When Vinnie met Vivek...

I was reading vinnie mirchandani’s excellent article on India’s inflexion point in terms of our `illusion of control’ ( Vinnie credits Vivek Paul with that coinage ). Read and enjoy. Some excerpts -

“ I met Vivek Paul at the Enterprise conference a couple of weeks ago. Vivek, now an investor, was the number two guy at Wipro and helped grow its US operations rapidly in the first half of this decade. Vivek ribbed the work I do for clients in helping source technology - "You give customers the illusion of control".

We both laughed, but I walked away thinking Vivek's "illusion of control" was a more apt description of where Indian firms like Wipro find themselves after the last few years of sustained success. Their growth was particularly striking in contrast to the flat or negative growth at many Western firms.

The core strength of Indian firms continues to be in application maintenance. They have not made meaningful dents in the systems integration market - especially in projects which call for complex program management, industry knowledge or change management (something their focus on engineering talent has actually prevented them from developing organically).

But as Vivek would say - a good first step would be to get over their "illusion of control" over the IT services market.”

A real good read on the current Indian IT scene.

I have always maintained that when at least 15% of our population ( 1.1 billion that is ) take to internet for at least 50% of their daily needs of education, healthcare, shopping, career, business, leisure, travel etc., we’ll have our internet inflexion point.

Currently it is widely held that less than 2% of our population are active computer users. Most of it still use it only for routine word processing, e-mail or IM chats. This needs to improve significantly to make a dent.

That said, my benchmarks for an inflexion point/era in Indian Internet space should be viewed from a mass adoption perspective. It could be when -

a) even a kirana shopkeeper is as efficiently networked with his suppliers and customers as much as the back end of a large shopping mall.

b) we show the world how to start "positive" internet epidemics of their own in new applications ( like how we try to ape Google, Amazon, Yahoo, Facebook etc.). The virtue of an epidemic, after all, is that just a little input is enough to get it started, and it can spread very, very quickly.

c) The ideas and local talent available tempt even Valley VCs ( the John Doerr, Paul Graham, Peter Rip types ) to open their de facto branches in India, shifting in with their bag and baggage.

d) A few internet startups made on shoestring budgets end up making hundreds of millions of dollars and we are not surprised.

Is that too much to ask ?

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IPO Grading – What is SEBI up to ?

The Securities and Exchange Board of India (SEBI) made it mandatory for companies planning initial public offers to get rated by agencies and tightened disclosures for real estate IPOs.

The regulator also said real estate firms must provide ownership or purchase agreement details to justify their claims about land holdings, to prevent firms from exaggerating their real assets. While announcing this on Thursday, Mr.Damodaran, Chairman also said the Board has approved short-selling by institutions as indicated in the Union budget on Feb.28.

While Damodaran didn't detail the reasons for the decisions, market players said the performance of some newly listed shares that are trading below their offer price could have led to the move. For instance, Parsvnath Developers Ltd. and Akruti Nirman Ltd. made a strong debut on the markets but are now available below their IPO prices.

SEBI’s decision to make IPO grading mandatory has triggered a negative reaction in Industry circles on the following lines –

a) The five principal grades represent Earnings, Accounting, Management, Financial risks and Corporate Governance, but leaves out the primary aspect viz. price / valuation which is the key parameter of the issue. The rating agencies themselves admit their grading does not mean a “recommendation” or a comment on valuation of the stock.

b) Even a good company could be a bad investment at a high price. However for the small investors’ interest which the grading exercise apparently aims to protect remains unserved since despite disclaimers, (s)he would expect a graded IPO to quote above the market price.

c) If the purpose of grading is to improve the disclosures, the Lead Managers / Merchant Bankers are clearly not doing their job despite the high fees they charge. Now by introduction of grading, SEBI has enabled Merchant Bankers to conveniently shift the blame for a badly diligenced IPO to Rating Agencies who have graded the issue. Eventually it will lead to a blame game between Merchant Bankers and Rating Agencies and SEBI will have to arbiter truce – while the small investor had been disdained all along.

Have we forgotten the Rs.12 billion ( $ 272 MM) CRB Capital Markets scam ? It happened despite the The A+ rating given by CARE for its Fixed Deposits *scheme* and upfront cash incentives of 7-10% attracted investors in hordes to Bhansali's schemes. Incidentally the same Debt rating agencies are empowered to grade IPOs now. Déjà vu ?

The industry vividly remembers the reason behind introduction of debt rating then which was also to introduce an element of transparency and enhanced disclosure standards by the issuers – which at least was a global mechanism. But IPO grading is totally unheard of anywhere else and is a First-From-India initiative. [ By the way, the prestigious IOSCO conference is scheduled to be held for the first time in Mumbai, India between 9th -12th April, 2007 – We need something to crow there, don’t we ? ]

Why are we pioneering something which others before us have considered and discarded because of its futility ? Are we still deluding that IPO grading could be a panacea for improving IPO quality – or worse, a guarantee for stocks quoting at a premium to issue price upon listing ? Why wouldn’t we recognize that risk is the reason why equities quote at a premium / discount and it can’t be mitigated by regulation beyond a point ? Why can’t we leave price discovery being a function of demand and supply which has it always been and will be ? Why are we trying to increase the cost of IPO by adding another fee based, subject to disclaimer, no responsibility undertaken exercise in futility ?

Ask me. There are only investors in any market, no specie called the `small’ investor. Everyone who comes to stock market is greedy. Small or big, (s)he has an ambition and a risk appetite to match it. (S)He may not be savvy to talk tall about portfolio analysis or risk management, but (s)he knows where to draw the line in own ways. (S)He will come to market no matter how hard you may try to dissuade or warn. For them, no template is graven in stone. It's a rage or just plain greed. You can't hold it back.

Whom are we trying to protect ?

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Real estate for the price of coffee

San Francisco's modern-day bedouins are typically armed with laptops and cell phones, paying for their office space and Internet access by buying coffee and muffins.

A new breed of worker, fueled by caffeine and using the tools of modern technology, is flourishing in the coffeehouses of San Francisco. Roaming from cafe to cafe and borrowing a name from the nomadic Arabs who wandered freely in the desert, they've come to be known as "bedouins." [ed: the term appears in a 2006 Charter Street post, which is also a nice meditation on the benefits of "going Bedouin"]

The move toward mobile self employment is also part of what author Daniel Pink identified when he wrote "Free Agent Nation" in 2001.

Pink calls it "Karl Marx's revenge, where individuals own the means of production. And they can take the means of production and hop from coffee shop to coffee shop."

If you could split the Web workers into two main camps, you could say that one camp plugs in at Starbucks, while the other chooses independent neighborhood cafes. The two have vastly different ethics.

Starbucks offers a more corporate culture, and is a popular place for business meetings. Executives who travel a lot often prefer Starbucks, knowing they can find many branches in whatever city they go to. They also pay for the Wi-Fi, through Starbucks' partnership with T-Mobile.

Yet many of the scrappier startups, particularly those who have not taken funding from venture capitalists, prefer the ethos of the independent cafes, where the music is a little louder and the Wi-Fi is free.

May be, throwback of sorts. Ernest Hemingway and F. Scott Fitzgerald wrote some of their best work in Parisian cafes. And in San Francisco, writers and poets of the Beat generation, such as Jack Kerouac and Lawrence Ferlinghetti, wrote in the cafes of North Beach.

Fixed loyalty to corporations is morphing into a new independent model of working. In a free-agent world, people serve their work ideals and personal needs, rather than a specific company. Without oversimplifying the so-called demise of loyalty, we can see a mutually informed contract between those with talent and those with opportunities for work, a contract that balances collective and individual interests. Free agency hawks itself by spelling out its perks, giving tips on how to juggle the challenges, and promoting it as a path more respectful of the family, as well as the human spirit.

You can read the full article at SF Chronicle here. [ Hat Tip : Ben Casnocha ]

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Inflation - the ripple effect spares none

I have a lot of interests, so much that I lead a slash lifestyle. My theory is that half of what I seed may not sprout, so keep the widest wingspan. But Economics, with its theories of preserving the created wealth has never been my favorite. I would say " if I know how to create wealth, I know a thing or two about how to keep it as well" !

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Lately though, with inflation hogging the limelight, I had a change of mind.

I was reading an article today (“Farms are not islands”) in The Economic Times by Narendar Pani on why it’s essential to improve the ability of farming families to absorb risk. Hey, wait a minute...why only the farmer's family and not mine ? I began to wonder.

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The original article has been a long one. I’ve made it in a Q & A format so that it makes sense to you and you don’t drop off midway.

Q. Why did India's budget 2007 focus so much on agriculture ? Unusual ?

Agricultural production has been under pressure for a while, but food shortages are now beginning to affect prices. Agriculture which contributes less than a fifth of the GDP has to provide livelihood for around three-fifth of the population that is dependent on it. It is this imbalance which is threatening to spike even the famed SEZ policy of the Government. Yes, it’s a bit unusual since normally the Budgets indulge corporate sector and industry more than agriculture.

Q. What is the immediate challenge ?

The immediate challenge is on the food front and to arrest the growing number of farmer suicides. Shortfalls in farm production have been allowed to affect food supplies and hence prices. The Finance Minister’s response in the budget has been to step up allocations towards Irrigation and revive other Green Revolution (GR) measures.

Q. But we have farm subsidies ? What led to this grim situation ?

The problem with previous GR strategy has been the decision by the state to take out the risk of collapse in prices. The Government offered the farmers remunerative prices ("support prices") and a guaranteed procurement of their production in case the open market could not absorb all of it. They borrowed from the Banks, acquired GR technology, produced as much as they could without worrying about glut. All this meant huge state subsidy to farmers and was manageable so long as there was a food shortage – since prices in the open market managed to stay above the support prices and state did not have to procure too much as there was market demand. This lasted till the situation turned to surplus and market prices declined, when the state had to procure at above market prices pushing up the food subsidy bill.

Q. What were the other obstacles in the system ?

Another shocker was that farmers produced crops based on what government offered instead of genuine market demand. When input costs grew, there was a constant demand by the farmers for upping the support prices. In times of abundance, huge volumes were offered for procurement - states simply had no money to pay for it either. Governments normally budget for a modest growth in subsidy and not for relentless demand for hike in support prices from farmers. This led to a situation when states had to withdraw the support prices altogether. Instead of trying to develop market making skills and rein in the subsidy bill, the Government closed the only safety valve available to the hapless farmers.

Q. What is so unusual about it given that every market has its own cycle ?

Any commodity is produced after assessing the level of market need and demand. The tracking errors can be corrected by appropriate marketing efforts ( if supply exceeds demand) or by raising funds for scaling up ( when demand exceeds supply).

The anomaly here is that farmers are forced to play blind. Their choice of crops is influenced by prices before they start sowing since they have no way of figuring out what it would fetch post harvest because of the intervening time lag. This leads to acreage allocation imbalances for different crops, results in a glut and price crash. So next year, farmers switch out of that crop leading to a shortage, and demand pushes the prices up. This cycle of abundance / shortage caused by default is not quite the way an efficient market should function. We’ve been an agrarian economy for over centuries and it’s time that we adopt efficient market practices. Developed markets have built-in systems for a realistic demand forecast backed by effective supply chain which leads to efficient price discovery.

Q. which calls for a futures market ?

Precisely. The way out of this lag is offered by the futures market. If a farmer knows what price he would get after harvest, he wouldn’t plan his crop based on price at the time of sowing.

Q. Why not have it then ?

We have it already, but is not efficient enough to achieve the desired end. The missing link is the tracking mechanism between futures market and the farmer’s ability to discover appropriate future prices of crops on the basis of sowing patterns. When a crop is sown beyond a limit, future prices will decline and farmer should be forewarned of the impending glut. Since this vital link is missing, the commodity futures market is dominated by pure-play speculators that trade on technical support and resistance. Thus instead of focusing on efforts to establish the link between the farmer and the futures market, our politicians often shoot the messenger by banning the futures trading itself – out goes the baby with the bathwater !

Q. Where does that leave the farmers ?

Farmers now are left high and dry. Neither support prices nor a futures market leaves them to absorb the whole risk. They have no way to know what prices their harvest would yield at the time of sowing. Since land is also in short supply, the risk is doubled. Scanty water resources deprive the farmer of going in for more than one crop. Since the percentage of population dependent on agriculture is not declining in tandem with the sector’s share in GDP, the buffer available for the farmer to absorb the risk is under threat. These imbalance chokes up the farmer’s finances, forces him to mortgage his land to unscrupulous loan sharks just to get by. Left with no income, the farmer often defaults on the loan and eventually gets evicted from his land which is his only means of livelihood. This often leaves to starvation or worse, suicides.

Q. That’s terrible. We need to arrest this trend before it has its spill over effect on the economy as a whole ?

It’s already fairly widespread. The urban people are already feeling the heat of high prices for vegetables, groceries and grains. It has even led to the fall of Amrinder Singh Government in Punjab.

Q. What options we have besides the routine incremental allocations made by the Government towards agriculture and irrigation in the Budget ?

Firstly, we must reduce the numbers dependent on agriculture even as we try to introduce a second GR or other innovative risk control measures. Secondly, the National Rural Employment Guarantee Scheme (NREGS) should be able to provide job to at least one member from the farmer’s family not just in state projects but also in the industry – by providing training to the rural people and incentives to the private sector. Another effective step could be by extending reservation within the existing quota to include rural farming family members belonging to those communities.

Q. why do you call it “the Ripple effect that spares none” ?

Argentinians and Indonesians have experienced it during their market meltdown in the mid 90’s – when a dozen eggs cost $100 during those days of hyper inflation. Bank accounts were frozen across the board, supplies were rationed...rich and the poor suffered alike. The ripple effect spared none.

There’s this indifference I'd noticed with the generation X and Y that the agriculture policy doesn't concern them since they were not farmers. For them, it is an issue between the farmers and the Government. They'd overlooked the fact that so long as we have a fully functional metabolism, we all are going to need food and that comes straight from the farm. Farther we are from the farm, more we will have to pay for food and that’s the truth.

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Voila, when even the Government has stirred, the situation must be real bad...!

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Should media content be archived ?

Doc Searls has this great insight in his post on the evolution of Mass Media because of our habits shaped by the internet. Here he makes his case why mainstream media (MSM) has no choice but to free up their archives for online viewers and why they can’t lock it up behind a paywall for long.

It’s a long post, so I am block quoting some gems which one shouldn’t miss.

“The Net is a giant zero. It puts everybody zero distance from everybody and everything else. And it supports publishing and broadcasting at costs that round to zero as well.

It is essential for the mainstream media (MSM) to understand that the larger information ecosystem is one that grows wild on the Net and supports everybody who wants to inform anybody else. It no longer grows inside the mainstream media's walled gardens. Those gardens will continue to thrive only to the degree that they do two things: 1) open up; and 2) live symbiotically with individuals outside who want to work together for common purposes.

Framing is a huge issue here. We have readers and viewers, not just "audiences" and "consumers". We write articles and essays and posts, not just "generate content". "User-generated content", or UGC, is an ugly, insulting and misleading label.

"Content" is inert. It isn't alive. It doesn't grow, or catch fire, or go viral. Ideas and insights do that. Interesting facts do that. "Audiences" are passive. They sit still, clap and leave. That might be what happened with newspapers and radio and TV in the old MSM-controlled world, but it's not what happens on The Giant Zero. It's not what happens with blogging, or with citizen journalism. Here it's all about contribution, participation. It involves conversation, but it goes beyond that into relationship — with readers, with viewers, with the larger ecosystem by which we all inform each other.

We don't just "deliver information" like it's a Fedex package. We inform each other. That is, we literally form what other people know. If you tell me something I didn't know before, I'm changed by that. I am not merely in receipt of a box of facts. I am enlarged by knowing more than I did before. Enlarging each other is the deepest calling of journalism, whether it's done by bloggers, anchors or editors.

The majority of papers today still lock up their archives behind paywalls. It's time to stop that, for the simple reason that it insults the nature of the Giant Zero environment on which they now reside. They can make as much or more money by exposing those archives to Google's and Yahoo's indexing spiders, by placing advertising on them, by linking to them and bringing interest and visitors to them, by making them useful to other journalists (many of whom will be bloggers) seeking to write authoritatively about their communities and their communities' histories."

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Tell me how do you vote - for paid, archived, inert content which gives us no freedom on what to watch between commercials OR free, open, dynamic content which allows us choice and enables us to react meaningfully ?

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One Gates quote and a few great comments

"Google by a lot of criteria is probably at the top of the list. They're in this honeymoon phase of, Google can do anything at all times. If it was rumored they were doing pizza, you'd think it was going to be zero calories and free."

-- Bill Gates, in a wide-ranging interview with the Mercury News, says Microsoft's foremost competitor has a lot to learn about married life.

Posted by John Murrell on 06:38 AM in Quoted


Comments

Microsoft pizza, on the other hand, is only available with spoiled cheese, ketchup sauce and cardboard-flavored crust, and shows up at your door even though you didn't order it.
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Gates should stop giving interviews. I think the reasons why are obvious.
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Posted by: Badonkadonk Nov 20, 2006 1:02:53 PM
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Don't forget that MS pizza is full of bugs. Bill delivers the pizza, points a gun at your head and says "pay up". Soon after Bill leaves, a phisher comes and steals your wallet.
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Posted by: John Nov 20, 2006 1:27:39 PM
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the reason that google is so much better than microsoft is that google does not have a married life. google is like isaac newton : the eternal virgin whose ability to think and create and invent and discover has not been perverted subverted or otherwise contaminated by marriage.
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Posted by: linda marie hilton Nov 20, 2006 3:36:28 PM
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What? You don't like anchovies on your pizza? Something fishy here . . . That google has the true pulse of what the technology sector wants is in direct conflict what Gates delivers. (i.e., what he wants to give it . . ) Free, is of course the operative word here, and no, we don't honor coupons for that pizza . . . .
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Posted by: Raspy Nov 20, 2006 5:57:25 PM
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Don't forget, you don't actually OWN MS Pizza, you merely license it. Then again, that's ok. That's similar to what you do with beer.
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Posted by: bert Nov 21, 2006 11:10:05 AM
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* * * * * * * * * * * * * * * * * * * * * * * * * * *

The full text of Q & A session with Bill Gates on life, philanthropy and competition is here.

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The 3 minute judgement – only VCs can do it !

It’s the same everywhere !

I was reading the report titled “ Pitch & Woo – Speed dating for Venture Capital “ by Constance Loizos of Mercury News regarding a so-called revolutionary interaction between Entrepreneurs and VCs at Stanford University. It started like this –

“In an interesting sign of the times, venture capitalists in search of big returns are no longer waiting for revolutionary ideas to come to them.

Instead, VCs from some of the valley's biggest firms came to Stanford on Friday night for a speed-investing event called VC3 to meet with budding, Stanford-affiliated entrepreneurs in an attempt to marry fresh ideas with financing.

Company founders spent six minutes with each VC -- three to pitch them and three for feedback -- as part of EntrepreneurshipWeek USA, a first-time national effort sponsored by hundreds of organizations to encourage entrepreneurialism in the United States…..”

You can read the full report here.

I am truly shocked. Are they VCs or some ordained, intellectually endowed prophets ? Even to get a hang of the idea in three minutes, either the VC must be endowed with something significantly more than clairvoyance or that its Limited Partners ( investors ) are smarting from their recent loot of Fort Knox for such a hurried deployment to be in order. Latter seems likely.

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If none of the above, the VCs are just way too egotistical to be tolerated for long.

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Stanford and its budding entrepreneurs are my candidates for coming year’s Nobel peace prize.

[ The report says one creep ( oh sorry, His Excellency - the VC ) was even fidgeting with his Blackberry even during those narcissistic three minutes ! ]

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Crowdsourcing - way to go for Patent screening ?

Crowds may not be all that wise, but they can be smart, and the U.S. Patent and Trademark Office, an agency in need of help if ever there was one, is hoping to tap into that intelligence. The USPTO is starting a pilot project in which it will post patent applications (just from companies that volunteer so far) on the Web and invite comments, using a community ranking system like Digg's to raise the visibility of the most respected comments.

The U.S. patent application examination process has been increasingly overwhelmed, both by volume -- its 4,000 examiners handled a record 332,000 applications last year -- and by a shortage of expertise in areas like software, where related data can be scarce. On top of that, USPTO examiners have long been reluctant to seek outside opinion and in some cases have been barred from doing research on the Net because their search queries could reveal proprietary information. Obviously, this is no way to do business, what with billions of dollars in sales and/or legal fees potentially riding on ill-considered patents. The crowdsourcing model may end up being messy to administer and subject to gaming, but if it can occasionally keep the Patent Office from making an egregious blunder, it would be worth it.

Here’s the open call from USPTO. The Patent and Trademark Office is starting a pilot project that will not only post patent applications on the Web and invite comments but also use a community rating system designed to push the most respected comments to the top of the file, for serious consideration by the agency's examiners. A first for the federal government, the system resembles the one used by Wikipedia, the popular user-created online encyclopedia.

The Essjay episode underlines some of the perils of collaborative efforts like Wikipedia that rely on many contributors acting in good faith, often anonymously and through self-designated user names. But it also shows how the transparency of the Wikipedia process — all editing of entries is marked and saved — allows readers to react to suspected fraud.

In the process, USPTO should also help keep Patent Trolls which debunk good startup initiatives at bay.

Do you have some idea to go about and a brilliant team of talent and skill sets to execute something like this ? Is it something I can bet a million $$ on ?

I liked it. Go find a good team, I’ll help you bootstrap and move forward.

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