The hidden cost of lakhs of crores

Recently the spectrum was auctioned for a whopping one lakh crores. The coal block licensing was also sold for two lakh crores. It has been all over the news as a positive story trying to depict how the government has managed to "raise" the money through its auctions, particularly after it failed to get the money leading up to the 2G scam few years before. With the fiscal deficit target fixed at 4.1% for the current financial year, this is a welcome boost to the government treasury.
Just like the famous "Broken window" economic story (Economics in one lesson), the public is being brain-washed to believe how this "new" money was generated that the government can use for people's welfare, also known as the redistribution of wealth. But what is not often said or discussed in public forums has been - who has paid this money and what is his incentive to part his cash. In other words, someone has invested in the auctions and the investor is planning on getting returns on his investment. Ideally more that what he invested.

Lets take a look at the blind spots in these unimaginably high revenue transaction.

In any transaction, there is a buyer and a seller.

The seller economics

The first and the foremost negative of the auction is, there is an assumption that the money raised is going to be put to effective use. What is the government going to do with this much huge sum. Does it have a game plan to make efficient use of this money? Probably not. Usually governments all over the world, and particularly in India collects a lot of money from the haves' and then wastes it in the guise of helping the have-not's. I am pretty sure, this time its going to be no different. Why would the government need this money? Water supply is erratic, roads are horrible and the power supply is not regular - on top of it - the people pay for all these services in the way of water bill, tolls and electric bills. Petrol and diesel - the lifeblood of the economy is heavily taxed. So in-spite of all these earnings that the government benefits from these huge sums are really fat-fat bonuses the government can play with. It would be ideal, if the money is put to efficient use? but if we have to go with past performance, then even this would be perennially wasted on welfare schemes that will not reach the actual beneficiary but will be sucked up by the corrupt bureaucratic system in place. Even if you would want to use this money on capital incentive project like metros in few cities, how would you invest this pan-India money on say developing a particular infrastructure like a metro in few particular cities. What happens to this money is never known unfortunately, except it gets lost overtime. Taking this money to fill a hole somewhere else is a usual way how these are used. Want to pay interest on an already existing loan!

The buyer economics

Now lets talk about the giver The companies that paid for the auctions have to find a way to retrieve this money by doing a business. It so happens, when the cost of doing business goes high (like here) the profits are squeezed. The money is absorbed in through its customer base. If you take mobile spectrum - a huge chunk of people are charged more to retrieve this money from. The companies are left with no option but the charge more for existing services. In the case of spectrum - the customers are charged extra and in the case of coal - the buyers are charged more, who in-turn charge the customers more (with high utility bills). Just imagine - the price is just 10% of what it has been. Then the companies can afford to share that windfall with its customers. It would not be possible for the companies to charge lot more, when they got with less money. The companies are there out there to win more customers with less fees. This money that the company saves - the remaining 90% would be put to use for a different investment that will again benefit its so-called customers. And more importantly - this private money would be invested wisely unlike the government. It will not be wasted. More often these companies have shareholders - who again are common man - who reap the fruits of better investment. In a real free society - businesses do good for the society. In societies that have crony capitalism like in India - the government loots all the money instead of productive companies. What doesn't happen - is the climate of crony capitalistic society being gotten rid off, instead of the government trying to fill in those shoes.

The public get a feel good feeling - where the government "successfully" managed to suck the "extra" money from big corporations and in the process has got ample money to serve its poor but "good" people. The sad part of this transaction is - the public never see the benefits that WOULD HAVE happened had this auction not happened involving such a huge sum.

Inflated prices - of any commodity is bad for society. It merely reflects that the Indian rupee is losing value.

Bottom line the citizens of India LOSE A LOT from these huge deals. The establishment is successful that the blind spots are not highlighted and discussed in civil society. Its all bash the rich and praise the government attitude. The way they are supposed to operate, governments can never do profitable business, they always lose financially. Unfortunately the media and the society in which we operate highlight it in a "non-productive" or "not realistic" approach. Awareness has to spread on who really can make a difference in the way we live our life. Rise in our quality of living is what every citizen wants and there is absolutely no-one who is an exception to it.
 

The low hanging fruits

The new BJP government at the center and the AAP government in Delhi are voted in for radical change. The so called non-performing Congress government both in the center and the state of Delhi is replaced by these new leaders. We have seen a lot of promises all round but unfortunately not lot of work. This blog would reflect on what needs to be done.

There are lot of talk about what needs to do done. But so far the BJP government has talked the talk but has not walked the talk. Recently I read a business today article whose cover story was  about smart cities in India. There is a ambitious proposal to create 100 smart cities in India in the next 10 years or so. I was introduced to this term my the BJP government's manifesto and hence was curious. I read the cover story by Business Today magazine and surprisingly still didn't understand what it was. There are lot of proposals on what needs to be done but how and when part is completely missing. I am not blaming the article, but the lack of ideas on what it is and even if its feasible is the bigger question. Wonder if its just a talk rather than action. I would like to give more time to the new government and do not want to judge them now. Even though the concept of creating smart cities is good., but the preliminary details of how and when are just as puzzling as what will be done. Wonder if it is a 50 year plan or something. Creating a society that has high-quality of living is what it intends to achieve. I am not sure, if the government can do it as the way its trying to explaining the concept of smart cities.

As soon we talk about smart cities, wind goes through your ears on what about land acquisition for it, what about getting land from poor farmer and handing them over to the developers? Handing over the land to some greedy MNC? These things come to the forefront and its often a boring rhetorical discussion where no one agrees.

Bottom line, the intention of the idea is to build a place that is just livable. Not many parts of India are like that unfortunately. For a decent living, lets come up with a list on what we need at home

1. Home with ample greenery around and within parking for 2 cars at least.
2. 24-hours of unlimited power supply
3. 24-hours of unlimited pumped-in portable water supply
4. Park in the vicinity for healthy exercising / recreation / games for children
5. Hospitals
6. Schools/Colleges
7. Quality roads and access to public transport

That's it.

We just have to create "communities" ALL around the country that has these facilities available and move people from else where to here. As soon the government helps to create this, people would be willing to move in with delight. This can be periphery of cities and villages.

Just say, I have the money to build such a community today and want to house 1000 families. Can the government of India assure me of 24/7 power and portable water? No. That is the problem.

What India needs is a "high-standard" living for MOST of its people. It is possible, smart cities can create this in BULK. But nothing stops us from doing it now in smaller cities TODAY.

Instead of coming with huge ambitious plans that don't get completed by say 10-20 years, the government of today should work on supply side of power, water and roads. That's all the people need. They can figure out the rest. The problem today is without the unlimited power, water and roads - any plan to modernize will fail. Innovation should happen in these fields and government should facilitate that. Not sure how Modi's foreign trips are going to make changes to this. There are people who want to manufacture in India, but that should take care of living standards in India. Just imagine a person is rich. He can afford to buy cars and drive. He can afford a nice garden at his home. He can afford a A/C in the entire house. The problem with the current set-up is - There isn't enough power/water/ road to create this set-up. I recently heard someone say, that India's problem is not corruption but lack of infrastructure. which sounds a nice way of thinking and could well be right.
Once we have proper infrastructure all our routine problems "go away". Believe me - it is lot easier. The entire western world has did it.. why can't we. Just that the private entrepreneur with profit motivation can alone do it. The government can't.

Even the Swach Bharat scheme introduced by the government is the symptom of the same problem - lack of infrastructure. No one wants to throw garbage on the street. But there are no dumpsters - that is the problem. No one wants to urinate on the street, when there are good, decent toilets available. Government has to find ways to facilitate the happening of these new changes.

Talking about the uncleanliness in our society is a good thing. At least the government acknowledges that it is a problem. Good start. But the way to solve it is not by make people cleaning them. No one can do it everyday. There can be awareness to not make the place "dirty". But cleaning using a broom by citizens just doesn't work. But instead what woks - Is create infrastructure where in  - it is not possible to throw garbage on street. Make road pavements in cement with greeneries so that no one take a leak there.

There are lot of low hanging fruits the government can pick up on. They will make a huge difference in every citizens life. Modernizing the railways in one great thing the government is trying to do. This is long overdue.

The following would make a huge difference. I would do it, if I was the government.

1. Multiple water projects to convert sea water to portable water. Abundant drinking water supply.
2. 24 hours of power supply. Ensure ALL cities/towns never have a power cut.
3. Upgrade ALL state road's width. make the 2-ways into 4-ways. Make the 4-ways into 8-ways. Make the 8-ways into 10 ways.
4. Complete sanitation within cities. (the villages would solve it themselves)

The municipality and corporations have been utter failures. Non-performers should be fired out and new management with professional skills at the IAS cadre level should take in-charge.

If the government take huge initiatives, the people would behave. It is all in one together. The state government has to do the bulk of heavy lifting. It is very unfortunate that the leadership is slow on making these changes.

What we need is smart communities (areas within cities). keep expanding them. A lot of things needs to be done and its high time we start acting on them.

Coming up with long term ideas are good, but doesn't make a difference except for newspaper fillings. Big ideas start small. We need to demonstrate what we are trying to achieve in a chosen city and see how it goes. Rectify and apply the formula else where. Modernize the way construction is done. The current way of building houses with cement and sand takes lot of money and time. Lot of things should be pre-fabricated buildings.

In the article, it was mentioned Barcelona is a successful smart city. There is lot of history behind that city. I am pretty sure they re-planned it, rather than re-building it from scratch. We need to do exactly that.

 

Statistics - the third lie

It was once famously said, there are three kinds lies in this world.

1. Lies
2. Damn lies
3. Statistics

We see newspapers and news sites dumped with statistics through out. There is virtually nothing that cannot be measured these days. Throw the word "Science" or "Scientific" into the mix. Its just a truth booster to fool the reader. What happens to be a western phenomenon of forcing a public opinion by polls and statistics, is now creeping into the developing world like ours.

It is common in developed countries to publish results of opinion polls which generate curiosity rather than real substance. If you open any newspaper or a news website, I can guarantee you that you see an section for poll. I always wonder if they are held accountable for the results. They usually do not publish how the poll was conducted and how many people were part of it, and how they arrived at the results. They just assume the readers is sucked into the assumption that the poll is originally right and reflects its depiction of the result. He just has to accept that at face value. Most of the time its just a propaganda news item. It is common in western countries to ask a sample size of people, about the job satisfaction level of the President or the Prime Minister. They come up numbers usually in percentages to highlight its accuracy. They make attractive headlines based on the poll, and fill the first page of the newspaper. The initial euphoria would be mostly gone by the end of the day and will fade fully in next couple of days. The sales probably increased. And few days pass by - no one hardly remembers and truly no one cares. In next three months, they repeat the whole damn thing again. What is really the intent of these polls. Who is the beneficiary of the effort. Is it to arm-twist the political class by the media? I have also seen instances where the results are completely off between two news media outlets. One would say the President has a 80% approval ratings and another would say 25% percent. Most likely, both are completely wrong. They are just obeying their respective masters. You could just change the channel based on what results you like. who owns these polls - who acknowledges the findings? It is always self propaganda. It is basically paid news. The media outlets are paid by people who benefit with the publication of such a poll "result". A significant section of the people really think these results as gospels of truth. They are simply being manipulated by the ruling class establishments. A free market would eventually weed out the bad apples - but until then it is frustratingly insulting human intelligence for a by-stander.

A poll would come up with a statement saying the President has 45% job approval rating. An ideal way would be to ask each and every citizen in the country and get a Yes / No answer of this simple question - Is the President doing a good job? You count them out and stick a percentage value to it with respect to the total. This effort needs a lot of people and funds. No media outlet can afford to do that. So they now depend on what is sugar-coated as "scientific" approaches. They come up a sample size - what they think represents the citizens of the country. It is bare minimum that they could afford to spend. Ask them the same questions and project the results over. Isn't that stupid? They sample size selection is so complex and twisted, that as an ordinary man - you just can't understand it. A research fellow would justify why this approach is right highlighting some theories. What is happening is just guessing. It is paid news. The persons who benefit from the polls, fund and orchestrate the process. It is just mind boggling that those things are takes seriously and are accepted at face value. It is never questioned. The establishments take advantage of that and make the people get to think like the way they think. A normal person is sucked in to this design. The build up to the war on Iraq citing weapons of mass destruction is a classic example of manipulating the masses through the media. The opinions of the ruling class was slowly and carefully percolated into the American people. The tactics was done systematically and people were scared so much into the WMD story, that they thought something was imminently bad and the only way out was to bomb Iraq. Whatever happened next is history.

The other recent example of changing the public opinion by controlling the media was the Scottish independence referendum - to see if they can leave the union of the UK. Right towards the day of the vote, pretty much all the local and world media scarred the hell of the scots, with the adverse consequence of voting "Yes". It is a general feeling the No won with a larger lead because of this. There is free and fair elections but its outcome is not. Actual processing of vote is not rigged probably - but the people are being channelized into sections that is not allowed to have a different opinion than its ruling masters. 

The opinions, projections, expectations, consumer confidence numbers - all these are common jargons in business news items. World economy is perceived to run based on these numbers.  It is very common that you hear - the IMF has changed the growth projections of next year from x percentage to y percentage. lets parse this a little bit. First of all It is an admission of the IMF that its earlier projection was wrong. Only because of this, is it forced to revise now. If it is revised now - what is the guarantee that it will not be revised again next time. If Yes, why would we need this projection? At least don't call them "projected" results. These things happen so often in business news, that people don't even realize that they are being fooled to fill up the news columns. If projections keep on changing - why even predict it. We can wait for the actual occurrence to happen and measure them in hind sight. Polls about consumer confidence is just another stat, that is beyond reasoning. How do you measure confidence of people, say of your family members ? Do they really matter. I am sure, the confidence goes up and down every other day or even within a day. How could a consumer confidence number be arrived it? Is it really tangible ? How did you arrive at a consolidated number that represents everyone in a country? The way in which the current modern economies operate - there is place for this nonsense. When this whole bubble economy collapses, the right questions would be asked. It would make us all feel so ashamed we lived through these. It is just surprising. that people just don't question these idiotic numbers and their source. People have to questions these logics.

It should be a habit of the publishers to convey news stories as "they are". Not the way they want it to look like. In the world we live in now - the people are just not smart to differentiate this. It will not be long that they come to senses either.

 

DA Case : Did the system work?

In the past, I have written posts here grumbling about a non-performing judiciary in our country. The recent verdict on a 18-year old corruption case against the AIADMK supremo Jayalalitha and her subsequent arrest is one that needs a response here in my columns. On conviction, she lost her MLA seat and her post as the Chief minister. She became the first sitting chief minister to go to jail under the Prevention of corruption act. She is currently lodged in the Bangalore prison fighting for her bail.

There is a feeling that the system worked and an environment that the rule of law is finally in place. Did the verdict really convince the average man on the street? Not really.

There are many highlights (rather lowlights) in this judicial verdict:


Time Line: Why would a corruption case against a single public servant go on for eighteen years. Did it take that long to find, if a person got richer more than his officially stated income. why can't those be solved lot sooner than that? If the courts do not deliver the verdict in-time, then they should drop the case and move on. Why waste time of the defendant and the prosecution. People barely remember what happened 18 years old in their life. This empty statement of - Justice delayed but not denied might sound comforting to heart for some, the fundamental flaw in the judicial process in our country is right in front of our eyes. Wonder, if it is even possible that someone in the judiciary or the legislation can possibly defend that. It could be argued the defense team was instrumental in the delay. Why was it allowed? There were instances in this case, where documents got translated from one language to other as requested by the defense. The question is why allow that? Why even have that option to choose from, for the defense. It is also a mental agony for the person who goes through the trial process for these many years. It is not fair to someone who is eventually found not guilty. Would the courts compensate for that. One idea is to make a threshold starting date say January 01 2015 - any case that has been filed on or after this threshold date, will be prosecuted to its logical conclusion within a maximum of 6 years. If no verdict has been reached in that time frame, just throw the case out of the courts and make the case "void". No one needs to stay in prison anymore for it. Free up the prosecution and defense, so that they can do something else productively. The crime can be forgotten and the country can just go on.

Special Court:The trial was moved from a court in Tamil Nadu to a court in Karnataka. The reason cited was the defendant is the Chief minister of the state and would not get a fair trial. This itself is a fair admission of the judiciary that the political establishment can easily fix the outcomes of any trial. This is screwed up to its core and a proof that you could get away with murders and looting in our country, if you have the political power. The Judiciary has to reform itself to impinge its authority on the society. Right now, because of its historical under performance, it is not credible in performing its duties. Once it has the confidence and respect of the society - a fair trial can take place in any part of the country for any citizen. Right now, the machinery is so out of control and hence inefficient. A complete revamp is necessary.

Bail Process:Once the verdict was delivered and the Chief Minister was taken into custody, the defense started filling for bail petitions. There were undue delay in the process mainly because of Dussehra holidays. The holidays were running not into days, but weeks. Do the judiciary need these long vacations? Say Someone has a genuine medical emergency and is languishing in Jail and needs a bail immediately - would it be right to make him wait until the courts come back from vacation? With lakhs and lakhs of cases pending in Indian courts - is Dussehra vacation really needed? There is no other institution that has as many holidays on a calendar year as the judiciary. Weekends are also holidays. whatever way its counted - its just too much. The bail petition was rejected by the high court judge who came back from Dussehra vacation (Hope he had a nice vacation!). Now the bail petition is looming in the Supreme Court. It would not be surprising, that it might be postponed for another week, becase the court is out for another week for Diwali. what a horrible employer is the Indian judiciary. No institution can succeed with this set-up.
The judiciary has to be reformed so that it acts better and sensible to the society and gives fair trial to both people outside and those convicted and in custody. On a high level - reduce the number of people who hit the courts for example, as a argument sake - anyone who has been convicted cannot apply for bail for the first 3 months. Some thing like that would make things more predictable. Make the process so simple and straight forward, so that the people can understand it and not just the lawyers. Laws that affect the common people is supposed to be non-complex.

Fine Amount:The defendant in this case has been asked to pay Rs. 100 crores as fine as part of the conviction. How was the Rs. 100 crore arrived at? why not Rs. 99 crores! Everyone knows for a high-profile leader like the AIADMK supremo - the amount is not substantial. It can be managed either through the individual's asset or through the party machinery. Why can't the rules be changed that ALL assets in the defendant's name will be taken over and auctioned out., if found guilty. A public servant found guilty must be disowned of all assets in his name irrespective of whether they were obtained prior to or after the looting. It is one - a good source of income for the courts and two - it could act as a firm deterrent for perpetrators. In general - court fines must be increased a lot, at least 10 times the current amount. They should act as deterrent for people to come to the court. Only valid and genuine "winnable" grievances need to hit the court causing less traffic. Most cases that are pending in Indian courts today are just "false" cases. At the face of it, they can be rejected/verdict delivered. But the horrible truth is, even these cases are put in the queue process, and they drag on for multiple years. A high fee to initiate a court proceeding would act as a deterrent. It could be argued that the poor might not be able to afford it. In reality its not true. Now they end up paying the lawyers for years together as fees. The poor would be happy to pay more and get a verdict than to end up paying the lawyer and go through the pain of the delay for years.

The work of the judicial system in this country is not to deliver verdicts once in a blue moon on high profile cases. With so much high profile cases on, It needs to perform consistently every time and very fast. Most of the elected member of Parliament and State assembly have criminal cases pending against them. Their only hope is the courts would never deliver and they could get away with it for very many years when the suit is "pending". The courts facilitates the existence of a corrupt ruling class by not responding actively to their old complaints. It doesn't matter if its a guilty verdict or not-guilty verdict. The essence is to get to a verdict.

Appoint a committee

Whenever new scams surface, there is usually a political rally by opposition for it. Newspapers flash story about it. They come up with huge monitory figures to depict how serious the crime was. They make it so juicy and nice to read for its viewers. The 24 x 7 news channel would be on top of it until they get the next story. It is fun time everywhere. Initially the ruling government denies anything ever went wrong. Usually they all end up in the same way - the government would set up a committee to investigate the issue. (like any other Indian movies that end with the hero marrying the heroine and all moviegoers leave the theatre happy) The people who are accused of, say the investigation is going to bring out the truth. We don't want to discuss this - because its under judiciary now. Basically it says - Lets leave this out for now and lets move on. To make the intention look sincere they sugarcoat by saying that only a retired supreme court judge would handle it. Anyone with a lesser cadre would not be able to track the truth. They make a committee, with the judge's name (at least he gets some publicity) and for now - Its Business as usual for everyone including the accused, government, opposition and the common man who is glued to his television set and the newspaper. How many committees has this country seen. Countless. Over time - the intensity of the matter comes down and the committee itself gets multiple extensions. We usually don't hear about it for a long time., sometimes even decades. We hear quiz questions and even in public service exams about which committee is tracking which scams. Most often people get it wrong because there are just too many of them and it gets really confusing for an ordinary candidate. Pockets of news appear on the newspaper here and there about its existence by saying it conducted an investigation of so and so witnesses. Usually the committee member comes in a ambassador car with a public servant with him - carrying his suitcase/files and trying to make him way to get into the building. After that the accused comes in a fleet of car, with lots of his supporters surrounding him and raising slogans against sometime unrelated opposition party. The person would wave his hands, hug people around, would talk to the waiting cameras. The supporters around him are very agitated and are pushing people around. Its a hectic place to stand within for anyone. It is really a good publicity for the politician. Next day you see pictures flashed in newspaper and very same rhetorical political punch statements. You don't hear about it for a long time after that. Over time - the investigation gets diluted. Nothing comes out of these committees ever. Sometimes when it does see a day of light, they don't make it to main page of any newspaper. Most witness turn hostile. The political climate is far different from the original days. Basically the wrong-doer gets away with it.

The Adarsh report is one such report to have met its deadline. It has blamed four chief ministers of wrong doing with multiple political heavy weights also mentioned in the report. The ruling party has taken a decision to discard it. In fact it is the same establishment that the report finds fault with. To accept that would mean - that the Congress party has to admit its Chief Ministers tried to exploit government funds for personal benefits. The current home minister of the country is also accused to have got the favor. He should resign too. It is just lot of things to admit. The Maharashtra state government has refused to accept the report. This is a new low point in the Indian Democracy. If there are no credible action or punishment - why even constitute a committee. Just think that the committee came out saying that everything was followed as per law and discharges everyone from any guilt. The establishment would praise the committee and would highlight it by saying : I always trusted the Indian Judiciary. Are they not supposed to find what went wrong and bring people to justice? Issues like Adarsh - the politicians consider them harmless vice. They just think - they just capitalized on a apartment building built for fallen soldier's families. They extended the project by building more house on top of that for themselves. If rules are not followed in strict sense, this is what happens to civil society. Every law of the country is diluted one-by-one. It makes us wonder - which laws really are followed tooth and nail. Either all laws are treated equally and followed., nor everything goes out of the window. In India - looks everything goes out of the window. People who commit murders come out on bail within a month. People who are accused of rape are out of prison right away. People who are convicted with jail term - come out by appealing to a higher court. Lallu Yadav did it recently. People who are punished by Supreme Court (after decades) - just come out on parole very often for months. Sanjay Dutt and Manu Sharma are recent examples. Things are so confusing to put a logic below them. It looks you could get away with ANYTHING in our country.

If you just think it over - it all ends up as a thamasha to public. The initial phase keeps media busy. The government counters them with their own statements, press releases. Opposition makes their own statements, dharna, bandh. Finally its all nothing. The status quo remains. No harm caused anywhere. The looting continues.

The Rise of AAP

First let me take some credit for myself  - for rightly predicting a rise of a political force after the Anna Hazare movement in 2011. (http://indiapoliticalblog.com/2011/04/19/anna-hazare-the-catalyst-of-new-india/#.UsGYc6yA2t8)

I am also glad, I used the word "Catalyst" - meaning Anna Hazare would facilitate a formation without being a part in it.

Now that you are impressed - let us get going.

The rise of the AAP is simply spectacular. Historically, a rapid rise of a political power in Independent India was always due to a larger than life image of its leader. NTR and MGR are notable examples. They were people from the screen. The face recognition was there., and they capitalized with a favorable personal image. The next line of new netas where mass leaders. They came out of  vote bank politics. They adhere to their base (religion, caste) for their political ascent. L.K Advani, Kanshi Ram, Mulayam Singh Yadav, Lallu Yadav are notable examples. In both cases, unlike the AAP - the leader was bigger than the party. The rise in AAP however is amazingly different. AAP was more or less a leader-less grouping to start with. It was a group of people who reflected a big section of Indians - who were upset with the status quo of the political apparatus in the country. The frustration and anger at established political parties and their unwillingness to change., and the peoples sorry state of helplessness - were fundamental reasons of the formation and rise of the AAP. When they decided to contest the Delhi state elections., we all knew it is going to play a role. But it was difficult to predict that they would win 28 seats. As the campaign got into momentum it was successful in convincing the people of Delhi that they were honest and more importantly - one of them. Because it was their first election - the people in other parts of India had serious doubts about their survival. The Delhi results were stunning. The BJP not able to get a majority on its own was a blessing in disguise for AAP. This new party suddenly in lime light now. The phenomenon has evolved., and it took just over a year. Unlike the film stardoms or vote bank political leaders, the AAP leader, Arvind Kejriwal is still very much unknown even today across the country. The principal he stands for are getting noticed. His involvement and evolvement as the face of AAP is tremendous progress. His name is not "pronounceable" to most south Indians like me. (Before the NDA PM's name hit households repeatedly in south India, there were times when you asked who Vajpayee is - the immediate question is - in which film has he acted?) His simplicity and thought process looks promising.

Now that the Delhi government is in place, it is time for AAP to give good governance. It does not have to be a perfect government - but should be vastly different from current establishments. The Congress would support the initial vote of confidence. With a heavy defeat, the wounded grand old party is looking to save its face. It is highly unlikely it will withdraw support to the AAP., even if it means its targeted for corruption in the 15 year old Sheila Dixit government. So I believe AAP party is here to stay in Delhi government at least till the Lok sabha polls. BJP would function as an opposition and blame the AAP, even if something minor goes wrong. It too has the may-election in mind. It will try not to spoil its name and would just concentrate on the Modi magic somehow take it home to 272 seats. So for now it looks - the BJP would be a silent opposition for the next 6 months.

Arvind Kejriwal oath taking was impressive. The symbolism of taking the metro to get to the swearing-in ceremony has been well received across the nation. Also having it in Ramleela maidan was symbolic too. Unlike the crackers going bizarre and people in white and white netas running in their scorpios, safaris, Benz and BMWs with a hooligan crowd dominating the proceedings  - this gathering was different. The speech by Arvind Kejriwal was also impressive. He made people take a oath that they would not give or take bribe. No political leader has done that in recent memory. At least we have someone who talks about it. The common man is looking forward to it.

There are low hanging fruits that can be done without much effort. They are not controversial., but will have deep impact on society. It is also positive step to ban all the red-beacons and personal security to people. They are completely useless and in more than one way "spoils' the society and the perception of a politician. We have got to realize that no one needs a police security. Why in the world you need a police personnel coming around you when you are walking or riding in a car - where everybody goes in the road? It is not that they are going in a dense forest with wild animals around. It is really ironic that elected law makers, even village chairman go in fleet of cars. Not sure - when it got introduced., and people started accepting it was OK.

AAP effort to tackle this menace and identity itself with the common man is unparalleled to ethics of other political parties. The introduction of Lokpal is next goal. This should reflect Zero tolerance for corruption in public offices. System in place to report bribe seekers. Strict punishments to start with immediate loss of Job. Heavy fine and jail term., if proved guilty. It should also Increase fines to abnormal levels. Even petty traffic violations., should cost lot of money to the people. This will fund the state's coffers and judiciary. Strict enforcement of law and order is vital and the whole system has to change.

On the government financial level, it should concentrate only on Bijli, Sadak, Paani, Education and Health. Reduce ALL unwanted expenses of government. Ban ALL subsidies that goes to people of age 15 and above., and age 60 and below. Only Children and old people should be entitled to government subsidies. Also streamline taxes. Make them low and simple in procedure. Tax consumption but not income. (We got rid of the British because of taxes.)

AAP with its media hype surrounding it should not play into their hands. The time has come to leave the camera out and do efficient governance. They don't have to be sitting there and clapping for every move. And more importantly the government doesn't have to impress the public every single day. All that matters is a systematic change for a better livelihood for the people. Three months from now, if the people of Delhi see visible improvements in how the society operates - that would be the only gauge to measure the new government's success.

There is a charge against AAP - that its pursuing the now outdated communist ideals. Personally I do not think so - but there is a feeling its going to shower freebies on the poor and going to tax everyone else for it. Since the movement identifies itself with the common man - and the majority of the common man are poor - policies needs to be done according to reality. Arvind Kejriwal I believe understands that. But at the same time - it is not possible the government can supplement their hard work. The nature of the society has to evolve such that everyone can get a job and pursue a living with hard work and make a decent wage with basic freedom. The government should try to create this kind of society. Flushing out free rice, wheat, bulbs, saree, dhoti, television laptops (by the way - have no idea how this benefitted) etc. is just repeating failed policies. It will only make poor people worse off.

The AAP government seems to be on-ground and getting its act together. Let us wait and watch and see how they are able to make it better. A long way to go.

What would be AAPs strategy for Lok Sabha has become the next point of interest. I will not be surprised if they pull north of 200 seats with the current momentum in place.  The party has left the nation guessing on this. Unlike Delhi, the rest of India is lot different. Delhi being a small state and fully urban - AAP mode of reaching to the people has clearly worked out in its favor. This approach cannot be replicated in the entire nation simply because of vastness of the country and its diversity. More importantly - with just six months away for the election. Just wonder - if India had a presidential system - Arvind Kejriwal would definitely become President. (Even Modi or Rahul Gandhi would agree!) With representative form of government still in place - the number of MPs is what matters. AAP needs to employ a different strategy. The following are some options that they might consider.

(*) Contest ALL seats and hope for the best.
(*) Contest realistic seats only - say 150 seats (Delhi, Mumbai, Kolkata, Chennai, Bangalore and other urban cities)
(*) Contest realistic states - say 150 seats (Delhi, Maharashtra, UP, Gujarat, Tamil Nadu)
(*) Align with parties like Lok Satta and create a genuine seat sharing agreement in some specific states.

I am not going to guess any more - let AAP surprise us more.

With the rise of AAP - both the national parties in the Congress and BJP have been left thinking. Congress is the worst hit. Poor assembly election results have exposed its vulnerability in the national election. Modi - who until now seemed to have capitalized on the anti-Congress feeling in the country is suddenly feeling just not strong. The assembly election results have proved that people are against the Congress. But if there is a non-Congress, and non-BJP alternative - then people would opt for it. This is where AAP filled the vacuum in Delhi. This is a good news for AIADMK supremo Jayalalitha in Tamil Nadu and the YSR Congress's Jegan Reddy in Andhra Pradesh. With current mind-set of anti-Congress and anti-DMK (with multiple scams to its name and the perceived vision of not doing enough in the Sri Lankan war against tamils) AIADMK should sweep the state. Modi is not a factor in the state, I believe. (goes back to which film he has acted!!)

 The rapid rise of the AAP is because of "lack of will" in the Congress government at the center particularly in the last five years. In UPA-1, the policy hurdles and lack of major progress in decision making was pin-pointed to the Communist parties in the coalition. But the UPA-2 was without them. Congress had a better margin of seats. But the complete lack of will in the part of the government to enact strict / ground breaking laws really cost the party. They could have changed the face of the society by vital reforms, such as Lokpal and would have taken 100 percent credit for it. Rahul Gandhi coming out now and pointing out the problems is probably too little too late. The government underestimated the anger of ordinary Indians., who were suffering because of lack of change. In India - the so called spring Arab revolution did not topple any ruling heads, but it created a new wave of leaders to lead this nation to a better destination. At last we see some light. Power was lying on the ground for someone to take it, and AAP took it. Good Luck AAP.



 

Software mergers and acquisition

The company that I have been working for the past seven years has been acquired by a bigger competitor in the same industry. In modern US insurance industry it is common. In fact we have been sold and resold three times in the last five years.

The modern capitalistic system particularly in the west grows on mergers and acquisitions. Gone are the days where industries became more productive, produced more and because of that, added more resources and serviced more clients, and as a consequence made more profit. When this happens, they invest the profit in more machines, man power and take it to the next level.  They diversify into related fields and expand businesses around them. They grow from scratch to huge conglomerates.

The modern capitalism - the way it is practiced in the west now., has brought in a new phenomenon in the past decade or so. You do not grow by being more productive but instead you acquire smaller (multiple) businesses with often borrowed capital and show up a bigger revenue estimate and a fatter balance sheet. This way the path to becoming a bigger company is sooner and easier rather than a painful way of growing up from start. This has resulted in successful companies. They acquire and brand it as though it was yours. You build on the legacy. It is always the end users (client) who benefits from it. Overtime the acquired company name and brand become oblivious and only the buyer is known. Not many people remember wa-mu, Wachovia these days. Do they? They were easily recognizable until the 2008 economic crisis. People had their money in them actually. It takes few moments to recognize their past now.

Why is this trend so prevalent. Western industries have moved from manufacturing to service sector in the past 20 to 30 years. A normal progression of a manufacturing company is long often cumber some. It involved huge capital, high-end machinery, factory, labor, time, and a lot of years to make it successful. Most often the people who started the business end up running them for a life time. We see this setup in growing economies like in Asia. I have seen it in India where the entrepreneurs run their business as part of life. Most often they start it in their late 20s and 30s and end up running it through their life time. It gets carried over to their siblings who end up running it in the same fashion. Lot family owned businesses follow this model.

Acquiring a manufacturing firm is lot riskier. it often involves lot of capital. Service sector industry is so abstract.

One of the primary reason for mergers and acquisitions to be so common is the easy monitory policy of the US Fed. Big business often with a good track record can borrow millions of dollars from the bank and buy out competition rather than competing with it. This consolidate business. Eliminates competition in a way and ultimately results in fewer options for end users.  The money that is supposed to create new jobs often end up cutting jobs. There are harmful effects of easy credit policy.

**** Companies get bought for more than market price.
**** Ridiculously low interest rate skews market demand / supply.
**** Badly informed decisions by upper management.
**** More optimism for success there by masking failures.
**** Stock market highly priced based on bad facts.
**** Unproductive labor employment. Eventually huge layoffs when reality catches in.
**** Poor cost benefit.

Unlike manufacturing, the service oriented companies tend to be acquired or merged with others relatively with ease. The aim of the merger is to consolidate business and be more a major player. The field is reduced to lesser players. It does not add any new value.

With respect to acquisition that happened in Aplifi:

> Cost of acquisitions is higher than market price.
> Merger hopes for a more weakened competitor rather than strength of "Merged Company".
> Promise on new products that is yet to be developed from scratch. No one knows what this should look like and there are more probability of failure.
> Process and resources are in conflict and needs a careful management strategy to put things in place.
> Right now in my opinion the morale is at an all time low with unclear directions or road map. Unless there are radical changes., it is just a lost cause.

One thing that is always overlooked is there is huge money changing hands at these times of mergers. Often it's done with secrecy and only the top tier knows about it all. They sit together, deliberate it and decide. There is too much hype on the compensation claims, partnerships, bonus packages, relieving terms - the fundamental value (software products with resources to develop and maintain) is often overlooked. End of the day it's the "nuts and bolts" that matters. Enhancing the nuts and bolts is the ONLY thing that decides performance of the firms.

The current deal hugely lacks clarity on these.

One of the problems in merging service sector businesses is - we don't know if it's a good buy for a long-long time. The cause of failure can be easily blamed on a trivial change that happened post buy out. It wouldn't be a ideal for the top management to admit it was a bad deal to start with.
During mergers they shut down software products in favor of a better product that the bigger partner has. So what happens to the productive work that went into developing it in first place. Of course it was priced and sold off. But there is no continued value proposition of labor. This trims employment rather than create new employment. This would be unfair. The hidden truth could be the product that is being shut down could have had a better future prospect. It is lost opportunity. It would have been better to exist than to be sold on a fire sale.

Acquiring a company only to shut down later is true loss of productivity and a major mismanagement for the leadership. Multiple smaller companies benefit the real economy more than the few bigger ones. Some companies are found and operated by an entrepreneur. They reach a point there is a buyer for their company and the entrepreneur sells it for a fee. The cause could be that he is getting old or is unable to run the business or he thinks it makes sense for someone else to run the firm which could make it more profitable. This is a clean sale. Founder has interest in the well being of the firm and it's future. Many people find it more profitable and they initiate businesses with the sole aim of selling it to someone else. There is nothing wrong about it. Soon the trend carries over to people who are loaded with cash. They buy a business from a single owner and take it to the next level. These people are called investors. They do it because they are lumped with cash. And once they feel it's good for resale, they just flip it over. It's value addition to a commodity. Is this good for business always? But unlike the founder, the investor does not care about the future of the company. He just happens to be the holder for a brief period of time. In  a service oriented company it is very hard to measure the value proportion during these mergers. lot of emphasis is given to the revenue growth. We hear talks on how to make the company from a $10 million company to say, $50 million company. Lot of massaging of the financials take place to sell it to the biggest guy. One of the primary consequence of this is a reduced work force and less benefits. Income is exaggerated for the purpose of accounting and the expenses are cut drastically to give an impression of less cost. Sometimes you wonder if these really work at the ground level. irrespective of the huge numbers as I said before the nuts and bolts that govern the basic success is what matters.

Only the future can say how good Aplifi sale would work out. I will definitely want to know about it say 2-3 years from now.

If you don't mind living life in "whatever way you want" then you can lead a life like that. Some things bother you, and you go along with that. But if you decide to live a life with some self imposed conditionality then you might have to take some personal decisions that you know is right but would involve losing something personally.
Unfortunately you have to do those, not because it's different but because it is right. In a distant future, one day in my life I would turn back to look at this very moment and have a sense of satisfaction of the behavior. And that is where you gained.