Periyar EVR's observes that humans have a major weakness ..they are so insecure that they accumulate wealth for tomorrow. I know that some animals also have the habit of storing food ...but this tendency of humans to accumulate much more wealth than is required for a couple of generations is something that is strange ...for even if one were to spend as much as possible on oneself and one's kith and kin - there is an extent beyond which it is not possible. One look around , and one sees a lot of people accumulating more - lots more that that....their hunger for wealth seems insatiable, and appearing to border on obsession.
There is a saying in Tamil which translates thus 'There are only rare instances of a family flourishing for more than 3 generations or of families being impoverished for more that 3 generations' ...while I am not sure about the latter part , I am reasonable convinced that the first part is by and large true ( 3 may be 5 but generally not beyond that )
And that brings back the question - why accumulate so much ? If money is what money does - then accumulation does not appear to be rational. If it is a store of value - how does one realize and recognize value when there is no transaction in the forseeable future ? ...the only explanation that appears sensible is that it is a sign of insecurity.
Some decades back, this society valued its scholars and intellectuals ..it also valued people for their valour and philanthophy ...these days it values the 'wealthy'...probably some where it has collectively decided that if you are intellectual , you must also be able to use your intellect and become wealthy or conversely, if you are wealthy , it must be because you were smart, sensible (and intellectual ?)... I dont know, but if accumulation of excess wealth is a sign of insecurity - then the society is valuing the more insecure of the human kind and that certainly does not make sense ...
Wednesday, August 15, 2012
Sunday, February 6, 2011
Reinventing Capitalism - Michael Porter's idea of making a virtue of a necessity
A critique on 'How to reinvent capitalism - and unleash a wave of innovation and growth' by Michael E Porter and Mark R Kramer, in HBR
This article appeared on the HBR, Jan-Feb 2011. The article is an interesting read - Interesting because, it shows that there are people out there sitting tall and tight who can dish out such stuff and not just get away with it , but probably also get accolades for it ..... Please read the article and read on...
a) Looks like Porter is now acknowledging that his model needs a revisit - adding the sixth and most important force - society / the local environment - something that a lot of people I have met have spoken about ( He still however does not admit it in this article)
b) From whatever little I have seen of this corporate world, I think this idea of shared value will be spoken for some more time for sometime now - with nothing tangible ever happening - before the next new idea to talk gets written about.
c) The cause and effect issues in the examples he suggests are not convincing. For instance, if Intel and IBM are devising wayw to help utilities harness digital intelligence in order to economize on power usage - it , to my mind is not out of any shared value concept - it is simply because power costs are going up and it makes simple economic sense to address this. This is a segment in the market that is being addressed. If Intel and IBM dont do it - somebody else will.
If Nestle worked with farmers directly, to increase productivity of coffee beans - it is out a necessity to get good quality and assured supply of beans ( that is what the sugar mills in India have been doing for decades) ...it is not out of some higher and enlightened idea of shared value of capitalism. Not sure why there is an attempt to make a virtue of a necessity.
Some of the examples are simply ludicrous and others unbelievable. Marks and Spencers has overhauled its supply chain, and this is supposed to save the retailer GBP 175 million annually by 2016. Fine. But to take credit for reducing carbon emissions by doing this is .....to my mind , a rather interesting way to look at things !
It talks of a service in India by Thomson Reuters , which provides a monthly service for farmers who earn an average of USD 2000 per year at a fee of USD 5 per quarter, which provides them weather and crop pricing information and agricultural advise. This service reaches 2 million farmers and early results apparently suggest that it has increased the income of more than 60% of them - some cases even tripling incomes !!! Wow....
d) Net net - a valiant attempt at tweeking Capitalism. This 'ism' needs to be relooked and (re) built - tweeking, tinkering and repainting will not help it run for long .....
This article appeared on the HBR, Jan-Feb 2011. The article is an interesting read - Interesting because, it shows that there are people out there sitting tall and tight who can dish out such stuff and not just get away with it , but probably also get accolades for it ..... Please read the article and read on...
a) Looks like Porter is now acknowledging that his model needs a revisit - adding the sixth and most important force - society / the local environment - something that a lot of people I have met have spoken about ( He still however does not admit it in this article)
b) From whatever little I have seen of this corporate world, I think this idea of shared value will be spoken for some more time for sometime now - with nothing tangible ever happening - before the next new idea to talk gets written about.
c) The cause and effect issues in the examples he suggests are not convincing. For instance, if Intel and IBM are devising wayw to help utilities harness digital intelligence in order to economize on power usage - it , to my mind is not out of any shared value concept - it is simply because power costs are going up and it makes simple economic sense to address this. This is a segment in the market that is being addressed. If Intel and IBM dont do it - somebody else will.
If Nestle worked with farmers directly, to increase productivity of coffee beans - it is out a necessity to get good quality and assured supply of beans ( that is what the sugar mills in India have been doing for decades) ...it is not out of some higher and enlightened idea of shared value of capitalism. Not sure why there is an attempt to make a virtue of a necessity.
Some of the examples are simply ludicrous and others unbelievable. Marks and Spencers has overhauled its supply chain, and this is supposed to save the retailer GBP 175 million annually by 2016. Fine. But to take credit for reducing carbon emissions by doing this is .....to my mind , a rather interesting way to look at things !
It talks of a service in India by Thomson Reuters , which provides a monthly service for farmers who earn an average of USD 2000 per year at a fee of USD 5 per quarter, which provides them weather and crop pricing information and agricultural advise. This service reaches 2 million farmers and early results apparently suggest that it has increased the income of more than 60% of them - some cases even tripling incomes !!! Wow....
d) Net net - a valiant attempt at tweeking Capitalism. This 'ism' needs to be relooked and (re) built - tweeking, tinkering and repainting will not help it run for long .....
Saturday, December 11, 2010
Un 'Real' Estate
'Green City ... the Gate way to your dream home ' screamed a banner close to my house. It had a nice happy family - a sophisticated looking 'Dad' and 'Mom' with a lovely 'kid' beaming a broad smile. Behind them was the 'Dream home' and lots of greenary ...( I noticed that the Grand pa and Grand ma were missing ....oh yup, we live in nuclear times ! )
Sai Nagar, Sun City, Green City, Green Valley, Mathuram Nagar, Mathuram City , Al Kabeer Township.... the list went on. Some 15-20 km away from Tiruchirapalli there was hardly any agricultural land left.... all of it had been converted into Nagars , Cities , townships and the like , they were all levelled , and plotted ...some even had streets marked out....And interestingly , there were hardly any houses though ! There were some rain fed greenery and an occasional shepard herding a few sheep...
But yes, there were cars on the road, plying 'investors' from and to the city. One enterprising 'Real Estate' agent had organized for trips using 'Tempo Travellers'. He had decked up the place with flags, and tents and .... man, it was interesting to see people look into sheets of papers showing the map of the 'would be township'....
Some distance away there was a 'Sakti Matriculation School '...and the area around it had the boundry stones painted out prominently. Experience tells that the presence of the school would have increased the prices steeply.... Further away was a board '1200 sft for only 65000'. ...'ONLY' ...
A little more travel and I realized this is the kind of real estate development that has happened all around Trichy.... It almost looked like there is so much 'development' that it would require 3 times the population of Trichy to occupy all these plotted area ...When will people come to live in these places ?? When will the the promised development take place ?? When will the dream houses actually come ???
I know people buy these plots - not to live - but to sell it to somebody else with a 'profit' - who will sell it to somebody else and the path goes on and on . People are so busy spectulating on the future productivity of Land - that they dont seem to realize that - the productive resource does not seem to be producing at all !!! ....For, till all the development actually happens and people actually come to live there , whatever little agriculture would have been possible in those areas is also gone. To me it looks insane.
And till sanity finally comes ( it usually does ...) we'll see more of these (un)real estate agents hawk away agricultural land to greedy 'investors' ...who would hope to find somebody else who'll build a dream house on it ...
Sai Nagar, Sun City, Green City, Green Valley, Mathuram Nagar, Mathuram City , Al Kabeer Township.... the list went on. Some 15-20 km away from Tiruchirapalli there was hardly any agricultural land left.... all of it had been converted into Nagars , Cities , townships and the like , they were all levelled , and plotted ...some even had streets marked out....And interestingly , there were hardly any houses though ! There were some rain fed greenery and an occasional shepard herding a few sheep...
But yes, there were cars on the road, plying 'investors' from and to the city. One enterprising 'Real Estate' agent had organized for trips using 'Tempo Travellers'. He had decked up the place with flags, and tents and .... man, it was interesting to see people look into sheets of papers showing the map of the 'would be township'....
Some distance away there was a 'Sakti Matriculation School '...and the area around it had the boundry stones painted out prominently. Experience tells that the presence of the school would have increased the prices steeply.... Further away was a board '1200 sft for only 65000'. ...'ONLY' ...
A little more travel and I realized this is the kind of real estate development that has happened all around Trichy.... It almost looked like there is so much 'development' that it would require 3 times the population of Trichy to occupy all these plotted area ...When will people come to live in these places ?? When will the the promised development take place ?? When will the dream houses actually come ???
I know people buy these plots - not to live - but to sell it to somebody else with a 'profit' - who will sell it to somebody else and the path goes on and on . People are so busy spectulating on the future productivity of Land - that they dont seem to realize that - the productive resource does not seem to be producing at all !!! ....For, till all the development actually happens and people actually come to live there , whatever little agriculture would have been possible in those areas is also gone. To me it looks insane.
And till sanity finally comes ( it usually does ...) we'll see more of these (un)real estate agents hawk away agricultural land to greedy 'investors' ...who would hope to find somebody else who'll build a dream house on it ...
Thursday, October 14, 2010
Regulating MFIs
MFIs are back in the news and once again for the wrong reasons - or probably the right ones. I am not talking about the sacking of Suresh Gurumani as SKS's CEO - days after the successful IPO.
The AP CM has again raised issues about the interest rates being charged by MFIs and has sought regulation of MFIs. Reports talk of some MFIs charging effective interest rates as high as 45% and about the farmer suicides ( The average lending rate is around 27-30%). A few years back - roughly 5 years back ( during Dr YSR's time) too, the AP Gov raised this as an issue. If my memory serves me right, I remember Dr Nachiket Mor, who was then heading the agri biz (among other things) at ICICI bank flew down to meet the AP CM to sort out the issues. ICICI bank then had a large exposure to MFIs - mostly in AP . Issues have time and again been raised about the way MFIs do their business ...the only thing that remains to be done is regulation.
Most of the MFIs have ROA well above 2 % (SKS reported 3.07% ROA and Spandana - for instance reported an ROA of around 4.68%) in contrast to the ROA of around 1 to 1.5 of scheduled commercial banks ). There is a resistance among MFIs to bring down the rates. For instance SKS justified the ROA as being 'justified and appropriate' as the business was unsecured. While on the face of it , it appears a correct reasoning, the fact is that - the social / peer security structure that works when lending is done is as effective - if not more than secured lending. Most MFIs report neglible portfolios in stress ( basically overdue portfolio). The on-time repayment rates are upwards of 98% and ultimate repayment is much higher. Infact most MFIs trumpet this achivement of on time repayment when they seek funding assistance from banks , who would naturally be wary of lending money for on-lending small and unsecured amounts. It requires ingenuity to use the same point to argue both ways !
40% interest and 3% ROA are only a shade better than what money lenders make. And that ' shade better' is because these MFIs are sophisticated, organized , - some owned by management grads from premier institutions and have letter pads ....
SKS has the following mission statement
'Our purpose is to eradicate poverty. We do that by providing financial services to the poor and by using our channel to provide goods and services that the poor need'
The only point that I used to keep pondering over was ' whose poverty are these MFI's seeking to eradicate' ?. With the phenomenal success of SKS's IPO, I think I have the answer.
The AP CM has again raised issues about the interest rates being charged by MFIs and has sought regulation of MFIs. Reports talk of some MFIs charging effective interest rates as high as 45% and about the farmer suicides ( The average lending rate is around 27-30%). A few years back - roughly 5 years back ( during Dr YSR's time) too, the AP Gov raised this as an issue. If my memory serves me right, I remember Dr Nachiket Mor, who was then heading the agri biz (among other things) at ICICI bank flew down to meet the AP CM to sort out the issues. ICICI bank then had a large exposure to MFIs - mostly in AP . Issues have time and again been raised about the way MFIs do their business ...the only thing that remains to be done is regulation.
Most of the MFIs have ROA well above 2 % (SKS reported 3.07% ROA and Spandana - for instance reported an ROA of around 4.68%) in contrast to the ROA of around 1 to 1.5 of scheduled commercial banks ). There is a resistance among MFIs to bring down the rates. For instance SKS justified the ROA as being 'justified and appropriate' as the business was unsecured. While on the face of it , it appears a correct reasoning, the fact is that - the social / peer security structure that works when lending is done is as effective - if not more than secured lending. Most MFIs report neglible portfolios in stress ( basically overdue portfolio). The on-time repayment rates are upwards of 98% and ultimate repayment is much higher. Infact most MFIs trumpet this achivement of on time repayment when they seek funding assistance from banks , who would naturally be wary of lending money for on-lending small and unsecured amounts. It requires ingenuity to use the same point to argue both ways !
40% interest and 3% ROA are only a shade better than what money lenders make. And that ' shade better' is because these MFIs are sophisticated, organized , - some owned by management grads from premier institutions and have letter pads ....
SKS has the following mission statement
'Our purpose is to eradicate poverty. We do that by providing financial services to the poor and by using our channel to provide goods and services that the poor need'
The only point that I used to keep pondering over was ' whose poverty are these MFI's seeking to eradicate' ?. With the phenomenal success of SKS's IPO, I think I have the answer.
Tuesday, September 28, 2010
Getting priorities right
UNICEF data shows 48% of India's children under five suffer from malnutrition, that is some 60.8 million children. Both in percentage terms and in absolute terms it compares poorly with neighboring countries like China ( 15%),Bangladesh ( 43%) , Pakistan (42%)and African countries like Nigeria (41%), Tanzania ( 44%) and Congo ( 46%). Only Ethiopia seems to be worse off at 51%. And this when the GDP has more than doubled since 1991. What development are we talking about ?
Lets look at another piece of information. Between 1997 and 2007, the Parliamentary Committee found that 1.83 lakh tonnes of wheat, 6.33 lakh tonnes of rice, 2.20 lakh tonnes of paddy and 111 lakh tonnes of maize rotted due to either lack of storage facilities or poor maintenance of stocks in the existing facilities. And against a buffer norm of 31.9 Million tonnes, FCI was having a stock of 57.8 Million tonnes. With such a poor track record why maintain excess stock ? So the point is not about availability . The point is about willingness to feed people. What kind of Government are we having ??
And the third piece of information is this. An amount of Rs 28054 Crores has been spent to host the Common Wealth Games in Delhi. And we know the quality of the infrastructure created with this money.
The basic question is this : Is this the infrastructure that India needs now ? Cant the tax payers money be better spent in creating adequate storage facilities for grains or in distributing food at affordable price to the needy rather than let it rot...What national pride are we talking of when we have our children suffering for want of proper and adequate food ? When will we get our priorities right ?????
Lets look at another piece of information. Between 1997 and 2007, the Parliamentary Committee found that 1.83 lakh tonnes of wheat, 6.33 lakh tonnes of rice, 2.20 lakh tonnes of paddy and 111 lakh tonnes of maize rotted due to either lack of storage facilities or poor maintenance of stocks in the existing facilities. And against a buffer norm of 31.9 Million tonnes, FCI was having a stock of 57.8 Million tonnes. With such a poor track record why maintain excess stock ? So the point is not about availability . The point is about willingness to feed people. What kind of Government are we having ??
And the third piece of information is this. An amount of Rs 28054 Crores has been spent to host the Common Wealth Games in Delhi. And we know the quality of the infrastructure created with this money.
The basic question is this : Is this the infrastructure that India needs now ? Cant the tax payers money be better spent in creating adequate storage facilities for grains or in distributing food at affordable price to the needy rather than let it rot...What national pride are we talking of when we have our children suffering for want of proper and adequate food ? When will we get our priorities right ?????
Monday, September 27, 2010
Development - in numbers..
Over the years we have been seeing development quantified in numbers - more specifically in terms of the amount spent. A more interesting way is to talk of allocation - and that is not even spending !!!
So we hear of around Rs 1.34 trillion allocated for education etc ..or we hear it in terms of percentage of GDP spent. The focus is hence on spending and there are saner and some less saner ways of representing it.
The basic premise appears to be simple : If money is spent , then development or a positive change is guaranteed.
The questions are
1. Is the money well spent ?
2. Is there a mechanism to assess the actual development or change that has been created by way of this development ( basically are the assumptions made at the time of approving the spending tested and verified ?) Are there independant ( politically and economically independant) systems to study the impact of the spending ? ( The key point is Independant - if one arm of the government spends and another arm measures impact and both report to one ministry , it is not difficult to understand how the assessment would be ! )
3. Is there any monitoring and accounting mechanism to see the above
In the absence of these ; or in the absence of the information actually made available widely ( actually , this is the only information desired ), talking in terms of expenditure is meaningless.
Statistics they say, conceals more than it reveals. And spending is not equal to developing.
So we hear of around Rs 1.34 trillion allocated for education etc ..or we hear it in terms of percentage of GDP spent. The focus is hence on spending and there are saner and some less saner ways of representing it.
The basic premise appears to be simple : If money is spent , then development or a positive change is guaranteed.
The questions are
1. Is the money well spent ?
2. Is there a mechanism to assess the actual development or change that has been created by way of this development ( basically are the assumptions made at the time of approving the spending tested and verified ?) Are there independant ( politically and economically independant) systems to study the impact of the spending ? ( The key point is Independant - if one arm of the government spends and another arm measures impact and both report to one ministry , it is not difficult to understand how the assessment would be ! )
3. Is there any monitoring and accounting mechanism to see the above
In the absence of these ; or in the absence of the information actually made available widely ( actually , this is the only information desired ), talking in terms of expenditure is meaningless.
Statistics they say, conceals more than it reveals. And spending is not equal to developing.
Wednesday, September 22, 2010
A 120 Schemes
...that is the approximate number of schemes that a DDA ( Deputy Director of Agriculture) is supposed to manage. The Agricultural Department in the State is in a state of mess. Recruitment into this Department stopped long time back - as a part of the austerity drive to control Government spending ( I keep wondering if what the Agri department does is spending or investing .... but na, it has steadily moved to spending these days)...and the officers are busy today putting up vegetable arches and fruit arches when a minister visits or setting up exhibition stalls on the roads to please some visitor...
There is a scheme for everything ... for instance there is a scheme under the national horticultural mission , where if one were to submit (a copy of) the title deeds, the saplings of one's choice, the agricultural inputs - the bio fertilizer required, oil cake ..everything is given free. Such a wonderful scheme ....- except that one can never be sure if the sapling given is of the variety one actually asks , or if what has been given will ever grow , or if there is any nutrient at all in the fertilizer supplied or if what is supplied as oil cake is oil cake or soil. No wonder there are hardly any serious takers for this scheme. Similarly there are schemes for rearing cattle , growing earthworms etc etc ...all adding up to several crores of rupees. It is no rocket science to know what happens with all this money....and who actually gains.
And if there are 120 schemes to manage, one wonders if the scheme is actually managed or the vouchers and auditors are managed.
There is no vision for the Department. Or probably there is one - of how the create fancy and free schemes running to several crores to benefit select individuals. What else can one say of a scheme to increase pulse production - where the concerned official is simply given an amount to be spent in any way suitable to increase pulse production and he/she just conducts awareness programs ? or of the revised nutrient based subsidy scheme which no one seems to fully understand - except that now every fertilizer manufacture prices his product differently...
There seems to be no serious application of mind on actual agriculture development - on augmenting irrigation capabilities ,on rainwater harvesting , on water conservation, on extending responsible post harvest technologies , on creating good storage and market infrastructure , on supply of quality seeds, focused nutrient management etc. And we are happily turning prime agricultural land into SEZs and residential apartments and what not. No 'educated ' individual wants to take up agriculture as a career - oh forget the educated mass - even the not so educated mass benefiting from the 100 day employment scheme does not want to look at agriculture. Labor is probably the biggest problem that a farmer faces today - that is if the rains don't fail him. And we still keep talking of India living in villages and of more than 60 % of the population depending on agriculture for livelihood. That number surely should go down by over 20%. ...
I keep wondering how long we can pull along this way...
There is a scheme for everything ... for instance there is a scheme under the national horticultural mission , where if one were to submit (a copy of) the title deeds, the saplings of one's choice, the agricultural inputs - the bio fertilizer required, oil cake ..everything is given free. Such a wonderful scheme ....- except that one can never be sure if the sapling given is of the variety one actually asks , or if what has been given will ever grow , or if there is any nutrient at all in the fertilizer supplied or if what is supplied as oil cake is oil cake or soil. No wonder there are hardly any serious takers for this scheme. Similarly there are schemes for rearing cattle , growing earthworms etc etc ...all adding up to several crores of rupees. It is no rocket science to know what happens with all this money....and who actually gains.
And if there are 120 schemes to manage, one wonders if the scheme is actually managed or the vouchers and auditors are managed.
There is no vision for the Department. Or probably there is one - of how the create fancy and free schemes running to several crores to benefit select individuals. What else can one say of a scheme to increase pulse production - where the concerned official is simply given an amount to be spent in any way suitable to increase pulse production and he/she just conducts awareness programs ? or of the revised nutrient based subsidy scheme which no one seems to fully understand - except that now every fertilizer manufacture prices his product differently...
There seems to be no serious application of mind on actual agriculture development - on augmenting irrigation capabilities ,on rainwater harvesting , on water conservation, on extending responsible post harvest technologies , on creating good storage and market infrastructure , on supply of quality seeds, focused nutrient management etc. And we are happily turning prime agricultural land into SEZs and residential apartments and what not. No 'educated ' individual wants to take up agriculture as a career - oh forget the educated mass - even the not so educated mass benefiting from the 100 day employment scheme does not want to look at agriculture. Labor is probably the biggest problem that a farmer faces today - that is if the rains don't fail him. And we still keep talking of India living in villages and of more than 60 % of the population depending on agriculture for livelihood. That number surely should go down by over 20%. ...
I keep wondering how long we can pull along this way...
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