Banks deserting Mutual Funds?

Last fortnight of 2009 saw Indian banks pulling out as much as INR 104K crore from mutual funds - the largest in any fortnight.

It could be due to the fact that RBI had been urging banks to lend rather than park money in mutual fund investments. The central bank's advice is warranted because such activity adversely affects small sector industries and personal loans are undertaken by the banks.

But whether this change is for real or an eyewash remains to be seen. Banks could have taken such steps to improve their results for the quarter ending in dec. By investing this money in short term loans, banks can appear more compliant than they actually are.

Another reason for this act could be a fear of a W-shaped recession.

But I think that a major incentive to pull out could be their plans for the road ahead.
There have been news of SBI looking for some merchant acquisition joint ventures and Union bank looking for some acquisitions in Indonesia. Canara bank has been trying to acquire the state-run Dena bank. Country's biggest bank, SBI's Chairman has openly stated that to provide world class services, Indian banks will have to go on the consolidation route. This pile of money, freed up in the last few days can be an indicator to the big things these guys are planning.

Adam Smith on academia

Below are some excerpts. Text in black is my own.

In The Wealth of Nations, Adam Smith developed an incisive criticism
of academia (pp. 758-81). He at least touches on all of the following familiar
criticism of academia:

• Academic societies  are  organized “not for the benefit of the
students, but for the  interest,  or more properly speaking, for  the
ease of the masters” (764).   In other words, an industry where customer is not the king but the people working in the industry. So this industry has incentive to produce goods that conform to ideals of the people in the industry rather than the ones paying for it.
• They self-organize as self-validating societies, in which members
indulge each other’s conveniences (761).  By mutual indulgence and appreciation, they stand to gain in stature. Trading thoroughly replenish-able resources they can increase their "value" - which is based only on trade volumes. Read trade can make everyone better off.
• Academics tend toward an esoteric language  that  excludes
outsider participation (765).   The esoteric language is one of the most potent arsenals available to project and protect an image of elitism.
• Democratic decision making by professional units fails to make
individuals accountable for their actions within the process of
collective decision making (779). It wasn't ME !
• The clubs are prone to groupthink and the lock-in of foolishness.
They were sometimes “the sanctuaries in which exploded systems
and obsolete  prejudices found shelter  and protection, after  they
had been  hunted out of every other corner  of the world” (772).  I belong to this special group of people, I know what to believe.
They  have generated sciences  that  are “a mere  useless and
pedantick heap of sophistry and nonsense” (781).  Knowledge and thinking are important goals in themselves. How are ordinary mortals to fathom the importance of figuring out the number of angels that can dance on a pinhead?

Twitter buys Mixer labs

Just read that Twitter bought Mixer labs for an undisclosed amount. This company helped developers create products that cater to specific locations. These things help in delivering local ads to its residents. It will help both the customers in finding the right service/store, and the seller in finding its customers.

Looks like after so much talk of its potential, finally Twitter is taking concrete steps towards ad revenues.

Tell me about yourself

The past one month or so saw so many events and buildup to those events that it seemed like an entire year.
One of the reasons for this misaligned time length perception was the dreaded HR interview.  From the hallowed area of placement office, word seemed to spread that preparation for the HR interview would be crucial during the placement season.

The more meticulous (and jobless) inhabitants now sought "suitable" answers to more than 100 possible HR questions. The ones with more diversified activities, though primarily directed at finding a "good" job - chose to work on a set of two or three questions. Then there were others for whom job was a backup plan, so they just tried to answer the single most difficult question - "Tell me about yourself."

When I heard this question for the first time, I was amused. Why should such a innocuous question be dreaded so wildly. But, as it turns out, there is more waves associated with this question than the acoustic ones.

Few pointers to let you know why this question is important:
1) The interviewer needs sometime to go through the resume. If you point at things that (s)he needs, then the work of both you and the interviewer are simplified.
2) Will you fit well into the company culture?
3) How are your past experiences relevant to the job you have applied for.

But most importantly, the interviewer wants to know DO YOU KNOW ABOUT YOURSELF!
When people are self aware and take conscious decisions to pursue something - they are more likely to succeed and do well. And at a place where there is little to choose between the caliber of different applicants, the interest in the pursued field determines the chances of success.

Its easy to believe that one could say that one is passionate about something despite not being so. But the trouble here is that passion is transparent. Unless you are George Clooney, you will not be able to demonstrate the passion as well as someone who is genuinely interested.

Being self aware also helps in answering unexpected questions, then you have to answer honestly, simply because you haven't prepared any answer. Here your true interest will be reflected.

So if you are sitting for placements in the coming days, then please do ask yourself about yourself - why you chose what you did, why you want to do what you are choosing and how will what you did help you in what you are choosing now.

In the response to this question, you just have to convey two things:
1) Your passion
2) How your past will help you perform better at the position applied for.

Best of luck to everyone reading this post. May the force be with you.

Cricket as an educator in India

Cricket is by far the most followed game in India. While watching the game last week, I realised how much learning can and is imbibed (though unintentionally).

When the game is well balanced, the whole nation is busy dividing numbers by six, substracting numbers, finding the number of ways to get to a certain sum in atmost certain number of variables - which are constrained by being non-negative and less than equal to 6. Even problems like assigning weights to different players and devising ways to maximise the rewards (runs) in a set of discreet steps.

Other than improving our mathematical skills, It is also responsible for improving our language skills. It accustoms us to "foreign" accent. (Who does not like to enjoy Geoffrey Boycott describe events in his wonderful style) Besides, there is our own homegrown Navjot Singh Sidhu - with his wonderfully crafted one-liners, He has added more of the creative imagination to the Indian masses than any other single source.

Cricket in itself adds to one and a half of the three R's (Read, wRite, aRithmetic). It helps people come up with things to say - hence the half of writing. Maybe its time government introduced cricket watching and playing programs in its schools. It will both help kids learn and keep them interested in school.

PS - The idea for this post came to me when I was talking to my friend Abhishek Gandhi.

Express your disgust at child abuse

Tulir is organising a rally against Child Sexual Abuse. Join us at Marina beach, 4:00 pm on 15th Nov.

Here is their post.

Join us at a Rally against Child Sexual Abuse

Nov 15, 2009

Gandhi statue to Labour staue, Marina Beach, Chennai

4.oo pm.

Sexual abuse of children is frightening, often unimaginable & an abhorrent crime. Deafening silence is the hallmark. While it's the moral obligation for adults to ensure children are protected, we remain silent. More often than not for plain selfish reasons. The discomfort caused if acknowledged, the denial that our children can be sexually abused, family reputation at stake, sheer naiveté. Then there’s the quietness of the children. Because of the manipulation, ignorance, fear.

A silenced vulnerable child & a silent non-protective environment-working to an abuser’s advantage. Since usually victims are their relatives, neighbors, students, friends etc.

While in India we are just beginning to acknowledge the existence of abuse, Tulir has the belief & audacity of hope that it won't be long that larger community realizes the prevalence, dynamics & subsequent impact. The sabotage of a child’s right to a childhood. The often less than optimally led lives as adults.

A a society’s integrity & worth is not based on whether cases of sexual abuse exist. Instead it's based on the acceptance of the possibilities & proactive steps taken to respond in a timely & appropriate way to ensure that its children may benefit from its caring & foresight to truly have the right to be safe all the time, everywhere. After all, there is no excuse for child sexual abuse!

Artificial markets are just that

First up, Asterix (and Obelix) turned fifty this week - and this line goes out to its creators for giving us such a wonderful hero to look up to. If its not known to the reader (or is not conspicuous by the name of the blog) I am a fan of Obelix. So I was re-reading their series and read this particular story "Obelix and Co."

In this story, Caesar send one of his economists to the Gaulish village to disrupt normal life there. This chap goes and buys Obelix's menhirs at exponentially rising prices and turns the village into a unit producing menhirs and hunting boars. The menhirs don't have an existing market so extensive marketing and brand building is used to create a market for them. But competition lowers the prices and trade unions force policy changes for even more entrants. The profits decline while menhirs are being bought at exorbitant prices. It causes a credit crunch at Caesar's.

Lessons to be learnt from the story -
1) Artificial Markets are Artificial. Only if you serve a genuine want of the customer, do you have a chance when the novelty of the product/idea goes out.
2) Relaying on predictions when the artificiality of the market is not recognised can be dangerous. Augmenting your inventory on rose-colored predictions which don't take into account competition and customer sentiments is as huge a folly as any one else.
3) If you don't have a niche, you wont survive. The competition will always catch up. the head start that you had might not be good enough in most cases - more so in the manufacturing sector than the services sector. The customer must be able to look at the product and say - hey, I want this brand. Not I want this product -any brand will do.

Fascinating how much one can notice when one is not looking!

Reader's digest files for bankruptcy

A sad news indeed.
I remember being a fan of RD as a kid. But it has succumbed, to the rise of internet, more than recession. Print media has been struck real bad by the free content on th enet.

And there is no looking back. I dont think there is anyway that people can be coaxed into reading, and paying for, something that they can read on the internet for free.

The younger generation, the ones who have seen computer from an early age, are often more comfortable reading off the screen than from a printed version. Add to that the ubiquitous nature of free content, you know that the print media is fighting a losing battle.
The only way print media can tide over to the profit side is by providing content on the net. Right now, most media houses have free content on the net.

But this is not sustainable - because it requires the same amount of effort to produce content for the net, as it does for printing. The first thing that media houses must realize s that popularity is not revenue. You might be the most popular news agency on the internet - but that does not give you anything. Sure, you can find some advertiser on the web - but arent there too many websites vying for the same set of advertisers? The law of diminishing returns sets in very soon in such a market.

The only way out for the media houses is to have a free and a premium section, where the free section drives the masses . And the premium section catering to specialized news requirements.

A just society

I have heard a lot of noises about people not getting enough opportunities, someone getting an edge due to his/her parentage, division of society based on caste and religion. I hereby proposed a different setting of a society where everyone eats what (s)he earns.

1) Every kid - no matter what so ever - is taken into a state-run residential school. This school is funded by the taxpayer, and has caretakers besides teachers and support staff as employees.

2) Every kid goes to a fully funded (by the taxpayer, again) college. The entrance to which is by a test. The discipline of study is chosen by the kid him/her self.

3) Everyone works for a living. and all the money accessible to him/her is that what the person and his/her spouse has earned.

4) Invalids, and too-old-to-work people are taken care of by the society.

5) All the money after the death of the couple goes to the society. The only inheritance of money is after the demise of a spouse, it goes to the other person.

I wonder why such a society has not been institutionalized yet.

Energy services companies and financing energy efficiency initiatives

Here is another one for the NERD magazine.

An Energy services company (ESCO) is “a company that provides energy-efficiency-related and other value-added services and for which performance contracting is a core part of its energy-efficiency services business”.

The revenues of these ESCOs are tied to the amount of energy they help their client to save. Most of the ESCO projects have a payback period of two years and typically they help reduce the energy costs by about 20 to 25%.

As an estimate, India's potential energy savings are in the tune of 180 Billion kWh annually. That is about 36% of our total consumption now.

ESCOs have a big role to play in the BRIC countries by increasing the economic viability of accelerated growth. In 2007-2008, Indian ESCOs had an annual revenue of US $ 18 million while during the same time, Brazil had an annual revenue of US $ 280 million - about 15 times larger.

ESCOs take up energy efficiency projects where they take up the charge of a plant, invest in the required infrastructure and charge the client according to the energy savings achieved. They act as a energy efficiency consultants as in they find ways to streamline the operations to reduce energy costs.

One problem that EE projects face is their financing. The fact that these projects are auxillary to the strategic plans of the institutions. In contrast Industrial restructuring projects are more planned and tend to have a higher thrust from the managers as they are directed towards the company's long term goals.

These energy efficiency projects are distinguished from industrial restructuring projects because most of the IR projects are aimed at improving the units' overall market competitiveness by process changes and product modifications. These often need larger investments and have longer payback periods. These projects need a strategic thinking by the managers about the the units' competitiveness in the changing market conditions. Improving energy efficiency is not the major reason for this activity and neither is it the most desired outcome.

EE projects on the other hand, don't change the process, neither do they change the product. It only concentrates on increasing the energy cash savings and not about the impact on future market growth of the product.


Of late, IFC has taken up some initiatives to fund purely EE projects. As banks have started understanding the short payback time that these projects tend to have, a lot of tailor-made funding options are coming up.