a government is the power of coercion. And every single time coercion is used for public good, it has unintended consequences. Note all the controversies of land acquisition that have come to light, from the Narmada Dam project in the West, NanoCity in the North, Singur in the East and now Reliance might make the same mistake in Maharashtra. In India, the police knows no better than to use their guns on protesting people, often killing many. The legal costs rise and big businesses get discouraged by the reaction. In the United States, as business after business got stung by the backlash to eminent domain, a path-breaking and simple alternative emerged.

Create Options

This alternative has its roots in one of the most powerful insights that the wise have shared about decision making: you can always create OPTIONS. Taking this insight literally, let us try creating options for land acquisition (not the unrealistic't know a financial meltdown until the train hit them but the decision analytic variety whose math is simple enough to be understood by an English major with a minor effort). Let’s say Reliance plans an oil pipeline that needs contiguous areas of land. If any one of the landowners in the path of the pipeline hold out, the project will not take off, leaving Reliance with several non-contiguous pieces of land and a large hole in their pocket. In an alternative scenario, instead of buying any plot of land, Reliance could choose to buy an option from the landowner. The option will give Reliance the right to buy the land at the prevailing market (or agreed upon) price within a period of three years (for instance). This option can be valued easily using simple decision analysis tools and would be an order of magnitude cheaper than acquiring the land itself. Reliance could then plan multiple pipeline routes and try to acquire options on each of the routes. The moment they have all the options on a particular route, they can exercise the options on that route and acquire all the contiguous pieces of land.

There are several benefits to this approach. First, as Reliance is a private party, they are not required to reveal the purpose of the acquisition. They can send out agents who don't even need to reveal that Reliance is behind the acquisition. The government, on the other hand, is required to reveal the purpose of their acquisition, resulting in landowners realizing that they can make a lot of money if they hold out. The cost of acquisition will now be based on a good deal between the private party and the landowner. Second, as exercising the option is a legal right, there is no necessity for state coercion on the individual landowner. If someone holds out even after selling an option, that will be considered contractual fraud, and we have a legal framework in place to deal with that. The government no longer needs to deal with mass protests, the police no longer needs to open fire on hostile crowds, and entrepreneurs no longer need to sink large sums of money in legal costs. Third, if some people (tribals/farmers/middle class people) have a strong connection to their land and don’t want to leave it, all they have to do is not sell the option to their land. There should be no legal authority on the part of the government or the industry to force them to do so, and any forcible or fraudulent activity on the part of the entrepreneur would be subject to our existing legal framework that prohibits fraud and coercion. Human rights organizations can shift their focus from protesting to educating the tribals/farmers, while respecting the choice of these communities to accept or reject the education.

Creating options is not a new idea, and you have likely already used it in your life. We shall define an option as "the right to a future decision." A little consideration should reveal that insurance is a very good example of an option, where you buy the right to a lower medical expense should an emergency arise. The price of the option here would be the insurance premium you need to pay each year, which is a fraction of the coverage cost that the insurance company is legally obligated to pay should the situation arise. If you have played in the stock market, then you might be familiar with "call/put options" which is the right to buy/sell a stock at a predetermined price.

Who's Doing Non-coercive Acquisitions with/without options?

If this method is so simple, why hasn’t it been tried already for land acquisition? Strange as it may sound, this has been tried – it just hasn’t been spoken about as most private firms don’t want to talk about their land acquisition strategy. I’ve heard from a reputed professor at Stanford that Disney used options to acquire most of the land they needed for their theme park at Anaheim, California, after which people got wise to the purpose behind the acquisition and hiked up the selling price. Even then, Disney saved a fortune in legal fees by using this method. (For other companies in the US, see Box 2)

The intelligent reader may point out that what works in the United States may not necessarily work in India. To which I wonder what is so special about the Indian DNA that it would not like to save lives and lower costs when it could. In any case, options has been in use in India for a long time, without us explicitly recognizing it. If you've tried buying land in India, chances are you've been asked to pay a "roka" as North Indians would call it. The "roka" is an advance that a buyer would pay a seller after which the seller would stop showing the land to others. The "roka" is an option, a right to buy the land within a specified time. "Roka" options are quite common in the real-estate market and are probably referred to with different words in different parts of the country.

Finally, I have anecdotal evidence that after Larsen & Toubro (L&T) had completed acquiring land for the third Howrah Bridge in (hold your breath) West Bengal, neighboring land owners who had been skipped were upset at missing the pie, and begged L&T to consider buying their land too. It seems that landowners in West Bengal also like good deals, like landowners anywhere else.

Challenges

There are some legitimate challenges to applying this solution, especially in places like West Bengal. The business climate in the state is highly interventionist, with entrepreneurs unable to operate without the blessings of the prevailing local political party. In such a situation, talking about free markets is a travesty. The current government needs to realize that it cannot replace coercive prevention of industry by coercive adoption of it. It needs to start with the fundamentals and shrink to a minimal form of government. But then, what will happen to the party ranks? Instead of employing cadre into what amounts to an organized land mafia, they can be encouraged to become social entrepreneurs who combine the best of capitalism (freedom) and communism (caring for the community) while leaving the worst out (greed and coercion respectively). While this might take some time, a first step for India would be people from all walks of life coming together to demand the revoking of Article 300-A so that no government has the right to take away private property through any argument of public good. In today's society, we should realize that governments claim almost any economic activity as a public good, and eminent domain laws become a vehicle for individual abuse.

While economists would welcome the strengthening of property rights, they may raise several objections to entirely scrapping Eminent Domain laws in India. First, they will point out that there are "actual public goods" that a government must provide (e.g. roads, wildlife reserves, forested lands). How is the government to do so without laws that resemble eminent domain? Second, private parties cannot freely purchase agricultural land in India. We would need laws that allowed for land use changes, and we still need to consider if such a change is in public interest. Third, individuals sitting on vast natural resources ought not to have the right to refuse their commercialization - this is an argument for eminent domain laws. Fourth, there are thousands of land holders who have title to a small amount of land. This makes it infeasible for private parties to negotiate with so many, hence, the government is a good intermediary. Finally, you would need a sophisticated buyer and seller to be able to use options.

Lets take these arguments one by one. First, it is a 20th century idea that governments are responsible for public goods. There is ample evidence of societies that did fine in the past without government intervention in every sphere of life. As evidence in our present time, look at all the public goods in India and you will find those are the services that are most lacking in creativity and innovation. In the United States as well, the government builds roads as a public good. This is one sector which has seen so little innovation that you now have cars that are built to touch 200 miles per hour and roads that can only handle 65 miles per hour. Think about all the private toll roads you've been on in India and compare them to the government maintained roads, and the difference should immediately be apparent to you. India is full of examples of social entrepreneurs who have given up on the government's ability to provide public goods and provided solutions themselves, either as a for-profit or as a non-profit. Sulabh International builds public toilets(shauchalayas) that are financially sustainable and pay for their construction cost quickly, while generating employment. See Box 3 and Box 4 for further examples. Second, I agree that private parties should be allowed to freely purchase agricultural land and the land owner should have the right to decide how the land should be used. If the current land owner feels it is important that the land use should not be changed, this can be specified in a contract at the time of sale. The argument is often made that good agricultural land should not be used for non-agricultural purposes. If we truly believe that, then we should immediately proceed to demolish all the government (and other) buildings in Kolkata, which has some of the best agricultural soil you could find being on the banks of the Ganga. Third, it is possible to grant an individual the right to their property while one could also construct rights for what lies below the property and separate the two. Once this is done, there is an incentive for entrepreneurs to find ways to drill for oil or a similar natural resource without disturbing the landowner who is at the surface. Fourth, the argument of "too many land owners" is a terrible one, as the government does no better, and arguably worse, than a private negotiator. In fact, a private negotiator would not have the advantage of guns and would have to be polite and stay within legal boundaries. Perhaps, this is an area where an entrepreneur could provide negotiation consulting services. Finally, the argument of sophisticated buyer and seller is an argument for education, although the Indian market is already using "roka" options without doing sophisticated decision analysis. Companies that need help modeling options can hire decision consultants just like they hire tax consultants. I admit that companies will have an advantage in pricing methodology over individual landowners. However, this is a good reason for the creation of a friendly social venture that offers pricing services to individual land owners. On the topic of decision education in India, there is much that needs to be done. (See Box 5)

Philosophical, Economic and Traditional Reasons

Options should be used for both philosophical and economic reasons.

Philosophically, even if everyone around me says that murder and theft is the best way to get what I want, I refuse to do it, and I will argue that India, with its deep spiritual tradition of acceptance of all religions, systems and ideas, should stand firmly behind non-coercion. Just as the tool of coercive land acquisition is the use of a police force with guns, the tool of smart non-coercive land acquisition is options. Economically, let us be clear that while using options has lowered the cost of land acquisition for many, the method itself is not going to guarantee that industrialists will get the land they want, which is no different from the case of using coercion as we have just seen the Tatas getting thwarted even with government support. If both methods cannot guarantee success, and the coercive one consistently creates more headaches, takes lives and increases costs, then we ought to throw our weight behind the non-coercive methods.

Finally, traditionalists might point out that in the Indian tradition, the individual must sacrifice for the family, the family for the community, the community for the state and the state for the world (a maxim approved by Sri Krishna). While this is a noble spiritual idea, it is not what is followed today. On the other hand, a more accurate maxim for the practice of the modern day is, "the individual must be coerced to sacrifice for the family, the family for the community, the community for the state for the world." Every spiritual tradition in India recognizes a supreme internal freedom asks its followers to acknowledge and become aware of it. It is but natural that India lead the world in giving expression to this internal freedom in our external environment. We can start by recognizing that individual sacrifice is a decision to be made only by the individual, and coercion has no place in a society that wants to call itself free.

Almost every country in the world has a legal mechanism that resembles Eminent Domain laws. In the United Kingdom, New Zealand and Ireland, these laws are referred to as "Compulsory Purchase," while Canada and South Africa call it "Expropriation." India used to consider right to property as a fundamental right under Article 19(1)(f). This meant that your land could not be taken away except under the Land Acquisition Act of 1894, or a similar state law, which allows the use of forcibly acquired land by the Government "in the interests of the general public or for the protection of the interests of any Scheduled Tribe". The Land Acquisition Act of 1894 empowered the Central and the State Governments to acquire lands that they felt was necessary for a "public purpose". Public purpose was defined so broadly that even land use by state-owned corporations was included, thus turning this law into an all-powerful mechanism for the British. While this British baggage continues to this day, in 1978, the right to property was shifted out of fundamental rights so as to make it harder to challenge land acquisitions by the government, and Article 300-A was introduced which said that "no person will be deprived of his property save by authority of law." In other words, the state/central government can take your land away if Parliament or State Legislatures make a legislation/order/rule to do so, in exchange for compensation determined under the Land Acquisition Act by the Collector. You can challenge the action of the government in a court if you think the government has acted unfairly, and in most countries (except authoritarian ones like China), this leads to protracted legal battles, civil rights headaches for the government and spiraling legal costs for the industry involved. The Land Acquisition Amendment Bill (2007) is an effort to reform the 1894 law, but how much band-aid can one put on a gaping wound? Senior Advocate Bishwajit Bhattacharyya recently outlined in the Statesman (Oct 29, 2008) how even passing a law under Article 300-A has been successfully challenged in court. How many people have the resources to take on the government when their rights are violated?

At this time, the United States probably has the worst eminent domain laws on the planet. In 2005, a controversial Supreme Court ruling upheld (by a 5-4 vote) the government's use of eminent domain powers to take private property from one owner and transfer it to another owner under the pretext of economic development. This ruling was criticized publicly by many noted people, including Bill Clinton. Justice Sandra Day O'Connor, who voted against the law in the famed Kelo v. City of New London case, warned that this new addition would "wash out any distinction between private and public use of property." For the first time in US history, governments could use eminent domain powers to declare ordinary private use of property as a "public use." In a report by the Castle Coalition (a network of homeowners and activists in the US determined to stop the abuse of eminent domain), there have been more than 5,000 instances of abuse since the Kelo decision. This figure includes cases where private property owners have threatened the use of eminent domain on reluctant sellers to agree to their price or risk having their property taken away by force. This situation is quite comparable to India where the government acquires lands for private parties under the argument of "economic development."

The report also goes on to debunk the myth that eminent domain laws are needed for economic development by citing several projects that did not use eminent domain. Walt Disney's construction of Disney World, The Rouse Company's construction of a new city in Howard County, Maryland and Focus Property Group's creation of a 3000-acre community called Mountain's Edge are some of the examples. Disney World is particularly interesting to us as they used options quite heavily. Further Reading: http://www.castlecoalition.org

Box 3: Social Entrepreneurs in India, a powerful force for public good
Arvind Eye Hospitals in Madurai (and other cities in South India) treats patients who cannot pay; free of cost and make up their money from people who can. Exnora in Chennai (and now several other cities) has created a system of garbage cleaning where an erstwhile scavenger now collects garbage from each home and dumps it in the proper place, for a fee. LaserSoft Info Systems in Chennai employs "disabled" people and puts them to work in the field of banking software. The Sangini Mahila Seva Cooperative Society is for, of and by sex workers in Kamathipura, Mumbai's oldest red-light district, where sex workers gain access to banking services and rise out of destitution. A similar and older initiative has been quite successful in Kolkata's Sonargachi district. The popular Lijjat Papad is made by a social venture, Shri Mahila Griha Udyog, founded by Sarvodaya members. This is an organization focused on creating a dignified work environment for women in a decentralized manner, and its success should inform case studies in any serious business school. Most Indians are familiar with "utterly, butterly delicious" Amul butter. Amul stands for Anand Milk Union Limited, a social venture inspired by Sardar Vallabhai Patel, which is privately run as a cooperative to give milk farmers a good deal and provide high quality milk products to society. Anandwan is a social venture in Maharashtra founded by the late Baba Amte, and run as a self-sufficient rehabilitation center for people afflicted with leprosy. Anandwan has incorporated environment-friendly processes into the local lifestyle without your tax money.

Box 4: Environmental Social Entrepreneurship in the US
The Nature Conservancy (http://www.nature.org/) is a US charitable institution that acquires forested land using existing land acquisition laws as a private party in order to conserve it. Aimed at preserving bio-diversity, this organization has been voted as one of the most trusted national organizations in the US in online polls. Their work has led to the creation of several national parks. The Proactive Carnivore Conservation Fund is a private initiative by an organization called Defenders of Wildlife that finds innovative solutions to prevent people from killing wildlife (such as compensating farmers for the livestock they lose to wolves in return for sparing the wolf's life). The Property and Environment Research Center has an instructive article by the founder of this project, Hank Fischer, at http://www.perc.org/articles/article319.php

Box 5: Decision Education
It is a pity that most business schools in India either skip Decision Analysis or teach it as "Decision Tree Analysis," which is like stripping all the philosophy from yoga and teaching it as a bunch of stretching exercises. There is only minimal benefit in doing so. This is not just a problem in India but also in the United States (as you can see from the massive financial crisis). What is even more pitiable is that people need to wait till they get to a university (there are only a few that teach this as a philosophy) to learn good decision making. To remedy this, the Decision Education Foundation (www.decisioneducation.org) teaches high school children the basics of good decision making. Perhaps it is time to start a chapter of the foundation in India.

Here is a very brief introduction to the philosophical foundation of decision analysis (DA). DA does NOT help you predict the future or maximize the chance of the best outcome. For that, you are better off going to an Indian astrologer or a financial engineer (though I wouldn't trust the financial engineer - I recommend the book "The Black Swan" for people who call themselves statisticians or financial engineers). DA is an amoral method that helps you stay consistent with your preferences, information and alternatives. DA disabuses you of the notion of "objective decision making," making it clear that you can only judge the quality of your decision, not someone else's. Even more fundamentally, the quality of your decision must be judged before the outcome, as you cannot judge a decision from the outcome. If you knew the outcome, you wouldn't have a decision to make. Another fundamental tenet is the principle of sunk cost - the past matters only for learning, not for accounting.

Book Review: The Ten Commandments for Business Failure

Aaman Lamba — Thu, 18 Sep 2008 14:49:58 EDT

In this time of failing corporate giants, it feels appropriate to review a slim cautionary book called The Ten Commandments for Business Failure, written by the President of a company who has survived quite well so far. Donald Keough was former president of the Coca-Cola Company, and provides us an invaluable how-not-to guide, bolstered by a foreword by Warren Buffett, and reccomendations from the likes of Bill Gates, Rupert Murdoch, and Jack Welch.

As Warren Buffett puts it in the foreword, Mr. Keough is a human personification of the Coca-Cola Company, in all its multi-dimensionality, and has an ability to 'cut to the chase on an issue' and keeps his prescriptions simple, grounded in deep experience, and it is interesting to see how many of the dicta in this book were ignored or outright flouted by recent large failed corporations.

The very first commandment, 'top of the list' as it were, is 'Quit Taking Risks'. This might seem obvious, but as the examples of Xerox and many other giants shows, often enough, the companies that get complacent and believe themselves to be secure in their business model, stop trying to rock the boat, take risks, and bet the farm on the anti-thesis of their core ideas. This was illustrated efectively by Clayton Christansen in The Innovator's Dilemma, and more recently we have seen all the Indian IT Service majors continue to propagate their low-cost services model, venturing only marginally into alternative business models, purely because the current ones have served them well for so long.

The second commandment, "Be Inflexible" is an even more powerful mechanism for ensuring failure. The resitance of the auto industry to shed existing product lines has meant their return to near-bankruptcy. Other classic examples of inflexibility are the IBM PC, Digital Corporation, and as Mr. Keough acknowledges, Coca-Cola's own inability to move beyond the iconic bottle for years, losing market share to Pepsico. The movie industry's avoidance of television for a long time, and more recently, the music industry's Internet blind spot, are compelling examples of the power of inflexibility to destroy an industry's market positioning and value.

"Isolate Yourself" is equally effective, creating a culture where bringing good news is rewarded, and bearers of bad news excoriated. This ivory tower syndrome was observed most recently in the case of Dick Fuld, CEO of Lehman Brothers, who refused to see reason and sell out when he could have got at least a meaningful value for his firm, instead of pennies on the dollar, which will go to creditors rather than the stakeholders. Bringing bad news early is an invaluable skill that advisors must cultivate, and CEOs/leaders reward. The supporting corollaries to this rule are to only listen to those who agree with you, and take all the limelight for successes. As Mr. Keough puts it, "Watch out for bright lights who surround themselves with dim bulbs!"

"Assume Infallibility" means passing the blame for failure, typically on subordinates, but even more effectively on customers - after all, the boss is always right:) A grand alternative is Warren Buffett, who, as Mr. Keough notes, provides a full accounting of successes and failures in his annual letter to his shareholders, as opposed to CEOs who make their annual report 'an exercise in fingerpointing'.

The next commandment builds on the previous, "Play Close to the Foul Line", by highlighting the assumption that since one can do no wrong, whatever one does, no matter how gray, must be right. This enables effortless flouting of ethical boundaries to achieve one's goals, such as when loans were disbursed to people who patently did not qualify for them, leading, in part, to the subprime crisis. N R Narayana Murthy, the iconic founder of Infosys, is fond of saying that the softest pillow is a clear conscience, a dictum that might be the exact opposite of this one. The American International Group failure could be attributed to some extent to the rampant accounting irregularities in the 2000s, inculculated by then-CEO, Hank Greenberg. Mr. Keough notes the pressure for short term results at the cost of longer term perspectives, or outright fudging of earnings, as a pertinent example of 'playing close to the foul line'.

"Don't Take Time to Think" is another easy path to follow in the frenetic data-driven business stream. The author looks at the costs of such an attitude to business, from the Human Toll to the masking of reality, to finally the dangers and foolishness of not taking time to think about consequences. The volumes of data flowing through the corporate ecosystem do not necessarily contribute to more accurate decision making, and can cause leaders to overlook critical insights.

"Put All Your Faith In Experts and Outside Consultants" is a caution against the millions of con artists who have their own companies' interests ahead of your own. The compelling example used by Mr. Keough is that of New Coke, where the company made a famous and costly misstep, finding out before the Internet-driven meme age the costs of taking the word of consultants to switch the core product that consumers were used to. He notes research that shows 'experts' were 80% confident about their predictions, yet right only 45% of the time. As the old saying goes, we don't know which half was right. Statistics, that favorite tool of the marketer and consultant are counterpoised by the observation of the classical economist Ludwig von Mises, a personal icon, where he said "Statistical figures tell us what happened in a nonrepeatable histocical case."

The author segues into another, perhaps more dangerous constituency than external consultants - the bureaucracy in the organization. He recalls Jack Welch's final letter to General Electric stockholders, where he noted "Hate the bureaucracy in your organization" to coin the counter-intuitive commandment "Love Your Bureaucracy". The support systems and middle managers often enough become obsessed with micro-managing, sustaining their internal power centers, and perpetuating the rituals of their functions. He illustrates how these 'choke points' often become primary causes of attrition, and worse, stifle the company culture, leading to atrophied superstructures of busy workers producing little output.

"Sending Mixed Messages" is an extremely common phenomenon, almost inevitable in large organizations. An interesting example is sending the mixed message "It doesn't matter what you do, you will be rewarded". When a company harps on excellent customer service and delivers piss-poor service through multiple channels, it is sending the worst mixed message possible - that they don't care about their customers. Similarly, the same company, say Coca-Cola, is marketed in different geographies as a low margin, high volume product and at the same time as a high value product in others. A positive example touched on briefly in the book is that of IBM - its shift from a closed organization to an open, customer-friendly society is worth considering, in part, because it entailed the elimination of mixed messages and bringing a consistency to the entire global company on how they approached and engaged with customers.

Finally, "Be Afraid of the Future" is the anti-thesis of "Quit Taking Risks". This refers to the creeping malaise of pessimism that envelops organizations particularly successful ones. Fear-mongering and focusing on failure becomes the norm, leading to decision paralysis and demoralizing the organization.

A hidden eleventh commandment adds a final spice to these recipes for failure. "Lose Your Passion For Work - And Life". This essay goes into more mystical territory, dealing with notions of self-esteem, presentation, and making an emotional connection with one's work and life pursuits. The analogy of any food tasting better in a McDonald's box is an apt one, and tapping into the emotional aspirations of one's people is the critical factor in organizational or individual success.

This slim book is eminently readable and works best if the nuggets are mapped to one's own perspective and experiences. It should come with a handy flash card of commandments of failure. Surprisingly, they work more effectively when worded the way they are rather than in the positive sense.

The Website Ad Placement Heat Map

Ashish — Sun, 17 Aug 2008 07:27:38 EDT

One of the most important points to consider when trying to make money from ads on web pages is the proper placement of ads. If you have done some studies in this area, you could have come across many people trying to sell their secrets of Ad placement or how to make more money from properly placing Ads. However, the basis of many secrets of ad placement is how the human eye perceives ads, how they fit into the page, and whether people notice the ads or ignore them. And the basis for much of this is something called the 'Heat Map'. The Heat Map specifies positions on the page that are much more likely to catch user attention, and other places where users are likely to ignore the ads.

The Google page for the Heat Map specifies more details: Certain locations tend to be more successful than others. This "heat map" illustrates the ideal placing on a sample page layout. The colors fade from dark orange (strongest performance) to light yellow (weakest performance). All other things being equal, ads located above the fold tend to perform better than those below the fold. Ads placed near rich content and navigational aids usually do well because users are focused on those areas of a page.

Keep in mind that while the Heat Map is a good starting point, you need to spend more time on trying to figure out how your users read your page, and the amount of ads and their placement such that they earn the maximum money for you. This will not be a one-time activity, but something that is likely to take several iterations before you reach a higher level of earnings.

Public Services and the Public Sector

Dr Bhaskar Dasgupta — Tue, 15 Jul 2008 09:11:28 EDT

There seems to be an inherent assumption that public services such as hospitals, police, roads, infrastructure, garbage collection and so on and so forth have to be provided by the public sector as well, soup to nuts. And this is what bugs the heck out of me.

Recently, at a club for technology, public sector and business executives, a minister came in to talk to us about how the public sector is responding to globalisation. Incidentally, this is a great club, you get to hear some great people and meet even better people. Quite a lot of my knowledge of the public sector provision and senior government workings comes from this wonderful institution, but this time it was a bit of a rambling speech.

What it boiled down to was that globalisation was hitting public services with change on a very dramatic basis while the public sector delivery model was clearly not up to the mark to keep on supporting this. So what he is pushing the public sector to be more risk taking, more entrepreneurial in public service provisioning.

Now, nobody actually objects to public service provision, not if they do not understand what a nation - state is all about. It is about common values, language, culture, geography, history and yes, even public service provision. The fact that there is just one currency note type across the country and everywhere that note is accepted and that it needs public service to make sure that it is fine means that public services are required.

Same with the concept of universal public provision with the post office. In other words, this is a provision which means that the state has to make sure that a letter posted in one part of the country will get to another part of the country, irrespective of the distance travelled, deliveries will be made on regular intervals and so on and so forth. What is actually required is different from country to country. But it is there. Here's a fascinating discussion over what to do with this provision and how to standardise it across Europe. But most importantly is that how do you fund it?

And this is my problem, if the government run public sector does not know how to handle it or provide that public service provision, then instead of trying to get all risk takers and corporatist about it, just put in a regulatory model overseeing the service provision and farm that out to the private sector. Why press the public sector to get excited about this?

Now this is at variance with what is actually happening on the ground. See here for a fascinating story. The private and voluntary sectors are providing a stonking £80 billion of puiblic services, 6% of GDP and I quote:

A government-sponsored study by DeAnne Julius, the economist, revealed on Thursday that those sectors supply a third of public services – everything from National Health Service treatments to bin emptying, IT, back-office functions and RAF pilot training. The market is worth £79bn, employs almost as many people as the NHS and accounts for 6 per cent of gross domestic product, making it a larger industrial sector than pharmaceuticals, automotive or electricity, gas and water. It also has considerable potential for further growth both at home and abroad, the study is expected to conclude.

So the minister and the actual situation on the ground are totally different. And something that I like. Now you might quibble over whether or not the garbage collection is a public service or not but hey, the British public has agreed to do so (and I agree with that) and has outsourced it to private provision while making sure that the service delivery is purchased by government. Neat, no? and as you can see from the article, they are trying to sell this model across the world. Shame the minister did not know about this.

Technorati Tags: Outsourcing, United Kingdom, Public Sector

Infected by Inflation

Shantanu Dutta — Sun, 29 Jun 2008 10:39:06 EDT

One can sure meet some strange people these days at weddings and funerals. A couple of months ago, attending the wedding of a niece, I heard the story about one of my aunts. She had been invited to the wedding but was unwell. So she had sent her two sons to attend the wedding on her behalf –with a letter. The letter came with an intriguing stipulation – that it had to be handed to the bride’s mother – her sister-in-law or to the bride herself and no one else. The two sons who made a somewhat hurried exit from the wedding left the letter with the bride’s mother as they hurried out. They stayed quite a distance from the wedding venue and had to return.

In the busyness of the wedding, the letter remained unopened. The wedding guests departed slowly one by one and the letter remained buried in the purse where it was randomly tucked in on the wedding night. There it remained until the news arrived a few weeks later of the death of the aunt in question. At that point, memories were juggled and someone remembered the forgotten letter and after a lengthy search, the letter was finally found and read.

To say that the contents of the letter shell shocked my middle class family is to put it relatively mildly. For in that final letter, my departed aunt, unable to come herself to the wedding and meet anyone had poured her heart out in a letter which she had obviously hoped would be read in her lifetime.

My aunt’s letter described the effects of inflation far better than an economist would be able to, for if inflation is a pandemic, a contagion, then my aunt was one of those felled by it, much as dengue or cerebral malaria or cholera might claim its victims. She described in detail how the modest poultry business her two sons were running for a few years was ruined, first by the onset of bird flu and then the subsequent panic leading to reduced demand in the city. Just when they were beginning to recover and get back on their feet again, inflation began rising and once again the demand failed.

The only steady income in the family was a meager family pension due to my aunt on account of her late husband’s government service. Of late, it was not just the only steady income; it was the only income with her sons’ business in liquidation. The family was faced with a Hobson’s choice - was the pension money to be used to buy provisions and groceries for the family or to buy medicines for my aunt’s several age related ailments.

The decision was made more complex by the fact that the meager family pension would continue only as long as she lived but she finally cast the die and decided that she would wither away so that her sons could live as the little pension money would not allow her to buy any medicines after the groceries were bought. A couple of months later, she was dead. Unlike the many farmers in Maharashtra and else where who need to commit suicide when life becomes unlivable, she was spared that expense. Crude oil prices set somewhere in the New York Stock Exchange and the spiraling inflation took care of that.

Inflation has always been presented to us in newspapers and business media as an economic phenomenon. All the inflation-related fire fighting has been done by macro-economic bodies like the Reserve Bank whose tools are graphs, tables, prediction and politically-laced policy inputs. But these erudite economists need to know that while globally, inflation may be studied as an economic phenomenon, in India’s huts and homes, it is a rapidly spreading infection and potentially fatal among the particularly vulnerable.

In the absence of a prescription, the casualties are rising.

Philanthropy - Giving it All Away

Shantanu Dutta — Tue, 10 Jun 2008 00:29:46 EDT

Those who work in the charity sector have a lot to do with donors and typically one comes across one of two types: the obnoxious kind who makes it very clear from the first encounter that they see the charity worker and his agency as nothing more than a glorified beggar. Often this kind is usually not even dealing or handing out his own money. He or she is more likely to be some technical minion for a face less multi lateral or bilateral entity but looking at the airs that the workers put on, one could be excused for assuming that that they are actually reaching into their pockets and purses and making grants.

The other kind is the old style philanthropist – the one who actually gives out his own cash and sees himself as a partner in the whole exercise. Such donors see themselves as partners and catalysts in a much larger vision in which the agency is on the ground is the pivotal player and all others including themselves as ancillary services supporting the hard work on the ground. The first kind of donor may be more professional in their approach, but perhaps it is the second kind who invests a charitable entity with passion, zest and energy that bureaucratic processes can never deliver, no matter how efficient the number crunching. This piece is a sketch of one such philanthropist and how it made a difference and whether we in India will get to the point where philanthropy not only becomes a way of life and people no longer flaunt their wealth but create examples that are worthy of emulation.

Tom White is a devout Catholic and a World War II veteran who returned from the war to inherit his father’s heavy machinery and construction business in the United States and over time made a lot of money. That was in the late 40s.

Since then over the next 55 years, Tom White has given away $75 million, pretty much all of his assets. At 84, the construction millionaire has given away his fortune. If he has his way, he'll be down to his last quarter when he draws his last breath. He has supported more than 100 causes over the years, but his biggest gift by far has gone to Partners in Health, the program made famous last year with the publication of Tracy Kidder's book "Mountains Beyond Mountains." As Time Magazine which declared him as the philanthropist of the year in 2001, what set Tom White apart from the other givers like Warren Buffet or Bill Gates or the others is that most” big givers don't start redistributing their loot until they have made a pile, and many generous magnates, like Turner and Bill Gates, remain very rich even after they have made headlines for their charity.”

The gross inequities in the distribution of wealth in the world and especially among the poor challenged Tom White, relatively less wealthy man compared to the 4 billionaires from India in the latest Forbes’ top 10 billionaires list and the 53 over all billionaires from India in the list of the word’s 1000 richest people. A lot of the social sector work that the government should be doing for its citizens does not get done because our government’s spending priorities are skewed towards national security. India's defence budget is 960 billion rupees (£12bn) compared with 150.2bn rupees (£1.9bn) for health and 330bn rupees (£4bn) for education - considerably less than the pledged 6 per cent of GDP. With the kind of wealth that now resides in Indian hands, it is embarrassing to say the least that a significant part of the money that supplements the government efforts comes from abroad. Foreign contributions and donations to scores of Indian voluntary organizations, religious groups and charitable institutions every year touch nearly Rs 5,000 crore (Rs 50 billion). Indian philanthropists are badly needed if we are to ever reduce this dependence. But do we have any Tom Whites among us ?