Desicritics Category: BizTech: Entrepreneurship

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 ?

The World Congress of Information Technology 2008, Malaysia

Dr Bhaskar Dasgupta — Fri, 6 Jun 2008 13:28:10 EDT

I had the honour of attending and speaking at the WCIT 2008 conference in Malaysia and here are some rather disjointed notes that I had while listening to the speakers. I tried to clean it up, but again, apologies for not being able to make this very professional indeed.

Monday

The conference center is big! And I got lost in the exhibition hall. Quite an impressive setup. So then finally managed to extricate myself from poking into the guts of various exciting electronics bits, went looking to find the plenary hall, and found myself sitting in the hall looking at an ant hill of activity. I could not imagine how on earth will they manage to fit 3200 people and assorted volunteers and managers into this hall but they sure did.

Typically, there was the media scrum when a Prime Minister arrives....We were welcomed by 40 children welcoming us in 40 languages representing 90 odd countries here, but the language used through out the conference is English. Curious, no? the prevalence of English in the world?

He also said that UK and South Korea are behind Malaysia in the World Competitiveness Index, and I can well believe it. Although checking the Global Competitiveness Report here seems like the results are different. Perhaps he is talking about this report. Anyway, mere quibbling. And now the PM has left and literally the front 1/4th of the hall has emptied! Some more speeches about WITSA.

Then Dr. Craig Bennett, Chairman of Intel, started talking about how we have a billion people on the Internet and now we have to get the next billion on the Internet as well. He said that four factors are important for knowledge based economic development

Physical access to technology
connection to internet and connectivity
content targeted at local population
education on how to use the tool

He said that a well educated teacher is the magic and not the PC in the classroom. He showed a video about a Nigerian school which has embraced technology but said technology again is not really the only answer.

He talked about taking a holistic viewpoint, what's the point of giving a $200 PC while the monthly connectivity costs are $250 per month in many countries, 100kb monthly cost in Japan is 6 cents, 50 cents in USA and more than 80 dollars in Sub-Saharan Africa. Now you can get an idea how tough it will be to get these people on the intranet or to roll out the broadband revolution to them (more about the exception being that of India later on).

He talked about how Pakistan is being used as an example of pushing broadband and network connectivity out into the sticks. 60mm dollars is the budget, rolling out in untouched areas in Pakistan, he invited a Pakistani chap to the stage who is the CEO of the public company which is helping to push this (didn't catch the name). Connectivity is a challenge. Satellite is way too expensive. Fiber is the only way. Rolling out fiber is tough, so tehsils where its not remunerative for private companies, this company gives money and offers seed capital, it helps to improve the business case for the private firm. This was a good step. The Pakistani chap said that Govt should not be involved that much in this business, put power to public private consortiums or just private firms, give them a stake in the business and then it will work. But I am not holding my breath, I want to know whether connectivity actually helps or would more investment in say better teacher training help?

He video conferenced a doctor from Brazil into us, how location differences for patients versus diagnostics versus doctors versus care had disappeared, and this tele-medicine actually is helping far more people than medicine and doctors were previously. Then there was some corporate stuff with some kids brought on stage and it ended. It was a bit too slick and the questions with the kids was too obvious and that left a bit of a bad taste in my mouth. Such a senior chap shouldn't need such kind of gimmicks to play around with such an important topic, we are all adults, you don't have to take us to be children or idiots to play that game.

I was a bit impressed with what he had to say, but what he had to say was crucial (leave aside all the silly posturing and even more silly marketing of Intel stuff). His point was, throwing money at technology and expecting better performance from students was wrong, the idea is to teach the teachers to be better, that will provide better results than thousands of PC's and laptops.

Nothing much to note for the next few sessions. The post lunch session for the Ministerial panel was a bit interesting. Mainly because you could see how various governments approached this entire idea of information technology. You know what was the most disappointing? It was the Philippines MP. She came across as a complete Neanderthal, saying that in many parts of her constituency, there is no electricity power anyway, forget about PC's, and it was a whine. The Philippines government should really have thought that through. The Malaysian government minister and other ministers were smart, they obviously were pushing their countries and with due reason, telling us, the corporate folks, what we wanted to hear..., but Philippines? Pathetic. She is a blot on that country's face.

The next wireless broadband session made me go to sleep. Pure and simple, those two Romanian scientists, bright as they were, made me doze off specially when they started talking about antenna design, and specially after that excellent lunch.

Woke up to an excellent presentation by Professor Takenaka. He talked about how he was made the Minister for Finance in Japan by a certain Lionheart PM of Japan. Fascinating tale of how he took on the entrenched might of bureaucrats and financial institutions and won. And I well believe him, given some down sides, generally that time was brilliant, it still shows that even in a consensual driven society such as Japan, you can still have mavericks who hire mavericks who really make a huge difference! Brilliant fellow. Unfortunately he was not allowed to fulfill his destiny and do all that he wanted to do but there you go, he literally broke the back of the Japanese economic stalemate. I was personally quite impressed but I suspect that quite a lot were not as he was talking more about economics and finance than IT. The IT piece came way afterwards, a little bit and as an after thought.

Then we had Bill Gates in a hologram talking about Microsoft and then Dr. Zhang also, not very clear about what, was flagging badly by that time.... and then we went off back to the hotel, did some more emails and then some calls back home and then off to dinner, again, dinner was brilliant, and pigged out and came back and went to snore, i mean sleep.

Tuesday

The day started with perhaps one of the most interesting panel discussions I have ever attended. It was to do with how to produce innovation and creativity and what can be done to enhance it. These were the people there.

- Arnold Gay, Anchor, CNBC - Moderator
- Kamil Othman, Vice President, Multimedia Development Corporation
- Fritz Attaway, Executive Vice President, Motion Picture Association of America
- Terry Thoren, Chief Executive Officer, Rocket Fish Studios

You cannot get a better collection of people talking about the most creative of industries, motion pictures and a very educational and interesting debate happened. Terry said that the world is changing, Malaysia has twin towers now while USA no longer has it. Who knows what's going to happen in the future? He has severe distaste for politics but great admiration for tech, people, process, creativity, etc

Kamil went into deep details on how to build an innovative industry? Animation in Malaysia. Disappointing take up, long way to go, to make a Walt Disney, you need to start with one million children drawing in grade 8. You cannot create a flash laboratory, shove people in there and wait on the other side of the Lab waiting for Toy Story or Cinderella to drop out of the other side. It has to be started from the very basic levels, people cannot look down on the arts which they do at this moment.

Monetisation of opportunities and content is a challenge, how do you do it? look around you, all countries are pushing people to get educated and into the knowledge sciences, but not all people are thus inclined. Many people simply do not like mathematics or technology. Some people want to study arts, or paint or simply do not have the mathematical skills. What do you do to them? Those who want to write poems? How does he get paid? or fed?

There were conversations around how to create a movie or animated film, quite interesting to see how Hollywood and Silicon Valley literally took decades to develop, you cannot do that just by throwing technology at it. Quite thought provoking indeed. Perhaps one could question whether it is possible to force people to become creative? Or can you just provide the infrastructure and let them get on with it? or is it just let people be, and trust in them to come up with the goods?

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The next session had more ministers but I was quite interested and taken by A Raja, Minister of Communications and Information Technology, India. I have to admit, I was quite cynical at first knowing about Indian politicians, but was very impressed to see what he had to say about it all, how they are powering ahead with the licence's, what mistakes they made, how the process of governance is happening, who gets to approve what? and so on and so forth. Pretty good and well, I will think that what he is saying is right, because I have experienced the mobile phone revolution in India.

As usual, it has to be different. Rest of the world goes through scientific revolution, industrial revolution, then wars then dial up then broadband and mobile, India starts off with revolutions in 3000 years BC, then has fun, then goes into decline, then starts off with a revolution in Y2K and then the next revolution is mobile and mobile internet and mobile commerce is bigger now, how strange and unique... Very curious, loads to think about there. The technology trajectories of these two countries, based upon what Dr. Jiren of China said, are so different. One wonders what will happen in the future.

Incidentally, there was a gentleman from Saudi Arabia who made me think of the previous session. He spoke on about how much money has been pumped into the industry in Saudi Arabia, the emergence of knowledge cities, and the like. Not impressed at all. Not at all impressed. Setting up a knowledge city and throwing money at it does not solve the problem of creativity or having knowledge industries. For that, you need to have creativity at the school level. They have to inquire and challenge everything. Can you imagine something like that happening in Saudi Arabia? Which is the reason why I couldn't take it any more and went outside to grab a coffee. Perhaps the organisers should have kept coffee on tap, this was crazy, they dont want the participants to keep awake? dont they know we drink coffee by the gallon?

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The next topic was rather dry, Dr. Mobius talked about where the next hotspots will be. And I lost my notes on this lecture so this part is a bit vague. I remember him showing loads of graphs about where and when returns are made. It was an asset management view, so was a bit dry. Still, was a bit interesting, specially around the returns of the various sectors in the Asian economy. That is much that I remember... if and when I get my hands on his slide deck, and have time to read it again, will comment...

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For the next session, I went to the "Asia, the destination of choice for Shared Services and Outsourcing" session.

- Dato’ Narayanan Kanan, Senior Vice-President, Multimedia Development Corporation – Moderator
- Michael F. Corbett, Chairman of the International Association of Outsourcing Professionals
- Dr Ganesh Natarajan, Chairman, NASSCOM
- David Wong, Chairman, Outsourcing Malaysia
- Stephen Braim, Vice President Governmental Programs, IBM Asia Pacific

Very interesting, Michael spoke about the impact of the US elections on international outsourcing. I was, frankly a bit puzzled by that kind of emphasis. For two reasons. The first aspect is that the actual number of jobs which are dependent upon the classical aspect of outsourcing is reducing, and the second aspect is, did he really think that the elections will make a tiny bit of difference? Obviously yes, but I am rather disappointed that it was more American rather than International. Also, I was a bit saddened that there was no discussions about international aspects, taxation, technology which allows remote working, etc.

But overall, it was quite interesting, there was discussion about education and how that will help in various countries. What Malaysia is trying to do. What the IBM view was from the perspective of government initiatives and education and so on and so forth. But also, I was a bit disappointed that most people's perspective was the next 8 - 12 months, not more. Still, lets go to lunch, was feeling quite hungry now.

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Over lunch, we had a speech by Dr. Rowe, where he was talking about how the worlds of virtual reality and real life reality meet and how they work together. Quite an interesting topic and he spoke quite a lot about his own personal experiences and the like. But not much about real life applications. I then sent him an email afterwards, and this is what I said to him.

At ABN AMRO, we used Second Life to actually recruit, it was very challenging and interesting but it ultimately failed because of lack of regulatory frameworks. Ended up with 5.5 FTE dedicated to Second Life but then scaled back.
We also used a virtual world to help mentoring. Such as when we have just 2 IT employees in Uzbekistan, then how do I get the junior chap mentored? So we setup a virtual world where mentors and mentee's can congregate in a persistent state across the world. This helps in knowledge capture and better employee retention.
My friend from BP is using a virtual world to track every employee in complex and potentially dangerous plants. This location tracking and graphical display of every employee is used for fire, safety, evacuation and training purposes.

Second life and other virtual lives have become really challenging world and are throwing up some seriously challenging questions for us, again which have not been fully explored just yet.

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Unfortunately, I missed the next slot because we had to go and get powdered up for our session at 3. Not much to speak about in there, check out the slide deck. Also managed to miss out a large proportion of the next presentation from Dr. Pachauri because we were supposed to be in a room answering questions. But did manage to catch snippets of his talk. Quite interesting.

I had to take an office phone call so managed to miss out on the next one as well. So that was that. Nice dinner, watched a charity auction, observed some very nice and lovely looking ladies. This lady was standing 2 feet away from me. Very fragrant. Nice hair even.

Wednesday

This day was going to be challenging, specially since it was also the Champions League Final day.

The day started with me taking breakfast in the Trader Hotel Lounge, where I had been put up, its just next door to the KLCC so very convenient indeed. So took some pictures from the 34th floor lounge while having breakfast.

Here are the twin towers, at the base you can see the gigantic 6 story mall with two wings. It is absolutely stonkingly huge, that mall. Anyway, the twin towers, and the very well landscaped park around the buildings. The building on the left of the twin towers is the Mandarin Oriental where many other guests were also put up.

Then the day started with two debates on the future of the Internet. A deep discussion erupted over the net neutrality issue. To be honest, I have never really thought about it till I was forced to sit and listen to these two debates. Not that I have really firmed up my thoughts but the question is, who pays for the internet? It is my firm belief that nothing is free in this world, somebody will ultimately pay, either the taxpayer, stockholder, consumer, today you or tomorrow in the form of your child. Somebody has to pay. So this idea that the net is free is frankly stupid and more worryingly, it shows a childish view of the world.

Also, the idea that a communications network will or should be free is against human history. Do you think that the pigeon post was free to everybody? or the pony express allowed everybody to send stuff over? or how about the fact that letters still cost to send stuff to each other? Or the fact that we have public and private ownership over the postal system? Or the fact that we have regulations governing what can and cannot be sent over the posts? Or how about the fact that online classifieds are killing newspapers? Or how about the issue that emails are killing the postal system? So when we do not have any issues over that, why do we suddenly end up having an issue over the net neutrality aspect? Here is a good overview article. Very complicated matter, but I suspect it will end up like we have the health service. A Universal service provision which will provide some kind of a basic internet, which is slow and unreliable, while a paid for internet which is better and faster. Pretty much common compared to other industries, if you ask me.

Then there was a discussion about Silicon Valley, it started in 1940's, it took 10 years to know, 10 years to come, 20 years to investment, etc. etc. Takes a heck of a long time to start developing an industry. See what Taiwan did, took them decades to get to it but get to it they did. Now they are the champions, and almost every PC in the world has some Taiwanese components in it.

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Next session I had to miss, then popped into the Mexico session for a few just to realise that they were talking about near shoring. I mean, d'oh, get on with the programme, people are now in the 5th generation of out sourcing and we are still in the terminology of the 1st generation. Crikey! that made me so depressed that I went back to the room and started my calls. Also had a quick bite to eat in the room itself, couldn't’get out of the calls but went back to catch the next great debate.

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Not much to report on other than the fact that one of the guests (I told you, lost all my notes because my stupid My Documents folder decided that it wants to forget all about my previous history and start afresh to synch...). said that the adoption of energy efficiency standards by California means that the energy usage per citizen has now leveled off compared to other states. But if you think about it, the lesson from this is to start imposing energy standards more and more, get people challenged to be smarter about their energy usage. So while the usage will rise, but it will level off at some point!, interesting, no?

So I went looking for some data. What does this tell you? Well, it did make me go hmmmm. We are actually seeing a dip in the energy consumption per capita in North and South America, albeit from a relatively high level. Delving deeper into North America, Canada and Mexico are showing an increase while, very surprisingly, USA is dipping down and decreasing. How curious. 40 countries out of 134 countries actually showed a dip in energy consumption between 2000 and 2003. Some of them were obviously banana republics which were facing economic downturns such as Zimbabwe, or contractions such as Argentina, Ivory Coast, Bolivia, Eritrea, etc.

But what explains this reduction for countries as varied as Belgium, Brazil, Australia, Chile, Japan, New Zealand, Singapore, UAE, United Kingdom and USA? Can it be that despite increasing populations, their energy efficiency is improving? Dont take my word for it, check out the data. It is from the IEA even, so would be ok as well. Population information from the United Nations.

The next topic was the most interesting one, so I will put up another dedicated post for it. Came out to grab a coffee before going back in and saw that the sky was cloudy, the KL Tower was nearly hidden under clouds. Unfortunately, all the photographs with the top of the tower hidden did not come out, but hope you can make out the onion dome in the back being hazy in the mist.

One of the living legends of the internet age, Dr Vinton Cerf, Vice-president & Chief Internet Evangelists, Google, spoke on the topic of "Tracking the Internet into the 21st Century". This was the final presentation of the WCIT and the entire hall was absolutely crowded, people were standing on the aisles waiting to hear that great man.

He talked about the future of the internet. Said that the internet penetration around the world is strange. Asia, Middle East and Africa are bad or low or both. Only 20% of the world is connected. He used the World Population Reports from the UN about the 2300 figures and displayed them, some interesting rises and dips. I presume he is talking about this report. See the graph on page 19 of the report. High scenario shows a horrifying 36 billion people on the planet, with a medium one of less than 10 billion. Bloody interesting report but this is not the place to go into it.

He talked about how only 20% are connected to the internet and more will grow. Incidentally, I found it much easier to observe him up on the main screen rather than watch him on the far left. Which begs the question, if this was webcast, then I wouldn't have traveled to Malaysia.... (theoretical question...). Which made me go off into a different train of thought.

My facebook, orkut, myspace, etc. accounts are nothing but very primitive clones of myself. I cannot be everywhere, so my primitive clones operate on my behalf. Just like my email system does and my voicemail system does. As a matter of fact, my home is also a sort of a clone. It has an address which is independent of me. People can communicate with me on an asynchronous basis and I can get back to them whenever. So when people are writing something on my facebook wall, are they communicating with me? or with my clone?

Say I have an active Second Life account. Is that me or is that my clone? Or both? I feed those clones with information and they act/react based upon my preferences. So I can be in another place via my robot/clone and get back information to me when it is convenient to me. I do not have to be face to face with you to get information. You can email/voicemail me and I can pick it up at my convenience.

If I communicate with my son online in Second Life via both our avatars while we are both across the world, am I still his father? to what extent? How about love? Can I show my love to him? via that medium? How does he know that it is me? Or if I was seeing Dr. Cerf across the world on a webcast, how would I know it is him? Just because somebody said so? identity problems galore. Does this mean that more friends you have, more your identify is confirmed? Like an amazon or ebay seller, more positive recommendations, the better is the identity and better is the trust. What do I do when I am dealing with a financial institution? Curiously, microcredit or microfinance rests on this premise, it lends money to people on the basis of guarantors from their community. So a person has to be social and know people and be trusted by them in order to get money. Bit different from my neural network Kohonen map based credit scoring model, eh? But I digress.

He talked about IPv6 (a network address for every device on this planet and then some, even some for your socks..), better search engines. He said something that I will come back to, he said that the monetisation and earning potential online will be less and the current business models will have to change.

He also talked about BIT rot, how on earth will you manage to open a Powerpoint 1997 file in Windows 3000? Forget about that old a problem, here is my problem. I wanted to dig out some research that I had done way back in 1990. I did not have the files here in London so had to wait till I got back to home and went to poked through my old cupboard. Besides the nostalgic kick, I finally found the floppy disks. 5 1/4 inch floppy disks to be precise. I have also operated the 8 inch floppy disk but well, the data that I had was in two formats, Lotus 1-2-3 and dbase. I remember sitting back on my haunches, looking at the dusty pile of floppies, and thinking back to those hours and days that I spent in typing in the financial data of the companies and did the basic analysis. Do you know, I even managed to calculate multiple regression on the damn things in there? Anyway, for all purposes, that data is now lost to me. I do not have a floppy drive anywhere near me, none of the 4 home pc's have it. I have an old laptop which has a floppy drive but it is 8 1/2 inch drive, not the older 5 1/4th inch drive. So I am stiffed.

Fast forward today. Financial institutions are supposed to keep data for up to 10 years. So your transactions and your records are supposed to be kept nicely and carefully within the firm for 10 years. Now the transactions are processed, on an average, via 10 odd applications. There can be many more depending upon the country and product but just think about it, 10 applications, multiple operating systems, multiple upgrades, multiple hardware requirements, multiple network systems, multiple servers, so many different types of technology stacks, and we have to maintain a record of this. Within 5 years, it becomes a major issue to keep up to date with technology, we are talking about 100's of years? No bloody way.

Museums are now struggling with electronic art. I could have taken those disks to a museum but they are also facing problems. Here's a great paper written in 2001 and the problem has become even worse now.

He also talked about the inter-planetary internet. That just blew my mind away but it needs much more thought before I can write more about it, its not fully comprehended yet. Anyway, he got a standing ovation at the end. I ran to attend his Q&A after getting distracted by an email, but still managed to get to the hall to ask him a question. I asked him, you have talked so much about what will happen in 2035 and 2300, the physical shape of the internet, the devices, the penetration rates, and and and. What do you think would be the value system, the monetary framework, the price formation or who will pay for it all? It was obvious that I had asked a wrong question immediately because it did not go anywhere fast. I did ask some follow up questions, but he is a great man, he had to rush off to meet somebody else.

This is my problem. I am supposed to think about what's going to happen in 5 years time in the financial world. This is what I am seeing currently. People who are in the 15-25 years of age category, the great unwashed herd who will be our future employees and customers, are not that well versed in value creation online. And why would they be? Look at what kids do online these days. He watches movies, plays songs, plays games, chats with people, participates in joint coding, and so on and so forth. Almost all of this is free or stolen. His email is free, his programming language is free, songs and movies are free, his video is from YouTube, his chatting is free via text and messenger, his voice is free over VoIP. So all these assets that these kids are using, they are all free at this moment.

So I am most certainly not surprised that they do not know the value of online assets. So when you ask them, how much are you worth? or how much will you work for? or how much do you wish to charge for your ideas? or how much funding will you need for your great online idea? no idea. And that is the issue that I am struggling with. In 5 or 10 years, the link between physical work, money and online assets will be inextricably broken. So how much would I pay a coder? How much would Microsoft pay a programmer when most online assets are free?

My son said something to me today that completely blew me away. He said that he will go create some online jewels and armour in World of Warcraft as birthday gifts for his friend who lives 5 houses down. No money, no nothing, just pure and simple virtual asset formation, entertainment and happiness increased but with no reference to money at all. Deeply worrying.

So to go back to Dr. Cerf, on what basis will anybody pay for a book in 2300? or a share in the company making Windows 3000? or the ability to write code? Or to create a powerpoint presentation? I do not have an answer, but I didn't get one either. I will be struggling with this as part of my job as well, but I am seriously not sure what the answer is. We saw some amazing valuation modeling during the internet boom. But they did put a value on an intangible asset, no? It was a bad value, but a value none the less. Also goes to the heart of what Mark to Market is all about. If this is all too philosophical, think about this, my son is happier getting a World of Warcraft spell rather than an intricately carved wooden box which I got for him.....Should I have gone to the local electronic fair in Kuala Lumpur and bought a user-id/password for him instead? How would I judge what is a fair amount to pay? I have no idea whatsoever. No reference points at all.

That brought me to the end of the conference. The last day, Thursday, was a trip to Cyberjaya and Putrajaya, the IT and administrative hubs of the country, but dont think that fits in here, so you can see some pictures here. I have also written another essay on my observations on Malaysia and that should be published soon as well. End of the day, fascinating indeed and perhaps it was appropriate that that brought my professional career stint with technology to an end, now its moving back into the front office. But technology will remain with me, either with my shareholder, customer or employees. Food for thought, will try to attend the next one in 2010 in Amsterdam.

Technorati Tags: Technology,Internet,Web 2.0

Attrition And New Recruits

Tanay Behera — Sun, 1 Jun 2008 10:26:44 EDT

Attrition is a growing concern for many the firms across various sectors in different corners of the world but today the pain is felt more in India. This bruise gets highlighted more in an Indian context because of the growing gap between the growing economy and the engines which are partners in this ride to deliver. Because of employee attrition few initiatives are put on the back burner. The HR managers are having a tough time locating a suitable replacement with required experience and ability, to fill up the vacancies created on account of exit of key employees.

The points that I mention here as to why employees, especially new joinees leave the firm, a little after the embryonic stage of their job career cycle are from what I have seen in the real world corporate dynamics, heard about experiences from friends and few from the learnings and readings from various articles, journals and blogposts. These points are mostly centered around those who have spent their time and energy in the industry (mostly IT/Tech/Tech Services/Engineering) from a range of one year to four years after their graduation from an engineering school or a technical institute. Even few of the points apply to those who don a much higher number of years experience hat. The points mentioned below are not in any order of significance or priority and is just a compendium of views.

1. Opportunities available: The present economy has opened up the doors of opportunities. If a person is skilled, smart and is an inventory of ideas, s/he is like an appetizing cake, waiting for the market to react. Present day progressive forward looking youth aspire to see their career advancement as well as improvement in his financial earnings in the shortest possible time. Demand for smart talent is always there, so when an individual doesn't find his/her present place of work to offer a hotfooting atmosphere, there are other avenues to explore may be in another firm, a start-up or a similar place.

Thanks to his own ambition, and to the Indian outsourcing boom, he escaped. He gained admission to the best engineering school in India, then landed a job that he could hardly have dreamed of as a child: writing software for Oracle, the U.S. technology giant.

"I fell in love," he said, recalling his first visit to Oracle's campus in Bangalore.

But Jain's zest eventually fizzled under the repetitive rigors of the Indian back office. So he did what a parade of burned-out functionaries in Bangalore have begun doing: He quit outsourcing to create his own start-up - in his case, designing cellphone software that blocks calls from telemarketers.

2. Incorrect picture painted in campus placement talks: Many global firms work as different legal entities/operating units but under one global brand umbrella in India. To make things clear, let’s take a fictitious firm 'Desicritics Corp', which has under it many legal entities such as ' Desicritics R&D Center', ' Desicritics Software Services Center', ' Desicritics Consulting Team', ' Desicritics Technologies', etc. In most campus placements, ' Desicritics' would go as a single team for hiring but the offer letters are delivered by the different groups under its canopy. To a campus recruit, who is not aware of all these internal corporate crosswords everything appears to be the same. But after working in the industry for a year or two, when s/he realizes that s/he was offered a cozen pill, looking for opportunities elsewhere is the most pragmatic option.

3. Big names don’t matter much anymore: Today big brands in job market do not draw as much awe as it used to few years back. Big names are subtly occupying increasingly lower positions in a candidate's priority list. Individuals are perfectly fine working with small and mid tier firms because it's a known fact that sometimes the biggies cannot match the salaries offered by successful second-rung companies which functions to an extent on a start up blueprint. More so many big firms have even now withdrawn ESOPs, which were the main draw a few years ago. In contrast smaller companies are able to offer profit-sharing plans, interesting projects and more responsibility at an early stage in the candidate's career. This is like a ready made dish for a candidate working in a big firm shrouded with global policies, indefinite/infinite processes, layers of politics, and most important lack of visibility in a big crowd.

In just 3 short years, the world has changed. When I wrote this column for rediff.com in June 2004, it was still a big deal to join one of the Big Five. Except, perhaps at an IIT.

With the rising aspirations of fresh grads the same jobs have lost their sheen. The net has to be spread wider and wider, to tier 2 and tier 3 colleges, which would not be on the recruitment map at all a couple of years ago.

At a lesser known college it is a matter of pride that 'Infosys picked up 6 students'. The feeling is that of having 'arrived'.

But next year when 60 join, and then 100, the same 'we are being recruited like alu and pyaaz' feeling sets in.

Bottom line is: 'Aapne kaam se maatlab raakho, yeh big brand maain rakha kya hai'.

4. Company and personal goals clash: Many of the smart recruits in many local and global firms are hired through campus placements in engineering schools during the pre-final year days. Placement talks are like major brand shows and each of the hiring firms tries to outshine others in the fray by attractive presentations in diverse formats. Company goals and visions are put forward to candidates and these tastes like the best recipes to accelerate one's career. The message that is sent is: 'With the company's goals, all measures are taken for an employee's personal development also'. I am not denying the fact that there are companies who do orchestrate company's goals and employees' personal goals but the number is less. Come to the work place, the real world is not that hunky dory. This is completely out of phase, of WYWPIWYG assurance (what-you-were-promised-is-what-you-get). In short most of the cases of attrition thrive on the thread that firms place their priorities ahead of employees' goals, without understanding the employees' basic aspirations resulting in friction.

Although their HR depts claim that they have systems which ensure a smooth induction, training and deployment onto projects that isn't quite the case for everyone.

An interesting post related to this ishere.

5. Change in mindset, among individuals and society: Gone are the days, when one stuck to a job even though it was not satisfying, solely on grounds of monetary benefits. The present young generation wants money, no doubt about that, but it's just not money, it has to be enwrapped with stimulating job assignments and responsibilities that tickles one’s tastes. More often than not, the most heard verdict among individuals is.

Besides, they soon learn, the job is not really about programming at all... One such dude sums up the average IT career path on a Pagalguy forum:

There is not much of a ladder is S/W industry as such. For most life is quite typical. One or two years in a company. Then a chance to go onsite and see some money. Then back home. Another 2 years and then one becomes an analyst and after 5-6 years, a manager. And your engineering branch is the last thing that would matter here.

Even parents and family members, do not evaluate much when they realize that their children are not very happy with their professions and wish to pursue something that is completely out-of-the-box and divergent to their present occupations. These parents stand as pillars supporting their individuals realize their dreams. I know of few people who have left their regular 9 to 5 jobs in tech firms to work full-time for a NGO, to practice as a freelance photographer, to run a restaurant, etc. The attrition resulting from this is miniscule but it is happening these days. This case is more like pre-caution is better than cure. So when one realizes that s/he had boarded an in-correct ship that would never reach the destination s/he had sculpted in their mind, so better get down in the initial phase before it’s too late.

6. Higher studies plan: A sizeable number of campus recruits move to the U.S. or other countries to pursue higher studies and explore more attractive career opportunities after working in the industry for a year or two after their graduation. They form a small pool of the attrition camp. Few go abroad for their Masters degree, few for their PhDs and few others stretch their stay in India to apply later for an MBA program abroad later. It's not that foreign lands are the only destinations, these days many prefer to go for a Masters program in the IISc, IITs, NITs, or even BITS in the engineering and tech stream and to the coveted IIMs and other top ranked B-Schools after clearing the CAT in the domain of business management. Even ISB with its global tag in business education along with many other private schools in India partnered with other western schools of Business Management is an irresistible destination for many who wish to put their lives on a fast track road. Every year just before the admission season, many managers wait dumbfounded to see how many of the ambitious wickets would fall.

7. Manager-employee Relationship: A smart manager is one who can understand the aspirations of his/her employee and can harness the true capabilities and potentialities to the last drop, brusquely pointing the areas of improvement among the team members. Now that appears as a picturesque and cheeky definition never to be realized in reality because a greater chunk of IT related work in India is service and maintenance oriented, which in turn is purely dependent on margins and numbers. More often than ever, a manager can't do justice to both numbers and fulfilling aspirations and finds him/her self in a Catch-22 situation. For some inflammation or misunderstanding arising at work, involving the manager and employee, mostly the bosses chalk up the tension to a personality clash. There is a tendency, according to management experts, to think that personality is the cause of organizational discord rather than perhaps an effect of it.

Ben Dattner, an associate at Dattner Consulting executive coaching firm, believes that personality conflict might be a symptom of a larger organizational issue. "When I work with my clients, I often try to get them to see how it is not just a conflict between two people. I try to get them to see that it is also potentially a conflict between two visions, two agendas, two constituencies or two visions for the future."

The most applied remedy in this case by young employees is to nip off the problem at its root, just leave the job and find a job elsewhere that suits to one's personal liking in most aspects. Quite a number of exits happen in many firms because of the above mentioned reason.

8. Team one works for: Fresh out of engineering schools, many graduates have a swelled head for being a product from a top school in India. This is very much human and expected behavioral pattern that this crowd aspires to be a part of best of the available work/assignments in any organization in the initial days of his/her career. But since most of the IT industry in India is doused in services and maintenance layer of the entire business cycle as stated in Point. 7, easy to follow processes are defined to streamline the execution segment with élan and efficiency. After doing the same work in repetitive cycles, it's no rocket science and even a normal graduate can tackle that in the most cost effective way without necessitating the presence of smart engineers who demand higher pay checks for the same job.

This air of exclusivity and clannishness lingers in the minds of many for the initial few years. Unfortunately if they happen to belong to a team that is of a different clan/tribe than their's in many vistas, they connect with their friends and settle in zones that match their bandwidth. A sizeable number of exits in many firms fall under this category.

As I mentioned here, the points stated above are my personal views and are collected from various sources. This is definitely not intended on any organization, firm, group or for that matter anybody and everybody. This is an open post and would love to hear other diverse views, if you have any.

Narayana Murthy on Entrepreneurship

Intrepid — Wed, 28 May 2008 13:43:06 EDT

I was privileged to attend an interview of N R Narayana Murthy, the co-founder of Infosys Technologies. The interview session was part of a "Leaders and Learners" session organized by TIE at Welingkar's Institute in Mumbai. Murthy was interviewed by Anuradha Sengupta of CNBC TV18, and a select panel of entrepreneurs. Then the forum was thrown open to questions asked by the audience. Here were some of the key takeaways from this brilliant and humor-filled session:

Q. What does it take to start your own venture?
NM: You need 4 things before you can think of starting your own venture:
1. Idea. The key idea or concept of the service or product you want to sell in the market
2. Market value of the idea. You must have a basic level of confidence in the fact that the market values your product and is willing to pay for it.
3. Team. You must have a team of complementary skillsets - so identify your own strengths, and find people who have different, but complementary strengths.
4. High aspirations. You must be someone who sets his/her sights high, and is willing to work very hard to achieve those aspirations.

Q. What must a startup do for branding?
NM: Do unusual things. Infosys has always attracted the press and positive publicity by doing unusual things, which interest people.

Q. Who were your idols or people you looked up to?
NM: When we started our business, there were already well-established business leaders who had founded and expanded their companies while sticking to sound ethical principles - JRD Tata, even Mr. Birla, TVS, Mr. Kirloskar. Of course, by that time Bill Gates had also become well-known. Intel was one of the foremost examples of success for most security companies to follow.

Q. What is a non-negotiable component when starting your own business?
NM: A sound value system. You have to lead by example, you must walk the talk, eat your own dogfood. Only when will your team trust you implicitly, and only then will they deliver and help achieve the common goals.

Q. What are the characteristics of a successful entrepreneur?
1. Ability to work with other people and work in a team
2. Passion and will to persevere
3. High degree of optimism
4. High aspirations for oneself and for the company
5. Ability to put long-term interest ahead of short-term benefit

Q. How do you judge the value of your idea?
NM: You should be able to express your idea and its value to the market in a simple sentence. Not a compound sentence, nor a complex sentence.

Q. How do you attract and retain talent?
The leadership must articulate a grand vision - an exciting future. This will create a challenging work culture and attract future leaders to the company. The vision must be a story that is compelling, believable, and intrigues and excites the minds of the team members.

Q. What do you think about work-life balance?
I remember K V Kamath's answer to this question: first let's make a life, then think about work-life balance. I don't understand the concept of a work-life balance.

Q. How do you define success, and at what stage did you consider yourself successful, and why?
NM: I have thought a lot on this subject, and my definition of a successful person is one who when he/she walks into a room, people's eyes light up. If he/she brings a smile to people's faces, then irrespective of whether that person is educated, not educated, self-employed, employed, I would still consider that person to be successful. And going by that definition, I am still not sure whether I would consider myself as being successful.

Interestingly, Murthy's favorite books are Richard Feynmann's Lectures on Physics, and History of Mathematics vols 1,2,3.

Reliance Communications - Go, India Go

Varun P — Mon, 19 May 2008 07:47:06 EDT

Reliance Communications or RCOM (formerly known as Reliance InfoComm) is India’s largest private sector information and communications company with a subscriber base of over 48 million subscribers. Founded in 2002, RCOM has established itself as a dominant service provider in the CDMA segment. The company is now looking to grow via acquisitions and expansion of service offerings under the wireless and non-wireless service offerings. The next 12-18 months will see the introduction of plenty of new growth drivers for the company. Below is a brief look at some of the drivers:

1) Wireless Segment:

RCOM is gearing up operations to commence with one of the biggest roll-outs of GSM operations, aiming to achieve 90 percent population coverage within 12 months of the launch in India. The company is confident of rolling out its GSM services from the fourth quarter of 2008. The company has already established its presence in the CDMA segment and its dual-SIM enabled CDMA handsets will aid the company in retaining subscribers as well as easing the switch from CDMA to GSM. The company has secured a loan of $750 million China Development Bank for this purpose.

The company is also planning to introduce a net-enabled phone at a price of only Rs. 480/- per handset. This marks a steep discount to the currently available internet browsing phones at a cost of Rs. 1,400/-! The company intends to place an initial order for 12 million handsets. It will target the 600 million rural population and expects to sell around 1 million pieces a year in the rural and semi-urban areas. The company is also looking at roping in the labour ministry that is looking at digitisation of communication technology and making mobile phones affordable to farmers.

Reliance Infratel, RCOM’s tower arm, currently has 37,000 towers. Infratel is looking to increase to tower count to 60,000 by 2009 and 70,000 by 2010. The increase in the tower count will result in a higher transmission capacity. The increase in the tower count coupled with the GSM launch will drive higher revenue from the company’s wireless segment. Additionally, RCOM is seeking possible listing of Reliance Infratel on the Indian stock markets. Infratel has received the SEBI approval to proceed with the IPO which will witness the dilution of 10% stake in Infratel for a sum of Rs. 50,000 crore – Rs. 60,000 crore. Listing of Infratel’s IPO will result in significant unlocking of value for RCOM’s shareholders.

2) Non-wireless segment:

One of the most significant components of RCOM’s non-wireless segment is Reliance Globalcom. After Reliance Infratel, I believe that the company stands to gain significantly from the significant expansion activities being undertaken at Globalcom. From increasing the private undersea cable system to 137,000 route-km (r-km) (at an estimated cost of Rs. 1.5 billion) and landing ports to 64 to presence in 60 countries in 2010, Globalcom will enable RCOM to not only post strong margins (since a major part of expansion will take place in emerging markets) but it also help the company to maintain a higher growth rate compared to national as well as global peers. The expansion in the undersea cable network is expected to address the global connectivity needs of 90% of world population. Some news report also state that Globalcom is in talks with banks and mobile operators for setting up a global backbone to enable interbank money transfer on mobile platforms.

RCOM is also ready to begin with the roll-out of its Direct-to-Home (DTH) services, known as Big TV. I expect the company to corner a significant share of the DTH campaign based on its superior service offering (over 240 channels) and presence in over 4000 towns. The higher market penetration will in turn enable the company to derive higher revenue from the non-wireless segment.

RCOM is looking to increase its presence in Wimax with the acquisition of a majority stake in eWave world in April 2008. The company will invest $500 million in this service by 2012. RCOM estimates the revenue potential in emerging markets at $10 billion; the company expects to capture 10% of the market share in the next 24 months which will translate into revenues of $1 billion by 2010.
RCOM is also aiming to double its market share in the US in managed Ethernet. Acquisition of Yipes in July 2007 provided the company with 5% market share in the US in managed Ethernet. By 2010, the company has guided to revenues of $200 million - $250 million with a market share of 10%. In the Internet Data Centre (IDC) space, the company has set itself a target of being among the top three providers by March 2009. Additional expansion into the area of global conferencing will lead to further upside.

My entire argument for an investment in RCOM is based on the factors listed above. I’ve purposefully not taken the company’s base business (the CDMA segment) into consideration. I’ve also deliberately made an attempt to stay away from discussions on the company’s cash position or the net debt on its balance sheet. I believe that while the underlying business of the company’s remains strong, the next wave of growth could be derived from one or more of the above factors. But I must sound a note of caution: Although the company is very confident of delivering on its promises, I believe that the company is exposed to significant execution risk. Most of the company’s plans are highly ambitious and aggressive and require significant upgrade in operational efficiencies. Additionally, changes in government regulations may hamper the company’s plans and possible slow-down the execution ability of the company. Another concern is the amount of financing which the company will need to successfully carry out these expansion activities.

While the Indian Telecom industry is recording one of the fastest growth rates in the worldwide telecom market, the growth path is not without its share of obstacles, with the raging war between the CDMA and the GSM operators over spectrum allocation being one of them. However, despite the likely hurdles in its path, I expect RCOM to reap the benefits from the aggressive strides that the company is looking to make in both the wireless and non-wireless segments. The company is looking to drive incremental growth in India with the roll-outs of the GSM operations and Big TV while internationally, Globalcom is expected to provide a major thrust to the company’s top- and bottom-line growth by 2010. Besides the incremental revenue from these expansions, IPOs for Globalcom and Infratel will also unlock significant value for shareholders. Given the current market conditions, I believe this is the right time to accumulate shares of RCOM.

This article does not recommend any investment decisions. Readers are strongly urged to do independent research and make their own conclusions. Desicritics does not review or verify any of the information presented by our authors. The article is presented for your reading pleasure only.